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November 21, 2012
Requests for RFS waiver denied

Petitions from several state governors failed to persuade the EPA to waive the renewable fuel standard (RFS) for corn-based ethanol for the 2012 to 2013 compliance period. The petitioners had argued that the 2012 summer drought severely damaged corn production, and the resulting high price of corn exacerbated by the demand for corn caused by the RFS, would result in severe harm to the economy and particularly to livestock producers.  According to the Agency, the petitions, which were supported by major livestock organizations, did not present data sufficient to meet the statutory conditions on which a waiver must be based. 

The price of corn

The RFS requires that 13.8 billion gallons of ethanol be blended into the nation’s transportation fuel supply in 2013.  The National Chicken Council (NCC), one body that called for a 100 percent RFS waiver for 2013, reported that the 2012 corn harvest was the lowest in 5 years and 13 percent lower than 2011.  Nonetheless, absent a waiver, the RFS would require that 5 percent more corn be diverted to ethanol production for 2013.  Absent a waiver, the RFS would likely raise corn prices by more than $2. per bushel, a 24 percent increase, claimed the NCC.  In its own analysis, the EPA found that the waiver would basically have no impact at all on corn prices.

Narrow authority

The EPA emphasizes that the Energy Policy Act of 2005 (EPAct) provides the Agency with “narrow” authority to waive the RFS.  Specifically, a waiver requires that implementation of the RFS must itself severely harm the economy; it is not enough to determine that the implementation would contribute to economic harm.  The EPA would also have to find that there is a generally high degree of confidence that the RFS is severely harming the economy.

The EPA said it received nearly 30,000 public comments on the waiver request, the majority comprising short statements generally in support of the requests for a waiver.

As did the petitioners, the EPA conducted its own modeling of the impact a waiver would have on ethanol use, corn prices, and food prices.  The Agency also looked at empirical evidence such as the current price and availability of renewable fuel credits, called RINs, which fuel manufacturers nationwide can use to meet up to 20 percent of the total RFS volume requirement. 

7 cents more per bushel

Following its own computer analysis, the EPA concluded that it is highly unlikely that waiving the RFS volume requirements would have a significant impact on ethanol production or use in the time frame in which a waiver would apply.  The Agency said that 89 percent of the 500 scenarios it modeled showed no impact from the RFS program at all. Moreover, for the remaining 11 percent of the scenarios, the average impact on corn prices was only 7 cents a bushel, less than a 1 percent change in corn prices. 

The EPA also estimated that up to 3 billion rollover RINs will be available for the 2013 RFS compliance period, which could significantly alleviate the renewable fuel blending obligations of regulated fuel producers.

Click here to read EPA’s notice of its decision regarding requests for a 2013 waiver of the RFS.

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