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August 29, 2012
Many call for ethanol waiver
Untitled Document

Seven governors at last count, nearly 200 members of Congress, and 18 farm and livestock organizations have either petitioned or supported petitions to EPA Administrator Lisa Jackson to waive the federal renewable fuel standard (RFS) for 1 year.  According to the petitioners, the increased price of corn caused by the ongoing drought has reduced the corn crop and, absent an RFS waiver, will force livestock and poultry producers to reduce the size of their herds and flocks, “causing some to go out of business and jobs to be lost.” 
Corn-derived ethanol
Under the Clean Air Act (CAA), Jackson is empowered to waive the RFS for 1 year (with the option for a waiver renewal) if she determines that implementation of the RFS volume requirement would severely harm the economy or environment of a state, a region, or the United States, or that there is an inadequate domestic supply of renewable fuel.  Fuel producers can meet their RFS requirements through a range of renewable fuels, including cellulosic biofuel and biomass-based diesel.  However, for 2011, the EPA projected that over 91 percent of the nation’s 13.95 billion gallon RFS would be met by corn-derived ethanol.  A similarly high reliance on corn is expected for 2012. 
In their July 30, 2012, letter to Jackson, the industry petitioners refer to “private forecasters” who predict that the current corn crop will be the smallest since the flood year of 1993.   Approximately 4.8 billion bushels of corn will be needed to produce the applicable volume of renewable fuel in 2012.   One academic analysis estimates that a waiver of the RFS in 2011 would have reduced the price of a bushel of corn by $1.48.  Looking ahead, the researchers estimated that the effects of the current drought could add $2.13 to the price of a bushel of corn in 2015.
2008 petition
Much of the current discussion refers to a 2008 petition in which Texas Governor Rick Perry requested a 50 percent waiver of the RFS because of the negative economic effects the mandate had on Texas producers, consumers, and commuters.  This was the first formal petition the EPA had received requesting a waiver of any part of the RFS.  The Agency rejected that petition on the basis of a technical analysis and computer model developed by researchers at Iowa State University (ISU).  Based on that work, the EPA estimated at the time that RFS impact price would be $0.07 per bushel of corn.  The Agency stated that this did not satisfy the CAA’s criterion of severe economic harm. 
Industry petitioners now assert that modeling similar to what the EPA reviewed in 2008 shows a mean estimate of the impact of the RFS in the past year that is 21 times largerthan that in 2008.
In response to the current petitions, the EPA has published a notice requesting comments on the waiver request.  The EPA is specifically asking the public to provide information on how the requested relief would remedy the harm the RFS will supposedly cause, the extent to which a waiver would affect corn prices, how much of the RFS a waiver should affect, and when such a waiver should take effect.
Waiver benefits overrated?
The Renewable Fuels Association (RFA), one major ethanol proponent, claims that a waiver would “not result in meaningfully lower corn prices.”  The RFA cites a study by Purdue University, which indicates that the ability of refiners to use excess renewable identification numbers (RIN) accumulated in past years serves to reduce the price without the need for a waiver.  RINs are assigned by the renewable fuel producer to each gallon of qualifying renewable fuel and serve as a means to demonstrate compliance.  The RFA states further that work done by ISU indicates that fully waiving the RFS would result in “just a 7.4 reduction in corn price in the 2012/2013 marketing year.”
The industry petition is dated July 30, 2012.  The CAA requires that the EPA approve or disapprove an RFS waiver petition within 90 days of its receipt by the Agency.

EPA’s request for comment on the petition is at http://www.epa.gov/oms/fuels/renewablefuels/documents/2012-rfs-waiver-request-comment.pdf.
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