EPA to Decide on RFS Waiver Request This Week

Published on: 03:54AM Jul 21, 2008

By Jim Wiesemeyer
via a special arrangement with Informa Economics, Inc.

Decision extension possible

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This week the Environmental Protection Agency (EPA) is expected to make a decision regarding the Gov. of Texas request to modify the Renewable Fuels Standard (RFS). But there is already speculation that EPA could punt and announce an extension of the decision until after the first USDA survey-based estimate of the U.S. corn crop.

A prior Federal Register notice stated that "The [EPA] Administrator, in consultation with the Secretary of Agriculture and the Secretary of Energy, shall approve or disapprove a State petition for a waiver within
90 days of receiving it." That notice seems pretty clear and would mean a decision date no later than Wednesday, July 23. However, there has been conjecture that the EPA may wait until the Aug. 12 Crop Production Report, the first survey-based USDA estimate of the U.S. corn crop, before making the waiver decision.

An EPA spokesman was asked whether the possible RFS waiver decision timeline would be extended, or whether that was just talk. The spokesman was further asked whether EPA has any leeway in the timing of making the waiver decision. The response received, “We are not sure yet because we are still trying to meet the deadline.”

Background: Texas Gov. Rick Perry, a Republican, filed a Request for Waiver on April 25 asking the EPA to chop this year's requirement in half. Under the Renewable Fuels Standard, oil refiners are required to mix 9 billion gallons of ethanol into the nation's gasoline supply this year. 10.5 billion gallons in 2009 and 15 billion gallons a year by 2015. Opposition to the requirement has grown this year as corn prices accelerated and food prices rose.

Senate Ag Committee Chairman Tom Harkin (D-Iowa) said the standard should be upheld. "We need clean, domestic alternatives to oil, and the Renewable Fuels Standard is intended to make sure that we generate the investments needed to commercialize those fuels," he said in a prepared statement. "The waiver provision was written into law to ensure the Renewable Fuels Standard is not causing serious and sustained economic hardship. For that reason, there is a lot hanging on the EPA's upcoming decision, and I do not believe a waiver is justified in the circumstances."

Some other lawmakers, including presumptive Republican presidential candidate Sen. John McCain (R-Ariz.), sent a letter to EPA on May 2, suggesting it waive or restructure the rules – EPA has the power to waive or restructure the regulations if they cause unintended harm to consumers or the environment.

Point, counter-point. While oil refiners, environmentalists and some food processors claim that increased ethanol production is inflating food prices by diverting corn otherwise fed to livestock and discouraging farmers from planting wheat, soybeans and other crops, others argue that ethanol production has helped lower fuel prices by reducing demand for gasoline.

Iowa Secretary of Agriculture Bill Northey on Friday said, "It's hard to get a read from the EPA on how they're going to rule. They're taking it seriously. They've gotten a lot of comment."

There has been other speculation that the EPA will let the mandate stand, since corn prices have fallen back more than $1 from their earlier levels, Northey said. In addition, cornfields have improved since being damaged by flooding earlier in the season. "Crops are looking better," he said. "We may not be short as much as some people thought." But the middle of the season is not the best time to make a judgment, Northey said. "I think we have enough corn to make it easily from now until fall. The question is, will this fall's harvest be big enough to make it until the following fall? We can't know that now."

Northey said he thinks any long-term decision on the ethanol mandate should be postponed until officials have had a chance to size up this fall's harvest. "I would think it would make sense to deny this request and see what happens."

Meanwhile, a coalition of U.S. Senators has pressed EPA Administrator Stephen Johnson for a meeting soon, prior to a decision on the RFS. Reports indicated that Perry met behind closed doors with Administrator Johnson on July 9 to discuss his request for a waiver. The Senators said they “expect a fair and open decision-making process…that includes a good-faith consideration of all interested parties.”

Sen. Ben Nelson (D-Neb.)... “The move toward renewable fuels is an important and necessary step to reduce our dependence on foreign sources of fuel and to strengthen our energy security. Nebraska companies are already investing in the production of cellulosic ethanol and other renewable fuels. A reversal of the goals set by the RFS would hurt them as well as the rest of Americans who will benefit from clean, domestic-produced sources of fuel. I want Administrator Johnson to explain his meeting with Governor Perry and its effect on EPA decisions regarding the RFS,” said Sen. Nelson .

Sen. Chuck Grassley (R-Iowa)... “Administrator Johnson owes an explanation to the farmers who are fueling America as to why he felt it necessary to meet privately with Governor Perry and make an agreement on the timeline of his decision. Any decisions regarding the Renewable Fuels Standard should be made considering all points of view. The bottom line is that biofuels are increasing our national security, helping our balance of trade, and reducing our dependence on Middle East oil and the whims of Big Oil. I want to make sure that Administrator Johnson is open-minded following his meeting with Governor Perry,” said Sen. Grassley.

Sen. John Thune (R-S.D.)... “The Renewable Fuels Standard included in the 2007 Energy Bill was an historic step toward reducing our nation’s dangerous dependence on foreign sources of energy. Repealing or reducing the use of clean American-made energy would be a major setback for our growing biofuels industry, delay the transition to cellulosic ethanol, and would result in higher gas prices for American consumers. I look forward to discussing this issue with Administrator Johnson in the near future,” said Sen. Thune.

Sen. Kit Bond (R-Mo.)... “Thousands of farmers in Missouri and across the nation have invested large sums, pursuant to the Congressional ethanol mandate, to develop the infrastructure to produce this energy. To repeal the mandate now would be a major break of faith with all of these small investors, cause our imports to rise, and increase the amount of pollution coming from other petroleum sources,” said Sen. Kit Bond (R-Mo).

Sen. Claire McCaskill (D-Mo.)... "Americans are sick and tired of the White House making deals with the special interest lobby on energy policy behind closed doors. These decisions must be made in the light of day, allowing accountability and Congressional oversight," said Sen. McCaskill.

Sen. Tim Johnson (D-S.D.)... “Waiving the RFS requirement this year would mean higher gasoline prices for consumers just at the moment when Americans can least afford to pay more at the pump. Congress took a strong, bipartisan step last year to boost the use of biofuels in our nation’s fuel supply and to wean ourselves off of foreign energy sources. I am deeply troubled that some want to turn back that progress, punishing the driving public and frustrating our long-term energy security,” said Sen. Johnson.

The text of the senators' letter follows:

July 18, 2008

Administrator Johnson:

We have great concerns with news indicating that you held a closed-door meeting with Texas Governor Rick Perry on July 9, 2008 to discuss Texas’ request to waive the Renewable Fuel Standard (RFS) and that you supposedly reached an agreement to postpone making a decision. As you are aware, a group of Senators wrote to you on May 6, 2008, to register our strong opposition to the Texas request for an RFS waiver. As such, we are very concerned about any agreements being made behind closed doors with only one concerned party to this matter.

Mr. Administrator, we expect a fair and open decision-making process on this matter that includes a good-faith consideration of the concerns of all interested parties. We cannot accept and will not tolerate decisions on the RFS that are made behind closed doors and in concert with only the Governor of Texas. Moreover, we stress that an agreement to postpone any decision on the waiver raises additional concerns about whether the Agency is abiding by its responsibility to adhere to the law passed by Congress and signed by President Bush.

Accordingly, we request an immediate meeting with you and your staff that is docketed, or otherwise officially noted. The purpose of this meeting will be to gather information about your meeting with Governor Perry, learn about any agreements between EPA and Governor Perry on the waiver request and for you to assure us that EPA is following the law and the proper decision-making process.
We appreciate your prompt attention to our request and concerns. Please have your staff contact Senator Ben Nelson’s staff or Senator Grassley’s staff as soon as possible in order to schedule the meeting so that it takes place no later than July 23rd.

Sincerely,

Senator Ben Nelson (D-Neb.)
Senator Chuck Grassley (R-Iowa)
Senator John Thune (R-S.D.)
Senator Kit Bond (R-Mo.)
Senator Claire McCaskill (D-Mo.)
Senator Tim Johnson (D-S.D.)
Senator Kent Conrad (D-N.D.)
Senator Norm Coleman (R-Minn.)


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