EPA and Renewable Fuel Standard background

July 22, 2008

Texas Governor Rick Perry requested a 50 per cent waiver from the federal renewable fuel standard as a response to rapidly rising food prices. “We appreciate the good intentions behind the push for renewable fuels,” Perry said in a statement. “In fact, we’re diversifying our state’s energy portfolio at a rapid rate, but this misguided mandate is significantly affecting Texans’ family food bill. There are multiple factors contributing to our skyrocketing grocery prices, but a waiver of RFS levels is the best, quickest way to reduce those costs before permanent damage is done.”

“Ultimately, food prices are reaching high levels, so we’re looking at this as an option for reducing that burden,” said Allison Castle, a spokeswoman for Gov. Perry, told cattlenetwork.com. State have sought temporary waivers from EPA mandates in the past, but this is one of the first permanent waivers, and may cause ethanol quotas for other states to increase.

EPA background

The EPA has vastly expanded powers to determine crop policy and the rate of biofuels expansion, under the Energy Independence and Security Act signed into law last December. The EPA may waive or reduce annual targets prescribed under the Act, and determine which fuels qualify as “advanced biofuels” that count towards the overall goal of 36 billion gallons of renewable fuel blended with gasoline annually.

Under the Act, the EPA, states, or refiners can petition the EPA to waive ethanol blending requirement, or the EPA may alter the timetable itself. EPA officials have commenced design of their analytic framework, and at the heart of their work is a determination of land-use models to use in mapping the impact of ethanol production on greenhouse gas emissions. The EPA also will have final say in allowing higher blends of ethanol such as as E20 and E30 to be adopted as state minimums.

The Midwest Governors Association announced that they have written Environmental Protection Agency Administrator Stephen Johnson requesting that the EPA continue the Renewable Fuel Standard in its existing form and decline to issue waivers of ethanol blending requirements. The governors of Texas and Connecticut have issued requests for waivers in recent weeks. The EPA is responding to those requests by July.

Meanwhile, The Dallas News reported that Texas businessman “Bo” Pilgrim, who lobbied Governor Perry to seek the waiver, donated $100,000 to the Republican Governors Association headed by Governor Perry. Meanwhile, Sen. Pete Domenici of New Mexico, predicted that the request would be denied because Governor Perry had overstated the impact of ethanol on food prices.

The Renewable Fuel Standard, and state biofuels mandates, have come under increasing scrutiny since the passage of the Energy Security and Independence Act over food price concerns.

In Washington, US Agriculture Secretary Ed Schafer kicked off a response to recent attacks on biofuels, saying that fuel diversity is central to US security and added “The change in the Renewable Fuels Standard, the change in the (ethanol) tariff or duty, isn’t going to effect food prices. We need to focus on things that will actually have an effect, instead of a short-term political solution we need to look long-term, because we have a long-term problem here.

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Written by Jim Lane · Filed Under News & Financial Analysis