NCGA study details cost of proposed fuel standards

A study commissioned by the National Corn Growers Association tallies the high cost of proposed regulations by the U.S. Environmental Protection Agency to implement the expanded Renewable Fuel Standard.

The study found that the up-front cost to the ethanol industry for compliance with the new regulations could reach $30 million, with annually recurring compliance costs reaching up to $420 million.

Higher costs for ethanol producers mean increased costs for corn growers, said Steve Ruh, chairman of NCGA’s Ethanol Committee.

“Paperwork has a price,” Ruh said. “At a time of economic recession, the last thing any industry needs are new regulations — especially unneeded recurring reporting requirements — that can cost up to a half-billion dollars a year.”

If an acreage trigger approach were used by the EPA, the recurring costs would be minimal compared to ongoing verification. With corn yields on the rise, a shift in corn acreage above the 2007 crop trigger is not expected at this point, and the recurring costs would be $15 million per year.

Ruh pointed out that, at the farm level, the cost of the new regulations will mainly take the form of extra management and recordkeeping time associated with the “renewable biomass” definition. It is also possible that in some geographic areas other costs will be forced down to the farmer level of the supply chain.

“Because of unnecessary paperwork, farmers also may be forced to shuffle corn among buyers in the limited situation where they might produce corn on acres that don’t meet the stringent EPA regulations,” Ruh said. “They then would resort to delivering corn from previously cultivated land to ethanol facilities, while delivering corn from newly cultivated land to other markets.”

The report, “Compliance Costs Associated with the Proposed Rulemaking for RFS2,” was prepared by Informa Economics. Click here for a copy of the report.

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