Request to waive ethanol mandate denied by EPA

Source: Written by CHRISTOPHER DOERING, Des Moines Register, Gannett Washington Bureau • Posted: Monday, November 19, 2012

Agency found no evidence to justify the challenge

WASHINGTON — The Obama administration rejected a request Friday from several states and livestock groups to waive a federal mandate that requires millions of gallons of ethanol to be blended into the country’s gasoline supply.

The Environmental Protection Agency said it found no evidence “of severe economic harm” that was necessary to justify granting a waiver.

Governors from nearly a dozen U.S. states, congressional lawmakers and the meat industry lobbied the EPA to ease the mandate on ethanol after the worst drought in 50 years pushed corn prices to a record high during the summer. They said a pause in the mandate was needed to help both livestock producers who use corn to feed their animals and consumers who would be faced with more expensive prices for meat, milk and other items on supermarket shelves.

“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.”

The EPA said data reviewed by the agency found in most cases a waiver would have a minimal impact on corn, food or fuel prices. The average impact on corn prices in granting a waiver would amount to 7 cents a bushel, less than a 1 percent drop. To grant the waiver, the EPA is required by law to determine if the Renewable Fuel Standard is inflicting severe harm on the economy, something the agency did not find in its review.

“Today’s decision confirms what we knew all along — the petitioners were wrong in their belief that the RFS caused the economic harm,” said Tom Buis, chief executive of Growth Energy, a group that represents the ethanol industry.

Supporters of relaxing the Renewable Fuel Standard criticized the EPA for failing to act and called the Renewable Fuel Standard a “flawed law.”

They have argued the seven-year-old law, which requires 13.2 billion gallons of corn-based ethanol to be blended into the vehicle fuel supply in 2012, made it even more expensive to acquire the feed they need, and a waiver would have helped lower prices by freeing up millions of bushels of corn. Ethanol is expected to use about 4.5 billion bushels of corn, or about 40 percent of the country’s corn production this year.

The National Council of Chain Restaurants warned that consumers will face higher prices as a result of the EPA’s waiver rejection. Meanwhile, Patrick Kelly, a senior policy adviser with the American Petroleum Institute, the trade group that represents energy giants ExxonMobil, ConocoPhillips, among others, called the Renewable Fuel Standard “increasingly unrealistic and unworkable.”

“The EPA applied an improper and unnecessary high bar, which makes it questionable if any waiver could ever be granted,” he said.

The decision by the EPA was the second time it denied a waiver request. In 2008, the agency rejected a similar petition from Texas Gov. Rick Perry following a spike in corn prices. Josh Havens, deputy press secretary for Perry, said today’s decision was “another punch in the gut for states’ agricultural economies that have been plagued by skyrocketing feed prices and lingering drought. This denial goes beyond common sense and, unfortunately, every American is going to feel its effects.”

But the ethanol industry has countered that it is the weather, and not ethanol, that was responsible for driving up corn prices. They said opponents were trying to capitalize on weather concerns to get a break from the mandate. The soaring price of corn has led dozens of ethanol plants to scale back production or shutter their doors entirely, leading to a broad decline in production of the corn-based fuel.

Kyle Gilley, senior vice president of public policy and corporate affairs with Sioux Falls, S.D.-based ethanol producer Poet, said the EPA’s decision to reject a waiver request for a second time “validates our industry.” He said ethanol producers are bracing for future challenges to the renewable fuels law.

“We will continue to be challenged. Our industry is built on upsetting the status quo, and the people we are upsetting are some of the largest corporate entities, from big oil to big food,” said Gilley. “But the facts are on our side and we’re very comfortable we’ll beat back any challenges.”