EPA denies appeal to waive US Renewable Fuels Standard

| November 16, 2012

The U.S. Environmental Protection Agency (EPA) announced that the agency has not found evidence to support a finding of severe “economic harm” that would warrant granting a waiver of the Renewable Fuels Standard (RFS). The decision is based on economic analyses and modeling done in conjunction with the U.S. Department of Agriculture (USDA) and U.S. Department of Energy (DOE).

“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” said Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation. “But our extensive analysis makes clear that Congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact.”

To support the waiver decision, EPA conducted several economic analyses. Economic analyses of impacts in the agricultural sector, conducted with USDA, showed that on average waiving the mandate would only reduce corn prices by approximately one percent. Economic analyses of impacts in the energy sector, conducted with DOE, showed that waiving the mandate would not impact household energy costs.

EPA found that the evidence and information failed to support a determination that implementation of the RFS mandate during the 2012-2013 time period would severely harm the economy of a State, a region, or the United States, the standard established by Congress in the Energy Policy Act of 2005 (EPAct).

EPAct required EPA to implement a renewable fuels standard to ensure that transportation fuel sold in the United States contains a minimum volume of renewable fuel. A waiver of the mandate requires EPA, working with USDA and DOE, to make a finding of “severe economic harm” from the RFS mandate itself.

This is the second time that EPA has considered an RFS waiver request. In both cases, analysis concluded that that the mandate did not impose severe harm. In 2008, the state of Texas was denied a waiver.

Reaction from the industry

Brooke Coleman, Executive Director, AEC: “The advanced ethanol industry commends U.S. EPA for denying the RFS waiver petition. Waiving the RFS would have done little if anything to reduce grain prices, but would have hurt consumers at the pump and undercut investment in advanced biofuels. Congress was right to protect the RFS from specious and politically-motivated waiver arguments, and to include in the program explicit flexibility provisions that allow the standard to adjust to changing market conditions. The RFS is well-designed and is the primary reason why the United States has emerged as the global leader in the development of advanced biofuels. There will be other stalking horses advanced by the oil industry to weaken the RFS, but it is a step in the right direction to put this one behind us.

The American Coalition for Ethanol (ACE) applauded the U.S. Environmental Protection Agency (EPA) for denying a request from a handful of states to waive the Renewable Fuel Standard (RFS).

“Despite millions of dollars spent by Big Oil and Big Food to shamelessly attack American-made ethanol, it comes as no surprise EPA denied the requests to waive the RFS because the facts are on our side,” said Brian Jennings, ACE Executive Vice President. “EPA considered the flexibility built-into the RFS, precedent established in 2008, and data which proved waiving the RFS wouldn’t remedy the harm of the drought in making the right decision.”

Jennings says that comments submitted by ethanol supporters were a factor in the EPA’s decision.

“In a strong demonstration of grassroots support for ethanol, more than 130 unique comments were submitted by ACE members from 15 different states making the case for the RFS,” said Jennings. “Given the battle we anticipate over the RFS in Congress next year, we encourage ethanol supporters to stay engaged. One way to remain actively involved is to join ACE for our annual ‘Biofuels Beltway March’ fly-in scheduled for March 13-14 on Capitol Hill.”

Fuels America, a coalition of organizations representing a broad spectrum of renewable fuel stakeholders, released the following statement today after the EPA rejected requests to waive the Renewable Fuel Standard (RFS):

“The multi-sector members of Fuels America are happy to see that the RFS, a policy that has driven job creation and investment in a time of economic distress, will remain intact. It has helped to attract billions in investment to an industry that supports over 400,000 jobs.

“The economic facts support EPA’s decision. We commend the agency for recognizing the importance of the policy to lowering gas prices and reducing our dependence on foreign oil, and the role of the drought, not renewable fuels, in driving current commodity prices.

“The certainty that this decision delivers will support continued investment and innovation in a range of diverse, efficient and advanced renewable fuel technologies.”

The Fuels America coalition represents a diverse set of stakeholders – from industry, national security, agriculture and more – that support the RFS. Here’s what a few of its members said about today’s decision:

Adam Monroe, President, Novozymes North America, said of EPA’s decision to deny the waiver:

“With so much at stake for the economy, we need the Renewable Fuel Standard: Its stability has generated 400,000 careers, billions in private investment – and domestic, renewable fuel for America. Novozymes and other industry leaders have invested more than a billion dollars to commercialize advanced biofuels agricultural waste, household trash and more, in large part because of the RFS.

“We appreciate the Administration’s decision to deny the waiver request based on the data – and are pleased the United States will continue becoming less dependent on foreign oil with domestic, renewable fuel for its cars and trucks.”

Jan Koninckx, Global Business Director for Biofuels at DuPont:

“We are pleased with the EPA ruling. The agency continues to demonstrate a commitment to US production of renewable fuels to reduce our dependence on imported oil.   The careful analyses performed by USEPA and USDA show that the drought, and not the Renewable Fuels Standard, is the cause of the temporary situation,” said Jan Koninckx, Global Business Director for Biofuels at DuPont.   “While we empathize with both livestock and ethanol producers that are struggling with higher corn prices, we are also confident that farmers will continue to expand corn production, and DuPont and others will continue to commercialize advanced biofuels – to serve both our feed and renewable fuels needs.”

Jeff Lautt, CEO of POET

“The EPA today made a sound decision in denying a waiver of the Renewable Fuel Standard. As studies have shown, a waiver would have likely had little to no impact on commodities prices in the aftermath of the recent drought. This effort was nothing more than the latest attempt by renewable fuel opponents to undermine policy that has helped make America stronger.

“Today’s decision means the Renewable Fuel Standard remains strong and stable policy, and our industry can move forward with greater confidence, continuing to invest in new technology to make biofuels production even more efficient and commercializing fuel production from cellulosic feedstocks such as crop residue and other plant material.

“POET-DSM Advanced Biofuels is moving forward with construction of the joint venture’s first commercial cellulosic biofuels plant that will use corn cobs, leaves, husk and some stalk to produce renewable fuel. Long term, there are ambitious plans for expansion of this technology to more plants in the POET network and to other companies through licensing agreements. By maintaining the integrity of the Renewable Fuel Standard, those expansion plans are much more feasible.”

Bob Dinneen, CEO, Renewable Fuels Association

“The EPA made the right decision today.  We applaud the EPA for basing its decision on thoughtful analysis of the facts and not emotion or panic.  The RFS is working as designed.  The flexibility that is built into the RFS allows the marketplace to ration demand, not the government.  Indeed, the ethanol industry has responded to the market by reducing output by approximately 12%.  Other users of corn have responded to a lesser degree.  Maintaining the RFS is in the best interest of both U.S. agriculture and American consumers.  The RFS is resulting in greater energy independence and diversity, real job creation, lower gas prices, and a cleaner environment.

Brent Erickson, executive vice-president of BIO’s Industrial & Environmental, Section: 

“EPA has made the right decision and we thank them for making a careful and fully considered analysis. Earlier studies by researchers at Purdue University, Iowa State University and the University of Missouri’s Food and Agricultural Policy Research Institute showed clearly that a waiver of the RFS would not undo the economic harm caused by the drought.

“However, a waiver of the RFS could have undercut ongoing investments in advanced biofuels. Renewable fuels are a significant contributor to our nation’s economy and energy security, creating jobs and directly reducing reliance on imported oil. This decision allows BIO member companies to continue to deliver innovative technologies to the market to expand our domestic production of biofuels, including fuels from agricultural residues, municipal solid waste, algae and purpose grown energy crops.”

Tom Buis, CEO, Growth Energy: The announcement by the EPA is welcome news to the renewable fuels industry and those dedicated to reducing our dependence on foreign oil, spurring investment and creating jobs right here in America.

“Growth Energy has continually advocated that the current conditions fall short of the threshold required to modify the RFS and that the market is working. Furthermore, granting a waiver on the evidence presented by the obligated parties would have sent the wrong signal the investment community, whose participation is vital to the reducing our dependence on foreign oil, creating jobs in the US that cannot be outsourced, improving our environment and saving consumers at the pump.

“Today’s decision confirms what we knew all along – the petitioners were wrong in their belief that the RFS caused the economic harm. I commend the administration’s efforts to carefully review the facts and data in this matter. Their findings have echoed the comments of Growth Energy and we are pleased that the most successful energy policy enacted in the last forty years will not be modified.

“I thank the EPA for their diligent work and applaud them for ensuring the win-win energy policy for America is not changed due to political pressure from an isolated event.”

Reaction from critics

Michal Rosenoer, biofuels policy campaigner at Friends of the Earth: “If the worst U.S. drought in more than 50 years and skyrocketing food prices are not enough to make EPA act, it falls to Congress to provide relief from our senseless federal support for corn ethanol.  The RFS is a broken policy — rather than giving  us clean energy, it’s incentivizing biofuels like corn ethanol that are exacerbating our economic and environmental problems.

“Congress needs to cut corn ethanol from the RFS entirely to protect the economy and the environment from this destructive and dirty fuel.”

Joint statement from Environmental Working Group, Friends of the Earth and ActionAid USA:
“We are disappointed with EPA’s decision to deny relief for those who need it most. High corn prices have put enormous pressure on livestock producers, dairy farmers and consumers, as well as the environment. While Americans struggle to stay afloat and put food on their tables, more than 40 percent of the nation’s corn crop is being used to make ethanol – a result of the requirements of the federal Renewable Fuel Standard.
“This decision should serve as a wake-up call to Congress and the White House that the Renewable Fuel Standard does not protect producers and consumers in times of hardship and must be reformed. Its reliance on mandates for food-based fuel – namely corn ethanol – exposes us to spiking prices whenever yields drop because of drought or other severe weather.
“The skyrocketing cost of animal feed will force 100 of California’s dairies out of business by year’s end. Overall food prices are expected to rise by as much as 4 percent in the coming months, with even greater increases for meat, poultry, milk and eggs. These mandates have also spurred the conversion of 23 million acres of environmentally sensitive wetlands and grasslands – an area the size of Indiana – to row crops, mostly corn.
“In order to stem further damage, we urge that lawmakers in Congress consider a responsible phase-out of the corn ethanol mandate. No amount of tinkering can substitute for the impact of real reform.”


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