By Michael Hirtzer
(Reuters) - Hard-hit livestock and poultry producers petitioned the government on Monday to reduce or cancel the required use of ethanol in gasoline for a year, asking for "a little help" to ride out the worst drought in 56 years.
The request for a first-ever waiver from the federal Environmental Protection Agency's mandate, which in essence requires that more than a third of the U.S. corn harvest be converted into ethanol, comes as grain prices have surged to record highs, driving up feed costs and squeezing profits for producers.
"We are having trouble buying corn... it's really putting a burden on our operations and many others across the nation," says J.D. Alexander, president of the National Cattlemen's Beef Association, whose Nebraska feedlot is about half full of cattle. "It's time to wean the ethanol industry and let it stand on its own."
The EPA has not granted a waiver since the Renewable Fuels Standard (RFS) was enacted in 2007. The policy has enjoyed years of staunch bipartisan support, boosting income for U.S. farmers and helping reduce the country's dependence on foreign oil. But it is now coming under renewed attack.
The beef, chicken, pork and turkey trade groups said they had delivered a petition to EPA administrator Lisa Jackson to waive the mandate "in whole or in substantial part" for the remainder of this year and part of next.
Matt Hartwig, a spokesman for the Renewable Fuels Association, said in an interview the move by the livestock groups "is not an official waiver request -- and did not trigger EPA to begin the process."
The only groups that can petition the EPA for a waiver are oil refineries or blenders, a state or the EPA itself.
The request had been expected as livestock groups hit hardest by the 60 percent rise in corn prices over the past six weeks ramped up lobbying efforts. It is far from clear whether they will succeed where Texas Gov. Rick Perry failed four years ago, when he sought a partial waiver.
The groups said the mandate had proved powerful enough to "directly affect the supply and cost of feed", causing sufficient harm to meet the requirement of severe economic or environmental harm. But analysts say meeting that criteria may be difficult to prove.
It is also unclear what kind of political reception the request will have in Washington ahead of the November election, in which President Barack Obama, a supporter of ethanol, seeks a second term. Some of the most fiercely contested states are in the farm belt, where the mandate is very popular.
"EPA officials and the secretary of agriculture (Tom Vilsack) have all indicated that they are not considering a waiver at this time. I am not sure if this (petition) changes the landscape all that much," said Mark McMinimy, biofuels analyst at Guggenheim Partners Washington Research Group.
IF NOT NOW, WHEN?
Corn futures soared to a record of $8.28-3/4 per bushel this month at the Chicago Board of Trade as the most extensive drought in five decades reduced the yield potential of the developing crop.
About 35 percent of the U.S. corn supply is now used to produce ethanol -- about the same amount that is used as animal feed, according to the U.S. Agriculture Department.
"The whole waiver process, if not enacted now, has to be put into question. If we are not going to do this now, in a historic drought year, then when?" said John Burkel, vice chairman of the National Turkey Federation and a Minnesota turkey farmer.
Two-thirds of the country is suffering from moderate to exceptional drought.
But ethanol supporters doubt EPA will make any change to the mandate amid ample ethanol stocks and a cushion of tradable credits generated when a gallon of ethanol is produced -- known as renewable identification numbers (RINs) -- which will keep corn-ethanol use in check for 2012 and into 2013, they say.
Additionally, waiving the ethanol mandate would reduce supplies of the ethanol byproduct dried distillers' grains, which is also used to feed animals.
"Waiving the RFS won't bring the type of relief the livestock groups are seeking, nor will it result in significantly lower feed prices," Bob Dinneen, president of the Renewable Fuels Association, said in a statement.
"Because ethanol plants also produce a high protein feed, limiting ethanol production will only further complicate drought related feed issues and costs," he added.
(Additional reporting by Christine Stebbins in Chicago.; Editing by Dale Hudson, Bob Burgdorfer and Andrew Hay)