Texas' Bid For Ethanol Waiver Spurs Debate

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The Environmental Protection Agency wants more time to decide whether to grant Texas a waiver from the federal mandate for ethanol in gasoline. Margaret Kriz, an energy and environmental correspondent for National Journal, says the debate could be a political hot potato.

ROBERT SIEGEL, host:

This week, an enormous political football bounced through Washington, D.C., and the U.S. Environmental Protection Agency punted. The question is, will the federal government stand by its mandate for ethanol in the nation's gasoline, or will it grant Texas a waiver, cutting the amount of ethanol it would need in half?

That question has potentially huge economic consequences for corn growers and other farmers, cattlemen and other livestock producers, consumers, environmentalists, motorists, oil companies, international food aid groups, you name it. And here to talk about this question is Margie Kriz, energy and environmental correspondent for National Journal. Margie, first of all the mandate. What does the mandate say?

Ms. MARGARET KRIZ (National Journal): The mandate was put together by Congress. It was originally done in 2005, and then they boosted it to even higher levels at the end of 2007, saying that you have to blend a certain amount of ethanol in your fuel, in your oil, on a regular basis, and it sort of happens little bit by little bit over time.

What this has meant is that people have been willing to build more and more ethanol plants around the country, and there's been a higher demand for corn.

SIEGEL: Price of corn has gone up. People who raise corn have done pretty well. Texas Governor Rick Perry wants a waiver for his state from the mandate. What does that mean?

Ms. KRIZ: Well, he's - under the law, it said that states could apply to EPA for a waiver if there was some sort of extraordinary circumstance. He's saying it's charging - that because the price of corn has gone up, it's costing more for the livestock industry in his state - chicken growers, cattle growers, hog growers - to feed their animals, and so therefore it's costing much, much more for food industry overall.

SIEGEL: Because the demand for feed corn has been increased enormously by the use of it for ethanol.

Ms. KRIZ: Exactly.

SIEGEL: Well, as this question - it's gone to the EPA to decide, and I gather today was the decision day, July 24th.

Ms. KRIZ: It was the decision day, but the EPA has come out and said, gee, give us a little bit more time because we've gotten 15,000 comments from various groups, and you can just imagine the corn growers and the food industry and all of the other people that are involved in this just ginning up all of their members to write in.

SIEGEL: Well, give us a rough idea of who's on which side here - people who think we should maintain the mandate and keep putting as much ethanol in the gasoline as we possibly can.

Ms. KRIZ: Okay, that would be the farmers, because they're growing the corn, and they're getting more money for it. It's the auto industry, because they're putting out cars that take not just a little bit of ethanol, but also some of them will take as much as 85 percent ethanol in the blend. So they're getting credit for that under the fuel efficiency program the federal government has in place. And you know, ethanol states tend to be important political states, so those politicians from those states are on Capitol Hill making sure this exists, that this continues.

SIEGEL: Iowa, Minnesota, for example.

Ms. KRIZ: Iowa, Minnesota, Indiana, Illinois.

SIEGEL: Okay, now those who would be on Rick Perry's side, broadly on Texas's side here, and say we're for a waiver here, let's maybe stop the movement toward ethanol a bit.

Ms. KRIZ: Well, that would be obviously the livestock industry. It would be the food industry. The Grocery Manufacturer's Association has been going crazy because food is costing more and they're blaming that on corn prices, corn prices brought up by ethanol use. And also, interestingly enough, the environmental community has been against the larger mandate because they say not all ethanol that's produced is environmentally friendly.

It really depends on how you make the electricity that is used to make the ethanol. It's kind of complicated, but what it is basically is if you have a dirty, coal-fired power plant that's being used to make the ethanol, then it doesn't do any good for the environment.

SIEGEL: It sounds like an incredible brawl involving all sorts of hugely powerful Washington lobbies, but does it really - is the final say really with the EPA, or can the Congress overrule whatever the administration does about this?

Ms. KRIZ: For the time being it's with the EPA because there is this allowance in the bill to do a waiver. Just because they might grant the waiver to Texas doesn't mean that they would give it to all the other states. No one else has asked for it at this point, only Texas. But it brings this question up, and it's a political hot potato that Congress will take on if not this year, then certainly next.

SIEGEL: Do we know when EPA is going to announce its decision in this?

Ms. KRIZ: Probably in early August. They're talking about that time period. I can imagine when everyone leaves Washington, Congress goes out of session, it would be an appropriate time for them to move.

(Soundbite of laughter)

SIEGEL: Okay, Margie Kriz, thank you very much for talking with us.

Ms. KRIZ: Thank you.

SIEGEL: That's energy and environmental correspondent Margie Kriz of the National Journal.

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