As a result of sharply increased corn prices that resulted from the drought this past summer, several states requested a waiver of the renewable fuel standard (RFS) by the US Environmental Protection Agency (EPA). In making her Aug. 14, plea “on behalf of the State of North Carolina,” Governor Beverly Perdue writes, “I hereby request that the applicable volume of renewable fuel be waived…. The imposition of a 15.2 billion gallon renewable fuel standard (RFS) in 2012, coupled with the prospect of a 16.55 billion gallon standard in 2013, has imposed severe economic harm to my state’s swine, poultry, dairy, and cattle-producing regions.”
At the end of her letter she asserts, “Altogether, severe economic harm is being experienced by the State of North Carolina and many of its agricultural regions, as well as important economic sectors in the state, as a direct result of the implementation of the applicable volume requirements of the RFS. This harm could be alleviated by a waiver of the RFS applicable volume for renewable fuel in 2012 and 2013.
“Granting a waiver now would allow for the waiver to extend into the 2012 harvest season and a large part of the 2013 growing season. I therefore ask that you consider a full range of waiver options…including waiver of the full amount of the applicable volume of the RFS…to allow the maximum impact on the price of feed grain in 2012 and 2013.”
On Nov. 16, the EPA denied the request of Governor Perdue and others. The short story is that while the EPA recognizes the impact of the drought on livestock producers, “the agency’s extensive analysis makes clear that Congressional requirements for a waiver have not been met and that waiving the RFS would have little, if any, impact on ethanol demand or energy prices over the time period analyzed.”
The longer story is contained in EPA’s 83 page notice of their decision regarding the request for a waiver of the RFS for a current link to the Federal Register copy of the notice). One of the interesting parts of the “longer story” concerns the role that ethanol currently fulfills in the production of gasoline. Let us pick up this portion of the story directly from the EPA decision.
In assessing the impact of implementing the RFS volume requirements in the 2012/2013 time frame on ethanol production, a key consideration is the economic incentives for refiners to use ethanol during that time frame as well as the ability of refiners and fuel blenders to reduce, over that one-year timeframe, the quantity of ethanol being blended into the gasoline pool.