US EPA rejects Texas ethanol waiver

07 August 2008 18:51 [Source: ICIS news]

The EPA rejects an ethanol waiver request from Texas (adds details paragraphs 16-22, currency conversion)

HOUSTON (ICIS news)--The Environmental Protection Agency (EPA) rejected on Thursday a request by the state of Texas to waive a federal mandate for ethanol consumption.

Under the mandate the US will be required to blend 9bn gal (34bn litres) of ethanol into its gasoline this year. In 2009, the amount increases to 11.1bn gal.

Texas governor Rick Perry wanted the EPA to cut that figure by half due to an impact he claims US ethanol production is having on food prices.

"After reviewing the facts, it was clear this request did not meet the criteria in the law," said Stephen Johnson, EPA administrator.

The EPA could grant a waiver if the mandate would cause severe economic hardship or environmental damage, Johnson said. The agency could also consider a shortage of ethanol production.

Texas only cited economic hardship, so the EPA restricted its review to that criteria, Johnson said.

Moreover, the EPA restricted itself to the 2008-2009 time span that Texas requested in its waiver, Johnson said.

As such, the EPA found that any possible economic disruption caused by the ethanol mandate from 2008-2009 would not be sufficient enough to grant the waiver, Johnson said.

He added, "The [renewable fuels standard] remains an important tool in our ongoing efforts to reduce America's greenhouse gas emissions and lessen our dependence on foreign oil, in aggressive yet practical ways."

US ethanol is corn-based and critics, including the Texas governor, point to increased production of the biofuel as the main factor behind a surge in the price of corn this year.

US food companies have also blamed ethanol for higher beef and poultry prices, claiming the biofuel is squeezing their margins by making corn feed more expensive.

The US ethanol industry has rejected those claims, arguing that ethanol has had but a minor impact on the price corn and food.

The Renewable Fuels Association (RFA), a lobbying group that represents 90% of the US ethanol industry, claims only about 20 cents (€0.13) of every US dollar spent on food actually goes to farmers.

Most of the remaining 80 cents, the association claims, goes into transportation and packaging costs.

The RFA said that crude oil, not ethanol, is the culprit behind higher food costs due to surging packaging and fuel costs.

In a statement, Perry said the ethanol mandate is trading food for fuel.

“I am greatly disappointed with the EPA’s inability to look past the good intentions of this policy to see the significant harm it is doing to farmers, ranchers and American households," Perry said in a statement.

"For the EPA to assert that this federal mandate is not affecting food prices not only goes against common sense but every American’s grocery bill," he said.

By contrast, the RFA said the EPA's decision was "an important victory for all Americans".

The nation's dependence on imported oil would increase had EPA granted the waiver, according to a statement by Bob Dinneen, the group's president. "Moreover, such a decision would have sabotaged the development and growth of new technologies and a cellulosic biofuels industry," he said.

Dinneen repeated his group's stance that oil prices - and not the renewable fuel standard - was behind the run up in corn prices. Without ethanol displacing gasoline, the effects of high oil prices would be even worse, he said.

“We applaud the EPA for keeping America squarely on the path toward greater energy independence," Dinneen said.

($1 = €0.65)

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