Secretary Vilsack and the RFS Waiver Requests

Published in DTN

Aside from a few political shots at the Republicans for failing to move the House Committee bill to the floor, the administration has been fairly quiet recently about the policy issues themselves. This means primarily they have been willing to hold still for the shallow loss programs in the Senate bill that economic analysts and several farm groups have criticized so heavily. Still, this should be no surprise, politics being politics. Certainly, farm bills considered in the midst of bitter political debates risk evaluation on the basis of political rather than economic or even social criteria.

This also seems to be true regarding the important decision the administration must make regarding the Renewable Fuels Standard — the escalating requirements for blending renewable fuels into the national supply. Press reports indicate that "a hundred members" of the ethanol trade group Growth Energy have been meeting with 160 members of Congress to press for continued support for ethanol, and to argue against waivers of the RFS as requested by several governors because of the this year's drought-damaged corn crop.

The ethanol producers argue that the gross numbers are misleading, since only the starch is used for ethanol, while the rest is still available for use for feed. In general, the group is arguing that Mother Nature, not ethanol production, is causing rising corn prices and that the markets will adjust to the shortages. This approach suggests that opponents of the RFS are attempting to scapegoat ethanol producers for the current situation.

Then, Agriculture Secretary Tom Vilsack got into the act with a number of quite surprising — shocking, really — statements. For example, he told reporters Monday that he has met with Environmental Protection Agency Administrator Lisa Jackson on the waiver issue — not to help EPA identify the issues involved, but to pressure that agency not to change the RFS. He then ticked off a list of reasons not to reduce the ethanol mandate and said EPA was aware of them all.

Among other things, he said, "there is some serious question" whether refiners would even reduce their use of ethanol significantly if the mandate were reduced. Then, he emphasized the politics of the issue by telling the ethanol producers, there is no "waiver of support" at USDA.

Vilsack did note that the current drought and resulting calls for waivers have created a "stressful time" for the industry, and said that EPA will make the call. "But I will tell you this,'" the secretary said, "I have conveyed and will continue to convey my support for this industry."

Vilsack then seemed to backtrack a little with the prediction that EPA will examine the waiver requests and public comments currently being sought with a "360 view," but also pointed out that the "market is responding as it should."

As he has in the past, Vilsack has responded to this issue more like a governor touting a major local company than as a Cabinet official with a national constituency. It is public policy for the United States to produce significant amounts of renewable fuels, but it also is public policy to invoke an escape clause under certain conditions when the basic programs might cause economic harm.

The decision whether to grant the waiver requests will be made by the government, not just the EPA — and, it will be overseen and watched carefully by the Office of Management and Budget and the White House. Certainly, USDA with its vast array of economic experts will be involved in the "360 review" the secretary touts.

It almost seems like the secretary has forgotten this role for his agency. Certainly, the governors of the states that requested the waivers can be forgiven if they wonder how objective the waiver decision will be since the Agriculture secretary has so clearly gone beyond defending public policy to weigh in on behalf of rejecting their request.

The performance certainly is an embarrassment for the administration and the professional staff at USDA, observers on both sides of the waiver issue suggest. The agency should be encouraged to describe specifically its role in this decision and steps being taken to insure that the relevant analyses are objective and comprehensive in order to reassure all stakeholders.