updated 8/8/2008 1:47:58 PM ET 2008-08-08T17:47:58

The Environmental Protection Agency on Thursday denied a request from Texas Gov. Rick Perry to cut the federal ethanol mandate in half for a year.

Perry spokeswoman Allison Castle said EPA Administrator Stephen Johnson spoke to Perry about his waiver request by phone shortly before Johnson announced the agency's decision publicly Thursday.

An energy bill passed in December required 9 billion gallons of ethanol to be blended into gasoline this year and about 11 billion gallons next year. Perry asked the EPA in April to drop the Renewable Fuels Standard requirement to 4.5 billion gallons because demand for ethanol is raising corn prices for livestock producers and driving up food prices.

In a statement issued by his office, Perry called the decision "a mistake" and "bad public policy."

"I am greatly disappointed with the EPA's inability to look past the good intentions of this policy to see the significant harm it is doing to farmers, ranchers and American households," Perry said. "For the EPA to assert that this federal mandate is not affecting food prices not only goes against common sense, but every American's grocery bill."

Castle said Johnson did not address the other issue Perry included in his petition.

"The administrator didn't mention anything to the governor about the livestock industry," she said, adding that cattle feeders in Texas had their worst monthly loss in history in March.

Between January and June, cattle feeders nationwide lost $1.5 billion, officials said. James Hunt, spokesman for the Amarillo-based Texas Cattle Feeders Association, said EPA's decision will mean cutbacks by cattle producers and higher priced beef in meat cases in about a year.

Johnson, during a conference call with reporters, said the agency's assessment looked at the livestock issue and found feed prices have increased because of biofuel production.

"However, is that the result of the (Renewable Fuels Standard) mandate? Our conclusion is no," Johnson said. "And second, are those price increases meeting the statutory requirement of severe harm to the economy? And our conclusion is no."

More than four dozen House Republicans and two dozen GOP senators, including presidential candidate John McCain, wrote EPA in support of a waiver. The state of Connecticut also supported Texas' request

Environmental groups, concerned about how biofuels affect climate, water quality and biodiversity, also supported the waiver.

Sandra Schubert, spokeswoman for the Environmental Working Group, said the denial is shortsighted and that the country should be focused on viable clean energy solutions.

"Instead, the misguided corn ethanol mandate is forcing farmers to plow up marginal land and wildlife habitat, while increasing global warming and dumping toxic fertilizers and pesticides into our precious water sources," she said in a statement.

On Capitol Hill, the decision drew mixed reaction.

Members of the Texas congressional delegation, U.S. Rep. Joe Barton and Sen. Kay Bailey Hutchison, who has filed legislation that would freeze future ethanol production at this year's level, criticized the agency's decision.

"I am disappointed that the EPA missed this opportunity to provide relief for American consumers who are dealing with skyrocketing food prices due to the unintended consequences of the continued escalation of the ethanol mandate," Hutchison said in a statement.

U.S. Sen. Chuck Grassley of Iowa, also a Republican, called the decision a "victory," saying it will allow farmers to "continue to plan for and meet the fuel and food needs of the future."

Corn growers agreed. David Gibson, executive director of the Texas Corn Producers Board, said consumers win as ethanol lowers gas prices and reduces America's dependence on foreign oil.

"Every independent study has confirmed that using corn to make this cheap, clean, American-made fuel has no significant impact on food prices," he said.

Perry came under fire early in July after it was reported that he filed his waiver request shortly after a prominent poultry producer donated $100,000 to the Republican Governors Association, which he chaired.

Lonne "Bo" Pilgrim, co-founder of Pilgrim's Pride Corp. of Pittsburg, the nation's largest chicken producer, made the contribution in March. Perry filed his waiver request in late April.

Castle said then that Perry asked for the waiver only because of ethanol's potential negative impact on livestock and poultry producers.

In a statement, George Watts, president of the National Chicken Council, which represents the nation's chicken producers, processors and marketers, said the group was "deeply disappointed" by the EPA's decision.

The group estimates higher feedgrain prices have cost companies in the broiler chicken industry more than $6 billion since October 2006.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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