EPA decision upholds RFS, denies requests for waiver
On Friday (Nov. 16) the federal Environmental Protection Agency (EPA) denied the petitions of several states that would have waived the renewable fuel standard (RFS) - the federal regulations that require certain amounts of ethanol be added to motor fuels.
The decision was hailed by biofuel backers in farm country.
This summer, in light of drought conditions plaguing the Corn Belt, governors from several states filed official requests with the EPA asking for waivers of the national volume requirements for the RFS program, citing high corn prices and potentially scarce supplies of the feed grain from which nearly all of the nation's ethanol is produced.
Nearly 30,000 comments were received by the agency between the end of August when the EPA announced it was considering the waiver and the close of the comment period on Oct. 11.
The renewable fuel program was adopted in the Energy Policy Act of 2005 and was expanded in the Energy and Independence Security Act of 2007. The program requires that transportation fuel sold in the United States contain a minimum volume of renewable fuel.
Ethanol is an octane enhancer in motor fuels that can help cities and regions achieve Clean Air Act standards, as it did in Milwaukee when that city was deemed to be a non-attainment zone.
The Clean Air Act also allows the EPA administrator, in consultation with the Secretaries of Agriculture and Energy, to waive the requirements under certain conditions.
Any such process includes a notice and public commentary period and is based on deciding if implementation of the RFS requirements would "severely harm the economy or environment" of a state, a region or the country as a whole.
In its decision, the EPA said it recognizes that this year's drought has created "significant hardships in many sectors of the economy, particularly for livestock producers.
"However, the agency's extensive analysis makes clear that Congressional requirements for a waiver have not been met and that waiving the RFS would have little, if any, impact on ethanol demand or energy prices."
The National Farmers Union (NFU) has long been a backer of renewable fuel programs. Upon the release of Friday's decision NFU President Roger Johnson said he was pleased with the EPA decision not to waive the RFS for this year.
"The RFS has helped reduce our dependence on foreign oil from 60 percent in 2005 to 45 percent today and currently supports almost 500,000 American jobs and generates $53 billion in economic activity each year."
Johnson added that the existing structure of the RFS provides sufficient market flexibility in case of a drought or other market disruption.
"It is crucial that we maintain a stable and long-term biofuels policy in order to incentivize the commercialization of next generation biofuels."
In its decision, the EPA said that in order to grant a waiver of the RFS it would have to determine that the implementation of the mandate itself would "severely harm" the economy. "It is not enough to determine that implementation of RFS would contribute to such harm."
The EPA said it would also have to find that there is a "generally high degree of confidence that the RFS is severely harming the economy."
According to its statement, the EPA examined a wide variety of evidence, including computer analysis of the impact that a waiver would have had on ethanol use, corn prices and food prices.
That analysis found that it is "highly unlikely" that waiving the RFS volume requirements will have a significant impact on ethanol production or use in the time frame that the waiver could be applied - the 2012-2013 corn marketing season - and therefore would have little or no impact on corn, food or fuel prices.
The agency statement said it had examined 500 scenarios and in 89 percent of them they saw no impact from the RFS program at all.
That left 11 percent of scenarios where the RFS requirements would have an impact on corn and other markets, but the average impact on corn prices was found to be only 7 cents a bushel, less than a one-percent change in corn prices.
That evidence didn't support any decision that the criteria for a waiver had been met. Under those circumstances the agency said it "must, by law, deny" the waiver.