RFS waiver requests filed, the ethanol industry responds

By Erin Voegele | August 15, 2012

North Carolina Gov. Beverly Perdue filed a petition for wavier of the renewable fuel standard (RFS) with the U.S. EPA on August 14. According to a letter Perdue sent to EPA Administrator Lisa Jackson, she is seeking that the applicable volume of renewable fuel be waived pursuant to section 211(o)(7) of the Clean Air Act.

“The imposition of a 15.3 billion gallon renewable fuel standard (“RFS”) in 2012, coupled with the prospect of a 16.55 billion gallon standard in 2013, has imposed severe economic harm to my state’s swine, poultry, dairy, and cattle producing regions,” Purdue said in the letter.

“While the severe drought that our nation has experienced is an underlying factor in current economic conditions, the direct harm is caused by the RFS requirement to utilize ever-increasing amounts of corn and soybeans for transportation fuels, severely increasing the costs of producing food and further depleting already severely stressed grain supplies,” she further alleged in the letter.

According to Perdue’s letter, the harm that the drought is causing is increasing the price of corn and soybeans, which is leading to severe economic impacts in her state. “This harm is fully of an extent and character that meets the requirements of CAA section 211(o)(7),” she said.

She also stated that severe economic harm is being experienced in North Carolina as a direct result of the RFS. “This harm could be alleviated by a waiver of the RFS applicable volume for renewable fuel in 2012 and 2013,” she said. “Granting a waiver now would allow for the waiver to extend into the 2012 harvest season and a large part of the 2013 growing season. I therefore ask that you consider a full range of waiver options under CAA section 211(o)(7), including waiver of the full amount of the applicable volume of RFS, waiver of a partial amount of the applicable volume of renewable fuel, and granting any waiver to allow the maximum impact on the price of feed grain in 2012 and 2013.”

Under section 211(o)(7) of the CCA, the EPA is required to publish a public notice on the waiver, and allow the public opportunity to comment. The EPA administrator is also directed to consult with the secretary of agriculture and the secretary of energy to approve or disapprove a petition for a waiver within 90 days after the date the petition is received by the EPA. This means a response must be issued by mid-November.

Several other governors have filed similar RFS waiver requests with the EPA, including Arkansas Gov. Mike Beebe, Maryland Gov. Martin O’Mally, and Delaware Gov. Jack A. Markell.

Representatives of the U.S. ethanol industry have been quick to respond to the waiver requests. Growth Energy CEO Tom Buis said that these waiver requests are unnecessary and based on misinformation. “First, the RFS contains plenty of flexibility to ensure that the volume goals can be met when shortages occur, such as this drought,” he said. “Hysteria and misinformation should not dictate policy directives…The governors continue to use misinformation saying that corn ethanol uses 40 percent of the corn crop—we do not. In fact, only 16 percent of the corn acres harvested goes to ethanol production. Just one-third of the kernel is used for ethanol, with all the protein, fiber and oil being returned to the food chain in the form of a high protein animal feed, which replace corn and soybean meal and is less expensive. It is not the ethanol industry that is causing the economic harm; it is Mother Nature—specifically a lack of rain and record high temperatures are the true culprits of rising commodity prices, something that neither the EPA, nor any government agency is able to fix.”

Brian Jennings, executive director of the American Coalition for Ethanol, noted that the industry welcomes a fact-based examination of the role of the RFS in moderating gas prices and reducing expensive foreign oil imports. “While we cannot complete with our opponent’s well-funded public relations attacks on the RFS, we are absolutely certain that an examination of the facts by EPA, the Department of Agriculture, and Department of Energy will confirm the role the RFS plays in reducing gas prices, and as a result, confident they won’t waive the RFS.”

The Renewable Fuels Association has also weighed in on the issue. According to the organization, waiving the RFS will not solve the problems. “Just like in 2008, seeking to reduce U.S. ethanol production will not bring about the return to undervalued corn sought by meat groups and food processors,” the RFA said in a statement.

The RFA also noted that the RFS is a remarkably flexible program that allows oil refiners a variety of options to meet their obligations. “The market is already taking advantage of this flexibility by reducing ethanol corn demand by 12 percent in just the last two months,” the RFA said. “A mountain of excess RFS credits, strong ethanol supplies, and continued demand for ethanol as a fuel additive make any waiver of the RFS unnecessary.”