EPA Denies Texas Request for RFS Waiver

Published on: 03:49AM Aug 08, 2008

By Jim Wiesemeyer

via a special arrangement with Informa Economics, Inc.

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Agency leaves things unchanged for 2008 & 2009

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

The Environmental Protection Agency (EPA) today denied the Texas request for a waiver of the Renewable Fuels Standard (RFS):

Following is the text of the EPA announcement on this matter:

Following extensive analysis, U.S. Environmental Protection Agency (EPA) Administrator Stephen L. Johnson today announced his decision to deny a request submitted by the State of Texas to reduce the nationwide Renewable Fuels Standard (RFS). As a result, the required total volume of renewable fuels, such as ethanol and biodiesel, mandated by law to be blended into the fuel supply will remain at 9 billion gallons in 2008 and 11.1 billion gallons in 2009.

“After reviewing the facts, it was clear this request did not meet the criteria in the law,” said EPA Administrator Stephen L. Johnson. “The RFS remains an important tool in our ongoing efforts to reduce America’s greenhouse gas emissions and lessen our dependence on foreign oil, in aggressive yet practical ways.”

Current law authorizes EPA to waive the national RFS if the agency determines that the mandated biofuel volumes would cause “severe harm” to the economy or the environment. The agency recognizes that high commodity prices are having economic impacts, but EPA’s extensive analysis of Texas’ request found no compelling evidence that the RFS mandate is causing severe economic harm during the time period specified by Texas.

The Energy Policy Act of 2005 established the RFS program – and included amendments to the Clean Air Act to set strict criteria for RFS-related waivers. RFS nationwide volume mandates were increased in the Energy Independence and Security Act, which was signed into law in December 2007. EPA conducted detailed analysis, consulted closely with the Departments of Energy and Agriculture, and carefully considered more than 15,000 public comments in response to the Texas request. This is the first RFS-related waiver request.

In a Federal Register notice, EPA is publishing a detailed rationale that will also serve as a framework for any future waiver considerations.

As for why EPA did not grant the Texas request, EPA offered the following as the basis for that decision:

  • EPA is authorized to grant Texas' waiver request if EPA determines that implementation of the RFS mandate would severely harm the economy of a State, region, or the United States.
  • EPA interpreted the waiver provision as providing only narrow waiver authority:
    • EPA 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;
    • EPA would also have to find that there is a generally high degree of confidence that the RFS is severely harming the economy; and
    • This requirement calls for a high threshold for the nature and degree of harm that would support the issuance of a waiver based on "severe harm" to the economy of a State, region, or the United States.
  • EPA examined a wide variety of evidence, including modeling of the impact that a waiver would have on ethanol use, corn prices, food prices, and fuel prices. EPA also looked at empirical evidence, such as the current price for renewable fuel credits, called RINs, which are used to demonstrate compliance with the RFS mandate.
  • EPA determined that the weight of all of the evidence indicates that implementation of the RFS would have no significant impact in the relevant time frame (the 2008/2009 corn season), and the most likely result is that a waiver would have no impact on ethanol production volumes in the relevant time frame, and therefore no impact on corn, food, or fuel prices.
  • EPA also determined that the evidence also indicates that even if the RFS mandate were to have an impact on the economy during the 2008/2009 corn marketing year, it would not be of a nature or magnitude that could be characterized as severe. Even in the modeled scenarios where a waiver of the RFS mandate might reduce the production of ethanol, the resulting decrease in corn prices is anticipated to be small (on average $0.30 per bushel of corn), and there would be an accompanying small increase in the price of fuel (on average $0.01 per gallon in fuel costs). The average increase in corn prices in all modeled scenarios, including scenarios where the RFS mandate would and would not have an impact, was $0.07 per bushel of corn. Such levels of potential impacts from the RFS program do not satisfy the high threshold of harm to the economy to be considered severe.
  • EPA's decision is based on the facts of this case, and applied the evidence to the narrow criteria for a waiver. EPA found that the evidence did not support a determination that the criteria for a waiver had been met, and denied the waiver.

    NOTE: Regarding the 11.1 billion gallon figure mentioned by EPA's Johnson, in their response to the Texas request, EPA notes the law "requires 9 billion gallons of renewable fuels in 2008 and 11.1 billion gallons in 2009; however, 600 million gallons of the 2009 volume must be advanced biofuels (including 500 million gallons of biomass-based biofuels)."

BACKGROUND: Texas Republican Governor Rick Perry asked EPA in April to reduce by 50 percent the renewable mandate requiring 9 billion gallons of ethanol and other renewable fuels to be blended into gasoline in 2008. Perry's request claimed the blending requirement was having an "unnecessarily negative impact" on the livestock industry in Texas, the nation's leading cattle producing state.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.