Washington, D.C. - Forget the U.S. Department of Agriculture. The Environmental Protection Agency may well be the most important government agency to the future of agriculture.
The person the next president appoints as administrator of the environmental agency could well decide what happens to the prices of corn, soybeans and many other commodities.
That's because of the role the agency will have in deciding how much of the nation's crops are converted into ethanol, biodiesel and other biofuels and how quickly that happens.
Sure, there's a new mandate that refiners use larger and larger amounts of biofuels every year, reaching 36 billion gallons by 2022.
But the agency can waive or lower the annual targets, and the agency also will decide what kind of fuels will qualify for meeting the mandate and possibly even whether there is a sufficient market for using all the ethanol that will be produced in coming years.
It's no accident that the Environmental Protection Agency, or EPA, has these broad powers. Environmentalists, led by the Natural Resources Defense Council, insisted on it, and House Democratic leaders made sure that the agency's authority was written into the new energy bill.
"At least on paper, the EPA has a lot of authority," and the agency's decisions "are going to have major impacts on agricultural markets," said Pat Westhoff, an economist at the University of Missouri.
Consider the ways the agency could affect the production of biofuels and consequently the price of corn, soybeans and other commodities:
- The energy bill requires usage of up to a billion gallons of biodiesel annually. However, the EPA can waive that requirement if the agency believes it will increase diesel prices significantly. That's a distinct possibility, given the soaring prices of vegetable oil, experts say. Guess who wanted that provision in the bill? Yes, truckers.
- The corn ethanol mandate could be waived if the agency finds that there is a serious harm to the economy or the environment. Under the energy bill, refiners would be allowed for the first time to petition for the waiver. Previously, only states could do so. The EPA also could decide on its own to consider waiving the mandate.
- Imported sugar-based ethanol could qualify to meet the energy bill's annual consumption targets for "advanced biofuels." Such fuels are likely to be in short supply and fetch a higher price than conventional corn ethanol, Westhoff said.
- The energy bill also requires that production from new domestic biofuels plants meet standards for reducing greenhouse gas emissions. The agency has some leeway in deciding how that analysis is done, but the agency has to take into consideration the impact on global land usage.
Biofuels that don't meet the greenhouse-gas standards won't count toward meeting the usage mandates that refiners are required to meet.
EPA officials have started to design the analysis. At issue is the extent to which new biofuel production would lead to clearing of forests or grasslands for crops, wiping out the greenhouse gas reductions achieved by switching from fossil fuels to biofuels.
How the agency decides to do that analysis will have a "lot of impact on a lot of different environmental interests and our overall approach to global warming," said Franz Matzner of the Natural Resources Defense Council.
- Finally, the EPA will likely be asked to allow higher amounts of ethanol to be used in conventional cars and trucks. Ethanol production is approaching levels where there may not be a market for the alcohol unless it's used in higher blends. Ethanol is typically used as a 10-percent additive in gasoline. There is concern that gasoline with higher blends of ethanol could worsen smog and harm engines.
Farmers aren't accustomed to having the EPA decide how much they're going to get for the crops. They had better get used to it.
Reporter Philip Brasher can be reached at (202) 906-8138 or [email protected]Des Moines Register
