EPA to Consider RFS Waiver Requests

Graph courtesy of Roger Pielke Jr.

The EPA announced yesterday that it would open a 30 day commenting period as it weighs requests from multiple state governors to use provisions in the Clean Air Act to temporarily suspend the corn ethanol mandate under the Renewable Fuel Standard:

The EPA asked on Monday for public comment on the need for an ethanol waiver. The 30-day comment period will begin once the notice is published in the Federal Register.

“This notice is in keeping with EPA’s commitment to an open and transparent process to evaluate requests the agency receives under the Clean Air Act, and does not indicate any predisposition to a specific decision,” agency spokeswoman Alisha Johnson said in a statement.

By law the agency has until November 13 to make a decision on the waivers, meaning EPA could act on the requests after national elections on November 6.

Aimed at reducing U.S. reliance on foreign oil, the Renewable Fuels Standard, or RFS, would require 13.2 billion gallons of ethanol to be made from corn this year.

Recall in 2008 Texas Governor Rick Perry submitted a similar request to the EPA which the EPA denied by arguing that waiver requests must show that the mandate was “severely damaging” a region’s economy rather than just contributing to economic damage.

As noted, the EPA will not need to act on this until after the election. It’s possible at that point they would consider in some way reducing the blend level of corn ethanol, though it seems very unlikely as the Obama Administration — like the administrations before him — has repeatedly placed the interests of ethanol producers over the interests of consumers.  The popularity of ethanol has shifted slightly in recent years, though its hard to imagine it’s shifted enough such that the EPA would be willing to enrage the ethanol industry, and send a “chilling signal” to investors in order to alleviate the demand for corn created by the Renewable Fuel Standard. Perhaps things will change if the drought continues or intensifies.

More likely, if anything, as Roger Pielke Jr. points out the outcome will involve some sort of change to the Renewable Identification Number system allowing refiners increased flexibility to push blending obligations to future years when (presumably) drought conditions have alleviated. He also produced a nice graph (above) displaying modeled reductions in corn prices in response to theoretical changes to the RFS. The same study, oddly enough, has been touted by ethanol supporters to suggest that changes to the RFS would not have significant impacts. However, the study found corn price reductions in the range from 7.5-25%, depending on the severity of modifications to the RFS. I wouldn’t classify any of those as insignificant.