STATE OF UTAH 

GARY R. HERBERT	OFFICE OF THE GOVERNOR	

SPENCER J. COX 

GOVERNOR	

SALT LAKE CITY, UTAH

	

LIEUTENANT GOVERNOR 

84 1 1 4-2 2 20 : 

May 14, 2014 

The Honorable Gina McCarthy 

Administrator 

U.S. Environmental Protection Agency 

Ariel Rios Building, Room 300 

1200 Pennsylvania Avenue, N.W. 

Washington, D.C. 20460 

Dear Ms. McCarthy: 

The Renewable Fuel Standard (RFS) was established by the Energy Policy Act of 2005 and was 

expanded by the Energy Independence and Security^Act of 2007. It requires th'at fuels sold in the Utiited 

States contain 36 billion gallons of renewable fuels by 2022. The mandate fdr renewable fuels increases 

each year. ln 2014, 18.5 billion gallons of renewable fuels must be blended, of which 14:4 billlon wi11'be 

met with corn-based ethanol. 

T'he goals behind the RFS were well-intentibned, but the energy '^harket' and our riation's energy 

landscape were very different in 2007 than they are today. The RFS was designed to reduce greenhouse 

gas emissions, make our nation more energysecure, and provide a'reliable dornestic sourceof energy, 

which would lessen energy irnports from less stabl"e"regions. At present, we are closerto a'chieving all °of 

those important goals, but not because of the RFS. The 21 S` century energy renaissance has driven our 

nation's CO2 emissions near a twenty-year low, made the U.S. the number, one producer of natural gas, 

and put us on track to become the world's largest producer of oil. Meanwhite; the mandate is causing 

unintended harm to our country's economy. 

Last year, 10 governors petitioned the U.S. Environmental Protection Agency (EPA) to waive the 

corn ethanol mandate due to severe economic harm to their states' livestock industries and the trickledown impact to supporting industries and consumers. Under Section 211(o)(7) of the Clean Air Act, 

Congress explicitly authorized the EPA to waive the RFS mandates, in whole or in part, where there 

would be either (1) an inadequate domestic supply or (2) severe economic harm. Despite the devastating 

effects of the worst drought in 50 years, EPA did not take action. 

This year, we are faced with another challenge created by the RFS. While renewable fuel 

requirements are increasing yearly, gasoline demand in the U.S. is steadily declining. This dynamic has 

created the E10 blendwall—the point at which more renewable fuel is required to be blended than can be 

safely consumed in the United States—due to fundamental constraints imposed by fueling infrastructure 

and problems of gasoline engine incompatibility with increased ethanol blends. With a few exceptions, 

automobiles are built and warranted for a 10 percent ethanol blend, and the same applies to small engines 

used in boats, lawnmowers, and motorcycles, for example.
Because of the blendwall, the RFS limits the supply of gasoline and diesel fuel for U.S. 

consumption. Compliance with the RFS is demonstrated through Renewable Identification Numbers 

("RINs"). In effect, RINs operate like permits to sell specific quantities of gasoline and diesel for U.S. 

consumption. The number of RINs available for compliance depends on the consumption of renewable 

fuels in U.S. transportation fuels. Therefore, as the RFS mandates exceed the ability of the underlying fuel 

supply and vehicle and infrastructure compatibility to accommodate additional amounts of renewable 

fuels, there will be a shortage of RINs for compliance (i.e., permits to sell gasoline and diesel). This will, 

in turn, limit supplies of gasoline and diesel for U.S. consumption, resulting in severe economic harm to 

consumers and the overall economy. 

According to NERA Economic Consulting, there will be an inadequate supply of RINs to satisfy 

the various mandates of the 2014 RFS, forcing the overall reduction of supplies of gasoline and diesel for 

U.S. consumption. Therefore, NERA predicts that this reduction in supplies will create "an inadequate 

domestic supply" of gasoline and diesel fuel, resulting in "severe harm" across the U.S. economy. 

Indeed, NERA predicts that the blendwall would "include a$770 billion decline in GDP and a 

corresponding reduction in consumption per household of $2,700" by 2015. 

The State of Utah has a vested interest in diversifying transportation fuel options. However, due 

to the severe economic harm and inadequate domestic supply caused by the mandate, as described above, 

the EPA has the authority under Section 211(o)(7) to waive the volumes required to be blended in 2014. 

The EPA took a step in the right direction when it acknowledged the blendwall and exercised this 

authority in the proposed 2014 RFS volumes rule by waiving the volumes to .just below 10 percent 

ethanol. The EPA must still finalize the 2014 RF,S volumes, and I strongly urge the agency to stay the 

course and remain steadfast in its resolve to avoid the blendwall and a dangerous economic situation by 

keeping the volumes below 10% ethanol. 

Regardless of the path forward with respect to the Renewable Fuel Standard in the nea.r term, the 

State of Utah will continue in its leadership role in the areas of Compressed Natural Gas vehicles, electric 

vehicles, and other alternative technologi.es, which help move t.he state and the country toward a future 

that.is both environmentally responsible and economically productive. I appreciate your leadership in this 

realm. I am optimistic that we can work together on this issue, which is so critical to rural Utah. 

Thank you for your consideration.

Sincerely,


^ 

Gary R. Herbert 

Governor