December 4, 2009

Mr. Vincent Camobreco

U.S. Environmental Protection Agency

Ariel Rios Building

1200 Pennsylvania Avenue, N.W.

Washington, D.C. 20460

Submitted electronically

Subject: FASOM Sensitivity Analysis to Distillers Grains Assumptions

Dear Vince,

As you are aware, distillers grains from corn ethanol plants can have a
significant impact on the net amount of land required to produce corn
for ethanol and other markets. FASOM, the model used by EPA to estimate
domestic land use changes for the RFS2 analysis, assumes that 1 lb of
distillers grains replaces 1 lb of feed, where the replaced feed is
0.915 lbs of corn and 0.085 lbs of soybean meal. Our comments on the
proposed rule show that, based on information from the feed industry,
nutritionists and Argonne National Laboratory, the replacement rates are
higher than assumed in FASOM. 

We carefully examined the proposed RFS2 rule for any evidence that EPA
evaluated FASOM’s predictions of corn and soybean meal production and
their sensitivity to the distillers grains feed replacement assumptions,
but found no sensitivity analyses. Therefore, we asked Air Improvement
Resource, Inc. (AIR) to run sensitivity analysis of FASOM results to
three different DG input assumptions, as follows:

“Default” DG assumptions (same as EPA)

“Zero DGs” (i.e., DGs do not replace feed at all)

“RFA DGs” (i.e., DGs replace corn and soybean meal at rates
recommended by Prof. Gerald Shurson, University of Minnesota)

The results of this analysis are shown in the attached briefing slides.
Basically, there are three findings from this analysis: 

1.	The model shows that DG use does reduce land devoted to soybeans, and
also reduces soybean production. 

2.	The model shows that DG use does reduce land devoted to corn, but for
some unidentifiable reason, does not reduce corn production. 

3.	The model does not reduce corn and soybean acreage in response to
increased DG displacement to the degree our external calculations
suggest should reasonably occur. The reasons for this are not clear. 

Since DGs have a significant effect on net land use for corn ethanol, we
think these FASOM modeling issues should be carefully examined by EPA
before finalizing the RFS2. While the directional effects of increasing
DG substitution inside the FASOM model appear correct, the magnitude of
the effects appears grossly understated. The reasons for this should be
investigated. Based on the apparent gross understatement of the land
impact of increasing DG substitution, it appears the FASOM model may
possibly be flawed in how it translates changes in DG substitution rates
into acreage impacts.

If you have any questions on our analysis, we would be glad to meet with
you to go over these results. 

Respectfully yours,

Geoff Cooper

VP, Research & Analysis

