Governor Perry of Texas had filed a request to waive 50% of the national volume requirements for the renewable fuel standard (RFS). The Governor’s Waiver Request cited to the following factors to support issuance of a waiver:
- Since ethanol mandates were instituted, more of the U.S. corn crop is being diverted to produce fuel
- 25% of the corn crop was diverted in 2007 and its projected to rise to 30 to 35% in 2008
- Corn prices have skyrocketed, going from $2.06/bushel to at least $4.00/bushel
- Globally, corn prices are up 138% over the past three years
- Global food prices have increase 83% over that same time period
- Translates to a $1.17 billion dollar negative impact on the current Texas economy
The RFS mandate came about through the Energy Policy Act of 2005 and was expanded in the Energy and Independence Security Act of 2007. The total volume of renewable fuels, such as ethanol and biodiesel, mandated by law to be blended into the fuel supply is 9 billion gallons in 2008 and 11.1 billion gallons in 2009.
EPA denied the request the RFS waiver request based upon its analysis of the evidence suggesting a waiver would have only a nominal impact on corn prices (on average $0.30 per bushel of corn). The EPA concluded there was no evidence to support the claim the RFS mandate was causing "severe harm" to the economy of a State, region, or the United States.
I would guess this will not be the last waiver request submitted. However, in denying the request, EPA also provided insight into its interpretation of the requirements for issuing a waiver. The legal standard articulated with be very difficult to meet. Generally, EPA found it has only narrow waiver authority:
- EPA would have to determine that the implementation of the mandate itself would severely harm the economy; it is not enough to determine that implementation of RFS would contribute to such harm;
- EPA would also have to find that there is a generally high degree of confidence that the RFS is severely harming the economy; and
- This requirement calls for a high threshold for the nature and degree of harm that would support the issuance of a waiver based on "severe harm" to the economy of a State, region, or the United States.