In his letter to the United States Environmental Protection Agency (EPA) requesting that it grant a waiver of the Renewable Fuel Standard (RFS), Arkansas Governor Mike Beebe writes, “while the drought may have triggered the price spike in corn, an underlying cause is the federal policy mandating ever-increasing amounts of corn for fuel. Because of this policy, ethanol production now consumes approximately 40 percent of the US corn crop, and the cost for use in food production has increased by 193 percent since 2005. Put simply, ethanol policies have created significantly higher corn prices, tighter supplies, and increased volatility.”
It is clear from this statement and other comments received by the EPA that some would like to see a permanent waiver that would in effect eliminate the RFS mandate altogether. It could also be argued that without a mandate and, depending upon the relative price of crude oil and ethanol, the petroleum industry could change their refining processes in such a way as to use less ethanol in the production of gasoline. In that way more corn would be available for feed, exports, food, and various industrial uses.
While acknowledging that the role of ethanol production on the price and availability of corn is an important consideration, the EPA in its November 16, 2012 denial of a waiver of the RFS volumetric requirements makes it clear that it “has authority to grant a waiver for a period of one year only.” It can also renew a waiver “after consultation with the Secretary of Agriculture and the Secretary of Energy…. Such consultation would be in the context of evaluating the economic impacts of the initial waiver as well as whether sever economic harm is still being caused by implementation of the RFS volume requirement.”
Because the statutes establishing the RFS volumetric requirements gives the EPA the responsibility to “issue regulations ensuring that gasoline sold in the US, on an annual average basis, contain[s] a specific volume of ‘renewable fuel’ the EPA does not have the authority to grant a multi-year waiver simply because it has raised the price of corn to livestock feeders and industrial users. That kind of action would instead require an act of Congress repealing the RFS.
For that reason the EPA confined its analysis of harm to a one-year timeframe.
In our previous column we reported that the EPA found that because of the way that the refiners have taken advantage of the high octane content of ethanol by producing a lower octane gasoline for blending, the ability of refineries to reduce their use of ethanol under a one-year waiver would be severely limited.