EPA Declines Texas Request to Reduce Renewable Fuel Requirements

August 13, 2008

The U.S. Environmental Protection Agency (EPA) decided on August 7 to deny a request from the State of Texas to reduce the national Renewable Fuels Standard (RFS). The RFS currently requires 9 billion gallons of renewable fuels, such as ethanol and biodiesel, to be blended into the nation's fuel supply in 2008, increasing to 11.1 billion gallons in 2009, and that requirement will stay in place. Current law authorizes the EPA to waive the national RFS if the agency determines that the mandated biofuel volumes would cause "severe harm" to the economy or the environment. On April 25, Texas Governor Rick Perry requested that the mandate be cut in half for 2008, based on the perceived contribution of the RFS to high grain prices, which are negatively impacting the production of beef, poultry, and eggs in his state.

In denying the request, the EPA determined that the proposed waiver would have no impact on ethanol production volumes in the relevant time frame, and therefore no impact on the price of corn or food. And even if it did impact ethanol production, the waiver would have only a minor impact on grain prices, cutting the price of a bushel of corn by at most 30 cents, while the U.S. Department of Agriculture (USDA) is predicting a price of $5.40 per bushel for the current season. Both DOE and the Renewable Fuels Association (RFA) agreed with the EPA's decision, noting that the RFS is critical for reducing the nation's dependence on oil imports. See the EPA press release, the EPA Web page on the waiver request, the USDA's season-average price forecasts, and the press releases from DOE and the RFA.

Meanwhile, a new USDA report finds that the flooding in the Midwest in early June had a minimal impact on corn and soybean production in the United States. Thanks in part to replanted crops in the flood-affected regions, U.S. farmers are on pace to produce the second-largest corn crop in history and the fourth-largest soybean crop. Corn production is forecast at 12.3 billion bushels, down 6% from last year's record crop, while soybean production is forecast at 2.97 billion bushels, up 15% from last year. Farmers often rotate between corn and soybean crops, causing production numbers to fluctuate, so a smaller corn crop was expected from the start of the growing season. See the press release and full report (PDF 414 KB) from the USDA's National Agricultural Statistics Service. Download Adobe Reader.