EPA Rejects Texas Waiver Request for Renewable Fuels Standard

Beveridge & Diamond, P.C., August 8, 2008

On August 7, 2008, the U.S. Environmental Protection Agency (EPA) rejected Texas Governor Rick Perry's April 25, 2008 request that the Agency waive by fifty percent the national volume requirements of the Renewable Fuel Standard (RFS) the 2008-2009 corn season.  In its denial, EPA explained that the evidence did not show that implementation of the RFS mandate would severely harm the economy or environment.  EPA's decision also laid out the Agency's general expectations for future waiver requests, including the types of information and analysis that should accompany a waiver request.  Waiver requests for the current year were limited to states, but next year industry may file waiver petitions.  Notice of EPA's decision is available online at: http://www.epa.gov/oms/renewablefuels/decision.pdf.

Under the RFS program, EPA sets an annual benchmark representing the amount of renewable fuel that must be used by each gasoline refiner, blender (other than oxygenate blenders), or importer (called obligated parties). The RFS program includes registration, recordkeeping and reporting requirements for all renewable fuel producers and obligated parties, and established a trading market in renewable fuel credits, known as Renewable Identification Numbers (RINs).  For more information about the RFS program, please see Beveridge & Diamond, P.C. update dated February 4, 2008, "Renewable Fuel Standard Program Update," available online at: http://www.bdlaw.com/news-202.html.

Section 211(o)(7) of the Clean Air Act allows EPA to waive the RFS requirements if the Administrator determines, after public notice and comment, that implementation of the RFS requirements would severely harm the economy or environment of a State, a region, or the United States.  According to Governor Perry, EPA's implementation of the RFS has pushed up corn and food prices, with a negative impact on Texas' livestock industry and economy.  However, EPA explained that it views its authority to waive the RFS requirements narrowly, requiring that the Agency determine with a high degree of confidence that the implementation of the RFS mandate itself would severely harm the economy.  According to EPA, Congress set a high threshold for the nature and degree of harm that would support the issuance of a waiver based on "severe harm." 

After receiving close to 15,000 comments and examining a wide variety of evidence, including modeling of the impact that a waiver would have on ethanol use, corn prices, food prices, and fuel prices, EPA determined that implementation of the RFS would have no significant impact on the 2008-2009 corn season.  EPA also found that a waiver would have no likely impact on ethanol production volumes in the relevant time frame, and therefore no impact on corn, food, or fuel prices.  

For more information about EPA's decision or RFS compliance, please contact David M. ("Max") Williamson, (202) 289-6084, dwilliamson@bdlaw.com, or Alan J. Sachs, (410) 230-1345, asachs@bdlaw.com.