Price and market trends: US EPA denies request to waive Renewable Fuel Standard

29 November 2012 18:47  [Source: ICB]

The mandate to blend ethanol into gasoline will remain in place, despite objections from the refining sector

The US Environmental Protection Agency (EPA) announced on 16 November that it will not grant a waiver of the Renewable Fuel Standard (RFS), keeping the mandate in place for ethanol blending into gasoline.

Several governors came together earlier this year to ask the EPA to waive the RFS, which requires 7.5bn gal of renewable fuels to be blended into gasoline.

They argued that the agriculture industry, particularly livestock, has been hit hard by this year's drought, which caused record-high corn prices. Corn is the primary feedstock for bio-based ethanol.

"We recognise that this year's drought has created hardship in some sectors of the economy, particularly for livestock producers," said Gina McCarthy, assistant administrator for the EPA's Office of Air and Radiation. "But our extensive analysis makes clear that congressional requirements for a waiver have not been met, and that waiving the RFS will have little, if any, impact."

Bob Dinneen, president and CEO of the Renewable Fuels Association, said the decision not shows the RFS is working as designed.

"The flexibility that is built into the RFS allows the marketplace to ration demand, not the government," Dinneen said. "Indeed, the ethanol industry has responded to the market by reducing output by approximately 12%."

He said there needs to be "more constructive dialogue with livestock and poultry groups about the real causes of high feed costs and the impacts on retail food prices".

Charles Drevna, president of the American Fuel & Petrochemical Manufacturers (AFPM), however, said the EPA's decision underscores the problems with the RFS.

"While AFPM supports the sensible integration of alternative fuels into commerce, consumer choice in the marketplace, not mandates, should dictate how these fuels are used," he said. "The growing chorus of concern from food, livestock, engine and consumer communities continues to highlight the mandate's unintended consequences and destructive nature."

He said the original purpose of the RFS was to wean the US off foreign oil.

"[Now] the US is on track to surpass Saudi Arabia in oil production by 2020, effectively rendering RFS obsolete," he said. "We have the capability of being energy self-reliant, but only if excessive and ineffective mandates are repealed. At stake are jobs, economic growth and a stable national security."

By: Bobbie Clark
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