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OMAHA (DTN) -- Iowa has a lot to lose with the proposed cuts to the Renewable Fuel Standard, Iowa Gov. Terry Branstad told reporters Wednesday as all sides in the debate prepare for a hearing hosted by the Environmental Protection Agency.
Branstad is expected to be among those people testifying to the EPA on its proposal. Iowa leads the nation in corn, ethanol and biodiesel production. The RFS has brought economic prosperity to agriculture, Branstad said.
"I was governor during the farm crisis in the '80s," he said. "I know what can happen when you have agriculture depression."
EPA's proposed 3 billion-gallon cut to the overall RFS, including to corn-based ethanol, "could cost 45,000 jobs nationally," Branstad said, though it is not clear how he came to use that figure.
"When land values start dropping, equipment needs are less and this will lead to company layoffs," he said.
The oil companies are resisting, Branstad said, because they "don't want something they can't control."
"The decision EPA makes will have an effect on economic viability in Midwestern states," he said. "I would remind the president that he launched his campaign in Iowa" and won in the state based on his support for ethanol.
"I think the president has made a terrible mistake in caving to big oil on this. We believe this would be devastating in a state that is making a difference. I don't want to go back to falling land prices and equipment companies going out of business. The RFS was to restore stability and predictability in our state. It has done that."
Matt Erickson, American Farm Bureau Federation economist, said the RFS has been a boon for U.S. agriculture and a "success story for the rural economy."
Since the passage of the RFS in 2005, agriculture exports have increased by 57% and crop output by 44%, Erickson said. With what is expected to be a record corn crop this year of around 14 billion bushels, he said cutting the corn-based ethanol portion of the RFS would lead to a reduction in demand for corn of about 500 million bushels.
To start 2014, Erickson said, production costs likely will lag behind prices. For the first time since 2005, he said, corn's break-even price may be around $4.
EPA HOLDING RFS HEARING THURSDAY
Thursday's hearing will draw a crowd of farmers. The National Corn Growers Association stated at least 30 members from around the country plan to attend and testify.
"It's great to see so many people willing to leave their farms at this time of year for an important opportunity to give the EPA a piece of their mind," said NCGA First Vice President Chip Bowling, a Maryland grower. "This has already had a negative effect on our farms, and if the EPA gets its way, it could cause serious harm to the rural economy -- not to mention cutting the environmental benefits of domestic, renewable ethanol."
Some two dozen representatives of the U.S. biodiesel industry also are slated to testify at the EPA hearing, according to a news release from the National Biodiesel Board.
Biodiesel is the first EPA-designated advanced biofuel in the RFS to reach commercial-scale production nationwide. The EPA proposal, however, would reduce the biodiesel mandate to 1.28 billion gallons -- down from the industry's production rate of about 2 billion gallons since July.
Tim Keaveney, vice president for Erie, Pa.-based biodiesel producer HERO BX, said in a statement that he will tell EPA that his company's record production is helping to revitalize the local economy.