EPA denies request to waive US ethanol mandate for gasoline blending


WASHINGTON -- The Environmental Protection Agency on Friday said it is moving forward with a mandate for corn ethanol in gasoline, denying requests to waive the requirement following a drought that pushed up corn prices.

The EPA said Friday it hadn't found any evidence that its renewable fuel standard is causing economic harm. The agency said suspending the standard would reduce corn prices by only 1%.

"We recognize that this year's drought has created hardship in some sectors of the economy, particularly for livestock producers," Gina McCarthy, EPA's air chief, said in a statement. "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."

Cattle ranchers and dairy farmers, who use corn to feed cattle, have complained for several months that the ethanol mandate was driving up demand for dwindling supplies of corn.

"We are extremely frustrated and discouraged that EPA chose to ignore the clear economic argument from tens of thousands of family farmers and livestock and poultry producers," a coalition of agriculture groups said Friday.

Due to drought conditions in the Midwest, the Agriculture Department predicts this year's corn crop will be the smallest in six years.

In August, the governors of Arkansas and North Carolina formally asked the EPA to waive the standard, triggering a 90-day review by the agency.

The EPA is requiring refiners this year to blend 13 billion gallons of corn-based ethanol into the nation's gasoline supply under a mandate adopted by Congress in 2005 to reduce US dependence on foreign oil. The requirement is expected to jump to nearly 14 billion gallons in 2013.

Ethanol producers applauded EPA's decision to keep the ethanol mandate in place. "A waiver would have likely had little to no impact on commodities prices," said Jeff Lautt, chief executive for Poet, one of the world's largest ethanol producers.

This is the second time EPA has denied a waiver request for the renewable fuels standard. The agency denied a petition from Texas in 2008.

The American Petroleum Institute, which represents the oil industry, said the EPA "applied an improper and unnecessary high bar" when determining whether the standard should be suspended.

The livestock industry says ethanol producers exacerbate problems caused by the drought by consuming 40% of the nation's corn crop.

The ethanol industry says that number is actually less than 26% after accounting for the high-protein ethanol byproducts used for animal feed. It says that ethanol companies are already producing less this year and that ethanol has a relatively small impact on corn prices.

Dow Jones Newswires

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