EPA rejects governors' requests to waive ethanol mandate

The Obama administration on Friday rebuffed requests by Texas Gov. Rick Perry and the leaders of several other states to waive a federal renewable fuel mandate that requires ethanol to be blended into the nation's gasoline supply.

In rejecting the waiver requests, the Environmental Protection Agency effectively disagreed with the states' concerns that the mandate was spiking corn demand and prices following a drought that devastated crops in the Midwest. The EPA concluded the Renewable Fuel Standard would not cause "severe economic harm" to states and regions.

"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."

This is the second time Perry has lost his bid for a renewable fuel standard exemption. In 2008, the EPA also turned him down.

But this time, Perry was joined by Arkansas, Delaware, Maryland, North Carolina and other states in seeking at least a one-year waiver of the Renewable Fuel Standard.

Perry had insisted a timeout was needed because otherwise, the cost of groceries and feedstock will be pushed higher as refiners keep buying corn-based ethanol to satisfy the mandate, even though corn yields are down.

Anti-hunger activists note that because the mandate relies on a food-based fuel, it exposes the public to spiking prices whenever yields drop.

'Beyond common sense'

Perry spokesman Josh Havens called the decision "another punch in the gut for states' agricultural economies that have been plagued by skyrocketing feed prices and lingering drought."

"Congress provided relief from the Renewable Fuel Standard in the form of emergency waivers, yet the EPA continually refuses to accept requests from the states whose economies are being harmed the most," Havens said. "This denial goes beyond common sense and, unfortunately, every American is going to feel its effects."

Ethanol producers are the largest purchases of U.S. corn, snapping up 40 percent of the annual crop in 2011-2012 to help meet the mandate that requires refiners to blend a steadily increasing amount of ethanol and other biofuels into the nation's transportation fuel. This year, refiners have to blend 13.2 billion gallons of ethanol into the nation's fuel supply; the requirement will climb to 13.8 billion gallons in 2013.

Renewable fuel supporters cheered the EPA's decision and said the governors were trying to capitalize on concerns about the drought before the mandate starts squeezing refiners.

"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," said Brooke Coleman, executive director of the Advanced Ethanol Council. "Congress was right to protect the RFS from specious and politically motivated waiver arguments."

Biofuel boosters say that current law allows enough flexibility for drought or other market disruption, but otherwise, stable policy is necessary to foster investment in the emerging alternative fuels industry.

"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," said Jeff Lautt, CEO of POET, one of the country's biggest ethanol producers.

But EPA's decision drew criticism from an unlikely alliance of environmentalists, California livestock producers, refiners and chain restaurants.

Charles Drevna, the president of the American Fuel and Petrochemicals Manufacturers, described a "growing chorus of concern from food, livestock, engine and consumer communities" about the mandate.

"Consumer choice in the marketplace - not mandates - should dictate how (alternative) fuels are used," Drevna said.

Animal feed a factor

Anti-hunger and conservation groups, including the Environmental Working Group, Friends of the Earth and ActionAid USA, jointly said the 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."

As many as 100 California dairies could close or go bankrupt this year in part because of the cost of animal food.

Rep. Jim Costa, D-Calif., said the EPA is putting "a flawed policy over the interests of hard-working Americans." He noted that since June, feed prices have jumped nearly 60 percent.