The Renewable Fuels Association (RFA) today strongly encouraged the Environmental Protection Agency (EPA) to deny requests from several states to waive the requirements of the Renewable Fuel Standard (RFS). “EPA has no option but to deny the waiver requests because they are procedurally incomplete, legally insufficient, and factually flawed,” said Bob Dinneen, RFA President and CEO. “Perhaps most outrageous is the fact the petitioners make no mention of the RFS program’s inherent flexibilities, and they blatantly ignore the fact that the ethanol industry is responding rationally to current grain market conditions by significantly reducing production. Supporters of a waiver overlook the impact of RIN credit banking, borrowing, and trading provisions. The very provision that allows obligated parties to meet up to 20 percent of their current year RFS obligation with RINs generated in the previous compliance year was designed specifically to mitigate the impacts of a drought on agricultural markets. The RFS is unquestionably working as intended. It is a proven success, and it absolutely should not be waived.”
To obtain a waiver, a petitioner must show that there is severe harm to the economy of a state, a region, or the United States; that the harm is being directly caused by the RFS; and that waiving the RFS would cure the claimed harm. The waiver requests completely fail to satisfy the statutory waiver criteria for the following major reasons:
• No showing of severe harm. The net state-level impacts of changes in corn price that might result from a waiver of the RFS would be trivial. For example, the impact of changes in corn price that might result from a waiver would be equivalent to no more than 0.01 percent of the North Carolina’s Gross Domestic Product (GDP), 0.02 percent of Arkansas’ GDP, and 0.01 percent of Georgia’s GDP. These effects can hardly be considered severe economic harm, particularly when they do not take into account the benefits to the state economies from the use of ethanol, such as lower fuel prices.
• No showing that the RFS itself is causing the claimed harm. The petitioners do not establish that RFS implementation itself is the cause of the higher feed costs facing their state livestock and poultry industries; rather, the waiver request letters explicitly recognize that the drought of 2012 was the root cause of the increased feed costs.
• No showing that waiving the RFS would cure the claimed harm. Studies estimating the impact of a potential RFS waiver on corn prices show that waiving the requirements in 2013 might reduce corn prices by as little as $0.04 per bushel, or just 0.5 percent. Further, prices for other feed key ingredients (e.g., distillers grains) may increase in response to a waiver, meaning net feed costs would be unchanged or may actually increase for some species.
• Failure to recognize the impact of RFS compliance flexibilities. The petitioners make no mention of the RFS program’s flexibilities that mitigate the impacts of marketplace anomalies and allow markets to adjust rationally. Specifically, the petitioners ignore the impact of RIN banking, borrowing, and trading provisions. In fact, the provision allowing obligated parties to meet up to 20 percent of their current year RFS obligation with RINs generated in the previous compliance year was designed specifically to mitigate the impacts of a drought on agricultural markets.
•Failure to consider the economic benefits of the RFS. The RFS has facilitated the achievement of significant economic benefits, including job creation, increased farm income, lower consumer fuel prices, and enhanced energy security. EPA’s evaluation of the requests must consider not only the alleged impacts to the livestock and poultry sectors, but also the economic benefits that would be foregone if a waiver was granted.
Congress first established the RFS in the Energy Policy Act of 2005 and later expanded the program in the Energy Independence and Security Act (EISA) of 2007. The multiple intents of the RFS are to enhance energy security, decrease fuel prices by diversifying energy supplies, create jobs and stimulate the economy, and improve the environment. According to the RFA comments, “Without question, the RFS is achieving those goals today and providing tangible benefits to the American public. Unfortunately, the requests for a waiver of the RFS attempt to derail this progress and undermine the national goals of enhanced energy and economic security.”
The entirety of RFA’s comments can be read here.