70752 Federal Register / Vol. 77, No. 228 / Tuesday, November 27, 2012 / Notices 

EPA has established a public docket 

for this ICR under docket ID number 

EPA–HQ–OECA–2012–0528, which is 

available for public viewing online at 

http://www.regulations.gov, or in person 

viewing at the Enforcement and 

Compliance Docket in the EPA Docket 

Center (EPA/DC), EPA West, Room 

3334, 1301 Constitution Avenue NW, 

Washington, DC. The EPA Docket 

Center Public Reading Room is open 

from 8:30 a.m. to 4:30 p.m., Monday 

through Friday, excluding legal 

holidays. The telephone number for the 

Reading Room is (202) 566–1744, and 

the telephone number for the 

Enforcement and Compliance Docket is 

(202) 566–1752. 

Use EPA’s electronic docket and 

comment system at http:// 

www.regulations.gov to either submit or 

view public comments, access the index 

listing of the contents of the docket, and 

to access those documents in the docket 

that are available electronically. Once in 

the system, select ‘‘docket search,’’ then 

key in the docket ID number identified 

above. Please note that EPA’s policy is 

that public comments, whether 

submitted electronically or in paper, 

will be made available for public 

viewing at http://www.regulations.gov 

as EPA receives them and without 

change, unless the comment contains 

copyrighted material, Confidentiality of 

Business Information (CBI), or other 

information whose public disclosure is 

restricted by statute. For further 

information about the electronic docket, 

go to www.regulations.gov. 

Title: NSPS for Synthetic Fiber 

Production Facilities (Renewal). 

ICR Numbers: EPA ICR Number 

1156.12, OMB Control Number 2060– 

0059. 

ICR Status: This ICR is scheduled to 

expire on December 31, 2012. Under 

OMB regulations, the Agency may 

continue to either conduct or sponsor 

the collection of information while this 

submission is pending at OMB. 

Abstract 

The affected entities are subject to the 

General Provisions of the NSPS at 40 

CFR part 60, subpart A and any changes, 

or additions to the Provisions specified 

at 40 CFR part 60, subpart HHH. 

Owners or operators of the affected 

facilities must make an initial 

notification report, performance tests, 

periodic reports, and maintain records 

of the occurrence and duration of any 

startup, shutdown, or malfunction in 

the operation of an affected facility, or 

any period during which the monitoring 

system is inoperative. Reports are also 

required semiannually. 

Burden Statement 

The annual public reporting and 

recordkeeping burden for this collection 

of information is estimated to average 34 

hours per response. ‘‘Burden’’ means 

the total time, effort, or financial 

resources expended by persons to 

generate, maintain, retain, or disclose or 

provide information to or for a Federal 

agency. This includes the time needed 

to review instructions; develop, acquire, 

install, and utilize technology and 

systems for the purposes of collecting, 

validating, and verifying information, 

processing and maintaining 

information, and disclosing and 

providing information; adjust the 

existing ways to comply with any 

previously-applicable instructions and 

requirements which have subsequently 

changed; train personnel to be able to 

respond to a collection of information; 

search data sources; complete and 

review the collection of information; 

and transmit or otherwise disclose the 

information. 

Respondents/Affected Entities: 

Owners or operators of synthetic fiber 

production facilities. 

Estimated Number of Respondents: 

22. 

Frequency of Response: Occasionally, 

quarterly and semiannually. 

Estimated Total Annual Hour Burden: 

1,860. 

Estimated Total Annual Cost: 

$345,058, which includes $180,058 in 

labor costs, no capital/startup costs, and 

$165,000 in operation and maintenance 

(O&M) costs. 

Changes in the Estimates: There is no 

change in the respondent burden hours 

in this ICR compared to the previous 

ICR. This is due to two considerations: 

(1) The regulations have not changed 

over the past three years and are not 

anticipated to change over the next 

three years; and (2) the growth rate for 

the industry is very low, negative or 

non-existent, so there is no significant 

change in the overall burden. However, 

there is an increase of one burden hour 

for the Agency due a correction of 

rounding error in the previous ICR. 

There is an increase in burden costs 

for both the respondents and the Agency 

due to an adjustment in labor rates. This 

ICR uses updated labor rates from the 

Bureau of Labor Statistics to calculate 

burden costs. 

John Moses, 

Director, Collection Strategies Division. 

[FR Doc. 2012–28650 Filed 11–26–12; 8:45 am] 

BILLING CODE 6560–50–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

[FRL–9754–4] 

Notice of Decision Regarding 

Requests for a Waiver of the 

Renewable Fuel Standard 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Notice. 

SUMMARY: The Governors of several 

States requested that EPA waive the 

national volume requirements for the 

renewable fuel standard program (RFS 

or RFS program), pursuant to section 

211(o)(7) of the Clean Air Act (the Act), 

based on the effects of the drought on 

feedstocks used to produce renewable 

fuel in 2012–2013. Several other parties 

submitted similar requests. Based on a 

thorough review of the record in this 

case, EPA finds that the evidence and 

information does not support a 

determination that implementation of 

the RFS program during the 2012–2013 

time period would severely harm the 

economy of a State, a region, or the 

United States. EPA is therefore denying 

the requests for a waiver. 

DATES: Petitions for review must be filed 

by January 28, 2013. 

ADDRESSES: EPA has established a 

docket for this action under Docket ID 

No. EPA–HQ–OAR–2012–0632. All 

documents and public comment in the 

docket are listed on the 

www.regulations.gov Web site. Publicly 

available docket materials are available 

either electronically through 

www.regulations.gov or in hard copy at 

the Air and Radiation Docket in EPA 

Headquarters Library, EPA West 

Building, Room 3334, 1301 Constitution 

Ave. NW., Washington, DC. The Public 

Reading Room is open from 8:30 a.m. to 

4:30 p.m., Monday through Friday, 

excluding legal holidays. The telephone 

number for the Reading Room is (202) 

566–1744. The Air and Radiation 

Docket and Information Center’s Web 

site is http://www.epa.gov/oar/ 

docket.html. The electronic mail (email) 

address for the Air and Radiation 

Docket is: a-and-r-Docket@epa.gov, the 

telephone number is (202) 566–1742, 

and the Fax number is (202) 566–9744. 

FOR FURTHER INFORMATION CONTACT: 

Dallas Burkholder, Office of 

Transportation and Air Quality, 

Environmental Protection Agency, 

National Vehicle and Fuel Emissions 

Laboratory, 2565 Plymouth Road, MI 

48105; telephone number: (734) 214– 

4766; fax number (734) (214–4050; 

email address: 

burkholder.dallas@epa.gov. 


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1A RIN is unique number generated by the 

producer and assigned to each gallon of a qualifying 

renewable fuel under the RFS program, and is used 

by refiners and importers to demonstrate 

compliance with the volume requirements under 

the program. 

2On average, across the 500 cases considered in 

the ISU analysis, a small $0.07 cent per bushel 

reduction on corn prices would be expected in the 

case of a waiver. 

3See for example the World Agricultural Supply 

and Demand Estimates, select issues, prepared by 

the U.S. Department of Agriculture; http:// 

www.usda.gov/oce/commodity/wasde. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary 

Governors from several States have 

requested a waiver of the national 

volume requirements for the renewable 

fuel standard program (RFS or RFS 

program). Broadly summarized, the 

States requesting a waiver (requesting 

States) assert that the RFS program is 

having a negative impact on their 

respective State economies based on 

this period of severe drought conditions 

by diverting corn from other markets to 

production of ethanol to meet volumes 

required under the RFS, leading to 

increased corn prices and resultant 

negative impacts on the livestock 

industry and food prices. Other parties 

requested a waiver on similar grounds. 

On August 30, 2012, EPA published a 

Federal Register notice inviting public 

comment on the waiver requests and 

other matters relevant to EPA’s 

consideration of those requests. 

In determining whether these waiver 

requests should be granted or denied, 

our decision is based on the relevant 

criteria for a waiver set forth in CAA 

Section 211(o)(7)—whether 

implementation of the RFS volume 

requirements would severely harm the 

economy of a State, a region or the 

United States. In making its 

determination, EPA took into 

consideration all comments submitted 

as well as an analysis of relevant 

impacts of the drought on the crops that 

would be used as feedstock in the 

production of renewable fuel during the 

2012/2013 corn marketing year 

(September 2012 through August 2013). 

EPA analyzed the impacts with and 

without a waiver, utilizing an updated 

version of an Iowa State University 

(ISU) model that was used in response 

to a Texas waiver request in 2008 

(discussed further below) when 

analyzing this year’s waiver requests. 

This analysis identified the extent to 

which, if any, implementation of the 

RFS volume requirements would affect 

ethanol production and thereby the 

price of corn and other products over 

the relevant time period. EPA also 

considered other empirical data 

including historical and current 

Renewable Identification Number (RIN) 

credit prices and the available quantity 

of carryover RINs.1

After weighing all of the evidence 

before it, EPA found that the evidence 

does not support a determination that 

implementation of the RFS over the 

time period in question would severely 

harm the economy of a State, region, or 

the United States, the high statutory 

threshold for a waiver. The body of 

information shows that it is very likely 

that the RFS volume requirements will 

have no impact on ethanol production 

volumes in the relevant time frame, and 

therefore will have no impact on corn, 

food, or fuel prices. In addition, the 

body of the evidence also indicates that 

even in the unlikely event that the RFS 

mandate would have an impact on the 

corn and other markets during the 

2012–2013 time frame, its nature and 

magnitude would not be characterized 

as severe. In the small percentage of 

modeled scenarios where a waiver of 

the RFS mandate would have any 

impact on the production of ethanol (11 

percent of the cases), the decrease in 

ethanol production is small and the 

resulting reduction in corn prices is 

projected to be limited (on average $0.58 

per bushel of corn).2 These potential 

impacts from implementation of the 

RFS program would not be considered 

as meeting the high statutory threshold 

of severe harm to the economy set by 

the statute. It is worth emphasizing that 

the modeling shows that even this 

degree of impact is a very unlikely 

outcome. The most likely outcome is 

that implementation of the RFS program 

during this time frame would have no 

impact at all on ethanol production and 

corn prices. 

EPA also received comment on issues 

related to, among other topics, the 

general impact of increased use of 

biofuels on the economy and global 

markets, on ethanol’s characteristics as 

a transportation fuel, and on the RFS 

program in general. EPA recognizes that 

many parties, both those supporting the 

waiver and those opposing the waiver, 

have raised issues of significant concern 

to them and to others in the nation 

concerning the role of renewable fuels 

and the RFS program in our country. In 

particular, EPA recognizes comments 

that focus on the severity of the drought 

and its major impacts on multiple 

sectors across the country. Many 

commenters describe the dire economic 

impact that this year’s drought has had 

on corn crops, corn prices and those 

industries that rely on corn as an input. 

EPA and its federal partners recognize 

the substantial negative economic 

impacts suffered as a result of this year’s 

historic drought. The drought’s impact 

on U.S corn and other crop production 

has been well documented and was 

reflected in increasing corn prices 

starting early this summer.3 Crop 

growing regions across the country were 

affected, and the impacts of reduced 

crop production are far-reaching. 

However, as was the case in 2008, the 

issue directly before the Agency is 

limited given EPA’s authority under 

section 211(o)(7)(A) of the Act. After 

considering all of the public comments, 

both those in support of a waiver and 

those against, and consulting with the 

Secretaries of Agriculture and Energy, 

EPA has determined that the waiver 

requests should be denied because the 

evidence does not support making a 

determination that implementation of 

the RFS volume requirements during 

this time period would severely harm 

the economy of a State, region, or the 

United States. 

It is important to note that this and 

other waiver decisions are based on 

current circumstances and market 

conditions. As indicated by EPA’s 

modeling, the impact of the RFS volume 

requirements is highly dependent on the 

volumes at issue, the number of RINs 

carried over from prior years and the 

relevant market commodity prices, such 

as corn and crude oil prices, and other 

factors applicable during the time 

period analyzed. 

II. Overview of the Renewable Fuel 

Standard (RFS) Program 

The Energy Policy Act of 2005 

(EPAct) amended the Clean Air Act to 

establish a Renewable Fuel Standard 

(RFS) Program and gave EPA 

responsibility for implementing it. 

EPAct required EPA to issue regulations 

ensuring that gasoline sold in the U.S., 

on an annual average basis, contained a 

specified volume of ‘‘renewable fuel.’’ 

The Energy Independence and Security 

Act of 2007 (EISA) amended the RFS 

program by, among other things, 

extending the program to cover 

transportation fuel, not just gasoline, 

extending the years in which Congress 

specified the required volume of 

renewable fuels by ten years, and 

increasing the required volumes of 

renewable fuels. EISA set the 2012 and 

2013 RFS renewable fuel mandates as 

15.2 billion gallons and 16.55 billion 

gallons respectively, and the mandate 

rises to 36.0 billion gallons by 2022. 

EISA also imposed additional 

requirements for the use of advanced 

biofuel, biomass-based diesel, and 

cellulosic biofuel, included within the 


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4 Data from EPA’s Moderated Transaction System 

(EMTS) through September 2012. Retrieved 

November 8, 2012 from EMTS. See ‘‘RIN Rollover’’ 

memo in the docket for more information or http:// 

www.epa.gov/otaq/fuels/rfsdata/index.htm. 

5A renewable fuel ‘‘pathway’’ under the RFS 

program encompasses a feedstock, process, and fuel 

combination. For example, ethanol (fuel) produced 

through a dry-mill process (process) and derived 

from corn starch (feedstock). 6 73 FR 47168 (August 13, 2008). 

7See, for example, the July 30, 2012 letter 

submitted by the National Pork Producers Council 

(NPPC), on behalf of several national regional 

livestock, poultry, and other organizations (‘‘July 30 

NPPC letter’’) requesting a waiver, EPA–HQ–OAR– 

2012–0632–0012. 

8The Governors’ letters requesting a waiver are 

available at docket number EPA–HQ–OAR–2012– 

0632. 

9 In an August 9, 2012 letter, the Governors of 

Delaware and Maryland jointly wrote in support of 

the July 30 NPPC letter. The Governor of Delaware 

subsequently wrote in a September 25 letter asking 

that the August 9 letter ‘‘be formally considered a 

Petition for Waiver;’’ mentioned in EPA–HQ–OAR– 

2012–0632–1969. The Governor of Maryland also 

submitted a subsequent letter dated October 11, 

2012 requesting a waiver, EPA–HQ–OAR–2012– 

0632–2259. 

10This includes several letters EPA received from 

Members of Congress supporting a waiver, all of 

which are available in the docket. 

11 77 FR 52715 (August 30, 2012) (‘‘August 30 

Notice’’). 

overall mandate of renewable fuel. As 

part of EISA, Congress required EPA to 

determine the life-cycle emissions of 

greenhouse gases associated with 

renewable fuels, and required a 

minimum level of greenhouse gas 

reduction to qualify as renewable fuel, 

advanced biofuel, cellulosic biofuel or 

biomass-based diesel. EPAct had the 

statutory goal of increasing the volume 

of renewable fuels that are required to 

be used in the transportation sector and 

Congress furthered that goal with the 

passage of EISA. In this context, 

implementation of EISA is aimed at 

reducing dependence on foreign sources 

of energy, increasing the domestic 

supply of energy, and reducing 

greenhouse gas emissions associated 

with the transportation sector. 

EPA published regulations for the 

RFS program as amended by EISA on 

March 26, 2010 (75 FR 14670), and the 

amended RFS program became effective 

starting July 1, 2010. Since that time 

more than 36 billion ethanol-equivalent 

gallons of renewable fuel have been 

produced under the RFS program.4 EPA 

has also continued to update the RFS 

regulations through rulemaking actions 

to establish specific required renewable 

fuel volumes and annual percentage 

standards, as well as to identify 

additional qualifying renewable fuel 

production pathways. New pathways to 

produce renewable fuel for the RFS 

program, such as biomass-based diesel 

produced from canola oil have been 

approved as qualifying renewable fuels 

under RFS, and several others, such as 

ethanol produced from grain sorghum, 

are currently under evaluation. As new 

biofuel, feedstock, and fuel production 

technologies approach 

commercialization EPA will continue to 

review potential renewable fuel 

pathways for inclusion in the RFS 

program.5

In April 2008, EPA received a request 

from the Governor of the State of Texas 

for a fifty percent waiver of the national 

volume requirements for the RFS; we 

provide more detail on this request here 

due to the relevance of our response to 

that request to today’s determination. 

Texas based its request on the assertion 

that the RFS mandate was having a 

negative impact on the economy of 

Texas, specifically in the form of 

increased corn prices negatively 

impacting the livestock industry and 

food prices. After considering all of the 

public comments, and consulting with 

the Secretaries of Agriculture and 

Energy, EPA denied the waiver request.6

In making this decision, and as 

discussed in more detail below, EPA 

interpreted the statutory provisions to 

require a determination based on the 

expected impact of the RFS program 

itself, a generally high degree of 

confidence that implementation of the 

RFS program would severely harm the 

economy of a State, region, or the 

United States, and a high threshold for 

the nature and degree of harm. After 

weighing all of the evidence before it, 

EPA determined that the evidence in 

2008 did not support a finding that 

implementation of the RFS would 

severely harm the economy of a State, 

region, or the United States. First, the 

evidence indicated that the most likely 

result was that the RFS would have no 

impact on ethanol production volumes 

in the relevant time frame, and therefore 

no impact on corn, feed, food, or fuel 

prices. Second, EPA also determined 

that if the RFS volume requirements 

were to have an impact on the economy 

during the 2008/2009 corn marketing 

year, it would not be of the nature or 

magnitude that could be characterized 

as severe. As part of the determination, 

EPA also provided guidance on what 

types of information should be 

submitted in the case of future waiver 

requests under the same provision of the 

Act. 

III. EPA’s Administrative Process 

In this section we first provide 

background information concerning the 

waiver requests and EPA’s public notice 

of, and solicitation of comment on those 

requests. We also address comments 

related to procedural issues concerning 

our consideration of the waiver 

requests. 

1. Letters Seeking an RFS Waiver and 

EPA’s Request for Comment 

Beginning in July 2012, EPA received 

a number of requests for it to exercise 

its authority under CAA 211(o)(7) to 

grant a waiver in whole or in part of the 

renewable fuel standard requirements. 

In addition, EPA received a number of 

petitions seeking the same or similar 

EPA action from a number of state 

Governors, including the Governors of 

Arkansas, North Carolina, New Mexico, 

Georgia, Texas, Virginia, Maryland, 

Delaware, Utah, and Wyoming. The 

Governor of Florida wrote in support of 

a waiver in an October 16, 2012 letter 

to the EPA.789

All of the letters from State Governors 

discussed above, as well as the many 

letters EPA received supporting the 

waiver requests or asking EPA to waive 

the RFS volume requirements, cite the 

negative impact of this year’s severe 

drought conditions, and most discuss 

the effect the drought has had on corn 

and feed prices, and the subsequent 

impacts being felt by the livestock, 

poultry, and other sectors.10 Several of 

the letters claim that the RFS program 

significantly increases demand for corn, 

thereby increasing corn prices and 

harming those sectors that use corn as 

a production input, such as the 

livestock and poultry industries. Many 

of the letters claim that a waiver of the 

RFS volume requirements would 

alleviate some of that harm. Though not 

all of the letters specify a time period for 

the waiver, many of them request a 

waiver of the RFS volume requirements 

in 2012 and 2013. While the contents of 

the letters described above vary in 

detail, each letter either requests that 

the Administrator grant a waiver of 

required RFS volumes or expresses 

support for the granting of such a 

waiver. 

On August 30, 2012, EPA published a 

Federal Register Notice providing 

notice of its receipt of the waiver 

petitions, letters of support for the 

waiver petitions, and requests that EPA 

grant a waiver and invited public input 

on those requests over a 30-day 

comment period.11 EPA stated in the 

Notice that any similar requests 

received by EPA after issuance of the 

Notice would be docketed and 

considered together with the requests 

already received (collectively, the 

‘‘waiver requests’’). 

EPA requested comment from the 

public on any matter that might be 


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12 77 FR 57566 (September 18, 2012). 

13EPA–HQ–OAR–2012–0632–2357, EPA–HQ– 

OAR–2012–0632–2218. 

14EPA–HQ–OAR–2012–0632–2218. 

15EPA–HQ–OAR–2012–0632–2218. 

relevant to EPA’s review of and actions 

in response to the waiver requests, 

including but not limited to: (a) 

Whether compliance with the RFS 

would severely harm the economy of 

Arkansas, North Carolina, other States, 

a region, or the United States; (b) 

whether the relief requested will 

remedy the harm; (c) to what extent, if 

any, a waiver would change demand for 

ethanol and affect prices of corn, other 

feedstocks, feed, and food; (d) the 

amount of ethanol that is likely to be 

consumed in the U.S. during the 

relevant time period, based on its value 

to refiners for octane and other 

characteristics and other market 

conditions in the absence of the RFS 

volume requirements; and (e) if a waiver 

were appropriate, the amount of 

renewable fuel volume appropriate to 

waive, the date on which any waiver 

should commence and end, and to 

which compliance years it should 

apply. 

In response to requests for an 

extension of time for public comment, 

EPA extended the public comment 

period by 15 days to October 11, 2012.12

EPA received in excess of 29,000 

comments during the comment period; 

the majority of the comments were short 

statements generally in support of the 

requests for a waiver. EPA also received 

numerous comments from various trade 

organizations and businesses, 

Governors, Members of Congress and 

other elected officials, researchers, and 

environmental organizations either 

supporting or opposing a waiver. Many 

of the comments referenced various 

analyses which are discussed below. In 

addition, EPA received comments that 

either supported EPA’s legal 

interpretation of section 211(o)(7) as 

described in the 2008 Texas waiver 

determination or suggested that 

different interpretations and 

applications were appropriate. EPA 

addresses these and other comments 

either in the discussion of our process, 

results and conclusions, or in section VI 

of this determination. 

2. EPA’s Treatment of Petitions for a 

Waiver, Letters in Support of Petitions 

for a Waiver, Letters Requesting That 

EPA Act on its Own Authority To Issue 

a Waiver 

Section 211(o)(7)(A) states, in relevant 

part, that ‘‘The Administrator * * * 

may waive [the RFS requirements] in 

whole or in part on petition by one or 

more States, by any person subject to 

the requirements of this subsection, or 

by the Administrator on his own motion 

* * * (i) based on a determination 

* * * that implementation of the 

requirement would severely harm the 

economy or environment of a State, a 

region or the United States, or (ii) based 

on a determination * * * that there is 

an inadequate domestic supply.’’ 

(Emphasis added). The statutory criteria 

that must be met to issue a waiver are 

the same regardless of whether EPA acts 

on its own motion or responds to a 

petition from a State or person subject 

to the RFS requirements. The only 

difference the statute draws between the 

Administrator acting on her own motion 

or in response to a petition submitted by 

the listed parties is the 90-day deadline 

for EPA action in the latter case, set by 

section 211(o)(7)(B). Therefore, EPA has 

given all waiver requests, whether 

received before or after the August 30 

Notice, equal consideration. For the 

reasons described below, EPA is 

denying all of the waiver requests. 

EPA received comment that although 

EPA sought comment on all the waiver 

requests, the Administrator need only 

decide that one of the requests meets the 

statutory requirements of CAA section 

211(o)(7) in order to exercise her 

authority to waive the requirements of 

CAA section 211(o)(2) in whole or in 

part. This commenter noted that while 

EPA may consider the entirety of 

information and comments submitted 

on the various waiver requests, it need 

not decide that all, or several, of the 

requests have sufficient basis in order to 

grant a waiver. The commenter suggests 

that the waiver provision requires the 

Administrator to make individualized 

decisions with respect to ‘‘a State,’’ or 

‘‘a region’’ of the United States that may 

be the subject of an individual request. 

EPA has considered all of the 

information and analysis submitted by 

the petitioners and parties who 

requested a waiver, as well as that 

submitted in comments. We have 

considered all information before us, 

including an analysis developed by 

EPA, as discussed below. Our technical 

analysis is relevant to all of the 

individual waiver requests. Based on 

the entire record before it, EPA has 

determined that each of the petitions 

and requests should be denied. In this 

decision EPA addresses each of the 

requests and petitions it has received to 

date. Therefore, EPA does not find itself 

in the situation posited by the 

commenters where some of the 

individual petitions are determined to 

satisfy the criteria for a waiver and other 

petitions do not. Rather, EPA has 

determined that each of the petitions 

should be denied. 

3. Other Comments Related to EPA’s 

Administrative Process 

As mentioned above, as part of the 

2008 waiver determination EPA 

provided guidance on what types of 

information and analysis should be 

submitted with future waiver requests. 

In response to this year’s August 30 

Notice, commenters argued that such 

guidance effectively established 

‘‘completeness criteria’’ that petitioning 

States failed to meet, and that EPA 

failed to apply when initially evaluating 

the requesting letters.13 Commenters 

argue that had EPA applied such 

criteria, EPA ‘‘would not have even 

sought comment on the state petitions 

submitted this year.’’ 14 Commenters 

further argued that because the petitions 

submitted in 2012 fail to meet the 

criteria put forth by EPA in 2008, EPA 

‘‘may not grant a waiver as the public 

has been deprived of the opportunity to 

comment on the basis for granting a 

waiver’’ of the RFS.15

EPA takes seriously its responsibility 

to evaluate whether circumstances 

warranting a waiver have arisen. EPA 

also recognizes the need to avoid the 

uncertainty to the renewable fuel and 

RIN markets that may be associated with 

unnecessarily frequent evaluations of 

whether issuing a waiver is appropriate. 

To help meet those objectives, EPA 

provided guidance in 2008 regarding 

expectations for future waiver requests, 

and today we repeat that such guidance 

should be followed in the future. At the 

same time, we explicitly stated in 2008 

that the guidance provided ‘‘is not a 

rule, and therefore is not binding on the 

public or EPA. Any final decision on the 

sufficiency and merit of a petition will 

be made upon review of a petition by 

EPA in consultation with USDA and 

DOE.’’ We further stated that EPA 

would ‘‘review a request for a waiver 

and first determine whether to proceed 

with public notice and comment.’’ 

EPA, in consultation with USDA and 

DOE, reviewed the waiver requests 

received in July and August. In light of 

the severe drought affecting much of the 

country, and the clearly expressed 

support for a waiver by a number of 

States, governmental representatives 

and industry trade groups, it was clearly 

appropriate to seek public comment on 

the requests before making a final 

decision. Such a step would be required 

before EPA could make a decision to 

grant a waiver, and it was clearly 

appropriate to do so in these 

circumstances involving severe drought 


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16Section 211(o)(7) reads, in relevant part, that 

the ‘‘Administrator * * * may waive the [RFS] 

requirements * * * by reducing the national 

quantity of renewable fuel * * *’’. Emphasis 

added. 

17 73 FR 47173 (August 13, 2008). 

18For a recent example of this documentation, 

see: Babcock, B. ‘‘Updated Assessment of the 

Drought’s Impacts on Crop Prices and Biofuel 

Production.’’ (‘‘Babcock-Iowa State.’’) Center for 

Agricultural and Rural Development, CARD Policy 

Brief 12–PB 8, August 2012, available in the docket 

and at http://www.card.iastate.edu/policy_briefs/ 

display.aspx?id=1169. 

19http://www.usda.gov/oce/commodity/wasde/. 

20http://www.eia.gov/forecasts/steo/. 

21Babcock-Iowa State. 

conditions before making a decision to 

either grant or deny a waiver. The many 

important public submissions in 

response to EPA’s solicitation of 

comment have affirmed the importance 

of addressing the waiver issue in a 

prompt and transparent fashion. 

IV. Key Interpretive Issues 

Section 211(o)(7) of the CAA provides 

that EPA may waive the mandated 

national RFS volume requirement in 

whole or in part based on a 

determination by the Administrator 

that: (i) ‘‘implementation of the 

requirement would severely harm the 

economy or environment of a State, a 

region, or the United States,’’ or (ii) 

‘‘that there is an inadequate domestic 

supply.’’ The 2012 waiver requests are 

all based on claims of severe economic 

harm to states, regions and/or the 

country as a whole associated with 

implementation of the RFS 

requirements in light of the drought 

experienced in large agricultural 

production areas of the country this 

summer. Therefore, the relevant 

statutory provision authorizes a waiver 

if EPA determines that RFS 

implementation ‘‘would severely harm 

the economy of a State, a region or the 

United States.’’ 

In the August 30 Notice, EPA sought 

public comment on its interpretation of 

this provision as discussed in the 

context of the 2008 Texas waiver 

determination. EPA’s responses to the 

comments received are set forth in 

section VI of this determination. For 

reasons more fully described in that 

section, EPA continues to interpret this 

statutory provision as it did in 2008. 

Thus, it would not be sufficient for EPA 

to determine that there is severe harm 

to the economy of a State, region or the 

United States; rather, EPA must 

determine that RFS implementation 

would severely harm the economy. 

Furthermore, EPA interprets the word 

‘‘would’’ as requiring a generally high 

degree of confidence that 

implementation of the RFS program 

would severely harm the economy of a 

State a region, or the United States. EPA 

interprets ‘‘severely harm’’ as specifying 

a high threshold for the nature and 

degree of harm. Although there are 

many factors that affect an economy, the 

RFS waiver provisions call for EPA to 

evaluate the impact of the RFS mandate 

itself. EPA does not evaluate the impact 

of the RFS volume requirements in 

isolation, but instead evaluates them in 

the context of all of the relevant 

circumstances, including in this case 

the impact of the drought. However the 

purpose of this analysis is to 

characterize the impact of the RFS 

mandate itself, within this context. 

Finally, because the statute specifies 

that EPA ‘‘may’’ grant a waiver if it 

determines that implementation of the 

RFS requirements would severely harm 

the economy of a State, a region or the 

United States, the statute provides EPA 

with discretion to decline to issue a 

waiver even if it finds that the severe 

harm test is satisfied. This discretion 

allows EPA to take into consideration 

the possible impacts of issuing a waiver 

that extend beyond the geographic 

confines of a particular State or region. 

EPA believes that such consideration is 

particularly appropriate in light of the 

statutory requirement that any RFS 

waiver be nationwide in scope.16 To the 

extent relevant to the waiver requests 

before it, EPA has applied this 

interpretation in reaching a decision on 

the waiver requests. 

V. Technical Analysis 

To evaluate the impact that 

implementation of the RFS would have 

on the amount of ethanol produced and 

consumed over the relevant time period, 

and the resulting impacts, if any, on the 

agricultural and other industries, we 

applied the same analytical framework 

EPA used in evaluating the 2008 waiver 

request. We first assessed what impact 

implementation of the RFS program 

would have on ethanol production and 

consumption, and thus corn prices, by 

conducting our own analysis using a 

model developed by Iowa State 

University. We then evaluated the 

impacts such changes, if any, would 

have on a set of key factors, including 

corn prices, feed prices, food prices, and 

fuel prices. A number of commenters 

submitted analyses looking at similar 

issues, and we reviewed those studies as 

part of our overall evaluation. 

Throughout this section we also address 

various comments we received in 

response to the August 30 Notice. 

1. Methodology 

(a) Analytical Model 

To assess the impact of 

implementation of the RFS, EPA 

evaluated two scenarios: one in which 

no waiver is granted and another in 

which a waiver of the total renewable 

fuel mandate is granted, as discussed 

below. As we did in evaluating the 2008 

Texas waiver request, EPA utilized an 

economic model developed by 

researchers at Iowa State University 

(ISU model). During development of the 

analytical framework used in 2008, EPA 

evaluated different models and 

modeling approaches, and we refer 

readers to that discussion for more 

detail.17

EPA believes the ISU model continues 

to be the most appropriate choice for a 

number of reasons. First, as discussed in 

2008, EPA believes it is critical to use 

a stochastic framework to capture a 

range of potential outcomes, rather than 

a point estimate, given potential 

variation in a number of critical 

variables associated with ethanol 

production (e.g., corn yields, gasoline 

prices). Second, the ISU model captures 

the interaction between agricultural 

markets and energy markets, and is able 

to examine the impacts of uncertainty in 

variables within both sectors. The 

ability of the ISU model to account for 

this variability across both sectors gives 

the model an advantage over other 

models that are locked into a single 

projected fuel price or corn crop 

estimate. Third, documentation for the 

ISU model is relatively straightforward 

and transparent compared to other 

options, and allows all interested parties 

to understand the assumptions that 

drive the results.18 Fourth, the ISU 

model was designed to be easily and 

regularly updated with the most 

recently available data, such as USDA’s 

World Agricultural Supply and Demand 

Estimates (WASDE) and the Energy 

Information Administration’s (EIA) 

Short Term Energy Outlook (STEO) 

reports, making it useful for analysis 

looking at fairly short time frames (e.g., 

within one year into the 

future).19, thnsp;20 Finally, we note 

that the ISU model has been used in 

analytical work conducted outside EPA; 

reports based on such work are and 

have been available in the public 

domain for review. We are using a 

model, in other words, that has been 

subjected to external scrutiny 

independent of our own analysis. By 

way of example, many commenters 

cited a non-EPA study that used the ISU 

model and same basic approach we 

adopt here to analyze potential impacts 

of a waiver in 2012.21 EPA is not aware 


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22The assumptions and inputs used within any 

model are of critical importance to modeled results, 

and we explain our selection of key inputs below. 23These variables are called exogenous factors, or 

uncertain variables. The gasoline price put into the 

model is a ‘‘petroleum only’’ price, meaning that it 

represents a gallon of gasoline that contains no 

ethanol. 24See memo to the docket from the Department 

of Energy on ethanol demand for further 

information. 

25See memos to the docket describing the ISU 

model (‘‘Description of Iowa State University 

Stochastic Model’’) and detailing EPA modeling 

results (‘‘EPA Stochastic Modeling Results’’) for 

more information. 

26Note that the RFS program does not require that 

this volume of renewable fuel be met through use 

of corn based ethanol; any other renewable fuel can 

also satisfy the requirement. 

27While some of the requests for a waiver do 

discuss a ‘‘whole or partial’’ waiver, our analysis 

focuses on a waiver of the full amount between the 

advanced biofuel requirement and the total 

renewable fuel requirement. Analyzing scenarios 

with and without the volume requirements in place 

helps evaluate the full impacts of the RFS program. 

Because we find that it is unlikely that the RFS 

requirements are having an impact in the time 

period analyzed, we do not address the question of 

a partial waiver. If waiving the entire volume 

requirement were to have no impact, then we 

would not expect waiving just a portion of the 

requirements to have an impact. 

28For example, see comments submitted by 

National Pork Producers Council, available at EPA– 

HQ–OAR–2012–0632–2209, stating that ‘‘benefits of 

[a] waiver do not need to coincide with waiver 

period’’ at 26. 

29For example, using gasoline prices for longerterm projections necessarily involves a higher 

degree of uncertainty. The same goes for projections 

related to crop yields. 

of any significant technical criticism of 

the ISU model itself.22

The ISU model is a stochastic 

equilibrium model that projects, among 

other outputs, the prices of corn, 

ethanol and blended fuel given 

uncertainty in six variables: U.S. corn 

yields, U.S., Brazilian, and Argentinean 

soybean yields, U.S. wholesale gasoline 

prices, and Brazilian ethanol 

production.23 The analysis simulates 

500 scenarios, and for each one the 

model independently picks a value for 

each exogenous factor (such as U.S. corn 

yield) by randomly selecting from a 

probability distribution curve for that 

factor. Since the probability of the 

specific value of a given corn yield is 

built into the distribution curve for corn 

yields, the greater the probability of a 

certain corn yield, the more likely it is 

that the model will pick that value for 

any scenario. The result is that the 

distribution of the random draws for 

each exogenous factor fairly reflects the 

probability of the various uncertain 

variables. For each of the 500 scenarios, 

the model projects ethanol production 

and the prices of corn, ethanol, and 

blended fuel based on the values picked 

for the exogenous factors for that run. 

As mentioned above, we ran the model 

with and without a waiver, modeling 

500 different scenarios, to assess the 

impact of a waiver. 

For the results described below, EPA 

made modifications to the model in 

preparation for the current analysis. At 

EPA’s request, ISU researchers updated 

their model with data from the October 

WASDE and STEO reports. After 

consultation with DOE, we also 

modified the demand curve for ethanol 

to reflect our understanding of 

flexibility in refinery markets over the 

next twelve months. A full description 

of the ethanol demand curve developed 

in consultation with DOE can be found 

in the docket.24 We discuss the issue of 

refiner flexibility more fully in Section 

V.1.d below. Further, as detailed in 

Section V.1.c below, the model utilizes 

EPA estimates regarding excess, or 

‘‘rollover’’ RINs, that will be available 

for use for compliance purposes in the 

2012/2013 corn marketing year time 

period. The time period analyzed is 

discussed in Section V.1.b below. The 

estimates of rollover RINs are based on 

information submitted to EPA related to 

RIN generation. Additional details on 

the model changes and assumptions 

made for EPA’s analysis are included in 

the docket.25

(b) Scope of Technical Analysis 

To analyze the impact of 

implementation of the RFS, our 

technical analysis focused on the 

volume of renewable fuel representing 

the difference in volume between the 

advanced biofuel requirement and the 

total renewable fuel requirement. This is 

the portion of the total volume 

requirement that is currently met almost 

exclusively with corn ethanol.26 EPA 

compared circumstances with and 

without a waiver to identify the impact 

properly associated with the use of corn 

ethanol in the implementation of the 

RFS program for the 2012/2013 corn 

marketing year.27

We note that several of the States 

requested a waiver of RFS requirements 

‘‘in 2012 and 2013,’’ although the 

various waiver requests were not always 

specific with respect to the time period 

for which the waiver was requested. 

EPA focused its technical analysis on 

the 2012/2013 corn marketing year 

(which runs from September 1, 2012, to 

August 31, 2013) for a number of 

reasons. All of the petitioners referenced 

the serious drought conditions as the 

underlying reason for waiving the RFS 

volume requirements. The drought 

primarily affects the 2012/2013 corn 

marketing year, and the harm claimed 

by the requesters was the impact of 

taking corn from the reduced crop 

affected by the drought and using it to 

produce ethanol as a transportation fuel. 

The corn crop at issue is the 2012/2013 

corn marketing year crop, and it is 

ethanol produced from this corn crop 

that was the overwhelming focus of the 

waiver requests. Focusing the technical 

analysis on the production of ethanol 

during this same 2012/2013 time period 

focused the analysis on the time period 

where implementation of the RFS 

volume requirements was claimed to be 

the source of the harm. In addition, 

focusing on the 2012/2013 marketing 

year is consistent with the petitioners 

request to waive the RFS requirements 

‘‘in 2012 and 2013’’ since it would cover 

portions of both calendar years. Finally, 

while other time periods are possible to 

analyze, data is often reported on a 

marketing year basis, and analysis of 

commodity markets is frequently done 

similarly. The WASDE data used in our 

analysis, as well as all other USDA 

projections of U.S. corn yields, 

production, and prices, are done within 

this same time frame. 

EPA received comment that a waiver 

granted for some or all of 2013 might 

have impacts on market dynamics in the 

2013/2014 corn marketing year, and that 

EPA is not limited to assessing only a 

one-year impact.28 Commenters state 

that a waiver granted for some or all of 

the 2013 RFS compliance year would 

make more RINS available for use in 

2014, when the RFS standards are 

higher, and that such a waiver would 

provide ‘‘relief’’ in 2013/2014. In 

considering the time frame used for this 

technical analysis, EPA recognizes that 

we have discretion in determining the 

appropriate time period to analyze. In 

this case, however, and as described 

above, we focus our analysis on the 

2012/2013 corn marketing years as that 

is the time period where the requesters 

claim that implementation of the RFS 

volume requirements would severely 

harm the economy. Evaluating whether 

implementation of the RFS volume 

requirements would severely harm the 

economy after the end of the 2012/2013 

corn marketing year would require a 

new set of assumptions regarding future 

crop yields, gasoline costs, refining 

market behavior, and other parameters, 

which can be projected but are less 

certain at this time.29 EPA believes that 

evaluating the potential impacts of 

implementation of the RFS volume 

requirements in 2013/2014 should take 

into account information on the 2013/ 

2014 corn crop, as well as updates on 

other information used in the analysis. 

While it is possible to look over a longer 

time period, as some of the studies 


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30See, for example, ‘‘Renewable Fuel Standard 

Waiver Options during the Drought of 2012,’’ Food 

and Agricultural Policy Research Institute, 

University of Missouri, Report #11–12, October 12, 

(‘‘FAPRI-Missouri’’), available in the docket. 

31National Pork Producers Council comments at 

EPA–HQ–OAR–2012–0632–2209. 

32See, for example, comment from Chevron at 

EPA–HQ–OAR–2012–0632–2306. 

33See, for example, the waiver request letter from 

the Governor of Utah, at EPA–HQ–OAR–2012– 

0632–2486, requesting a waiver ‘‘as to have the 

maximum impact on the price of corn and soybeans 

* * *’’. 

34 72 FR 23935 (May 1, 2007). 

submitted to EPA attempt to do,30

assessing impacts over a longer time 

period introduces an additional set of 

variables that increase the uncertainty of 

any analytical results. 

To the extent parties believe that 

implementation of the RFS program 

would severely harm the economy in 

2014 because of the production of 

renewable fuel from corn, then a future 

waiver request that focuses on the harm 

in that time period could present 

analysis and arguments addressing the 

impact of implementation of the RFS 

volume requirements during that time 

period. For example, the availability of 

rollover RINs in future time frames 

could be more limited, a fact which 

could impact the results of such an 

analysis. However as noted above 

assessing those issues now would 

involve a high degree of uncertainty. To 

the extent parties assert that 

implementation of the RFS volume 

requirements would severely harm the 

economy in 2014 because of market 

based limits on the volume of ethanol in 

gasoline (typically referred to as the 

blendwall, as blends greater than E10 or 

E15 may only be marketed to flexible 

fuel vehicles), then a future waiver 

request that focuses on this issue could 

present information and analysis 

addressing the relevant issues. However, 

it would be more appropriate to 

consider such issues in a future annual 

RFS rulemaking setting the volume 

requirements for years after 2013. 

In a related vein, EPA also received 

comments related to EPA’s ability to 

renew a waiver beyond a one-year time 

frame.31 Other commenters suggested 

that EPA should grant a waiver for two 

years. The statute provides that a waiver 

granted under section 211(o)(7) of the 

Act ‘‘shall terminate after 1 year, but 

may be renewed by the Administrator 

after consultation with the Secretary of 

Agriculture and the Secretary of 

Energy.’’ EPA interprets this provision 

to mean that Congress intended the 

length of time for which a waiver 

should be granted to be one year, and 

that EPA may consider, in consultation 

with USDA and DOE, whether the 

period should be extended. Such 

consultation would be in the context of 

evaluating the economic impacts of the 

initial waiver as well as whether severe 

economic harm is still being caused by 

implementation of the RFS volume 

requirements. EPA does not need to 

decide now the scope of its authority for 

a renewal of a waiver, especially since 

EPA is denying the waiver requests that 

are before it. EPA clearly has authority 

to grant a waiver for a period of one year 

only, and any renewal would need to be 

the subject of a separate, if related, 

action. 

For these reasons, with respect to 

assessing the impact that 

implementation of the RFS will have on 

ethanol production levels, and to 

evaluating the impacts and potential 

degree of harm from implementation of 

the RFS on corn prices and other 

factors, EPA believes that it is 

appropriate in this case to focus its 

technical analysis on impacts that occur 

from the production of ethanol in the 

2012/2013 corn marketing year. 

EPA’s technical analysis focuses on 

whether the RFS mandate has an effect 

on corn ethanol production and 

consumption over the 2012/2013 

marketing year. EPA recognizes that the 

drought affecting much of the nation 

during 2012 has affected not only corn 

yields, but also other crops used in the 

production of renewable fuels, most 

notably soybeans, which are used as a 

feedstock in biomass-based diesel (BBD) 

production. EPA also received comment 

arguing that a waiver should analyze 

impacts on all potential feedstocks and 

volume standards under RFS.32 EPA 

chose to focus our technical analysis on 

conventional ethanol, corn prices, and 

related impacts primarily because the 

requesting States and other parties as 

well as commenters focused the 

overwhelming majority of their 

discussion on ethanol production, corn 

price changes, and subsequent impacts 

from those increased corn prices on 

industries that use corn as an input (e.g., 

feed, livestock, and poultry industries). 

These parties assert that the RFS is 

creating demand for corn for use in 

production of transportation fuel, and 

that reducing that demand via a waiver 

would result in making additional corn 

available for other end uses and reduce 

prices of corn. Because the focus of the 

requesting parties is on corn and corn 

ethanol, we believe it is reasonable to 

similarly concentrate our technical 

analysis on the impacts of a waiver 

affecting the portion of the total 

renewable fuel mandate that is currently 

satisfied with conventional renewable 

fuel RINs, the majority of which 

represent corn-based ethanol. 

At the same time, some of the 

requesting States mentioned the 

drought’s impacts on soybean crops, 

and many of the requesting States 

requested a waiver of ‘‘applicable 

volumes’’ of renewable fuel.33 While 

EPA did not conduct its own technical 

analysis of these issues, EPA considered 

the technical analysis and other 

information submitted by commenters, 

and has determined that a waiver 

should not be granted for the RFS 

biomass-based diesel volumes. We 

discuss the biomass-based diesel and 

cellulosic volume requirements in 

section V.6. 

(c) Availability of Rollover RINs 

Under the RFS program, RINs are 

valid for compliance purposes for both 

the calendar year in which they are 

generated and the following calendar 

year. By regulation, the amount of an 

obligated party’s Renewable Volume 

Obligation (RVO) that can be met using 

previous-year, or ‘‘rollover,’’ RINs is 

capped at 20 percent. EPA explained 

our interpretation of the relevant 

statutory provisions, and our reason for 

establishing a cap of 20 percent, in the 

2007 RFS final rulemaking on RFS.34

For purposes of the current analysis, the 

number of rollover RINs available 

during the 2012/2013 marketing year 

affects the impact of implementation of 

the RFS volume requirements in 2013. 

The specific number of rollover RINs 

available for use in the 2012/2013 

marketing year is an input into EPA’s 

stochastic modeling. To the extent that 

the number of rollover RINs is greater, 

the RFS requirements could be met with 

less production and blending of ethanol 

in 2013. The converse is the case if the 

number of rollover RINs is less. As 

discussed in Section V.1.d, we believe 

that refiners and importers, the parties 

obligated to comply with a renewable 

volume requirement, at least in many 

cases, have reasons other than the RFS 

program for choosing to rely on ethanol 

blending for compliance purposes. 

However, to the extent that the RFS 

program also creates such pressure, 

rollover RINs reduce it in a given time 

period by increasing compliance 

flexibility for obligated parties. It also 

provides more flexibility for renewable 

fuel producers. From the perspective of 

the ISU model, one rollover RIN is 

equivalent to one liquid gallon of 

ethanol: both equally satisfy the RFS 

requirements, and thus both are sources 

of ethanol to draw upon in the model. 

Based on the most current data 

available from the EPA Moderated 

Transaction System (EMTS), EPA 


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35 40 CFR 80.1427. 

36 3.04 billion RINs is 20 percent of the total 

renewable fuel requirement for 2012 (i.e., 15.2 

billion gallons). 

37Even if D6 RIN generation declines by 10 

percent monthly in November and December of 

2012, we expect that the number of 2012 vintage 

D6 RINs available after obligated parties fulfill their 

2012 compliance obligations would still exceed 2 

billion, and would likely exceed 2.5 billion. See 

‘‘RIN Rollover’’ memo in the docket for more 

information. 

38See ‘‘RIN Rollover’’ memo in the docket. 

39See Babcock-Iowa State. See also Purdue 

University/Farm Foundation study,’’Potential 

Impacts of a Partial Waiver of the Ethanol Blending 

Rules,’’ EPA–HQ–OAR–2012–0632–0025. 

40See Department of Energy memo on ethanol 

demand, available in the docket, for further 

information. See also EPA memo, ‘‘Economics of 

Ethanol Blending and Refining Sector Flexibilities,’’ 

available in the docket. 

projects that obligated parties will 

collectively be able to roll over 2 to 3 

billion 2012 vintage RINs into the 2013 

compliance period. EMTS currently 

reports that approximately 3.5 billion 

2011 vintage D6 RINs are available for 

use towards 2012 compliance. As 

discussed above, no more than 20 

percent of a given year’s renewable fuel 

standard can be met with RINs from the 

previous year.35 That requirement is 

15.2 billion gallons in 2012, meaning 

that as many as 3.04 billion 2011 RINs 

can be carried over for 2012 

compliance.36 Since these 2011 vintage 

RINs expire at the end of the 2012 

compliance period, obligated parties 

have a strong incentive to use these 

RINs first, carrying over any excess 2012 

RINs into the 2013 compliance period. 

Based on this incentive and supported 

by conversations with industry and 

governmental stakeholders, EPA 

believes that obligated parties will 

utilize the maximum possible amount of 

2011 RINs (i.e., 3.04 billion RINs out of 

a total 3.46 billion RINs available) for 

2012 compliance and not let them 

expire. 

Based on total 2012 EMTS data 

available to date, we project for 

purposes of this analysis that D6 RIN 

rollover into the 2012/2013 marketing 

year period will exceed 2.0 billion. 

Total D6 RIN generation for 2012 has 

already exceeded 10.8 billion gallons. 

Monthly generation of D6 (general 

renewable fuel) RINs was approximately 

1.05 billion in October of 2012, only 

slightly lower than the 1.1 billion RINs 

generated in October of 2011 and just 

below average for 2012 as a whole.37 If 

monthly RIN generation holds constant 

at October levels for the rest of 2012, 

rollover of 2012 vintage RINs to 2013 

would likely exceed 2.6 billion. If RIN 

generation increases in November and 

December of 2012, as it did in both 2010 

and 2011, rollover RIN availability 

would likely exceed 2.7 billion and 

could potentially be even higher. Thus 

in all of these scenarios, it is expected 

that at least 2.0 billion rollover RINs 

will be available for the 2013 

compliance year. Further information 

on RIN rollover projections is also 

available in the docket.38

Several studies prepared by non-EPA 

researchers observe, and we agree, that 

the availability of rollover RINs can 

significantly affect the potential impact 

of implementation of the RFS volume 

requirements. Some studies have 

suggested that, in scenarios where 

rollover RINs are relatively scarce, 

waiving the effective conventional 

renewable fuel volume requirement 

might lead to a significant decrease in 

corn prices. However, if significant 

numbers of rollover RINs (i.e., 2.0 

billion or more) are available, these 

studies suggest that the effect of a 

waiver is significantly smaller.39

EPA recognizes that the estimate of 

rollover RIN availability used in the ISU 

model (and other models) can have a 

significant effect on the results of the 

modeling. For purposes of our analysis, 

EPA assumed that no more than 2.0 

billion rollover RINs would be available 

for use in the 2012/2013 time period. As 

discussed above, current data suggest 

that RIN rollover is likely to be higher 

or even significantly higher than this. 

We believe 2.0 billion rollover RINs is 

a conservative analytical assumption. 

Historically refiners and blenders 

have blended more ethanol than 

required due to its favorable economics, 

leading to the large carryover RIN 

balance discussed above. EPA received 

comment suggesting that even if the 

blending economics were not favorable 

for ethanol, refiners and blenders might 

look forward to future obligations and 

purposefully over-comply with the RFS 

requirements in 2013 to increase their 

‘‘bank’’ of relatively low-cost RINs that 

could be carried into 2014, in case they 

anticipate RIN prices to be higher then. 

If such behavior were to take place, 

ethanol production in the 2012/2013 

corn marketing year would be higher 

than the level projected in the ISU 

modeling results. The implication is 

that the waiver could have a slightly 

larger impact on ethanol production and 

corn prices than what is projected in the 

ISU modeling results. If this type of 

over-complying behavior were to take 

place, we would expect demand for 

ethanol to be right at the E10 blend wall 

limit in 2012 and 2013. However, the 

empirical data does not support the 

theory that obligated parties are overcomplying to the maximum extent that 

they can bank RINs today, since there is 

still a small but significant gap between 

the volumes of ethanol consumption our 

modeling projects for next year and the 

estimated E10 blend wall. Even if 

parties were to engage in overcompliance for banking purposes in 

2013, their desire to do so would likely 

be limited by their ability to blend 

ethanol into low level blends (i.e., E10). 

Therefore, we do not believe that this 

type of behavior would have any 

appreciable effect on our analysis for 

this waiver decision. 

(d) Flexibility in the Refining Sector 

In assessing the impact of 

implementing the RFS volume 

requirements in the 2012/2013 time 

frame on ethanol production, a key 

consideration is the economic 

incentives for refiners to use ethanol 

during that time frame as well as the 

ability of refiners and fuel blenders to 

reduce, over that one-year timeframe, 

the quantity of ethanol currently being 

blended into the gasoline pool. As 

ethanol production and availability in 

the U.S. has increased over the past 10 

years, the economics of blending 

ethanol into gasoline have been such 

that many refiners have transitioned 

from producing primarily finished 

gasoline to producing primarily 

blendstocks for oxygenate blending 

(BOBs) which require the addition of 

ethanol in order to meet the 

specifications of finished gasoline. 

However, assuming refiners wanted for 

business reasons to reduce the quantity 

of ethanol blended into the gasoline 

pool, refiners would have to seek 

alternative high octane blend stocks or 

significantly adjust refinery operations 

to make up for the volume and octane 

increase they currently receive from 

ethanol. Logistical challenges to the 

refined product distribution system 

would also have to be overcome in 

parallel with the necessary refinery 

operation changes.40

As mentioned, currently most refiners 

produce a sub-octane unfinished 

gasoline lacking oxygenates called 

blendstocks for oxygenate blending 

(BOBs). These BOBs are transported 

through fuel pipelines or other modes to 

petroleum product terminals where they 

are then blended with ethanol and 

become finished gasoline. Since ethanol 

is generally not produced near large 

refineries and may absorb water and 

impurities that normally reside in 

petroleum product pipelines, a separate 

ethanol distribution system has been 

established to distribute and ultimately 

blend ethanol into BOBs at terminals to 

produce the finished fuel. 


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41Octane rating or octane number is a standard 

measure of the performance of a motor or aviation 

fuel. The higher the octane number, the more 

compression the fuel can withstand before 

detonating. 

42EPA acknowledges that the blending 

economics for ethanol are significantly different for 

E10 and E85. Our ethanol demand curve takes these 

differences into consideration, resulting in large 

drop in the ethanol to gasoline price ratio at the 

volume of ethanol that corresponds to the E10 

blendwall. 

43We note that our analysis does take into 

account different fuels where appropriate, 

including imported ethanol derived from sugarcane. 

44Morgan Stanley, ‘‘Ethanol Demand a Function 

of Economics, Not RFS,’’ August 7, 2012. Hart 

Energy Special Report, ‘‘U.S.: RFS Waiver Unlikely 

to Affect Ethanol Use,’’ October 12, 2012. Both 

analyses are available in the docket. 

45Comments submitted by American Petroleum 

Institute, EPA–HQ–OAR–2012–0632–2240, 

Chevron, EPA–HQ–OAR–2012–0632–2306, and 

Marathon Petroleum Company, EPA–HQ–OAR– 

2012–0632–1968. 

46See for example National Chicken Council 

comments, EPA–HQ–OAR–2012–0632–1994 and 

Grocery Manufacturers Association comments, 

EPA–HQ–OAR–2012–0632–2341. 

47Were we to use the November WASDE 

estimates, the percentage of time that the RFS 

requirements are projected to be not binding would 

be even higher, due to the increase in the lower end 

of the corn yield projections. 

One reason refiners choose to blend 

ethanol into gasoline is for purposes of 

boosting gasoline octane levels. Ethanol 

has an octane value of 115 (R+M/2) 

while finished gasoline’s pump octane 

value ranges from 87–93.41 Ethanol also 

has a value as a gasoline extender when 

blended into the gasoline pool. Other 

properties of ethanol, such as its 

volatility and low sulfur and benzene 

content, influence its value to refiners. 

Each refiner is expected to make 

decisions about ethanol blending 

independently, in light of the value they 

place on these factors and the 

complexity and uniqueness of each 

refinery. Where the blending of ethanol 

is profitable to refiners we expect that 

they would continue to blend ethanol 

into the gasoline pool even in the 

absence of a renewable fuel 

requirement.42

After consultation with DOE, review 

of comments, and analysis undertaken 

by EPA, we determined that, assuming 

refiners had an economic incentive to 

reduce ethanol blending, refiners have 

limited flexibility to make the necessary 

adjustments to reduce ethanol blending 

if a one year waiver of the RFS program 

were granted under projected scenarios 

for ethanol and gasoline prices. Our 

modeling inputs reflect this 

determination.43 At current ethanol and 

crude oil prices, the blending of ethanol 

into gasoline is an economically 

beneficial practice for refiners, and 

based on EIA forecasts this is expected 

to continue through at least 2013. 

However if that were to change and 

blending ethanol into gasoline was no 

longer an economically beneficial 

practice for refiners, we believe that the 

challenges at both the refinery level and 

in the refined product distribution 

system would be significant deterrents 

to reductions in ethanol blending in 

response to a one-year waiver. Studies 

conducted by independent 

organizations such as Morgan Stanley 

and Hart Energy, among others, support 

our assumption that refiners would be 

limited in their ability to reduce ethanol 

blending if a one year waiver of the RFS 

requirements is granted under current 

economic circumstances.44 For 

example, Morgan Stanley argues that 

there would be significant impediments 

to moving away from ethanol because it 

is widely available and is the least 

expensive source of octane/oxygenates 

for most refineries. Similarly, Hart 

Energy estimates that ethanol’s octane 

value and the cost of partially replacing 

ethanol use will limit the economic 

attractiveness to refiners of using less 

ethanol even with a waiver. They 

conclude that because an RFS waiver 

cannot force a reduction in domestic 

ethanol usage or exports, a waiver 

would likely have a small, if any, effect 

on reducing corn prices based on the 

continued demand for ethanol under 

current market economics. 

EPA also received comments from the 

American Petroleum Institute, Chevron, 

and Marathon Petroleum Company 

stating that a one year waiver would be 

unlikely to result in a significant 

decrease in ethanol blending.45 Though 

we did receive some comment arguing 

that refiners could make operational 

changes quickly, commenters provided 

little evidence upon which to assess this 

claim. These comments are likely based 

on historical practices when splash 

blending of ethanol was much more 

prevalent and refining and distribution 

had not optimized toward the use of 

ethanol. 

Several commenters cited the 

challenges that refiners would face in 

reducing the quantity of ethanol 

blended into the gasoline pool in the 

near term as justification for a longerterm waiver.46 These commenters stated 

that doing so would allow the refining 

industry sufficient time to address the 

operational and logistical challenges 

mentioned in the previous paragraphs 

and be necessary to result in reduced 

ethanol demand and consequent relief 

from high corn prices to affected 

industries. While we recognize that 

analyzing a longer period could affect 

the results of our modeling, EPA did not 

conduct such an analysis here for the 

reasons discussed above, including the 

high uncertainty involved in projecting 

relevant conditions further into the 

future. As such our technical analysis is 

based on the impacts of implementation 

and a potential waiver over a period of 

one year. 

2. Projected Impact of Implementation 

of the Renewable Fuel Standard 

We ran the ISU model with the 

updates and inputs described above and 

here describe the outputs. The ISU 

model projects that the average expected 

amount of conventional ethanol 

produced in the United States during 

the 2012/2013 corn crop year without a 

waiver will be 12.48 billion gallons. 

ISU’s model predicts that for 89 percent 

of the simulated scenarios, waiving the 

RFS requirements would not change the 

overall level of corn ethanol production 

or overall U.S. ethanol consumption in 

2012/2013 because in the event of a 

waiver the market would demand more 

ethanol than the RFS would require. For 

those 89 percent of the scenarios, 

waiving the RFS requirements would 

therefore have no impact on ethanol 

use, corn prices, ethanol prices, or fuel 

prices. We refer to that model result as 

an 89 percent probability that the RFS 

will not be ‘‘binding’’ in the 2012/2013 

marketing year. Conversely, in 11 

percent of the simulated ISU model runs 

the RFS would be binding. In those 11 

percent of the random draws, the 

resulting market demand for ethanol 

would be below the RFS requirement 

and, therefore, the RFS would require 

greater use of ethanol than the market 

would otherwise demand. The binding 

scenarios are generally those in which 

projected fuel prices and corn yields are 

both unrealistically low, with both 

gasoline prices and corn yields in 2012/ 

2013 falling significantly below their 

current DOE and USDA projections.47 In 

those cases, the RFS would have an 

impact, albeit a limited or moderate one, 

on ethanol use and the food and fuel 

markets in the United States. 

The ISU model assumes corn ethanol 

would account for at most 13.6 billion 

gallons of the RFS volume requirement 

during the 2012/2013 corn marketing 

year. Because the corn marketing year is 

split over two RFS compliance years, 

the 13.6 billion gallons is based on the 

fraction of the marketing year that 

would occur in the 2012 compliance 

year (one-third) and the 2013 

compliance year (two-thirds). EISA 

requires 15.2 billion gallons of 

renewable fuels in 2012 and 16.55 

billion gallons in 2013; however, 2 

billion gallons of the 2012 volume and 

2.75 billion gallons of the 2013 volume 


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Federal Register / Vol. 77, No. 228 / Tuesday, November 27, 2012 / Notices 70761 

must be from advanced biofuels. While 

advanced biofuels, including biomassbased diesel, advanced ethanol, and 

cellulosic biofuels are included in the 

ISU model we focus our analysis on 

evaluating the effects of a waiver of the 

portion of the RFS volume requirement 

filled by corn ethanol (see Section 

V.1.b). The full results from this 

analysis are included in the docket. The 

modeling projects that 2.0 billion 

gallons of rollover RINs from 2012 will 

be used to meet the 13.6 billion gallons 

during this time period. 

Certain empirical data also support 

the projection that the RFS is unlikely 

to be binding in the 2012/2013 

timeframe. For example, the price of 

tradable renewable identification 

number (RIN) credits remains relatively 

low: below five cents per gallon as of 

September 26, 2012. Refiners and 

importers verify their compliance with 

the RFS by collecting and retiring RINs, 

which are assigned to volumes of 

renewable fuel by their producers. 

Refiners and importers use RINs for an 

appropriate volume of renewable fuel to 

demonstrate compliance with their RFS 

volume requirement. Parties that exceed 

their RFS obligations for a compliance 

period can trade excess RINs to other 

parties that need them for compliance, 

or under certain conditions, can bank 

them for future compliance. When the 

RFS requirement is expected to be 

binding, we would expect the demand 

for RINs would increase and the supply 

of excess RINs to decrease, leading to an 

increase in RIN prices. 

Therefore, we expect the current RIN 

price reflects the market’s current and 

near-term expectations about how 

binding the RFS is likely to be. Recent 

RIN prices represent a very small share 

of the price of a gallon of ethanol, 

suggesting that refiners and blenders 

expect the RFS is not likely to be 

binding in 2012 or 2013. It is possible 

that RIN prices have been depressed by 

market uncertainty generated by the 

recent waiver requests. However, the 

record high RIN price before these 

waiver requests was only approximately 

6.5 cents per gallon. In this particular 

case, the empirical RIN price 

information corroborates the modeled 

impacts of the RFS. 

3. Analysis of the Degree of Impact 

When evaluating the economic 

impacts of implementation of the RFS 

volume requirements, our analysis 

centered on four major areas: average 

U.S. corn prices, food prices, feed 

prices, and fuel prices. While there may 

be other areas of potential impact, we 

focused on these areas because they are 

expected to have the largest potential 

economic impacts in the U.S. Given the 

time available for this analysis, we have 

not looked at the interaction of these 

impacts in an integrated modeling 

system. However, we believe that 

looking at these indicators individually 

provides a useful framework for 

determining the impact of the RFS 

volume requirements. 

As discussed above, the body of 

information shows that it is very likely 

that the RFS volume requirements will 

have no impact on ethanol production 

volumes in the relevant time frame, and 

therefore no impact on corn, food, or 

fuel prices. In the unlikely event that 

the RFS program would have an impact 

on the corn and other markets during 

the 2012–2013 timeframe, its nature and 

magnitude is described below. Our 

analysis considers the impact in three 

ways (1) when the RFS volume 

requirements are not binding (89% of 

the scenarios), (2) the average across all 

500 scenarios, binding and not binding, 

(3) and the average across the binding 

scenarios (11%). As a bounding 

exercise, we also provide information 

on a ‘‘worst case’’ scenarios from within 

the binding scenarios (see Section V.3.e 

below). 

(a) Corn Price Impacts 

Based on the ISU modeling results, 

the average expected impact of waiving 

the RFS requirements over all the 

potential outcomes would be a decrease 

in the price of corn by $0.07/bushel. 

This average result must be considered 

in context, however, since our analysis 

projects that it is highly likely that the 

RFS volume requirements are not 

binding, and that the impact on corn 

prices will be zero. There is only an 

11% chance that the requirements will 

be binding. Because of this, we project 

that it is highly likely that the impact of 

waiving the RFS program is zero change 

in corn prices. However, in the subset 

of potential outcomes in which the RFS 

requirements are binding (11 percent of 

the results), waiving the program would 

result in an average expected decrease 

in the price of corn of $0.58/bushel. 

This leads to a non-zero average impact 

across all 500 scenarios, even though 

the most likely result is still zero 

impact. Table V.3.a–1 presents the ISU 

scenarios. 

TABLE V.3.a–1—RANGE OF ESTIMATED CORN PRICES

Iowa State mean 

estimate 

Iowa State when 

RFS does not 

bind 

Iowa State when 

RFS binds 

Mean Corn Prices with Mandate ($/bushel) .............................................................. $8.02 $8.00 $8.15 

Mean Corn Prices with Waiver ($/bushel) ................................................................. $7.95 $8.00 $7.57 

Change in Corn Prices with Waiver ($/bushel) ......................................................... ¥$0.07 $0.00 ¥$0.58 

Percentage of Runs ................................................................................................... 100% 89% 11% 

(b) Food Price Impacts 

In consultation with USDA, EPA 

estimated how these projected changes 

in corn prices would influence U.S. 

food prices. It is highly likely that the 

RFS volume requirements are not 

binding and there will be no impact on 

food prices. The results of the modeled 

corn price impacts discussed above 

appear to be modest for both the mean 

estimate and the subset of scenarios in 

which the RFS requirements are binding 

(see Table V.3.b–1). A $0.07/bushel 

decrease in corn prices would result in 

a 0.04% decrease in Food consumer 

price index (CPI) and a 0.006% decrease 

in All Item CPI. A $0.58/bushel decrease 

in corn prices would result in a 0.35% 

change in Food CPI and a 0.049% 

change in All Item CPI. For the average 

household, a $0.07/bushel decrease in 

corn prices would result in a reduction 

of household expenditures on food 

equal to $2.59 in 2012/2013, while a 

$0.58/bushel decrease in corn prices 

would result in a savings of $22.68. 

Since people in the lowest income 

groups are more sensitive to changes in 

food prices, we also analyzed the impact 

of changes in food expenditures as a 

percentage of total consumer 

expenditures and as a percentage of 

income. The changes in food 

expenditures are relatively small 

compared to total consumer 

expenditures for both average and low 

income households. When comparing 

the changes in food expenditures 

relative to income, the impact on low 


wreier-aviles on DSK5TPTVN1PROD with 
70762 Federal Register / Vol. 77, No. 228 / Tuesday, November 27, 2012 / Notices 

48See USDA memo on Food CPI and Food 

Expenditures in docket. 

income households is larger than the 

impact on average households. 

Additional details on the methodology 

used to calculate the CPI and household 

expenditures are included in the 

docket.48

TABLE V.3.b–1—IMPACTS ON FOOD PRICES, CPI INDICATORS, AND HOUSEHOLD EXPENDITURES

Units ISU mean 

estimate 

ISU when RFS 

binds 

Change in Corn Prices with Waiver .................................................................................................. $/bushel ... ¥$0.07 ¥$0.58 

Change in Food CPI with Waiver ...................................................................................................... Percent .... ¥0.04 ¥0.35 

Change in All Item CPI with Waiver .................................................................................................. Percent .... ¥0.006 ¥0.049 

Change in Annual Food Expenditures for Average Household with Waiver .................................... $ ............... ¥$2.59 ¥$22.68 

Change in Annual Food Expenditures for Lowest Quintile Household with Waiver ......................... $ .............. ¥$1.42 ¥$12.46 

Change in Food Expenditures as a Percentage of Consumer Expenditures for Average Household with Waiver.Percent .... ¥0.005 ¥0.047 

Change in Annual Food Expenditures as a Percentage of Consumer Expenditures for Lowest 

Quintile Household with Waiver.

Percent .... ¥0.007 ¥0.061 

Change in Food Expenditures as a Percentage of Income After Taxes for Average Household 

with Waiver.

Percent .... ¥0.005 ¥0.046 

Change in Food Expenditures as a Percentage of Income After Taxes for Lowest Quintile 

Household with Waiver.

Percent .... ¥0.0065 ¥0.057 

(c) Feed Price Impacts 

Using WASDE projections (which 

assume the mandate is in place) for feed 

costs in 2012/2013, we estimated that 

U.S. feed prices are projected to be 

$318.45/ton, using a weighted average 

use of corn, sorghum, barley, oats, and 

soybean meal. In estimating the impact 

of a change in corn prices on feed costs, 

we used a simplifying assumption that 

the percentage change in corn prices is 

applied to all components of the feed 

grains components used in this analysis. 

Since the price of other feed grains tend 

to track the price of corn, we believe 

this simplifying assumption is a realistic 

estimate of how feed grains will track 

each other with changes in corn prices. 

It is highly likely that the RFS volume 

requirements are not binding, and there 

will be no impact on feed prices. We 

estimated the potential impact of 

granting the waiver on feed costs for the 

corn price scenarios described in the 

previous sections: the ISU mean 

estimate of a $0.07/bushel decrease in 

corn price and the subset of ISU 

scenarios in which the mandate is 

binding ($0.58/bushel decrease in corn 

price). 

TABLE V.3.c–1—U.S. FEED PRICES

2009/10 2010/11 2011/12 2012/13 

Feed Cost ($/ton) without Waiver .................................................................... $158.17 $212.93 $255.38 $318.45 

Decrease in Feed Costs, $/ton ($0.07/bushel corn price change scenario) ... ........................ ........................ ........................ ¥$1.88 

Decrease in Feed Costs, $/ton ($0.58/bushel corn price change scenario) ... ........................ ........................ ........................ ¥$16.50 

Source: October 10, 2012 WASDE. 

Note: Feed is equal to the weighted average sum of feed use of corn, sorghum, barley, and oats plus domestic use of soybean meal. 

Based on USDA’s estimates for U.S. 

livestock feed costs and returns, we 

estimated the impact of a percentage 

change in feed costs per unit for poultry, 

hogs, fed cattle, cow-calfs, and milk 

production. Details on the methodology 

used to calculate feed impacts are 

included in the docket. Using USDA’s 

production and slaughter estimates, we 

aggregated the potential feed cost 

impacts of a waiver for the U.S. and the 

States that requested a waiver. Table 

V.3.c–2 presents the estimated changes 

in total nationwide and statewide feed 

costs due to the corn price changes 

observed in our modeling, alongside 

2011 livestock revenue and GDP. As 

Tables V.3.c–3, V.3.c–4, and V.3.c–5 

show, in dollar terms, the largest sectors 

of the livestock industry that could 

potentially benefit from the waiver are 

the cattle and dairy industry. However, 

as a portion of total feed costs, the 

impacts are similar across livestock 

types. As stated above, it is highly likely 

that the RFS volume requirements are 

not binding and there will be no impact 

on feed prices. However, we present the 

potential impacts from the corn price 

changes noted above in order to 

illustrate what might happen under 

those circumstances. 

When considering impact of the 

implementation of the RFS volume 

requirements, EPA considered the 

impacts in both absolute terms and 

relative to the entity being affected, 

since impacts will be more meaningful 

for some states than others. Texas, for 

example, sees the largest dollar value 

feed impacts among states that 

requested a waiver. Our average 

projected corn price impact of $0.07/ 

bushel represents a decrease of $35.2 

million in total feed costs. However, this 

is only a 0.6 percent decrease in total 

Texas feed costs, which is equivalent to 

approximately 0.2 to 0.4 percent of State 

livestock revenue. In the 11 percent of 

cases where we modeled the RFS 

requirements as binding, we project that 

a waiver might decrease Texas feed 

costs by about $308.5 million (a 2.0–3.8 

percent decrease in feed costs). 

In a State like Arkansas, where 

livestock revenue represents about 3.5 

percent of state GDP (the largest 

proportion of any state that requested a 

waiver of the RFS mandate), the impact 

of the waiver might be expected to have 

a larger impact. However, here we see 

only a 0.5 percent decrease in feed costs 

in the $0.07/bushel case, which is 

equivalent to only a 0.06 to 0.1 percent 

impact on State livestock revenue. 


wreier-aviles on DSK5TPTVN1PROD with 
Federal Register / Vol. 77, No. 228 / Tuesday, November 27, 2012 / Notices 70763 

49See memo on ‘‘Livestock Impacts’’ in docket. 

TABLE V.3.c–2—2011 GROSS DOMESTIC PRODUCT, 2011 LIVESTOCK REVENUE, AND PROJECTED TOTAL FEED COSTS

AND ESTIMATED DECREASE WITH RFS WAIVER FOR COMBINED CATTLE, POULTRY, PORK, AND DAIRY PRODUCTION

IN THE U.S. AND STATES REQUESTING A WAIVER

Total feed costs 

without waiver 

(million $) 

Decrease in feed 

costs in million $ 

($0.07/bushel corn 

price change 

scenario) 

Decrease in feed 

costs in million $ 

($0.58/bushel corn 

price change 

scenario) 

2011 State livestock revenue 

(million $) 

2011 GDP 

(million $) 

U.S. ........................................................ 77,802.37 ¥451.93 ¥3,964.30 123,400 14,981,020 

AR .......................................................... 526.83 ¥2.84 ¥24.95 3,900 105,846 

DE .......................................................... 364.77 ¥1.88 ¥16.49 700 65,755 

FL ........................................................... 738.80 ¥4.31 ¥37.80 1,340 754,255 

GA .......................................................... 1,619.71 ¥8.69 ¥76.19 3,900 418,943 

MD ......................................................... 295.42 ¥1.66 ¥14.52 1,000 301,100 

NM ......................................................... 1,289.02 ¥7.61 ¥66.78 2,100 79,414 

NC .......................................................... 2,728.98 ¥15.32 ¥134.37 5,400 439,862 

TX .......................................................... 6,041.58 ¥35.17 ¥308.47 10,800 1,308,132 

UT .......................................................... 538.24 ¥3.18 ¥27.87 917 124,483 

VA .......................................................... 1,006.17 ¥5.63 ¥49.40 1,800 428,909 

WY ......................................................... 23.00 ¥0.14 ¥1.19 840 37,617 

In addition to examining total feed 

costs in each state, we analyzed the 

impacts on the three main segments of 

the livestock industry: cattle and dairy, 

pork, and poultry and eggs. Here we 

present both the projected national-level 

impacts of a waiver and the impacts in 

selected States (chosen either because 

their livestock industry is large or 

because we observed a larger 

proportional impact on their market in 

cases where the mandate affects corn 

prices). 

As observed above, it is highly likely 

that the RFS volume requirements are 

not binding and there will be no impact 

on these industries. Our analysis 

suggests that implementation of the RFS 

program, when binding, has a 

proportionally greater impact on the 

cattle and dairy industries, and those 

industries would consequently see 

greater cost reductions from a waiver in 

those scenarios. National cattle and 

dairy feed costs would decrease by 0.6 

percent with a waiver. Texas, New 

Mexico, and Florida see the largest 

cattle and dairy feed cost impacts of a 

waiver in total dollar value, while 

Delaware and Utah would, along with 

Florida and New Mexico, see the largest 

cattle and dairy feed impacts from a 

waiver as a proportion of their total 

revenue in this sector. These outcomes 

indicate that, if the RFS volume 

requirements were binding, these are 

the states where a waiver may have the 

most impact on economic activity 

related to cattle and dairy. We present 

the impacts on their sectors below in 

Table V.3.c–3. In the $0.07/bushel case, 

the impact of a waiver in all of these 

states is less than a 1 percent reduction 

in cattle and dairy feed costs. This 

reduction represents a change of 

approximately 0.35 percent of Texas 

livestock revenue and a change of 

approximately 0.38 percent for New 

Mexico and Florida. In Delaware, the 

state where the change in feed costs has 

the greatest proportional effect on the 

cattle and dairy industry (due to the 

small size of this sector in Delaware), 

this reduction in costs would be 

equivalent to a 0.5–0.8 percent increase 

in cattle and dairy revenue and an 

approximately 0.0002 percent increase 

in Delaware State GDP. Impacts in 

Delaware would increase to 4.5–7.1 

percent of cattle and dairy revenue in 

the $0.58/bushel scenario. A full 

comparison of these impacts to cattle 

and dairy revenues is available in the 

docket.49

TABLE V.3.c–3—TOTAL FEED COSTS AND ESTIMATED DECREASE WITH RFS WAIVER FOR CATTLE AND DAIRY

PRODUCTION IN THE U.S. AND SELECTED STATES REQUESTING A WAIVER IN MILLIONS OF DOLLARS

Total feed costs 

without waiver 

(in million $) 

Decrease in feed 

costs in million $ 

($0.07/bushel corn 

price change 

scenario) 

Decrease in feed 

costs in million $ 

($0.58/bushel corn 

price change 

scenario) 

U.S. ............................................................................................................................ 49,518.32 ¥292.44 ¥2,565.30 

TX .............................................................................................................................. 5,114.25 ¥30.20 ¥264.94 

NM ............................................................................................................................. 1,288.82 ¥7.61 ¥66.77 

FL ............................................................................................................................... 533.78 ¥3.15 ¥27.65 

UT .............................................................................................................................. 482.60 ¥2.85 ¥25.00 

DE .............................................................................................................................. 27.75 ¥0.16 ¥1.44 


wreier-aviles on DSK5TPTVN1PROD with 
70764 Federal Register / Vol. 77, No. 228 / Tuesday, November 27, 2012 / Notices 

50The pork industries of North Carolina and 

Virginia are here analyzed together, owing to the 

fact that both are dominated by the operations of 

one company. Because of this, their pork feed costs 

and revenues are intertwined and are here 

examined together. 

51See, for example analysis prepared for the 

North Carolina Poultry Federation at EPA–HQ– 

OAR–2012–0632–2429, and comments submitted 

by the Virginia Poultry Federation at EPA–HQ– 

OAR–2012–0632–2066. 

The proportional impact of a waiver 

on the national pork industry is 

projected to be about the same as cattle 

and dairy, approximately 0.6 percent. Of 

the states that submitted waiver 

requests, we project that the combined 

pork industry of North Carolina and 

Virginia would benefit the most from a 

waiver if the RFS volume requirements 

were binding, followed by Texas and 

Arkansas.50 A $0.07/bushel decrease in 

corn prices is projected to reduce hog 

feed costs by just under $10 million in 

North Carolina and Virginia. We project 

an average savings of $87.35 million in 

cases where the mandate is binding. 

Impacts on pork revenue and State GDP 

in Texas and Arkansas would be smaller 

in both absolute and proportional terms. 

Impacts in Florida and Delaware, where 

the impact on the pork sector is much 

smaller in absolute terms but represents 

a large percentage of total pork revenue, 

in the $0.07/bushel case would 

represent less than 1 percent of their 

respective state livestock revenues and 

less than one thousandth of a percent of 

their State GDPs. 

TABLE V.3.c–4—TOTAL FEED COSTS AND ESTIMATED DECREASE WITH RFS WAIVER FOR PORK PRODUCTION IN THE

U.S. AND SELECTED STATES REQUESTING A WAIVER

Total feed costs 

without waiver 

(in million $) 

Decrease in feed 

costs in million $ 

($0.07/bushel corn 

price change 

scenario) 

Decrease in feed 

costs in million $ 

($0.58/bushel corn 

price change 

scenario) 

U.S. ............................................................................................................................ 14,439.12 ¥85.27 ¥748.02 

NC/VA ........................................................................................................................ 1,686.06 ¥9.96 ¥87.35 

TX .............................................................................................................................. 51.95 ¥0.31 ¥2.69 

AR .............................................................................................................................. 27.21 ¥0.16 ¥1.41 

FL ............................................................................................................................... 4.30 ¥0.03 ¥0.22 

DE .............................................................................................................................. 1.93 ¥0.01 ¥0.10 

The proportional impact of a waiver 

on the national poultry and egg 

industries is projected to be slightly 

smaller than those that might accrue to 

cattle and dairy and hogs, 

approximately 0.5 percent. The impacts 

of a waiver on the poultry industry are 

also the smallest of the three sectors in 

absolute terms. Of the states that 

submitted waiver requests, we project 

that Georgia’s poultry industry would 

benefit the most from a waiver if the 

RFS volume requirements were binding, 

followed by North Carolina and Texas. 

A $0.07/bushel decrease in corn prices 

is projected to reduce Georgia poultry 

feed costs by 6.74 million. We project 

feed cost savings of $59.11 million in 

cases where the mandate is binding. We 

project that poultry revenue impacts in 

North Carolina and Texas would be 

smaller in absolute terms but roughly 

equal proportional terms. Impacts in 

Utah and Florida would be equivalent to 

a larger portion of total poultry revenue, 

but would still only represent between 

0.1 and 0.3 percent of revenue in the 

$0.07 per bushel case. 

TABLE V.3.c–5—TOTAL FEED COSTS AND ESTIMATED DECREASE WITH RFS WAIVER FOR POULTRY AND EGG

PRODUCTION IN THE U.S. AND SELECTED STATES REQUESTING A WAIVER

Total feed costs 

without waiver 

(in million $) 

Decrease in feed 

costs in million $ 

($0.07/bushel corn 

price change 

scenario) 

Decrease in feed 

costs in million $ 

($0.58/bushel corn 

price change 

scenario) 

U.S. ............................................................................................................................ 13,844.94 ¥74.21 ¥650.98 

GA .............................................................................................................................. 1,290.01 ¥6.74 ¥59.11 

NC .............................................................................................................................. 1,136.26 ¥5.91 ¥51.86 

TX .............................................................................................................................. 875.37 ¥4.66 ¥40.83 

FL ............................................................................................................................... 200.72 ¥1.13 ¥9.92 

UT .............................................................................................................................. 51.48 ¥0.30 ¥2.65 

In their waiver requests, most States 

cited quantitative impacts on their 

agricultural sectors that are already 

realized or projected to occur due to the 

drought. EPA recognizes the significant 

impacts that the drought has had on 

state and national agricultural sectors. 

However, as we discuss above, the 

analytical task before us is to determine 

whether implementation of the RFS 

volume requirements themselves 

severely harm the economy. Most of the 

States that submitted waiver requests 

discuss the crucial role that corn prices 

play in the overall financial health of 

their livestock industries, but for the 

most part these States did not attempt 

to quantify in detail the impact of 

waiving the RFS on corn prices and the 

livestock industry. Various commenters 

in the livestock sector did provide 

analysis attempting to quantify the 

possible impact of a waiver on corn and 

soybean meal prices; these studies or 

the analyses such studies rely on are 

examined in Section V.4.b below.51

In summary, our analysis suggests 

that it is very likely that the RFS volume 

requirements will have no impact at all 

on ethanol production volumes in the 


wreier-aviles on DSK5TPTVN1PROD with 
Federal Register / Vol. 77, No. 228 / Tuesday, November 27, 2012 / Notices 70765 

52As with the average impact on corn prices, this 

figure is potentially misleading, in the sense that it 

is a non-zero outcome even though the most likely 

impact is zero (see Section V.3.a above). 

53See Department of Energy memo on Energy CPI 

in docket. 

relevant time frame, and therefore no 

impact on corn or feed prices. EPA 

looked, however, at what impacts on 

corn and feed prices might be in the 

unlikely event that the RFS mandate 

would have an impact on the corn and 

feed prices during the 2012/13 time 

frame. EPA assessed feed price impacts 

at the national level, State level, and at 

the individual sector level within eleven 

States. EPA believes that analyzing the 

feed price impacts on the nation, States, 

and individual sectors at the national 

and State levels is appropriate and 

provides further evidence upon which 

to base this decision, even considering 

the low probability that the RFS volume 

requirements will have an impact on 

ethanol production volume, and 

therefore corn and feed prices, in the 

relevant time frame. Given the low 

probability of the RFS having an impact 

in that time frame, and the estimated 

impact to state livestock sectors, EPA 

did not analyze any further geographical 

areas, as we consider the analysis above 

sufficient basis upon which to base our 

decision. 

EPA received comment that, during a 

period of drought, impacts attributable 

to the RFS, even if relatively small, 

could be enough to influence firm-level 

decisions regarding whether to continue 

operations or to shut down. Since our 

analysis indicates that the RFS is highly 

unlikely to have an impact on ethanol 

production, and therefore corn prices, in 

the time period of concern, and our 

analysis necessarily focuses on the level 

of an economy, as opposed to the firmlevel, we did not conduct analysis 

assessing the incremental impact the 

RFS would have, if any, on individual 

firms. 

(d) Fuel Price Impacts 

The ISU model also predicts changes 

in U.S. ethanol, gasoline, and blended 

fuel prices based on changes in ethanol 

production volumes. EPA’s analysis 

indicates that it is highly likely that the 

RFS volume requirements are not 

binding and there will be no impact on 

fuel prices. The ISU modeling projects 

that the average impact across all 

modeled scenarios is that waiving the 

RFS mandate would decrease blended 

gasoline prices by 2/10 of one cent.52

Blended gasoline prices in the ISU 

model decrease slightly on average 

across all of the modeled scenarios 

because ethanol prices decline by 

roughly one cent with less ethanol 

demand, for the limited scenarios where 

the RFS volume requirements are 

binding. We note, however, that this 

estimate should be considered within 

the limitations of the ISU model. The 

ISU model is not a refinery or fuel 

system model, and does not consider 

responses in the fuel markets to a 

reduction in U.S. ethanol demand in 

any depth. We include an estimate here 

to examine the potential magnitude of 

changes on average across all of the 

modeled scenarios, but we note that 

these results are based on a fairly 

simplistic approach to estimating 

blended gasoline price impacts. 

TABLE V.3.d–1—RANGE OF ESTIMATED ETHANOL AND BLENDED GASOLINE PRICES

Units ISU mean 

estimate 

Mean Ethanol Price with Mandate ............................................................................... $/gallon ..................................................... $2.90 

Mean Ethanol Price with Waiver .................................................................................. $/gallon ..................................................... $2.89 

Mean U.S. Corn Ethanol Production with Mandate ..................................................... billion gallons ............................................ 12.48 

Mean U.S. Corn Ethanol Production with Waiver ........................................................ billion gallons ............................................ 12.44 

Blended Gasoline Price with Mandate ......................................................................... $/gallon ..................................................... $2.918 

Blended Gasoline Price with Waiver ............................................................................ $/gallon ..................................................... $2.916 

Change in Blended Gasoline Price .............................................................................. $/gallon ..................................................... $0.002 

Given the limitations associated with 

our estimate on fuel price impacts, we 

present the projected average impact on 

fuel prices in Table V.3.d–1 as a 

sensitivity analysis. Were blended 

gasoline prices to change as the ISU 

model projects as a result of a waiver, 

this is the average impact we might 

expect to see. Based on these small 

predicted changes in blended gasoline 

prices, the overall impacts on the 

economy as it relates to fuel prices are 

also expected to be modest. It is highly 

likely that the RFS volume requirements 

are not binding and there will be no 

impact on fuel prices. Our analysis 

shows that a $0.002/gallon decrease in 

blended gasoline price for the Iowa 

State mean scenario would be expected 

to change the Energy CPI by 0.029%. 

Details on the methodology for 

determining these impacts are included 

in the docket.53

For the average household that owns 

a vehicle, the $0.002/gallon change in 

gasoline prices would result in a $1.98 

decrease in annual gasoline 

expenditures in 2012/2013. When 

analyzing the impact of these changes 

on the lowest income groups, the 

absolute expenditures on gasoline are 

lower than for the average household, 

due to the fact that this segment of the 

population tends to drive fewer miles 

on average. 

TABLE V.3.d–2—IMPACTS ON ENERGY CPI AND GASOLINE EXPENDITURES FOR AVERAGE AND LOW INCOME HOUSEHOLDS

Units ISU mean estimate ISU when mandate binds 

Change in Blended Fuel Price with Waiver .................... $/gallon .............................. ¥$0.002 ............................ ¥$0.016 

Change in Energy CPI with Waiver ................................ Percent .............................. ¥0.029% ........................... ¥0.225% 

Change in Annual Expenditures on Gasoline for Average Households with Vehicles.$ ......................................... ¥$1.98 .............................. ¥$17.40 

Change in Annual Expenditures on Gasoline for Lowest 

Quintile Households with Vehicles.

$ ......................................... ¥$1.20 .............................. ¥$10.49 

Change in Gasoline Expenditures on Gasoline as a 

Percentage of Consumer Expenditures for Average 

Households with Vehicles.

Percent .............................. ¥0.004% ........................... ¥0.035% 


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70766 Federal Register / Vol. 77, No. 228 / Tuesday, November 27, 2012 / Notices 

54Marzoughi H. and Kennedy, P. Lynn, ‘‘The 

Impact of Ethanol Production on the U.S. Gasoline 

Market’’, Paper presented at the Southern 

Agricultural Economics Association Annual 

Meeting, February, 2012, available in the docket or 

at http://EconPapers.repec.org/ 

RePEc:ags:saea12:119752. 

55 Xiaodong Du, Dermot J. Hayes, ‘‘The Impact of 

Ethanol Production on U.S. and Regional Gasoline 

Markets: An Update to 2012,’’ Center for 

Agricultural and Rural Development, Iowa State 

University, May 2012, available in the docket or at 

http://www.card.iastate.edu/publications/ 

synopsis.aspx?id=1166. 

56Christopher R. Knittel and Aaron Smith, 

‘‘Ethanol Production and Gasoline Prices: A 

Spurious Correlation,’’ July 12, 2012, available in 

the docket or at at http://web.mit.edu/knittel/www/ 

papers/knittelsmith_latest.pdf. 

57 Irwin, S. and Good, D., ‘‘Ethanol—Does the RFS 

Matter?’’ August 2, 2012, available in the docket or 

at www.farmdocdaily.illinois.edu/2012/08/ 

ethanoldoes_the_rfs_matter.html. 

58Comment submitted by Carter, Smith and AbuSneneh, EPA–HQ–OAR–2012–0632–2245. 

59Edgeworth Economics, ‘‘The Impact of a 

Waiver of the RFS Mandate on Food/Feed Prices 

and the Ethanol Industry,’’ October 10, 2012, 

submitted in comments from Growth Energy, EPA– 

HQ–OAR–2012–0632–2357. 

60Energy Policy Research Institute Foundation 

Inc., ‘‘Ethanol’s Lost Promise,’’ EPA–HQ–OAR– 

2012–0632–2231. 

61Urbanchuk, J., Cardno-ENTRIX, ‘‘Impact of 

Waiving the Renewable Fuel Standard on Total Net 

Feed Costs,’’ September 2012, submitted with 

comments from Renewable Fuels Association, EPA– 

HQ–OAR–2012–0632–2218. 

62Elam, T., FarmEcon LLC, ‘‘Ethanol RFS and 

2012 Drought Impact on Virginia Agriculture’’, 

August, 2012, and ‘‘Ethanol RFS and 2012 Drought 

Impact on North Carolina Agriculture and 

Consumers’’, September, 2012. Submitted with 

comments by the North Carolina Poultry Federation 

at EPA–HQ–OAR–2012–0632–2429, and comments 

submitted by the Virginia Poultry Federation at 

EPA–HQ–OAR–2012–0632–2066. 

63 Durham, C., Davies, G., and Bhattacharyya, T., 

‘‘Can Biofuels Policy Work For Food Security? An 

Analytical Paper for Discussion,’’ June 2012, 

available in the docket. 

TABLE V.3.d–2—IMPACTS ON ENERGY CPI AND GASOLINE EXPENDITURES FOR AVERAGE AND LOW INCOME

HOUSEHOLDS—Continued 

Units ISU mean estimate ISU when mandate binds 

Change in Gasoline Expenditures as a Percentage of 

Consumer Expenditures for Lowest Quintile Households with Vehicles.

Percent .............................. ¥0.005% ........................... ¥0.048% 

Change in Gasoline Expenditures as a Percentage of 

Income After Taxes for Average Households with Vehicles.

Percent .............................. ¥0.003% ........................... ¥0.028% 

Change in Gasoline Expenditures as a Percentage of 

Income After Taxes for Lowest Quintile Households 

with Vehicles.

Percent .............................. ¥0.012% ........................... ¥0.104% 

Some commenters argued to the 

contrary, claiming that waiving the RFS 

would significantly impact the price of 

fuel. They argue that if less ethanol is 

blended into gasoline as a result of a 

waiver, then the demand for petroleumbased gasoline would increase, putting 

an upward pressure on the world price 

of oil. In turn, the increase in petroleum 

prices would boost overall blended fuel 

prices. For example, a recent 2012 study 

by authors at Louisiana State University 

found that ‘‘* * * every billion gallons 

of increase in ethanol production 

decreases gasoline price as much as 

$0.06 cents’’.54 Other studies such as Du 

and Hayes from Iowa State University 

have suggested that increases in ethanol 

production over the last decade have 

reduced overall blended fuel prices.55

Thus, a waiver which reduced the use 

of ethanol would have the effect of 

raising blended fuel prices. We note that 

there is disagreement about the extent of 

these impacts (see, for example, Knittel 

and Smith and others).56 In any case, 

the Du and Hays and Knittel and Smith 

studies do not address the specific case 

at hand, the fuel price impacts of a 

waiver of the RFS mandate. 

As mentioned above, our analysis 

indicates that it is highly likely that 

waiving the RFS mandate would have 

no impact on ethanol volumes. The ISU 

modeling predicts that the average 

impact across all modeled scenarios is 

that waiving the mandate would 

decrease ethanol demand by only 40 

million gallons, and in 89 percent of the 

modeled cases the mandate is not 

binding. As a simplifying assumption, 

the ISU model does not take into 

account any potential impacts on the 

global oil markets, which we believe is 

a reasonable assumption in this 

situation given the small change in 

ethanol volumes that are projected in 

this analysis. Even in the 11 percent of 

the cases where the mandate was 

binding, changes in world oil market 

would be so small as not to change the 

overall conclusions of the study. 

(e) Worst Case Scenario 

As a bounding exercise, we also 

considered a ‘‘worst case’’ scenario that 

could occur if both corn yields and 

gasoline prices were at the low ends of 

the probability distributions used in our 

modeling. This worst case example 

considered the 1 percent of scenarios 

(five out of five hundred) where a 

waiver could have the largest potential 

impacts on corn prices. In this worst 

case scenario, the impact of waiving the 

mandate could decrease corn prices by 

$1.86/bushel, with a correspondingly 

larger impact on livestock, food, and 

fuel prices. It is highly unlikely that the 

combination of extremely low corn 

yields (approximately 116 bushels per 

acre) and wholesale gasoline prices 

(approximately $1.96/gallon) would 

occur simultaneously during the 2012/ 

2013 corn marketing year. However, we 

have included more information on this 

worst case scenario in the docket for 

illustrative purposes. 

4. Overview and Discussion of External 

Analyses 

Comments submitted to EPA 

referenced or included a number of 

analyses and studies examining the 

impact of a potential waiver of RFS 

standards. These include studies from: 

Hart Energy, Irwin and Good (University 

of Illinois),57 Carter, Smith, and AbuSneneh (University of CaliforniaDavis),58 Purdue University and the 

Farm Foundation (Purdue/Farm 

Foundation), FAPRI-University of 

Missouri (FAPRI-Missouri), BabcockIowa State, Edgeworth Economics,59 the 

Energy Policy Research Foundation, Inc. 

(EPRINC),60 Cardno-ENTRIX,61 Dr. 

Thomas Elam of FarmEcon LLC,62 and 

the Department of Environment, Food, 

and Rural Affairs of the United 

Kingdom government (DEFRA).63 Some 

of the studies focus more on fuel market 

impacts, while other studies concentrate 

specifically on U.S. agricultural sector 

impacts. Multiple alterative 

assumptions and options are explored 

across the different sets of analyses of a 

waiver of the RFS2 volume 

requirements making comparison of 

results challenging. Only a few of the 

studies are based on a fully integrated 

view that directly attempts to link 

detailed agricultural commodity 

markets with fuel market assessments to 

assess the impact of implementation of 


wreier-aviles on DSK5TPTVN1PROD with 
Federal Register / Vol. 77, No. 228 / Tuesday, November 27, 2012 / Notices 70767 

64This result refers to removal of the RFS, not 

from a one-year waiver of the RFS requirements. 

65EPA–HQ–OAR–2012–0632–2231. 

66EPA–HQ–OAR–2012–0632–2231. 

67EPA–HQ–OAR–2012–0632–2231. 

68See Morgan Stanley, August 7, 2012. 

the RFS volume requirements and a 

waiver’s impacts. 

(a) Fuel Market Studies 

Fuel market studies that focus on the 

impacts of an RFS waiver look at the 

economics of blended ethanol. Irwin 

and Good (University of Illinois) suggest 

that a waiver is likely to have little 

impact on the liquid fuel supply system. 

Their analysis rests on their observation 

that ethanol is currently the least 

expensive octane enhancer available, 

and that the current liquid fuel supply 

system in the U.S. has closely integrated 

ethanol use as a component to the 

finished gasoline supply. Alteration of 

ethanol’s utilization would take time 

and require reallocation of 

infrastructure. Irwin and Good argue 

that even if a waiver is granted, only a 

combination of relatively high ethanol 

prices and low wholesale gasoline 

prices would change current gasoline 

and ethanol supply patterns. They 

estimate that gasoline prices would have 

to fall to roughly $69/barrel (West Texas 

Intermediate crude) before a shift would 

occur. Alternatively, corn prices, which 

are the key determinate of the price of 

ethanol, would have to rise on a 

sustained basis to over $10/bushel. 

Carter, Smith, and Abu-Sneneh 

(University of California-Davis) present 

analysis using two different 

assumptions—one in which ethanol is 

priced in terms of its energy content, 

and one in which ethanol is priced on 

a volumetric basis. They suggest that the 

former is more likely, and that motorists 

realize the energy penalty associated 

with ethanol, but consumers do not 

have a choice but to accept the 

associated energy loss. If motor gasoline 

is valued for its energy content, they 

conclude that ultimately the RFS 

mandate is ‘‘severely harming’’ 

motorists. Their analysis suggests that, 

at current market prices, octane 

enhancement alternatives to ethanol 

would arise in the medium to long term 

without the RFS mandate if blended 

gasoline were valued based on energy 

content. They conclude that, if the 

mandate were eliminated, lower 

demand for ethanol would result in 

lower average corn prices by up to 

$0.87/bushel.64 They estimate the 

‘‘harm’’ from the conventional fuel RFS 

requirement to be roughly $2.9–$5.9 

billion annually, which they claim 

could be higher if all the costs 

associated with the use of ethanol are 

accounted for. There are several 

limitations of their analysis, however. 

The authors acknowledge that their 

conclusions do not incorporate all of the 

costs of reduced ethanol usage. For 

example, many oil refiners move their 

products through common pipelines. 

Refiners need to coordinate with other 

users of the pipeline to ensure that a 

uniform product enters the pool. The 

coordination costs of lower ethanol 

usage are not estimated. Furthermore, 

this study does not provide sufficient 

data or analysis upon which we can 

evaluate their assertion that consumers 

are currently aware or modify behaviors 

in response to the energy penalty 

associated with ethanol. Despite the 

paper’s conclusion that the RFS 

requirements should be waived, it is 

important to point out that their second 

scenarios supports our assessment that 

there would be ‘‘no market response’’ to 

a waiver if finished gasoline is priced on 

a volumetric basis. We discuss the basis 

for our ethanol demand assumptions 

above, and we did not see evidence 

presented in this study to change our 

reasoning with respect to how ethanol is 

priced. 

A study published by EPRINC, while 

not attempting to quantify the impact of 

a waiver on corn prices, states that a 

long term waiver would likely reduce 

corn prices and ‘‘could free over 18 

millions of acres of existing farm land 

for the production of crops to meet 

market needs for food, livestock feed, 

exports, or fuel.’’ 65 This study 

acknowledges, however, that a near 

term waiver (6 months to 1 year) would 

have little to no effect on corn demand 

for ethanol production.66 In concluding 

that the RFS mandate increases corn 

costs by $0.87/bushel, Carter, Smith, 

and Abu-Sneneh (University of 

California-Davis) cite the EPRINC study 

when discussing the ability of refiners 

to decrease ethanol blending in the 

gasoline pool in the medium to long 

term. The studies here discuss the 

ability of refiners to decrease ethanol 

blending over the medium to long term, 

but they do not discuss whether the 

economics of ethanol and gasoline 

production would be such that there 

would be an economic incentive to do 

so. As discussed above, whether refiners 

would move away from ethanol 

blending if they had the opportunity to 

do so is influenced by a variety of 

factors, including economic ones. 

Examining the impacts of a medium to 

long term waiver is a significant 

distinction between these two studies 

and the analysis performed by EPA. 

EPA’s authority is limited to granting a 

one year waiver, with potential for 

extending the waiver, a fact specifically 

noted by EPRINC.67 For a further 

discussion of this issue see Section 

VI.7(b). 

As discussed above, based upon a 

review of multiple external analyses 

including the studies cited above, 

consultation with DOE, and review of 

comments that we received, and given 

the circumstances and scenarios 

examined in our analysis, we believe 

that it would be highly unlikely that 

refiners and blenders would seek to 

replace ethanol in the time frame 

analyzed (i.e., one year) even if the RFS 

requirement were reduced or waived 

over the 2012/2013 corn marketing year. 

Ethanol blending is an economically 

beneficial option for refiners at this 

time, given the price of ethanol and the 

cost of production of finished gasoline. 

That is not expected to change during 

the time period at issue. In addition, 

even if it were economically 

advantageous to do so, previous 

investments that have been made to 

configure the fuel supply production 

and distribution systems (e.g., blending 

terminals) to incorporate ethanol are 

costs that have already been expended, 

and any change in utilization of these 

investments could take time and require 

reallocation of infrastructure. In 

addition, options or opportunities to 

make infrastructure changes may be 

technically and economically limited in 

the short term. Refiners are unlikely to 

make the changes to allow for reduced 

ethanol blending, such as modifying 

refining operations to produce higher 

octane blendstocks and draining storage 

tanks, if they do not believe these 

changes will be economically beneficial 

in the medium to long term, though this 

could differ in a scenario differing from 

that analyzed here with respect to oil 

prices, rollover RINs, and other key 

parameters. Fuel supply investments 

also tend to involve large capital 

expenditures. Fuel contractual 

obligations may be set over extended 

periods of time and could be difficult to 

alter in the short run (e.g., six months 

to a year). Also, the costs of using 

ethanol replacements, in terms of using 

different octane additives or even 

different sources of finished gasoline, 

including imports of finished gasoline 

to the U.S., would likely be significant 

in the near term.68

Further, assuming that U.S. 

agricultural markets return to predrought conditions in the following 

years (e.g., 2013/14 and beyond) and the 

blending of ethanol into the gasoline 

pool continues to be a profitable 

practice, it would not appear to be in a 


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70768 Federal Register / Vol. 77, No. 228 / Tuesday, November 27, 2012 / Notices 

69National Chicken Council comments, EPA– 

HQ–OAR–2012–0632–1994. 

70EPA–HQ–OAR–2012–0632–1994. 

71Comments submitted by, for example, the 

Virginia Poultry Federation and the North Carolina 

Poultry Federation included studies by FarmEcon 

LLC (Elam), which examined changes in feed prices 

and effects on revenue if corn prices were to 

decrease, due to a waiver, by $1.14 per bushel. The 

estimate of a $1.14 decrease is from the Purdue/ 

Farm Foundation study. It is the difference in corn 

prices between a case with 13.8 billion gallons of 

corn ethanol production and a case with 10.8 

billion gallons of production. For reasons discussed 

elsewhere (see, for example, sections V.1.e and V.2), 

we believe that ethanol production in the event of 

a waiver is unlikely to decline by 3 billion gallons. 

We also project that corn ethanol production in 

2012/13 without a waiver is most likely to be 

around 12.48 billion gallons (see Section V.2), less 

than the projection used by FarmEcon LLC. See, for 

example analysis prepared for the North Carolina 

Poultry Federation at EPA–HQ–OAR–2012–0632– 

2429, and comments submitted by the Virginia 

Poultry Federation at EPA–HQ–OAR–2012–0632– 

2066. 

72 ‘‘[R]educing the overall RFS has a small 

negative effect on the corn price in 2012/13 relative 

to the baseline because overall ethanol use and 

production are projected to be motivated mostly by 

crop and fuel market conditions in the current 

marketing year, not the RFS. Waiving the mandate, 

a minimum use requirement, has limited market 

impact if people were going to use almost as much 

as the mandate anyway.’’ FAPRI-Missouri study at 

1. 

refiner’s economic interest to make 

changes in the fuel supply system. This 

would especially be the case if EPA 

were to not renew a waiver after one 

year, since refiners would need to 

quickly undo all of the changes they had 

just made in order to comply with the 

RFS in 2014. Carter, Smith, and AbuSneneh acknowledge the costs of 

switching back and forth to different 

levels of ethanol usage between 2013 

and 2014 could be high. 

EPA further received comment that 

the RFS is saturating the ethanol market 

in the U.S.; commenters point to the 

large corn ethanol exports in 2011 as 

evidence that blending ethanol into 

gasoline in the U.S. is not a profitable 

practice.69 We do not agree that the 

significant corn ethanol exports in 2011 

indicate that blending ethanol into 

gasoline was not profitable in the U.S. 

and driven by the RFS. In 2011 the 

blending of ethanol into gasoline 

exceeded the RFS mandates by a wide 

margin. The most likely reason for this 

is that refiners and blenders found the 

blending of ethanol to be a profitable 

practice. Low prices for corn ethanol 

RINs appear to support this. We believe 

the large volume of exported ethanol in 

2011 is yet more evidence that, at least 

in 2011, ethanol production was the 

highest value use for corn. RINs for 

ethanol that is exported outside the U.S. 

must be retired when the fuel is 

exported; we therefore believe it is 

highly unlikely that the RFS program 

encouraged this practice and that 

converting corn into ethanol for export 

was simply more profitable than selling 

it into the food or feed markets. 

Comments also cited work done by 

EPRINC that shows that increased 

ethanol blending has not lead to 

decreased crude oil imports, but only to 

changes in the end uses of the crude oil 

as evidence that waiving the RFS would 

lead directly to reduced corn ethanol 

production.70 They cite the EPRINC 

study concluding that any decrease in 

ethanol blending could be made up for 

with additional gasoline from existing 

refineries without additional crude oil 

imports, but rather through shifting of 

refined crude oil products. While this 

may be the case we note that any 

increased gasoline production would 

correspond in a decrease in other 

refined products, most likely diesel fuel 

as noted in the EPRINC study. We 

believe that if these changes were 

profitable refiners would already be 

looking to minimize ethanol blending, 

which has not been the case in the past 

several years. We also note that the 

EPRINC study also states that a short 

term waiver would have little effect on 

corn demand for the production of 

ethanol. 

(b) Agricultural Market Studies 

Several studies focus on the 

agricultural sector impacts of a possible 

waiver of the RFS volume requirements. 

A number of these studies provide 

quantitative estimates of impacts of a 

waiver on corn prices and feed prices. 

Where commenters provided estimates 

of impacts to a State or a particular 

industry sector, such estimates were 

frequently based on results from the 

studies discussed below.71 In many 

cases, the studies below present a range 

of estimates for impacts, and 

commenters cited estimates from both 

the low and, more frequently, the high 

ends of those ranges. In general, these 

agricultural sector studies are 

directionally consistent with EPA’s 

analysis using the ISU model. In fact, 

the range of estimates provided in the 

Purdue/Farm Foundation study 

(described in more detail below), 

bracket the results that we present on 

the average impacts of a waiver and the 

impacts when the mandate is binding. 

Similarly, all of the referenced studies 

cite the importance of the same key 

assumptions that we have discussed 

previously, namely the amount of 

carryover RINs that are available and the 

degree of flexibility available to the 

refining industry over a one year period. 

As discussed further below, EPA 

believes that our technical analysis uses 

the most up-to-date data on available 

RINs and takes into account important 

information on refiner flexibility that 

these other studies treat only 

qualitatively or not at all. 

FAPRI—Missouri finds that ethanol 

production falls by roughly 160 million 

gallons from eliminating the 

‘‘conventional gap’’ which they define 

as ‘‘the maximum amount of 

conventional (corn starch) ethanol that 

can be counted towards the mandate’’. 

Less corn is needed to produce ethanol 

and, as a result, average corn prices 

decrease by roughly $0.04 cents per 

bushel. Lower average corn prices 

means lower feed costs for livestock 

producers, though the lower corn prices 

are partially offset by higher soybean 

meal and distillers grain prices. These 

feed price changes lead to an increase in 

net returns to meat production and, as 

a result, meat production increases and 

meat prices decrease. The FAPRIMissouri results, like the EPA results 

presented above, predict a fairly modest 

impact on corn prices from a waiver of 

the 2013 conventional mandate.72

Babcock-Iowa State looks at the 

impacts of a waiver of the conventional 

fuel component of the RFS requirements 

under two cases: a ‘‘full’’ and a 

‘‘flexible’’ mandate compared to a ‘‘no 

mandate’’ case. In the ‘‘flexible’’ 

mandate case, Babcock assumes that 

there are 2.4 billion rollover RINs for the 

2012/2013 corn-marketing year. 

Comparing the ‘‘full’’ and the ‘‘flexible’’ 

mandates, average corn prices decrease 

significantly, by $1.91 per bushel. As 

discussed in the Babcock paper, the 

‘‘full’’ mandate is not a realistic 

scenario, since it assumes there will not 

be any carryover RINs available in 2013. 

Based on the empirical RIN data 

discussed above, EPA is confident that 

there will be a significant number of 

carryover RINs in 2013 unless ethanol 

production changes drastically in 

November and December of 2012. 

Therefore, the ‘‘full mandate’’ results 

should only be considered as a 

bounding exercise. Comparing the 

‘‘flexible’’ to the ‘‘no’’ mandate scenario, 

average corn prices decrease by roughly 

$0.58 per bushel across all runs—a 

decline of roughly 7.4 percent. By way 

of comparison, in the EPA analysis 

eliminating the RFS requirements 

would result in a decrease in average 

corn prices of roughly $0.07/bushel, on 

average across all runs. 

One of the key differences between 

Babcock’s results and the results 

presented in EPA’s analysis above is 

how responsive ethanol demand is to 

the relative prices of unblended gasoline 

and ethanol. Babcock assumes that 


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73An updated version of this study is discussed 

below. 

ethanol demand is more responsive to 

changes in prices, meaning his analysis 

assumes refiners and blenders have 

more flexibility to substitute away from 

ethanol in response to a waiver. In light 

of the limitations on refiner flexibility 

identified in Section V.1.d above, we 

believe that our assessment of refiner 

flexibility, performed in consultation 

with DOE, is a better reflection of 

current conditions. In addition, 

Babcock’s analysis uses older WASDE 

data (which reflects larger uncertainties 

in corn yields) and older gasoline price 

data (in which the average gasoline 

price is lower than the October STEO). 

The Purdue/Farm Foundation study 

looks at different levels of drought (e.g., 

a weak, median and strong drought) and 

different combinations of ethanol 

blending levels, which could be 

achieved either with a waiver or the use 

of conventional RINs (e.g., 11.8, 10.4 

and 7.75 billions of gallons of ethanol). 

They conclude that if refiners and 

blenders have flexibility to reduce 

ethanol usage in the short term, use of 

prior blending RINs credits and/or a 

large waiver could reduce average corn 

prices by roughly $1.30/bushel of corn. 

Alternatively, a more modest waiver 

may reduce average corn prices by 

roughly $0.47/bushel of corn. As stated 

in the paper, results of the analysis are 

highly dependent upon how much 

flexibility is assumed to exist in the 

refining sector. Depending on the degree 

of refining and blending flexibility (and 

the severity of the drought), Purdue’s 

‘‘range of corn price impacts from a 

partial waiver is zero to $1.30/bu.’’ 73

Their results therefore ‘‘bracket’’ the 

results projected by the ISU model. 

Similar to the Babcock-Iowa State 

study, a large part of the difference in 

the agricultural sector impacts (e.g., 

commodity price impacts) between the 

Purdue/Farm Foundation study and 

EPA’s analysis is due to the 

responsiveness of ethanol demand to 

the relative prices of unblended gasoline 

and ethanol. Our review of multiple 

external analyses including the studies 

cited above in Section V.1.d, 

consultation with DOE, and review of 

comments that we received, suggests 

that ethanol demand, particularly in the 

short-run (i.e., the one-year, the 2012/ 

2013 corn marketing time frame of a 

possible waiver) would be relatively 

unresponsive. Even if the U.S. fuel 

system could adjust and reconfigure to 

use less ethanol in the 2012/2013 time 

frame, the economic circumstances of 

ethanol and gasoline production are 

such that there would continue to be an 

economic incentive to blend ethanol 

into gasoline, particularly if the 

expectation is that drought conditions 

will subside and corn production in the 

U.S. will return to more typical (e.g., 

pre-drought) levels as early as the 2013/ 

2014 corn marketing year. 

For the reasons discussed above, we 

believe these external studies find 

potential impacts of the waiver that are 

similar in scope and direction as the 

analysis that EPA conducted. Whereas 

some of the external studies present a 

range of results from varying key 

assumptions, our analysis uses a 

stochastic approach to capture 

uncertainty in several key variables. 

Where a stochastic analysis was not 

possible (e.g., on the refinery flexibility 

issue our review of multiple external 

analyses including the studies cited 

above in Section V.1.d, consultation 

with DOE, and review of comments that 

we received, suggests that ethanol 

demand, particularly in the short-run 

(i.e., the one-year 2012/2013 corn 

marketing time frame of a possible 

waiver) would be relatively 

unresponsive. Other agricultural 

analysis primarily discussed this issue 

qualitatively. 

Edgeworth Economics undertakes a 

scenario analysis to estimate the 

impacts on various sectors of the U.S. 

economy of a waiver of the RFS volume 

requirements. Based upon their review 

of recent studies (e.g., Babcock-Iowa 

State, Purdue/Farm Foundation) of the 

impacts of a waiver, Edgeworth 

Economics uses a decrease in average 

corn prices of roughly $0.52/bushel to 

estimate these impacts. They estimate 

that a waiver would decrease feed costs 

across the U.S. by roughly $3.1–$4.7 

billion in the 2012/2013 crop marketing 

year. The low end of the range is based 

upon an assumption that other feed 

prices would not track the price of corn. 

Alternatively, corn growers would see a 

loss of revenues of roughly $5.8 billion 

if feed costs track the price of corn. 

Ethanol producers, faced with a 

corresponding loss in demand of 

roughly 950 million gallons of ethanol 

in the scenario, would see a decrease in 

revenues and co-product sales of 

roughly $2.9 billion. This finding with 

regards to corn prices and feed price 

impacts is consistent with our 

projection of the impact of the RFS 

program in the binding case. We project 

that, in cases where the conventional 

portion of the RFS requirements are 

binding, a waiver would reduce corn 

prices by $0.58/bushel and feed prices 

by approximately $3.6 billion 

nationwide. However, as stated above, 

we only project this outcome in 11 

percent of cases, which are premised on 

the unrealistic view that gasoline prices 

and corn yields in 2012/2013 both fall 

significantly below their current DOE 

and USDA projections. Edgeworth 

Economics’ projections are plausible 

only to the extent this would occur. 

Further, because the Edgeworth study is 

premised upon an averaging of the 

Babcock and Purdue/Farm Foundation 

results, it shares the limitations of those 

findings as well. 

Cardno-ENTRIX evaluated two 

scenarios under a waiver: a ‘‘low’’ 

scenario in which ethanol production in 

2013 is reduced by 500 million gallons, 

or 3.7 percent below 2012 levels, and a 

‘‘high’’ scenario in which ethanol 

production in 2013 is reduced 1,425 

million gallons or 10.5 percent from 

2012 levels. In both scenarios, biodiesel 

production is reduced by 500 million 

gallons, or 50 percent below 2012 levels 

of production. These scenarios are 

patterned off of the results of recent 

analyses of RFS waiver impacts by 

Babcock-Iowa State University and 

Purdue/Farm Foundation. The 

reduction in biodiesel volumes makes 

the scenarios somewhat different. As 

did Purdue/Farm Foundation, CardnoENTRIX assumes that sufficient 

economic refiner flexibility exists to 

reach the volume of ethanol production 

assumed in each of their scenarios. 

In the ‘‘low scenario’’, average corn 

prices fall by $0.46/bushel and average 

soybean prices fall by $0.74/bushel. In 

the ‘‘high scenario’’, average corn prices 

fall by $0.48/bushel and average 

soybean prices fall by $0.96/bushel. As 

a response of demand shifts in the corn 

market (i.e., less ethanol, more feed and 

exports), corn price declines are roughly 

similar in the ‘‘low’’ and the ‘‘high’’ 

scenarios. The ‘‘low’’ scenario is 

comparable to our projected outcome if 

the RFS program is binding. In that case, 

we project that ethanol production 

would decrease by approximately 414 

million gallons, with corn prices 

decreasing $0.58/bushel. Much of the 

difference is attributable to differences 

in key assumptions. The Babcock paper 

from which Cardno-ENTRIX drew this 

estimate utilized earlier WASDE 

estimates and also used gasoline futures 

prices instead of STEO estimates. Inputs 

to that analysis also vary in terms of the 

economic value of ethanol to refiners, 

and under what circumstances refiners 

would shift away from ethanol. As 

discussed elsewhere in this decision in 

detail, our analysis with respect to the 

value of ethanol to refiners given 

current conditions led us to results that 

differ. 

In both scenarios, increases in DDGS 

and soybean meal prices offset declines 

in corn and soybean prices with 


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74Quantitative analysis presented in comments 

by the National Chicken Council, for example, uses 

estimates from an updated version of the Purdue/ 

Farm Foundation study, EPA–HQ–OAR–2012– 

0632–1994. At the request of the National Chicken 

Council, the authors of this study applied 

September WASDE data to the same methodology, 

providing new results. The National Chicken 

Council refers to a projected change in corn prices 

of $2.00/bushel as a result of a waiver. The authors 

of this study projected that change assuming that 

ethanol production dropped from 13.8 billion 

gallons without a waiver to 7.75 billion gallons with 

a waiver. As we detail in our discussion of Elam, 

we do not agree with the estimate that 13.8 billion 

gallons of ethanol would be produced in 2013 with 

RFS requirements in place. Further, as we detail in 

our discussion of the Purdue/Farm Foundation 

study, the assumption that ethanol consumption by 

the refining sector could fall by roughly 6 billion 

gallons within the space of one year does not reflect 

our assessment of limits on refiner flexibility. 

75 ‘‘Iowa State Analysis for 2015–2020/Analysis 

of Ethanol and Corn Market and the Impact on the 

Swine Industry,’’ submitted in comments by the 

National Pork Producers Council, EPA–HQ–OAR– 

2012–0632–2209. 

76Most of the studies examined in this 

determination, including those by Purdue/Farm 

Foundation, Irwin and Good, and Edgeworth 

Economics (all discussed elsewhere in this notice), 

focus only on the impacts of corn ethanol. FAPRIMissouri provides estimated impacts of a biodiesel 

waiver on soybean prices, but does not provide 

estimated impacts for key soybean products (i.e., 

soybean meal). For this reason, this paper’s 

estimates for soybeans are of limited usefulness in 

the context of feed costs. 

77EPA received comment on this topic from 

various soybean-related parties, including, for 

example, the Illinois Soybean Association and 

Minnesota Soybean Processors (CITE). 

relatively minimal impacts on net feed 

ration costs. For example, in the ‘‘low 

scenario’’, there is a slight decrease in 

net feed costs for beef due to the 

relatively high share of feed costs for 

feeder cattle accounted for by corn 

grain. However, net feed costs for dairy 

cattle increase by more than four 

percent and net feed costs for swine, 

broilers and layers increase by less than 

one percent. Part of the reason for the 

livestock outcomes in this analysis is 

due to scenario design. A waiver that 

reduces biodiesel usage results in less 

soy meal production and increases 

feedstock costs. The reduction in soy 

meal offsets the livestock impacts of a 

waiver that only influences ethanol 

production. 

Studies performed by FarmEcon LLC 

attempted to quantify the potential 

impacts of a waiver on poultry, dairy 

and hog producers in North Carolina 

and Virginia. Both studies cite the 

Purdue/Farm Foundation study as their 

source for the key analytical input of 

commodity prices; other commenters 

cited the Purdue/Farm Foundation 

study as well when presenting 

quantitative impacts.74 In one of the 

studies, FarmEcon LLC uses a decrease 

in average corn prices of $1.14/bushel 

from the Purdue/Farm Foundation large 

waiver scenario to look at feed costs 

impacts for the dairy, poultry and hog 

producers in North Carolina. The corn 

price changes estimated by Purdue/ 

Farm Foundation are higher than the 

change in corn prices we anticipate to 

result from a waiver for reasons 

discussed above. Using a larger change 

in corn prices, FarmEcon LLC estimates 

larger feed market impacts than we 

anticipate. 

We also note that this analysis does 

not consider the effects of a waiver on 

distillers grains prices. To the extent 

that a waiver would reduce corn ethanol 

production (as it would to at least some 

extent in all three scenarios examined 

above), it would also reduce the supply 

of distillers grains. This increased 

scarcity of distillers grains would likely 

increase their price; at best prices would 

remain stable. To the extent that a 

waiver would lead to increased 

distillers grain prices, the projected 

reductions in feed costs detailed above 

would be mitigated. 

Other studies submitted by 

commenters included work done by 

Babcock examining potential long-term 

impacts of the RFS program on the 

swine industry.75 We do not respond to 

this study here as it is analyzing a set 

of issues outside the scope of the 

current decision. The DEFRA analysis 

does not contain sufficient detail with 

respect to methodology or analytical 

parameters to enable an evaluation of its 

results in the context of the current 

waiver requests. For example, DEFRA 

assess illustrative scenarios where a 

price spike is simulated by reducing the 

U.S. corn area harvested by 40 percent 

while maintaining the U.S. renewable 

mandate and ethanol blenders’ subsidy 

in 2011. Various scenarios are simulated 

which waive an increasing share of the 

U.S. renewable fuel requirement, all 

while maintaining the ethanol blenders’ 

subsidy. DEFRA finds that the larger the 

share of the mandate waived, the larger 

the price increases that are offset. The 

DEFRA study does not analyze impacts 

of a potential waiver under current 

conditions (e.g., with projected corn 

yields for the 2012/13 corn marketing 

year, elimination of the blenders’ 

subsidy), and instead examines more 

generic consequences of a waiver for 

average corn prices. 

5. Summary of the Technical Analysis 

For the 2012/2013 corn marketing 

year, our analysis shows that it is very 

likely that the RFS volume requirements 

will have no impact on ethanol 

production volumes in the relevant time 

frame, and therefore no impact on corn, 

food, or fuel prices. In addition the body 

of the evidence also indicates that even 

in the unlikely event that the RFS 

requirements would have an impact on 

the corn and other markets during the 

2012–2013 timeframe, it would have at 

most a limited impact on the food, feed, 

and fuel markets. The nature and 

magnitude of these projected impacts, 

which are not likely to occur, would not 

be characterized as severe. After 

reviewing the analysis and information 

submitted by commenters, including 

that discussed above, EPA continues to 

believe that the results of its modeling 

are the most reliable indicator of the 

likelihood that implementation of the 

RFS volume requirements will have an 

impact on the economy, and in the 

unlikely case that it would have an 

impact, the nature and magnitude of 

such impact. 

6. Waiver Requests Related to 

Implementation of the RFS BiomassBased Diesel and Advanced Biofuel 

Volume Requirements 

EPA received several comments 

addressing issues related to a waiver of 

the biomass-based diesel (BBD) volume 

requirements. In general, the comments 

provided relatively little information or 

analysis on the relevant issues. 

While few analyses and comments 

examined the issue of a BBD waiver, 

those that did focused on the impact on 

livestock and feed prices. The key price 

impact here is that of soybean meal, 

since this is the primary soy product fed 

to livestock. We are aware of two 

quantitative studies that projected price 

impacts on soybeans and soybean meal 

as a result of a possible BBD waiver, 

Babcock-Iowa State and CardnoENTRIX.76 Babcock projects that a 

waiver of the BBD requirements might 

reduce soybean prices by $0.61 per 

bushel or about 3.5 percent (assuming 

that rollover RINs are available), but 

would also increase soybean meal prices 

by $22.00 per ton or about 4.2 percent. 

Cardno-ENTRIX finds, under an 

assumed 500 million gallon decrease in 

the BBD requirements, that soybean 

prices would decrease by $0.74 per 

bushel or 4.5 percent, while soybean 

meal prices would increase by $32.96 

per ton or about 6.7 percent. Because 

most livestock are fed soybean meal, not 

whole soybeans, these projections 

would mean that a waiver of the BBD 

volumes would very likely increase feed 

costs.77 This would mean that waiving 

the BBD requirements would likely 

exacerbate the impacts that the drought 

has had on feed prices. It is likely that 

waiving any portion of the BBD 

requirements would cause more 

economic harm than it would alleviate 

in food and feed markets. Given this, 


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78Examples include petitions and/or comments 

submitted by various requesting States and by 

individuals and organizations associated with the 

livestock, poultry, and dairy industries. 

79See, for example, August 13, 2012 letter from 

the Governor of Arkansas, EPA–HQ–OAR–2012– 

002. ‘‘Virtually all of Arkansas is suffering from 

severe, extreme, or exceptional drought conditions. 

The declining outlook for this year’s corn crop and 

accelerating prices for corn and other grains are 

having a severe economic impact on the State.’’ 

80See for example comment submitted by 

Bullock et al., EPA–HQ–OAR–2012–0635–1707. 

81See Dr. Thomas Elam, FarmEcon LLC, ‘‘The 

RFS, Fuel and Food Prices, and the Need for 

Statutory Flexibility,’’ July 16, 2012, submitted with 

comments from the National Chicken Council, 

EPA–HQ–OAR–2012–0632–1994. 

and in light of the fact that the few 

commenters who asked us to consider a 

biodiesel waiver focused on the impacts 

on livestock costs, we do not believe 

that an EPA analysis similar to our 

examination of corn ethanol is merited. 

In addition, EPA concludes that the 

evidence does not support a 

determination that implementation of 

the RFS BBD volume requirements 

would severely harm the economy and 

a waiver would therefore not be 

appropriate. 

Similarly, we have not conducted a 

technical analysis of the potential 

impacts of waiving the advanced 

renewable fuel standard, since a 

majority of the advanced standard is 

expected to be met with biomass-based 

diesel in the 2012/2013 corn marketing 

year. Finally, we have not analyzed the 

impacts of waiving the cellulosic 

renewable fuel standard in 2012/2013, 

since we did not receive any specific 

information or rationale concerning a 

possible justification for waiving the 

cellulosic volumes. In addition, the 

cellulosic volume requirement for 2013 

is likely to be relatively small and 

production volumes unlikely to be 

affected by the drought due to their 

sources of feedstock. 

VI. Other Issues 

EPA received comment on several 

areas of concern in addition to the 

economic impact of implementation of 

the RFS volume requirements. 

Comments addressed, among other 

things, overall U.S. policy on biofuels 

and the RFS; the environmental impacts 

of renewable fuels in general and the 

RFS program in particular; the impact of 

granting a waiver on the future of 

ethanol production in the U.S.; the 

characteristics, favorable or otherwise, 

of ethanol as a transportation fuel; and 

EPA’s interpretation of section 211(o)(7) 

of the Act. Although this section 

summarizes and provides general 

responses to some of the more the more 

frequently raised comments that are 

unrelated to the economic impact of 

implementing the RFS, EPA notes that 

these issues generally were not relevant 

to EPA’s consideration of the current 

waiver request. While EPA has broad 

discretion to consider such issues in 

determining whether or not to grant a 

waiver if it finds that implementation of 

the RFS would severely harm the 

economy of a State, region or the U.S., 

these issues are not relevant to EPA’s 

decision where, as here, EPA is denying 

the waiver requests because the 

evidence and information does not 

support a determination that the 

statutory criteria for granting a waiver 

are satisfied. 

1. Impacts on Corn Prices From 

Increasing Renewable Fuel Production 

EPA received many comments 

discussing the impact of increasing 

renewable fuel production over time on 

crop and feed prices, and on the 

economic consequences of increasing 

prices on various sectors, including the 

livestock, poultry, dairy, various foodrelated industries, and segments of the 

population.78 Multiple commenters 

argued that the rise of corn prices over 

the past several years has coincided 

with and is in substantial part a result 

of the increasing renewable fuel 

volumes required under the RFS 

program. Commenters state that the 

consequences of this dynamic include 

tighter global corn supplies, a more 

volatile commodity market, and higher 

costs for various sectors of the economy 

as the prices of a key input, corn, have 

risen. A number of the requesting States 

and many commenters state that higher 

corn prices caused in part by increased 

demand from the RFS program have had 

significant negative effects on the 

livestock, poultry, and dairy industries 

due to the rising costs of feed. Other 

commenters focus on the link between 

higher prices for corn or other food 

commodities and increased prices of 

food for consumers. Some of these 

comments cite analysis conducted by 

various individuals or organizations 

estimating the portion of the increase in 

corn prices over a period of time that is 

attributable to increased renewable fuel 

use, or the impact of rising corn prices 

on consumer food items. 

EPA acknowledges the linkages 

between corn prices, feed prices, costs 

to the livestock, poultry, and dairy 

industries, as well as impacts on food 

prices; the analysis presented above 

explicitly examines these connections. 

At the same time, and as many 

commenters also point out, the market 

price of corn is influenced by a variety 

of factors, including among other things 

macroeconomic factors like oil prices, 

international demand for coarse grains, 

crop production in different corngrowing countries, fertilizer costs, and 

weather conditions that affect crop 

production levels. As many of the 

requesting State letters point out, and as 

we discuss in the Executive Summary, 

this year’s severe drought has had a 

significant impact on the recent increase 

in corn prices.79

As mentioned above we fully 

recognize the toll this year’s drought has 

taken on multiple sectors of the 

economy, and we have reviewed 

comments submitted to us in detail. 

While we generally agree that the issues 

raised by commenters are important 

considerations, as discussed previously, 

the issue before EPA is a narrow one— 

whether implementation of the RFS 

volume requirements over the time 

period at issue would severely harm the 

economy. The historical impacts of 

overall production and use of biofuels 

in the U.S. is not the relevant issue for 

purposes of determining whether 

implementing the RFS would severely 

harm the economy of a State, region or 

the U.S. over the time period of concern. 

2. Overall U.S. Policy on Renewable 

Fuels 

EPA also received comments from 

various individuals and organizations 

critical of the broader RFS program and 

policies that promote renewable fuels in 

general. Some commenters raise the 

potential negative environmental 

consequences of renewable fuels, 

including impacts on wildlife habitat 

due to renewable fuel policy, and the 

potential for increased greenhouse gas 

emissions from land use changes 

connected to renewable fuel policy.80

Others focus on the impacts that the 

RFS and other renewable fuel policies 

can have on international commodity 

markets, effects of price changes in 

developing countries, volatility in 

agricultural prices, and effects on 

domestic consumers, and argue that a 

waiver of RFS requirements would help 

to begin addressing such negative 

impacts. Some commenters either cited 

or submitted a study by Dr. Thomas 

Elam of FarmEcon LLC presenting a 

fairly comprehensive assessment of the 

RFS program, its impact on the 

agricultural sector, fuel markets, and 

global commodity markets, and 

proposals for statutory modifications.81

EPA considers these important topics 

and has reviewed such comments in 

detail. However, the question before us 

is fairly narrow. EPA received requests 

for a waiver under a specific provision 

of law and our decision in response to 

those requests is necessarily based on 

our authority under that provision. EPA 


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82The first triennial Report to Congress is 

available at http://oaspub.epa.gov/eims/ 

eimscomm.getfile?p_download_id=506091. 

83See for example, comments submitted by the 

American Petroleum Institute, EPA–HQ–OAR– 

2012–0632–2240. 

84 72 FR at 23934–5. 

85See for example comments submitted by the 

American Fuel and Petrochemical Manufacturing 

Association, EPA–HQ–OAR–2012–0632–1939. 

has no authority to grant the waiver 

requests under this provision unless it 

determines that implementation of the 

RFS volume requirements would 

severely harm the economy of a State, 

region, or the United States. The 

evidence before EPA does not support 

such a determination, and EPA therefore 

is denying the waiver requests. With 

respect to the environmental impacts of 

increased renewable fuel use, the waiver 

requests are not based on a claim of 

severe harm to the environment. 

Outside the context of a waiver, EPA is 

required to address environmental 

concerns in various ways, including 

through analysis of lifecycle greenhouse 

gas emissions associated with different 

renewable fuels and fuel pathways. 

EPA’s lifecycle analysis of such 

emissions is discussed at length in our 

March 26, 2010 final RFS rulemaking 

(75 FR 14670). A separate provision of 

EISA 2007 (the section 204 report to 

Congress) requires EPA to assess other 

potential impacts of biofuel use.82 EPA 

also considers those kinds of factors 

when setting national volume 

requirements for the years not specified 

by Congress, under section 

211(o)(2)(B)(ii). 

3. RFS Programmatic Issues 

Comments submitted by organizations 

representing the oil refining sector 

suggested that either eliminating or 

increasing the 20 percent cap on 

previous-year RINs that can be used for 

compliance under § 80.1427(a)(5) would 

increase the flexibility available to 

obligated parties in the event of a 

market disruption.83 As mentioned 

above, EPA described its rationale for 

setting the cap at 20 percent in the May 

1, 2007 final RFS rulemaking.84 The cap 

is a reasoned way to implement the 

statutory requirements that credits in 

the RFS program have a duration of only 

12 months. We continue to believe that 

the 20 percent cap strikes an 

appropriate balance between allowing 

flexibility to address market disruptions 

while providing biofuel producers with 

a degree of certainty with respect to 

demand. Therefore, EPA is not 

considering modifying the cap level at 

this time. 

4. Characteristics of Ethanol as a 

Transportation Fuel 

EPA received multiple comments 

describing what commenters view as 

unfavorable characteristics of ethanol as 

a transportation fuel; most of these 

comments focused on either ethanol 

blended into gasoline at the 10 percent 

or 15 percent level (E10 or E15). 

Commenters discussed the lower energy 

density of ethanol relative to gasoline 

and concerns with the use of E15 in 

certain engine types. While EPA 

appreciates the importance of such 

topics, they are beyond the scope of this 

determination and we do not address 

them here. 

5. The Future of the Renewable Fuel 

Industry 

Many commenters raised concerns 

regarding the impact that granting a 

waiver could have on the renewable fuel 

industry and the future of renewable 

fuel production. Such commenters, 

especially those associated with the 

renewable fuel sector, pointed out that 

granting a waiver would increase 

uncertainty in the marketplace, reduce 

investment, and hinder progress 

towards the policy goals of EISA 2007. 

EPA also received numerous comments 

related to the potential negative 

economic impacts of a waiver on 

renewable fuel producers and various 

related supporting industries, including 

impacts on jobs. EPA recognizes that 

were a waiver to be granted, the impacts 

would not be constrained to those 

industries that utilize corn as a feed 

input (e.g., livestock or dairy sectors), 

and that impacts would also affect other 

sectors of the economy, including in the 

agriculture and renewable fuel 

production sectors. EPA has reviewed 

comments on this topic and will 

continue to monitor the status of the 

U.S. biofuels industry, but in light of 

today’s decision does not address these 

comments in detail here. 

6. The Ethanol ‘‘Blendwall’’ 

Comments from oil refiners and 

associated trade organizations, as well 

as others, discuss potential impacts to 

fuel market dynamics as the level of 

ethanol in blended gasoline approaches 

the ‘‘E10 blendwall.’’ 85 The term 

blendwall generally refers to the market 

based limits on the volume of ethanol in 

gasoline, as ethanol-gasoline blends 

greater than E10 or E15 (depending on 

the model year of the vehicle) may only 

be marketed to flexible fuel vehicles. 

Commenters note that volumes of 

ethanol required by the RFS in the near 

future exceed the volume that can be 

consumed as E10. Commenters state 

that once ethanol in gasoline hits this 

E10 saturation point, blending 

additional ethanol into gasoline will not 

be a viable strategy to comply with RFSrequired volumes. 

In their letters requesting an RFS 

waiver, the requesting States do not 

focus on issues that might be posed by 

the blendwall, though some commenters 

in the livestock and poultry industry 

raise this topic as an issue of concern. 

In addition, while some commenters 

pointed to analysis related to blendwall 

impacts, it was not a focus of the 

majority of comments, and the amount 

of data and analysis submitted on the 

blendwall, its impacts on the overall 

fuel market, and the relationship 

between a waiver and blendwall 

impacts in different years was relatively 

small. The blendwall issue is not 

relevant to the analysis undertaken as 

part of this determination, as EPA’s 

technical analysis indicates that for the 

2012/2013 corn year, in light of the 

volume requirements in RFS and the 

amount of rollover RINs, that the market 

is expected to cause production of more 

ethanol than is needed to comply with 

the RFS volume requirements. However 

we believe it may be instructive to 

discuss the general topic briefly here. 

In establishing the RFS program, 

Congress created a framework to 

increase the amount of renewable fuel 

used in the domestic transportation 

sector over time. It gradually increases 

from 4.0 billion gallons in 2006 to 36.0 

billion gallons in 2022. Congress 

charged EPA with implementation of 

the program, and directed the Agency to 

assign the obligation to use renewable 

fuels to ‘‘refineries, blenders, 

distributors and importers as 

appropriate’’ to ensure that the annual 

national statutory volumes were met. 

EPA subsequently promulgated the 

implementing regulations for the RFS 

program first in 2007 in response to the 

Energy Policy Act of 2005 and then 

again in 2010 in response to the Energy 

Independence and Security Act. Under 

these regulations refiners and importers 

are required to ensure that the volumes 

of renewable fuel required under the 

Act are actually consumed. 

The RFS program establishes volume 

requirements for each obligated party, 

but it is neutral with respect to the type 

or form of renewable fuel used to meet 

the volume requirements, as long as the 

fuels are used to replace or reduce the 

quantity of fossil fuel present in a 

transportation fuel, heating oil or jet 

fuel; meet the required life-cycle 

greenhouse gas (GHG) performance 

standards; and are made from qualifying 

renewable biomass. 

Ethanol has been the dominant 

domestic renewable fuel for several 


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86The number of retail service stations that offer 

E85 has grown at a rate of only 350 stations per year 

since 2007. As of today, the total number of retail 

stations offering E85 is only about 3000, so that 

only one out of every 50 retail fuel stations offers 

E85. 

87American Petroleum Institute, EPA–HQ–OAR– 

2012–0632–2240 

years, and during development of the 

law and regulations stakeholders in the 

fuel sector reasonably expected that 

ethanol would play a significant role in 

fulfilling the RFS volume requirements. 

As pointed out by commenters, E10 is 

approaching the point at which it 

saturates the gasoline market. As a 

result, if obligated parties choose to 

achieve their required RFS volumes 

using ethanol they should work with 

their partners in the vehicle and fuel 

market to overcome any market 

limitations on increasing the volume of 

ethanol that is used. Stakeholders in the 

refining sector have been aware of the 

E10 blendwall since passage of EISA in 

December of 2007. 

As the market has approached the E10 

blendwall, the ethanol industry has 

worked to support the introduction of 

E15 into the market, and domestic auto 

manufacturers have increased 

production of vehicles capable of 

running on even higher ethanol blends. 

Over ten million flex-fuel vehicles 

(FFVs) are now in the existing fleet. 

FFVs currently consume E85 only about 

0.4% of the time, but were they to be 

regularly fueled on E85, such vehicles 

would be capable of consuming billions 

of additional gallons of ethanol. The 

affected industries have had and 

continue to have the ability to achieve 

widespread adoption of E85 through 

working with partners in the retail and 

terminal infrastructure sectors to 

increase the number of stations that 

offer E85 or other intermediate ethanol 

blends and improve the pricing 

structure relative to E10.86 As noted 

above, however, other fuel options are 

available to meet RFS requirements. 

7. Legal Interpretation of 211(o)(7) 

(a) Implementation of the RFS Itself 

Must Severely Harm the Economy 

The statute authorizes a waiver where 

‘‘implementation of the requirement 

would severely harm the economy.’’ In 

the 2008 waiver determination, EPA 

concluded the straightforward meaning 

of this provision is that implementation 

of the RFS program itself must be the 

cause of the severe harm. We found that 

the language provided by Congress does 

not support the interpretation that EPA 

would be authorized to grant a waiver 

if it found that implementation of the 

program would significantly contribute 

to severe harm. EPA noted several 

instances in section 211 and other 

sections of the Clean Air Act where 

Congress authorized EPA action based 

on the contribution made by a factor or 

activity, and worded the statute to 

clearly indicate this intention. We cited 

as an example section 211(c)(1) of the 

Act which authorizes EPA to control or 

prohibit a fuel or fuel additive where it 

‘‘causes or contributes’’ to air or water 

pollution that may reasonably be 

anticipated to endanger public health or 

welfare. EPA also cited to various 

waiver provisions where Congress 

clearly used language indicating that a 

waiver could be based on a 

determination that there is a 

contribution to an adverse result or a 

similar lesser degree of casual link to 

the adverse result. Section 211(f)(4), for 

example, allows EPA to waive a certain 

prohibition on fuels and fuel additives 

upon a determination that they will not 

‘‘cause or contribute’’ to a specified 

harm. Other examples are presented in 

the 2008 waiver determination. 

In response to the August 30, 2012 

Notice, one commenter argued that the 

concept of ‘‘cause or contribute to’’ 

arises in the Clean Air Act under a set 

of contexts that pertain to ‘‘public 

health, environmental quality, safety,’’ 

but do not relate to the concept of 

economic harm. In interpreting the 

language of 211(o)(7) by examining 

other instances where Congress utilizes 

the concept of contribution under 

section 211, commenters assert, EPA 

unnecessarily limited itself to an overly 

stringent reading of the RFS waiver 

provision.87

EPA disagrees with this argument. 

Had Congress intended to authorize 

EPA to grant a waiver where RFS 

implementation is merely a contributing 

factor to severe economic harm, it could 

clearly have done so by using statutory 

language similar to that found in the 

statutory provisions cited by the 

commenter. 

Another commenter argued that EPA’s 

interpretation renders the provision 

impossible to meet and essentially 

prejudges the issue. They noted that 

implementation of the RFS 

requirements must always occur within 

the context of an existing economy and 

fact situation, so that it is inappropriate 

to interpret the waiver provision as 

requiring that implementation of the 

RFS alone would cause severe economic 

harm. They state that the statute does 

not require the Administrator to ignore 

the worst drought in 50 years, its effects 

on corn stocks, and the price effects of 

the interaction of the RFS with the 

drought-induced supply shock. The 

commenter misinterprets EPA’s 

position. EPA agrees that 

implementation of the RFS must 

necessarily occur within the context of 

existing market conditions, and that it is 

necessary and appropriate for EPA to 

consider the effect of RFS 

implementation in the context of those 

existing conditions. That is why for 

today’s determination EPA has modeled 

the impact of RFS implementation in 

the current economic environment, 

including the context of the current 

drought and its impacts on corn yields 

and corn prices. Nor does EPA believe 

that its interpretation renders the 

provision impossible to meet. In Section 

V we discuss a number of key 

parameters and inputs used in our 

modeled analysis; these include 

availability of rollover RINs, gasoline 

prices, and corn yields, among others. 

Changes in one or several of these 

variables could lead to analytical results 

that could provide support for a finding 

that implementation of the RFS is 

severely harming the economy—but our 

analysis does not support such a finding 

for the time period and scenario 

analyzed here. 

(b) There Must Be a Generally High 

Degree of Confidence That There Will 

Be Severe Harm as a Result of the 

Implementation of RFS 

The waiver provision indicates that 

EPA must find that implementation of 

the RFS ‘‘would’’ severely harm the 

economy. We previously interpreted 

this as indicating that there must be a 

generally high degree of confidence that 

severe harm would occur from 

implementation of the RFS, and we 

continue to believe this interpretation is 

appropriate. In the 2008 waiver 

determination we noted that Congress 

specifically provided for a lesser degree 

of confidence in a related waiver 

provision, section 211(o)(8). That 

provision applies for just the first year 

of the RFS program, and provides for a 

waiver of the 2006 requirements based 

on a study by the Secretary of Energy of 

whether the program ‘‘will likely result 

in significant adverse impacts on 

consumers in 2006.’’ (Emphasis 

supplied). The term ‘‘likely’’ generally 

means that something is at least 

probable, and EPA believes that the 

term ‘‘would’’ in section 211(o)(7)(A) 

means Congress intended to require a 

greater degree of confidence under the 

waiver provision at issue here. 

We also noted in 2008 EPA’s belief 

that generally requiring a high degree of 

confidence that implementation of the 

RFS would severely harm an economy 

would appropriately implement 

Congress’ intent for yearly growth in the 


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88National Pork Producers Council comments, 

EPA–HQ–OAR–2012–0632–2209. 

use of renewable fuels, evidenced by the 

2005 and 2007 requirements for such 

growth. In addition, it would limit 

waivers to circumstances where a 

waiver would be expected to provide 

effective relief from harm. If there is 

generally high confidence that 

implementation of the RFS program 

would cause harm, then a waiver should 

provide effective relief from that harm. 

However in situations where there is not 

such a high degree of confidence, a 

waiver might be ineffectual and 

unnecessarily disrupt the expected 

growth in use of renewable fuels. 

In our prior Texas waiver 

determination we found support for our 

interpretation of this waiver provision 

in an analogous approach taken by EPA 

in applying former section 211(k)(2)(B), 

the provision for waiver of the oxygen 

content requirement for RFG. In that 

provision, Congress provided that EPA 

‘‘may’’ waive the oxygen content 

requirement upon a determination that 

compliance with this requirement 

‘‘would’’ prevent or interfere with 

attainment of a NAAQS. EPA 

interpreted this as calling for the waiver 

applicant to ‘‘clearly demonstrate’’ 

interference before a waiver would be 

granted. This interpretation was upheld 

in Davis v. EPA, 348 F.3d 772, 779–780 

(9th Cir. 2003). 

In response to the August 30, 2012 

Notice, one commenter argued that EPA 

erred in finding support for its 

interpretation of the term ‘‘would’’ in 

Section 211(o)(7) by reference to the less 

stringent ‘‘will likely result’’ statutory 

test set forth in 211(o)(8) for a waiver of 

the renewable fuel requirements in 

2006. The commenter suggests that the 

fact situation in 2006 was different in 

that it was the first year of the RFS 

program, and that relatively smaller 

renewable fuel volumes were involved. 

While EPA agrees that the fact situation 

in 2006 was different than in 

subsequent years of RFS 

implementation, that fact does not 

render EPA’s analysis of the different 

statutory terms unreasonable. No doubt 

because the fact situation was different 

in 2006 than in subsequent years of RFS 

implementation, Congress established a 

different, and less stringent, test to 

justify an RFS waiver in that year than 

in subsequent years. It is entirely 

reasonable for EPA to conclude that 

Congress intended a higher degree of 

certainty of harm in 211(o)(7) than in 

211(o)(8) in light of the different 

statutory terms used in those sections. 

Therefore, EPA believes the ‘‘would 

severely harm’’ test in 211(o)7) requires 

a higher degree of certainty of harm than 

the ‘‘will likely result’’ test in 211(o)(8). 

(c) ‘‘Severely Harm’’ Indicates That 

Congress Set a High Threshold for Grant 

of a Waiver 

In 2008, EPA discussed the level or 

threshold of harm necessary to satisfy 

the ‘‘severely harm’’ phrase found in 

section 211(o)(7). EPA continues to 

agree with the interpretation from the 

2008 waiver determination, where we 

stated that while the statute does not 

define the term ‘‘severely harm,’’ the 

straightforward meaning of this phrase 

indicates that Congress set a high 

threshold for issuance of a waiver. In 

the 2008 determination we discussed 

our rationale for this reading, pointing 

to the difference between the criteria for 

a waiver under section 211(o)(7)(A) and 

the criteria for a waiver during the first 

year of the RFS program. In section 

211(o)(8)(A) Congress provided for a 

waiver based on an assessment of 

whether implementation of the RFS in 

2006 would result in ‘‘significant 

adverse impacts’’ on consumers. A 

waiver under section 211(o)(7)(A), 

however, requires that implementation 

‘‘severely harm’’ the economy, which is 

clearly a much higher threshold than 

‘‘significant adverse impacts.’’ We also 

considered the use of the term ‘‘severe’’ 

in CAA section 181(a). Ozone 

nonattainment areas are classified 

according to their degree of impairment, 

along a continuum of marginal, 

moderate, serious, severe or extreme 

ozone nonattainment areas. Thus, in 

section 181, ‘‘severe’’ indicates a level of 

harm that is greater than marginal, 

moderate, or serious, though less than 

extreme. We previously stated our belief 

that the term ‘‘severe’’ should be 

similarly interpreted for purposes of 

section 211(o)(7)(A), as indicating a 

point that is quite far along a continuum 

of harm, though short of extreme. In 

response to the August 30, 2012 Notice, 

one commenter, addressing this 

comparison, wrote, ‘‘EPA suggested in 

the Texas waiver decision that it needed 

to interpret ‘severe’ within CAA section 

211 in the same manner as CAA section 

181(a). EPA is under no such 

mandate.’’ 88 EPA agrees that we are 

under no such mandate, and disagrees 

with the commenter’s characterization 

of our decision in 2008. EPA is not 

required to interpret the term ‘‘severe’’ 

in section 211in the same manner as 

section 181(a), but as we wrote in the 

2008 determination, it is ‘‘instructive’’ 

to do so. EPA continues to believe this 

is the case. 

As in 2008, and after reviewing 

comments submitted this year, EPA 

finds that we do not need to interpret 

this provision in any greater detail for 

purposes of acting on any of the waiver 

requests, as the circumstances in this 

case do not demonstrate the kind of 

harm from RFS implementation that 

would be characterized as severe. In 

addition, as described in section V, EPA 

has determined that it is highly likely 

that implementation of the RFS in 2012 

and 2013 will have no impact on the use 

of renewable fuel in the United States. 

Thus, implementation of the RFS could 

not be seen as severely harming the 

economy, regardless of EPA’s 

interpretation of the term. 

(d) Harm to the Economy 

Under EPA’s prior Texas waiver 

determination EPA considered the 

meaning of the term ‘‘economy’’ in 

section 211(o)(7)(A)(2). Although Texas 

had argued that the term should be 

interpreted such that a showing of 

severe harm to one sector of the 

economy, e.g., the livestock industry, is 

sufficient under the statute, others 

argued that there must be a showing of 

severe harm to the entire economy of a 

State, region or the United States, 

including all sectors. EPA stated its 

belief that it would be unreasonable to 

base a waiver determination solely on 

consideration of impacts of the RFS 

program to one sector of an economy, 

without also considering the impacts of 

the RFS program on other sectors of the 

economy or on other kinds of impact. It 

is possible that one sector of the 

economy could be severely harmed, and 

another greatly benefited from the RFS 

program; or the sector that is harmed 

may make up a quite small part of the 

overall economy. EPA stated its belief 

that in the context of any RFS waiver 

request we should responsibly review 

and analyze the economic information 

that is reasonably available regarding 

the full impacts of the RFS program and 

a possible waiver, including detrimental 

and beneficial impacts, before 

determining that a waiver of the 

program is warranted. In addition, we 

examined the language in the statute 

providing that EPA ‘‘may’’ waive the 

RFS volume requirement after finding 

that implementation of the RFS program 

would severely harm the economy. As 

such, we determined that a broad 

consideration of economic and other 

impacts could be undertaken whether or 

not EPA adopted the more limited 

interpretation of the term ‘‘economy’’ 

advanced by Texas. For example, if EPA 

examined the full impacts on an 

economy, EPA would determine 

whether RFS implementation would 

severely harm the overall economy of a 

State, region, or the U.S. However, if 


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EPA adopted the more limited 

interpretation, and then found severe 

harm to a sector of the economy, EPA 

would still evaluate the overall impacts 

on the economy and other factors before 

exercising its discretion under the 

‘‘may’’ clause to grant or deny the 

waiver request. Some commenters 

argued in response to the August 30 

notice that EPA’s interpretation in the 

2008 Texas waiver decision was 

incorrect, because nothing in the statute 

allows EPA to broadly consider possible 

economic benefits as well as harm to 

various sectors of the economy. The 

commenter failed to acknowledge that 

EPA is not required to issue a waiver 

when severe economic harm to a state, 

region or the United States is 

demonstrated. The statute provides that 

EPA ‘‘may’’ do so in that situation. EPA 

continues to believe that in exercising 

its discretion under the statute to grant 

or deny a waiver request, it would be 

reasonable for EPA to consider all 

impacts associated with RFS 

implementation. In its Texas waiver 

determination EPA found that it did not 

need to resolve the issue of whether a 

waiver could be granted based solely on 

a demonstration of harm to one sector 

of the economy, since the circumstances 

in that case did not warrant a waiver 

under either interpretation. Similarly, 

despite the comments EPA received on 

this interpretative issue within the 

current waiver requests, we find that 

EPA does not need to resolve this issue 

of interpretation since the 

circumstances in this case do not 

warrant a waiver under either 

interpretation. 

VII. Decision 

EPA recognizes that severe drought 

has taken a large toll on many States 

and sectors of the economy, and further 

acknowledges that many parties, both 

those supporting a waiver and those 

opposing a waiver, have raised issues of 

great concern to them and to others in 

the nation concerning the use of 

biofuels. However the issue before the 

Agency in this case is a much more 

limited one, as described below. Based 

on a thorough review of the record in 

this case, and applying the evidence to 

the statutory criteria, EPA finds that the 

evidence does not support granting a 

waiver. 

EPA is authorized to grant a waiver 

request if EPA determines that 

implementation of the RFS 

requirements would severely harm the 

economy of a State, region, or the 

United States. As discussed above, this 

calls for a determination that 

implementation of the RFS itself would 

severely harm the economy; it is not 

enough that implementation would 

contribute to such harm. Today’s 

determination has two basic parts. The 

first part addresses whether there is a 

generally high degree of confidence that 

harm would occur from implementation 

of the RFS. The second part considers 

whether such harm, if it were to occur, 

is ‘‘severe’’, indicating a high threshold 

for the nature and degree of harm that 

would support issuance of a waiver, a 

point that is quite far along a continuum 

of harm, though short of extreme. Based 

on a thorough review of the record in 

this case, and applying the evidence to 

the statutory criteria, EPA finds that the 

evidence does not support granting a 

waiver. 

First, regarding the degree of 

confidence that implementation of the 

RFS program during the time period at 

issue would harm the economy, after 

weighing all of the evidence before it 

the evidence does not support a finding 

that implementation of the RFS would 

harm the economy of a State, region, or 

the United States. All parties agree that 

any claimed economic harm would 

derive from the increased production of 

ethanol associated with implementation 

of the RFS, and any associated increase 

in the price of corn. However the weight 

of the evidence shows that it is very 

likely that the RFS volume requirements 

will have no impact on ethanol 

production volumes in the relevant time 

frame, and therefore no impact on corn, 

food, or fuel prices. The ISU modeling 

projects that waiving the RFS would 

have no impact at all on the use of 

ethanol in 89% of the scenarios 

modeled. The availability of rollover 

RINs, the beneficial economics of 

producing ethanol gasoline blends, the 

generally low level of flexibility of 

refiners to shift from ethanol over a oneyear period, and the low price currently 

in the market for renewable fuel RINs all 

support the conclusion that waiving the 

RFS program would not be expected to 

have any effect on the production of 

ethanol. In other words, demand for 

ethanol would remain high with and 

without the RFS volume requirements 

for the time period at issue. As 

discussed in section V, the evidence 

submitted to support the view that a 

waiver would have a large effect on 

ethanol use is less credible because of 

concerns about the validity of key 

assumptions that underpin those 

analyses. After considering all of the 

evidence and information and weighing 

it appropriately, EPA believes that it is 

very likely that implementation of the 

RFS volume requirements will have no 

impact on ethanol production volumes 

in the relevant time frame. The analysis 

also indicates that it is unlikely that 

implementation of the RFS would cause 

any degree of harm to the economy. 

Though EPA fully recognizes the 

harmful impact to the economy from the 

2012 drought, the evidence before the 

agency does not support a finding that 

implementation of the RFS would likely 

or even probably cause harm to the 

economy over the 2012/2013 time 

period and certainly the evidence does 

not reach the generally high degree of 

confidence required for issuance of a 

waiver under section 211(o)(7)(A). 

Second, the Agency examined the 

evidence to evaluate the potential 

impact of implementation of the RFS 

program on corn prices and the impacts 

of such corn prices on various sectors of 

the economy and the overall economy, 

both within the requesting States and 

for the entire United States. In the ISU 

modeling, a range of scenarios were 

modeled, with the model projecting 

ethanol use, corn price and fuel price. 

The modeling indicates that for 89% of 

the scenarios implementation of the RFS 

volume requirements would have no 

impact on ethanol use or corn price, 

with only 11% of the scenarios 

indicating a change in ethanol use and 

a corresponding change in corn price. 

EPA determined that the average change 

in corn price over all of the scenarios 

was $0.07 per bushel of corn. The 

average change in corn price over the 

11% of scenarios where a waiver would 

have an effect was $0.58 per bushel of 

corn. As discussed in section V, a price 

change in corn of this magnitude would 

have only a moderate impact on 

livestock costs and food prices. It would 

also be accompanied by a small change 

in fuel costs. For the reasons discussed 

above, EPA believes the weight of the 

evidence supports the view that it is 

highly likely there will be no impact on 

ethanol use or corn prices from 

implementation of the RFS program 

over the time period at issue, and if an 

impact were to occur, it would likely be 

on average $0.58 per bushel of corn. 

EPA believes this range of potential 

price increases for corn, even without 

considering the accompanying impact 

on fuel prices, would not support a 

determination of severe harm to the 

economy, whether considering the 

various livestock industries of the 

requesting States, livestock industry of 

the nation, the economies of the 

requesting States, or the economy of the 

United States. In this case, EPA does not 

need to determine exactly what nature 

or degree of harm would amount to 

severe harm, as the evidence in this case 

clearly does not meet the statutory 

criterion of severe harm to an economy. 


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In conclusion, EPA finds that the 

evidence and information in this case 

does not support a determination that 

implementation of the RFS 

requirements during the time period at 

issue would severely harm the economy 

of a State, a region, or the United States. 

Dated: November 16, 2012. 

Lisa P. Jackson, 

Administrator. 

[FR Doc. 2012–28586 Filed 11–26–12; 8:45 am] 

BILLING CODE 6560–50–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

[FRL–9752–2; Docket ID No. EPA–HQ–ORD– 

2011–0051] 

Draft Integrated Science Assessment 

for Lead 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Notice of public comment 

period. 

SUMMARY: EPA is announcing the 

availability of a document titled, ‘‘Third 

External Review Draft Integrated 

Science Assessment for Lead’’ (EPA/ 

600/R–10/075C). The document was 

prepared by the National Center for 

Environmental Assessment (NCEA) 

within EPA’s Office of Research and 

Development as part of the review of the 

national ambient air quality standards 

(NAAQS) for lead (Pb). 

EPA is releasing this draft document 

to seek review by the Clean Air 

Scientific Advisory Committee (CASAC) 

and the public (meeting date and 

location to be specified in a separate 

Federal Register Notice). The draft 

document does not represent and 

should not be construed to represent 

any final EPA policy, viewpoint, or 

determination. EPA will consider any 

public comments submitted in response 

to this notice when revising the 

document. 

DATES: The public comment period 

begins, November 27, 2012, and ends 

January 28, 2013. Comments must be 

received on or before January 28, 2013. 

ADDRESSES: The ‘‘Third External Review 

Draft Integrated Science Assessment for 

Lead’’ will be available primarily via the 

Internet on the National Center for 

Environmental Assessment’s home page 

under the Recent Additions and 

Publications menus at http://

www.epa.gov/ncea. A limited number of 

CD–ROM or paper copies will be 

available. Contact Ms. Marieka Boyd by 

phone (919–541–0031), fax (919–541– 

5078), or email (boyd.marieka@epa.gov) 

to request either of these, and please 

provide your name, your mailing 

address, and the document title, ‘‘Third 

External Review Draft Integrated 

Science Assessment for Lead’’ (EPA/ 

600/R–10/075C) to facilitate processing 

of your request. 

FOR FURTHER INFORMATION CONTACT: For 

technical information, contact Dr. Ellen 

Kirrane, NCEA; telephone: 919–541– 

1340; facsimile: 919–541–2985; or 

email: kirrane.ellen@epa.gov. 

SUPPLEMENTARY INFORMATION: 

I. Information About the Document 

Section 108 (a) of the Clean Air Act 

directs the Administrator to identify 

certain pollutants which, among other 

things, ‘‘cause or contribute to air 

pollution, which may reasonably be 

anticipated to endanger public health or 

welfare’’ and to issue air quality criteria 

for them. These air quality criteria are 

to ‘‘accurately reflect the latest scientific 

knowledge useful in indicating the kind 

and extent of all identifiable effects on 

public health or welfare, which may be 

expected from the presence of [a] 

pollutant in the ambient air * * *.’’ 

Under section 109 of the Act, EPA is 

then to establish national ambient air 

quality standards (NAAQS) for each 

pollutant for which EPA has issued 

criteria. Section 109 (d) of the Act 

subsequently requires periodic review 

and, if appropriate, revision of existing 

air quality criteria to reflect advances in 

scientific knowledge on the effects of 

the pollutant on public health or 

welfare. EPA is also to periodically 

review and, if appropriate, revise the 

NAAQS, based on the revised air quality 

criteria. 

Pb is one of six principal (or 

‘‘criteria’’) pollutants for which EPA has 

established NAAQS. Periodically, EPA 

reviews the scientific basis for these 

standards by preparing an Integrated 

Science Assessment (ISA) (formerly 

called an Air Quality Criteria 

Document). The ISA provides a concise 

review, synthesis, and evaluation of the 

most policy-relevant science to serve as 

a scientific foundation for the review of 

the NAAQS. The CASAC, an 

independent science advisory 

committee mandated by Section 109 (d) 

(2) of the Clean Air Act, is charged with 

independent scientific review of EPA’s 

air quality criteria. 

On February 26, 2010 (75 FR 8934), 

EPA formally initiated its current 

review of the air quality criteria for Pb, 

requesting the submission of recent 

scientific information on specified 

topics. Soon after, a science policy 

workshop was held to identify key 

policy issues and questions to frame the 

review of the Pb NAAQS (75 FR 20843). 

Drawing from the workshop 

discussions, a draft of EPA’s ‘‘Integrated 

Review Plan for the Lead National 

Ambient Air Quality Standards Review’’ 

(EPA/452/D–11–001) was developed 

and made available in March 2011 for 

public comment and was discussed by 

the CASAC via a publicly accessible 

teleconference consultation on May 5, 

2011 (76 FR 21346). The final IRP was 

released in December 2011 (76 FR 

76972) and is available at http://

www.epa.gov/ttn/naaqs/standards/pb/s

_pb_2010_pd.html. 

As part of the science assessment 

phase of the review, EPA held a 

workshop in December 2010 to discuss, 

with invited scientific experts, initial 

draft materials prepared in the 

development of the ISA (75 FR 69078). 

The first external review draft ISA for 

Pb was released on May 6, 2011 

(http://cfpub.epa.gov/ncea/isa/

recordisplay.cfm?deid=226323). The 

CASAC Pb Review Panel met at a public 

meeting on July 20, 2011, to review the 

draft ISA (76 FR 36120). Subsequently, 

on December 9, 2011, the CASAC Pb 

Review Panel provided a consensus 

letter for their review to the 

Administrator of the EPA (http://

yosemite.epa.gov/sab/sabproduct.nsf/

D3E2E8488025344D85257961006

8A8A1/$File/EPA-CASAC-12-002-

unsigned.pdf). The second external 

review draft ISA for Pb was released on 

February 2, 2012 (http://cfpub.epa.gov/ 

ncea/isa/recordisplay.cfm?deid=235331

#Download). The CASAC Pb Review 

Panel met at a public meeting on April 

10, 2012, to review the draft ISA (77 FR 

14783). Subsequently, on July 20, 2012, 

the CASAC Pb Review Panel provided 

a consensus letter for their review to the 

Administrator of the EPA (http://

yosemite.epa.gov/sab/

SABPRODUCT.NSF/13B1FD83815FA1

1885257A410064E0DC/$File/EPACASAC-12-005-unsigned.pdf). The third 

external review draft ISA for Pb will be 

discussed at a public meeting of the 

CASAC Pb Review Panel, and timely 

public comments received will be 

provided to the CASAC panel. A future 

Federal Register Notice will inform the 

public of the exact date and time of that 

CASAC meeting. 

II. How To Submit Technical Comments 

to the Docket at www.regulations.gov 

Submit your comments, identified by 

Docket ID No. EPA–HQ–ORD–2011– 

0051 by one of the following methods: 

• www.regulations.gov: Follow the 

on-line instructions for submitting 

comments. 

• Email: Docket_ORD@epa.gov. 

• Fax: 202–566–9744. 


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