EPA rejects Texas’ RFS waiver request | TSLN.com

EPA rejects Texas’ RFS waiver request

Todd Neeley
DTN Staff Reporter

OMAHA (DTN) – The U.S. Environmental Protection Agency Thursday denied a requested 50-percent waiver of the nine-billion-gallon Renewable Fuel Standard for 2008, after weighing some 15,000 comments submitted to EPA in the past couple of months.

The request by Texas Republican Gov. Rick Perry and others said the RFS was hurting the livestock industry by driving up the price of corn for feed.

EPA Administrator Stephen L. Johnson made the announcement during a press conference.

In announcing its decision, the EPA said there was no evidence to support Perry’s claim that the mandate would “severely harm” the U.S. economy, Reuters news service reported.

The agency also said that reducing the mandate “would have no impact on ethanol production volumes in the relevant (2008) time frame, and therefore no impact on corn, food, or fuel prices,” Reuters reported.

Perry’s request was joined by a similar call from 24 Republican senators, including presidential candidate John McCain, who wrote a letter to the EPA asking for the RFS to be waived or restructured. Since then, nearly 50 members of the U.S. House of Representatives have expressed their support of a waiver as well.

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Some livestock companies, including chicken producer Pilgrim’s Pride Inc., have reported large dips in recent profit margins, blaming what they say is a dramatic increase in corn prices.

RFS supporters have contended that even if Congress was successful in waiving the RFS for one year, which is allowed in the provisions of the law, the U.S. ethanol industry will continue to expand.

The RFS is important to the ethanol industry because it creates demand for the fuel.

The RFS requires the production of 36 billion gallons of ethanol by 2022, including a 15-billion-gallon cap on corn-based ethanol. The RFS requires gasoline blenders to blend nine billion gallons of ethanol in 2008.

According to information from the Renewable Fuels Association website, however, U.S. ethanol producers already have a combined production capacity of about 9.4 billion gallons.

Eitan Bernstein, an analyst with capital markets company Friedman, Billings, Ramsey & Company, Inc., based in Arlington, VA, wrote in a July 18 research report that production capacity actually is closer to 9.8 billion gallons and should approach 13 billion gallons by sometime early in 2009.

RFS opponents have said a waiver is needed because livestock producers have been hurt by the rise in corn prices for feed. Corn futures prices have topped out at around $8 a bushel at times in the past year.

Those requesting a waiver have done so generally because they believe waiving the RFS would have the effect of lowering feed prices for the livestock industry and food prices in general.

Various studies in recent months, including one from Texas A&M University, have found that reducing the RFS would not lead to lower corn prices and that higher corn prices play a small role in higher food prices.

The EPA was originally scheduled to issue a ruling on July 24, but postponed the announcement to August in order to have more time to review some 15,000 comments submitted on the waiver request.

Todd Neeley can be reached at todd.neeley@dtn.com.

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