47168 Federal Register / Vol. 73, No. 157 / Wednesday, August 13, 2008 / Notices 

TABLE 1.—REGISTRATIONS WITH REQUESTS FOR AMENDMENTS TO DELETE USES IN CERTAIN PESTICIDE REGISTRATIONS

EPA Registration 

No. Product Name Active Ingredient Delete from Label 

1448-92 BUSAN 1024 1-Methyl-3,5,7-triaza-1- 

azoniatricyclodecane Chloride (Busan 

1024) 

laundry starch, petroleum production and recovery, textiles, 

papermaking chemicals and coatings, metalworking fluids 

Users of these products who desire 

continued use on crops or sites being 

deleted should contact the applicable 

registrant before September 12, 2008 to 

discuss withdrawal of the application 

for amendment. This 30–day period will 

also permit interested members of the 

public to intercede with registrants prior 

to the Agency’s approval of the deletion. 

Table 2 of this unit includes the 

names and addresses of record for all 

registrants of the products listed in 

Table 1 of this unit, in sequence by EPA 

company number. 

TABLE 2.—REGISTRANTS REQUESTING

AMENDMENTS TO DELETE USES IN

CERTAIN PESTICIDE REGISTRATIONS

EPA Company Number Company Name and 

Address 

1448 Buckman Laboratories, Inc. 

1256 North McLean 

Blvd. 

Memphis, TN 38134 

III. What is the Agency’s Authority for 

Taking this Action? 

Section 6(f)(1) of FIFRA provides that 

a registrant of a pesticide product may 

at any time request that any of its 

pesticide registrations be amended to 

delete one or more uses. The FIFRA 

further provides that, before acting on 

the request, EPA must publish a notice 

of receipt of any such request in the 

Federal Register. Thereafter, the 

Administrator may approve such a 

request. 

IV. Procedures for Withdrawal of 

Request 

Registrants who choose to withdraw a 

request for cancellation must submit 

such withdrawal in writing to the 

person listed under FOR FURTHER

INFORMATION CONTACT, postmarked 

before September 12, 2008. This written 

withdrawal of the request for 

cancellation will apply only to the 

applicable FIFRA section 6(f)(1) request 

listed in this notice. If the products have 

been subject to a previous cancellation 

action, the effective date of cancellation 

and all other provisions of any earlier 

cancellation action are controlling. 

V. Provisions for Disposition of Existing 

Stocks 

The Agency has authorized the 

registrants to sell or distribute product 

under the previously approved labeling 

for a period of 18 months after approval 

of the revision, unless other restrictions 

have been imposed, as in special review 

actions. 

List of Subjects 

Environmental protection, Pesticides 

and pests, Antimicrobials, Busan 1024. 

Dated: August 1, 2008. 

Mark A. Hartman, 

Acting Director, Antimicrobials Division, 

Office of Pesticide Programs. 

[FR Doc. E8–18612 Filed 8–12–08; 8:45 am] 

BILLING CODE 6560–50–S 

ENVIRONMENTAL PROTECTION 

AGENCY 

[FRL–8703–5] 

Notice of Decision Regarding the State 

of Texas Request for a Waiver of a 

Portion of the Renewable Fuel 

Standard 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Notice. 

SUMMARY: The Governor of the State of 

Texas requested a waiver of 50 percent 

of the renewable fuel standard (RFS or 

RFS mandate) for the time period from 

September 1, 2008 through August 31, 

2009, pursuant to section 211(o)(7) of 

the Clean Air Act (the Act), 42 U.S.C. 

7545(o)(7). Based on a thorough review 

of the record in this case, EPA finds that 

the evidence does not support a 

determination that implementation of 

the RFS mandate during the time period 

at issue would severely harm the 

economy of a State, a region, or the 

United States. EPA is therefore denying 

the request for a waiver. In this Notice 

EPA is also providing guidance on the 

Agency’s general expectations for future 

waiver requests. 

DATES: Petitions for review must be filed 

by October 14, 2008. 

ADDRESSES: EPA has established a 

docket for this action under Docket ID 

No. EPA-HQ-OAR–2008–0380. 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: 

James W. Caldwell, Office of 

Transportation and Air Quality, 

Mailcode: 6406J, Environmental 

Protection Agency, 1200 Pennsylvania 

Ave., NW., Washington, DC 20460; 

telephone number: (202) 343–2802; email address: Caldwell.jim@epa.gov. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary 

The RFS program, which requires the 

use of renewable fuels in the U.S. 

transportation sector, was originally 

adopted by Congress in the Energy 

Policy Act of 2005 (EPAct). This 

program was recently modified by 

Congress in the Energy Independence 

and Security Act of 2007 (EISA). The 

RFS program provides that the 

Administrator, in consultation with the 

Secretaries of Agriculture and Energy, 

may waive the national renewable fuel 

volume requirements, in whole or in 

part, if the Administrator determines 

that implementation of the requirement 

would severely harm the economy or 

environment of a State, region, or the 

United States (see Clean Air Act section 

211(o)(7)(A)). 

On April 25, 2008, the Governor of 

the State of Texas requested a fifty 

percent waiver of the national volume 

requirements for the renewable fuel 

standard (RFS or RFS mandate). Texas 


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1As discussed later, EPA believes that this body 

of information also supports, the determination that 

implementation of the RFS would have no 

significant impact in the relevant time frame. 

based its request on the assertion that 

the RFS mandate is unnecessarily 

having a negative impact on the 

economy of Texas, specifically that 

increased ethanol production is 

contributing to increased corn prices 

which are negatively affecting its 

livestock industry and food prices. EPA 

published in the Federal Register a 

notice of receipt of this request and 

invited public comment on all issues 

relevant to making a decision on Texas’s 

request. 

After considering all of the public 

comments, and consulting with the 

Secretaries of Agriculture and Energy, 

EPA has determined that the waiver 

request should be denied. In making 

this decision, EPA has 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 by requiring a 

determination of severe harm. EPA and 

almost all commenters recognize that 

there are many factors that affect the use 

of biofuels in the U.S. and the overall 

impact of such use. However, the RFS 

waiver provision calls for EPA to 

evaluate a much narrower set of issues, 

focusing on just the impact of the RFS 

mandate. 

With this framework in mind, EPA 

evaluated all of the evidence concerning 

the issues that are relevant under the 

waiver provision. In its supplemental 

comments, Texas requested that the 

waiver request focus on the 2008/2009 

corn marketing year. EPA agrees that 

looking at the impact with and without 

a waiver over this time frame is an 

important way to identify the impact of 

implementation of the RFS program. 

Several commenters submitted 

modeling analyses that looked at the 

impact of a waiver of the RFS mandate 

on ethanol production, corn prices, fuel 

prices, and other related impacts. In 

addition to evaluating the information 

submitted by Texas and other 

commenters, the Agency conducted its 

own analysis. In consultation with the 

United States Department of Agriculture 

(USDA) and the United States 

Department of Energy (DOE), EPA 

reviewed several economic models and 

chose a model created by researchers at 

Iowa State University (ISU model) to 

analyze the impact of the RFS on corn, 

ethanol, and gasoline prices based on 

uncertainty in key variables such as 

crop yields and crude oil prices. As part 

of our analysis, EPA reviewed the 

underlying data and assumptions in the 

ISU model for their appropriateness. In 

this context, EPA believes the ISU 

modeling reflects the most recent data 

available, is well designed and 

documented, and provides a number of 

advantages over other approaches to 

analyzing the issues relevant for this 

decision. EPA also considered current 

market conditions influencing the 

production of ethanol in the U.S. such 

as high oil prices and the large existing 

production capacity of the U.S. ethanol 

industry, as well as other empirical data 

including historical and current 

Renewable Identification Number (RIN) 

credit prices. 

First, after weighing all of the 

evidence before it, EPA determined that 

the evidence does not support a finding 

that implementation of the RFS 

‘‘would’’ harm the economy of a State, 

region, or the United States, because the 

evidence does not reach the generally 

high degree of confidence required for 

issuance of a waiver under CAA section 

211(o)(7)(A). On this issue, EPA believes 

that this body of information supports 

the determination that the most likely 

result is that the RFS would have no 

impact on ethanol production volumes 

in the relevant time frame, and therefore 

no impact on corn, food, or fuel prices.1

Second, on the issue of the severity of 

any harm, the weight of all of the 

evidence also indicates that were the 

RFS mandate to have an impact on the 

economy during the 2008/2009 corn 

marketing year, it would not be of a 

nature or magnitude that could be 

characterized as severe. Even in the 

modeled scenarios where a waiver of 

the RFS mandate might reduce the 

production of ethanol, the resulting 

decrease in corn prices is anticipated to 

be small (on average $0.30 per bushel of 

corn), and there would be an 

accompanying small increase in the 

price of fuel (on average $0.01 per 

gallon in fuel costs). Such levels of 

potential impacts from the RFS program 

do not satisfy the high threshold of 

harm to the economy to be considered 

severe. We also conducted a sensitivity 

analysis on a low probability scenario 

with larger potential impacts, the results 

of which are presented below. 

EPA also received comment on 

several issues not associated with the 

economic impacts of RFS. These 

include comments on the general 

economic and environmental impacts of 

the recent increase in biofuels, and the 

effect of the use of biofuels on 

commodity markets. EPA recognizes 

that Texas and many parties, both those 

supporting the waiver and those 

opposing the waiver, have raised issues 

of great concern to them and to others 

in the nation concerning the role of 

biofuels in our country. However, the 

issue before the Agency in this case is 

much more limited, as described below 

in our discussion of EPA’s authority 

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

Based on a thorough review of the 

record in this case and by applying the 

evidence to the statutory criteria, EPA 

finds that the evidence does not support 

making a determination that 

implementation of the mandate would 

severely harm the economy of a State, 

region, or the United States. 

This decision on the Texas waiver 

request is based on current 

circumstances and market conditions. 

However, we recognize that significant 

changes could occur in the future with 

respect to the multiple factors related to 

the production and use of renewable 

fuels in the U.S. transportation sector. 

EPA is committed to monitoring the 

implementation of the renewable fuels 

program and its impact on the economy 

and environment. 

This is the first RFS waiver request to 

be submitted to EPA and many 

important issues were raised and 

discussed in the public comment 

process. In addition to announcing and 

explaining EPA’s decision on the Texas 

waiver request, in this Notice the 

Agency is also providing guidance to 

interested parties on its expectations 

concerning future requests for a waiver. 

II. Overview of 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 mandate schedule began at 4.0 

billion gallons of renewable fuel in 

2006, and increased to 4.7 in 2007, 5.4 

in 2008, 6.1 in 2009, 6.8 in 2010, 7.4 in 

2011, and 7.5 billion gallons in 2012. 

The Energy Independence and Security 

Act of 2007 (EISA) amended the RFS 

program by extending the years in 

which Congress specified the required 

volume of renewable fuels by ten years, 

increasing the required volumes for the 

renewable fuel mandate, and adding 

new, separate mandates starting in 2009 

for advanced biofuels, including 

cellulosic biofuel and biomass-based 

diesel. EPAct set the 2007 mandate for 

renewable fuel at 4.7 billion gallons and 

the 2008 mandate at 5.4 billion gallons. 


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2A more detailed discussion of the requirements 

for different types of biofuels is included in Section 

V. 

3Texas subsequently submitted comments during 

the public comment period, including a recent 

briefing paper from the Agriculture and Food Policy 

Center at the Texas A&M University along with an 

economic analysis on the implications of a RFS 

waiver on the price of corn and impacts on the 

livestock industry as well as impacts on the 

petroleum markets and the broader economy. Texas 

also clarified that it was asking for a ‘‘50-percent 

reduction in the corn-derived, volumetric ethanol 

mandates, * * * effectively requesting that EPA, for 

the foreseeable future, return the RFS system to the 

status quo prior to enactment of EISA i.e., to the 

much more moderate trajectory that prevailed 

under the Energy Policy Act of 2005.’’ Texas states 

its preference that this be accomplished through a 

waiver that corresponds to the 2008–2009 crop year 

(i.e., September 1, 2008 through August 31, 2009). 

The initial Texas waiver request of April 25, 2008 

(Texas waiver request) can be found at EPA–HQ–

OAR–2008–0380–0058. The Texas supplemental 

comments of June 23, 2008 (Texas supplemental 

comments) can be found at EPA–HQ–OAR–2008–

0380–0526. In addition, Texas submitted additional 

comments after the close of the comment period, on 

August 6, 2008. These comments can be found at 

EPA–HQ–OAR–2008–0380. Given the date on 

which the additional comments were received, 

EPA’s response to them can be found in a 

Memorandum to the Docket dated August 7, 2008. 

4 73 FR 29753. 

5See Texas supplemental comments, National 

Cattlemen’s Beef Association at EPA–HQ–OAR–

2008–0380–0418 at 1, and Texas Cattle Feeders 

Association at EPA–HQ–OAR–2008–0380 at 1. 

EISA increases the 2008 and 2009 RFS 

renewable fuel mandates to 9.0 billion 

and 11.1 billion gallons. EISA also 

imposed additional requirements for the 

use of advanced biofuel and biomassbased diesel in 2009, included within 

the overall mandate for 11.1 billion 

gallons of renewable fuel in 2009.2

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 

diversifying the nation’s energy 

portfolio by requiring the transition 

from petroleum-based fuels to bio-based 

alternatives in the transportation sector. 

In addition, as part of EISA, Congress is 

requiring EPA to perform a life-cycle 

analysis of emissions of greenhouse 

gases associated with the full lifecycle 

of renewable fuels, and is requiring a 

minimum level of greenhouse gas 

reduction to qualify for advanced 

biofuel, cellullosic biofuel and biomassbased diesel. This will be further 

discussed in EPA’s upcoming second 

phase renewable fuel standard 

rulemaking (RFS2), which will 

implement the renewable fuels 

provisions of EISA. 

III. EPA’s Administrative Process 

On April 25, 2008, the Governor of 

Texas submitted a request to the 

Administrator under section 211(o)(7) of 

the Act for a waiver of 50 percent of the 

RFS ‘‘mandate for the production of 

ethanol derived from grain.’’ The 

request claims that the mandate is 

unnecessarily having a negative impact 

on the economy of Texas and driving up 

global food prices. In its request Texas 

specifically identified increased corn 

prices as having a negative effect on its 

livestock industry and that a waiver 

would also provide needed relief to 

consumers at the grocery store. This 

initial request did not include 

substantive supporting data or 

analyses.3

On May 22, 2008, EPA published a 

notice requesting comment on the 

petition submitted by Texas as well as 

any matter that might be relevant to 

EPA’s action on the petition, 

specifically including (but not limited 

to) information that would enable EPA 

to: (a) Evaluate whether compliance 

with the RFS is causing severe harm to 

the economy of the State of Texas; (b) 

evaluate whether the relief requested 

will remedy the harm; (c) determine to 

what extent, if any, a waiver approval 

would change demand for ethanol and 

affect corn or feed prices; and (d) 

determine the date on which a waiver 

should commence and end if it were 

granted.4 As stated in EPA’s notice for 

comment, granting a waiver would 

reduce the national volume 

requirements under section 211(o)(2) of 

the Act, which would have effects in 

areas of the country other than Texas. 

Therefore, EPA invited comment on all 

issues relevant to whether and how the 

Administrator might exercise his 

discretion under this waiver provision 

of the Act, including but not limited to 

the impact of a waiver on other regions 

or parts of the economy, on the 

environment, on the goals of the 

renewable fuel program, on appropriate 

mechanisms to implement a waiver if a 

waiver were determined to be 

appropriate, and any other matters 

considered relevant. 

EPA’s public comment period closed 

on June 23, 2008. EPA received in 

excess of 15,000 comments during the 

comment period; the majority of the 

comments were short statements 

generally in support of the Texas 

request. EPA also received numerous 

comments from various trade 

organizations and businesses, Governors 

and other elected officials, and 

environmental organizations supporting 

or opposing the waiver, many of which 

included references to various studies 

and reports which are addressed below. 

IV. Key Interpretive Issues 

As noted above, Section 211(o)(7) of 

the CAA provides, in part, that EPA 

‘‘may waive the [mandated national RFS 

volume requirements] in whole or in 

part on petition by one or more States 

* * * (i) based on a determination by 

the Administrator * * * 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 by the Administrator 

* * * that there is an inadequate 

domestic supply.’’

This is the first EPA action in 

response to a petition under this 

provision, and as a result EPA is 

addressing a number of questions 

regarding the scope of this authority. 

This section discusses EPA’s position 

on the meaning of various key parts of 

this provision, including EPA’s views 

on the interpretations advanced by 

Texas and other commenters. Because 

Texas argues that a waiver is justified 

under the claim that ‘‘implementation of 

the RFS program would severely harm 

the economy * * * of a State, a region 

or the United States,’’ we have focused 

our review on this provision. 

1. 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.’’

Texas and several commenters argue 

that high corn prices are causing severe 

harm to the Texas and U.S. livestock 

industry as well as to low-income 

individuals faced with increasing food 

costs. They acknowledge that high corn 

prices are caused by a number of factors, 

but argue that the RFS program is one 

of the factors leading to these high 

prices, that it is a significant or material 

factor, and that this kind of impact from 

the RFS program is sufficient to justify 

a waiver of the RFS requirements.5

Texas recognizes that the waiver 

provision ‘‘speaks in terms of a singular 

causal link between the mandate and 

the harm (i.e. ‘implementation of the 

requirement would severely harm’)’’, 

but that ‘‘Congress could not have 

intended to predicate a waiver on such 

a link because such a situation is never 

found in the real world. In the context 

of an economy at the scale of a state, 

region or nation, outcomes are 

determined by multiple factors. 

Congress must have meant to pivot a 

waiver on whether the mandates would 


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6Texas supplemental comments at 14. 

7Texas supplemental comments at 14. 

8Also see section 202(a)(1) (‘‘cause or 

contribute’’); section 213(a)(3), (4) (‘‘cause or 

contribute’’ and ‘‘significant contributor’’); and 

section 231(a)(2) (‘‘cause or contribute’’). 

9This provision of the Clean Air Act was deleted 

by the Energy Policy Act of 2005, ending the 

requirement that reformulated gasoline (RFG) 

contain 2% oxygen content by weight. During the 

time that the statutory provision was in effect, EPA 

considered and responded to requests to waive the 

2% mandate. See Davis v. EPA, 348 F.3d 772 (9th 

Cir. 2003). 

10Even the sentence structure used by Congress 

indicates that the harm is to come from the RFS 

mandate itself. Adding the idea of significant 

contribution would call for changing the way 

‘‘harm’’ is used from a verb (would * * * harm) to 

a noun (would contribute significantly to harm), 

and changing the kind of harm from the adverb 

severely to the adjective severe. Congress however 

did not write it that way. 

11 Indeed, Congress provided for a 9 year 

schedule in EPAct and a 14 year schedule in EISA, 

specifying the total amounts of renewable fuel that 

would be required during those years. Under both 

EPAct and EISA the required level of the RFS is to 

increase in each year after the end of the statutory 

schedule. EPA is to set the required level based on 

consideration of various statutory factors, with 

Congress specifying a minimum level of growth in 

the RFS each year. 

contribute significantly to causing 

severe harm, as part of a mix of 

forces.’’ 6

We do not agree with the 

interpretation Texas offers. The statute 

provides that a waiver of the program is 

authorized where ‘‘implementation of 

the program would severely harm the 

economy * * *’’ As recognized by 

Texas, the straightforward meaning of 

this provision is that implementation of 

the RFS program itself must be the 

cause of the severe harm.7 Texas would 

instead treat the waiver provision as if 

Congress had authorized a waiver where 

implementation of the program would 

significantly contribute to severe harm. 

The provision adopted by Congress does 

not support the interpretation by Texas. 

There are numerous examples 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. For 

example, section 211(c)(1) of the Act 

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.8

There are also 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. Likewise section 211(h)(5)(A) 

allows EPA to remove a federal Reid 

vapor pressure (RVP) waiver if a state 

has supporting documentation to show 

that the RVP waiver will increase 

emissions that ‘‘contribute to air 

pollution.’’ Under section 211(m)(3)(A), 

EPA may waive the requirement for a 

wintertime oxygenated gasoline 

program where a State demonstrates 

that mobile sources ‘‘do not contribute 

significantly’’ to carbon monoxide levels 

in the area. Similar language was used 

by Congress when it referred to lesser 

degrees of adverse impact on 

attainment, such as the provision for a 

waiver of the oxygenated gasoline 

requirement for reformulated gasoline 

under section 211(k)(2)(B) (‘‘prevent or 

interfere with * * * attainment’’) 9 and 

section 211(m)(3)(A) (‘‘prevent or 

interfere with * * * attainment’’). 

However Congress did not use such 

language in this waiver provision, and 

the omission of any reference to 

contribution or similar terms in section 

211(o)(7)(A) indicates Congressional 

intent to limit the availability of a 

waiver to situations where 

implementation of the RFS program 

itself would severely harm the 

economy.10

Texas essentially asks EPA to 

interpret this provision as if it was 

written to authorize a waiver where 

implementation of the RFS program 

would ‘‘significantly contribute’’ to 

severely harming the economy. 

However, Texas offers no explanation of 

why a ‘‘significant’’ contribution would 

justify such action, as opposed to some 

other level of contribution such as a 

non-de minimis, marginal, moderate, or 

some much more substantial 

contribution. In addition, Texas argues 

that this is called for because it would 

otherwise be impossible to ever 

demonstrate that the criteria of a waiver 

have been met and Congress could not 

have intended this result. Texas asserts 

this conclusion of impossibility, but 

fails to even attempt to show that this 

is the case. 

Even if the statute was less clear on 

its face EPA would still reject the 

approach suggested by Texas. Many 

circumstances other than RFS could 

lead to impacts on an economic factor 

such as increased corn prices. Other 

circumstances could be the substantial 

or the overriding contributor to such an 

economic factor. Under Texas’

interpretation, a waiver could be 

authorized where implementation of the 

RFS contributed in any significant 

manner to such a situation, as long as 

the economic factor, overall, was 

causing severe harm. This approach 

could apply even if the economic harm 

was based on this economic factor in 

combination with another economic 

factor or factors. The degree of harm 

actually attributable to implementation 

of the RFS would not matter. As long as 

the RFS would have some significant 

effect on some economic factor or 

combination of factors that was causing 

severe harm from an overall perspective, 

then the degree of harm actually 

attributable to the RFS would be 

irrelevant to EPA’s authority to issue a 

waiver. Given the logic of Texas’

approach and recognizing the many 

varied and complex interrelationships 

in our modern economy, Texas’

interpretation would amount to a very 

open-ended and wide ranging waiver 

provision; EPA does not believe this is 

what Congress intended. EPA believes 

that rejecting Texas’ approach, and 

implementing a more limited waiver 

provision that requires a showing that 

the RFS program itself would severely 

harm the economy of a State, region or 

the U.S., will better implement 

Congress’ overall desire to promote the 

use of renewable fuels, reflected in 

enacting the expanded RFS program and 

mandating the increased utilization of 

renewable fuels over a number of 

years.11

2. 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’’ harm the economy. 

We interpret this as indicating that there 

must be a generally high degree of 

confidence that severe harm would 

occur from implementation of the RFS. 

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 mandate 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. 

EPA believes that generally requiring 

a high degree of confidence that 

implementation of the RFS would 


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12Commenters include the Renewable Fuels 

Association (EPA–HQ–OAR–2008–0380–0479 at 1) 

and American Coalition for Ethanol (EPA–HQ–

OAR–2008–0380–0454 at 1–2). 

13This is of course limited by the 90 day time 

frame called for in the waiver provision. 

severely harm an economy would 

appropriately implement Congress’

intent for yearly growth in the use of 

renewable fuels, evidenced by the 2005 

and 2007 mandates 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 

mandate 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 disrupt the 

expected growth in use of renewable 

fuels but there would be no clear 

expectation that a waiver would provide 

a benefit by reducing any harm. As 

discussed below, EPA does not need to 

interpret this provision in any greater 

detail for purposes of acting on Texas’

petition, as the circumstances in this 

case clearly do not demonstrate the 

required degree of confidence that 

severe harm would occur. 

Support for EPA’s interpretation of 

this waiver provision is found 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). 

3. ‘‘Severely Harm’’ Indicates That 

Congress Set a High Threshold for Grant 

of a Waiver 

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. This 

is also indicated by 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.’’ It is also instructive 

to consider 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 believe 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. EPA does not need to interpret 

this provision in any greater detail for 

purposes of acting on Texas’ petition, as 

the circumstances in this case clearly do 

not demonstrate the kind of harm that 

would be characterized as severe. 

4. Harm to the Economy 

EPA must also consider the meaning 

of the term ‘‘economy’’ in section 

211(o)(7)(A)(2). Texas has 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 argue that there must be a 

showing of severe harm to the entire 

economy of a State, region or the United 

States, including all sectors.12 EPA 

believes 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. Based on the waiver 

request received and, where 

appropriate, public comments, EPA 

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.13

The statute provides that EPA ‘‘may’’

waive the RFS volume requirement after 

finding that implementation of the RFS 

program would severely harm the 

economy. Therefore, a broad 

consideration of economic and other 

impacts could be undertaken whether or 

not EPA adopted Texas’ more limited 

interpretation of the term ‘‘economy.’’

For example, if EPA rejected Texas’

interpretation, EPA would determine 

whether RFS implementation would 

severely harm the overall economy of a 

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

EPA adopted Texas’ 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. EPA 

does not need to resolve this issue of 

interpretation in this specific waiver 

decision. As discussed below the 

circumstances here do not warrant a 

waiver under either interpretation. 

5. EPA Has Broad Discretion in 

Determining Whether To Grant a Waiver 

Even If Implementation Would Severely 

Harm the Economy 

As noted above, Congress stated that 

EPA ‘‘may’’ grant a waiver if certain 

criteria are met, and the term ‘‘may’’

typically denotes discretionary action. 

Where Congress intends nondiscretionary action, it typically 

employs a term like ‘‘shall.’’ Thus, EPA 

believes Congress intentionally gave 

EPA discretion in determining whether 

to grant or deny a waiver request, even 

in instances where EPA finds that 

implementation of the program would 

severely harm the economy or 

environment of a State, region or the 

United States, or where there is 

inadequate domestic supply. As noted 

above, this interpretation allows EPA to 

look broadly at all of the impacts of 

implementation of the program, and all 

of the impacts of a waiver, and does not 

limit EPA to looking only at impacts to 

the economy, a sector of the economy, 

the environment, or domestic supply. 

The relief requested by a waiver 

applicant will always, under this 

provision, be national in character, 

hence we expect that EPA will always 

want to examine the nationwide effects 

of the requested relief, and give 

appropriate weight to the range of 

anticipated effects. This interpretation 

allows EPA to weigh all of the impacts 

before deciding to grant or deny a 

waiver of the statutory requirements 

designed to require the expanded use of 

renewable fuels. 

V. Technical Analysis of RFS Mandate 

In this section, we first examine the 

likelihood that implementation of the 

RFS will impact the amount of ethanol 

produced and consumed over the 2008/ 

2009 corn marketing year (September 1, 

2008 through August 31, 2009), and 

thereby impact factors such as the price 


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14We use the corn marketing year partially 

because it is the time period over which Governor 

Perry requested the waiver, and partially because it 

is the time period over which it is most 

straightforward to estimate the impact on corn 

prices due to a change in ethanol demand. 

15The March TAMU modeling results were 

referenced in Texas’ initial waiver request and cited 

by several commenters (EPA–HQ–OAR–2008–

0380–0058). A June update to the March report was 

provided in Texas’ supplemental comments (EPA–

HQ–OAR–2008–0380–0526). 

16Several commenters cited the March report by 

Dr. Elam (EPA–HQ–OAR–2008–0380–0574). The 

Balanced Food and Fuel Coalition also submitted a 

June version of the report (EPA–HQ–OAR–2008–

0380–0465). 

17The WASDE is USDA’s forecast of supply and 

demand for major U.S. and international crops and 

livestock. The information can be found at http:// 

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

18The distribution curves for the stochastic 

variables are based on historical information, where 

available. Where reliable data is not available, 

simplifying assumptions are used. Details are 

included in the June 2008 paper (EPA–HQ–OAR–

2008–0380–0548). 

19The model also accounts for the impact of the 

blenders’ tax credit and the tariff on imported 

ethanol. In the scenarios that were modeled these 

factors did not change, hence their impact on 

demand for ethanol did not change with and 

without a waiver of the RFS. 

20EPA–HQ–OAR–2008–0380–0548. 

21 Despite the fact that ethanol contains only 2/ 

3 the energy value of gasoline, it has historically 

and continues to be priced to retail consumers the 

same as if it is gasoline when it is sold in a gasoline 

blend with up to 10 volume percent ethanol (E10). 

Consumers are not able to detect the small decrease 

in fuel economy that results from a 10 percent 

blend, therefore ethanol can be priced based on its 

volume, not on its energy equivalent basis with 

gasoline. The wholesale price for ethanol has 

likewise followed the price of gasoline, on average 

being priced over time roughly 8 c/gal less than that 

of gasoline, reflecting its octane value, other 

blending costs, and distribution costs. In the last 

year or so, as ethanol use has continued to increase, 

the wholesale price of ethanol has begun to separate 

slightly more from that of gasoline as: (1) The 

octane value has declined, (2) the distribution costs 

have increased to get ethanol to more distant 

markets, (3) gasoline prices have increased, and (4) 

ethanol is having to compete in markets where 

gasoline is priced lower than in past ethanol 

markets. In recent months, the wholesale price of 

ethanol may also have been influenced by some 

temporary limitations in terminal blending 

capabilities to blend all the ethanol being produced. 

In the long term, as ethanol volumes increase above 

about 15 billion gallons, ethanol will saturate the 

gasoline market as an E10 blend and additional 

volumes of ethanol will have to be consumed in the 

form of E85 (a fuel that consists of up to 85 volume 

percent ethanol). When sold as E85, consumers will 

recognize a reduction in their mileage as compared 

to the use of an E10 blend due to the reduced 

energy content of ethanol. Therefore, retail pricing 

would be expected to take this fuel economy impact 

into account and wholesale prices for ethanol will 

have to be below that of gasoline to reflect its lower 

energy content. While this change in valuation will 

not occur until we reach about 15 billion gallons 

of ethanol, for our analysis we have conservatively 

assumed that this change in valuation will occur at 

10 billion gallons to reflect potential short term 

limitations in the distribution system. If we had 

used 15 billion gallons as the point at which 

ethanol must be priced on an energy equivalent 

basis, the likelihood that the mandate would be 

binding would be lower and the magnitude of the 

impacts smaller in the scenarios where the mandate 

was binding. 

22See Memorandum to Docket, entitled ‘‘Iowa 

State University Modeling Results.’’

of corn during that time period.14

Second, we evaluate the impacts and 

potential degree of harm from 

implementation of the RFS on key food 

and fuel parameters, such as U.S. corn 

prices, livestock feed costs, and fuel 

prices. As part of this section, we will 

discuss various comments and our 

response to them as appropriate. 

1. Likelihood of Impact of 

Implementation of the Renewable Fuels 

Standard 

To analyze the impact of 

implementation of the RFS, EPA 

evaluated the impact of a waiver of the 

standard. This comparison of 

circumstances with and without a 

waiver identifies the impact properly 

associated with implementation of the 

RFS program for the 2008/2009 

marketing year. To make this 

comparison, the EPA first determined 

the most appropriate economic 

modeling tool to employ for this 

purpose. EPA evaluated several models, 

including the model developed by 

researchers at Texas A&M University 

(TAMU model) 15 and the model used 

by Dr. Elam of FarmEcon, LLC.16 We 

chose a model developed by researchers 

at Iowa State University (ISU model) for 

a number of reasons. First, we felt it was 

critical to use a stochastic model 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. Second, the ISU 

model captures the interaction between 

the agriculture markets and the energy 

markets, and is able to look at 

uncertainty in variables in both sectors. 

Given the volatility in both crude oil 

and corn prices over the last few years, 

the ability of the ISU model to account 

for this variability gives the model an 

advantage over other models that are 

locked into a single projected crude oil 

price or corn crop estimate. Third, while 

the model has not gone through formal 

peer review, the documentation is 

straightforward and transparent, and 

allows all interested parties to 

understand the assumptions that drive 

the results. Finally, the ISU model was 

designed to be constantly and quickly 

updated with the most recently 

available data, such as the World 

Agricultural Supply and Demand 

Estimate (WASDE) reports.17 This 

design feature allows the model to be 

policy relevant, given the fact that a 

model is only as reliable as the data 

contained within it. 

The ISU model is a stochastic 

equilibrium model that attempts to 

capture the most probable prices of 

corn, ethanol and fuel given uncertainty 

in six variables: Corn acres planted, 

corn acres harvested, corn yields, U.S. 

corn export demand, crude oil prices, 

and the capacity of the U.S. corn 

ethanol industry. For each of the 

approximately 1000 simulated 

scenarios, the model picks a value for a 

factor like crude oil price by randomly 

selecting from a probability distribution 

curve 18 for that factor.19 Since the 

probability of the specific value of a 

future crude oil price is built into the 

distribution curve for crude oil prices, 

the greater the probability of a certain 

crude oil price the more likely the 

model will pick that value for any 

scenario. The result is that the 

distribution of the results from the 

random draws fairly reflects the 

probability of the various uncertain 

variables. The central tendency of the 

random draws represents the most 

likely estimate of the future 

circumstances. The model is run with 

and without a waiver to determine the 

impact of a waiver. Details about the 

model are included in the June 2008 

paper,20 although for the results 

described below, several additional 

modifications have been made since 

June. At EPA’s request, ISU researchers 

updated their model with the July 11, 

2008 WASDE report. In addition, ISU 

researchers also modified the 

assumption that ethanol will have to be 

priced on an energy equivalent basis for 

volumes greater than 10 billion 

gallons.21 As described in the June 

paper, the ISU model had previously 

assumed ethanol must be priced on an 

energy equivalent basis for volumes 

over 7.7 billion gallons of ethanol. 

Additional details on the model changes 

are included in the docket.22

As a result of these updates, the ISU 

model projects the average expected 

amount of ethanol demanded in the 

United States during the 2008/2009 corn 

crop year without a waiver will be 11.05 

billion gallons, which consists of 

approximately 10.67 billion gallons of 

domestic production and 380 million 

gallons (MG) of imports. ISU’s model 

predicts that for 76 percent of the 

simulated scenarios, waiving the RFS 

mandate would not change the overall 

level of corn ethanol production or 

overall U.S. ethanol consumption in 

2008/2009 because more ethanol would 

be demanded than the RFS requires. For 

those 76 percent of the scenarios, 

waiving the RFS mandate would 

therefore have no impact on ethanol 


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47174 Federal Register / Vol. 73, No. 157 / Wednesday, August 13, 2008 / Notices 

23Although Iowa State analyzed the impact of 

waiving 100% of the mandate, the model predicted 

no difference between waiving 100% of the 

mandate and 50% of the mandate, as the amount 

of ethanol demanded under all the scenarios 

without the mandate was more than five billion 

gallons of ethanol (50% of the mandate). 

24RINs are generated by producers of renewable 

fuels, and are used by refiners and importers to 

show compliance with the RFS. Excess RINs may 

be used as credits for the year following their 

generation, e.g., 2007 RINs may be used to show 

compliance with the 2008 RFS standard, and 2008 

RINs may be used to show compliance with the 

2009 RFS standard. 

25See Memorandum to Docket entitled, ‘‘Iowa 

State University Modeling Results.’’ 26EPA–HQ–OAR–2008–0380–057. 27The lack of model documentation submitted to 

the docket with regard to the model limited our 

ability to fully compare the results. 

use, corn prices, ethanol prices, or fuel 

prices. We refer to that model result as 

a 76 percent probability that the RFS 

will not be ‘‘binding’’ in the 2008/2009 

marketing year. Conversely, in 24 

percent of the simulated ISU model runs 

the RFS would be binding. In this case, 

binding means that in 24 percent of the 

random draws of potential corn 

production, crude oil prices, and corn 

demand, the resulting market demand 

for ethanol would be below the RFS 

mandate and, therefore, the RFS would 

require greater use of ethanol than the 

market would otherwise demand. The 

binding scenarios are generally those in 

which crude oil prices and corn 

production are relatively low. In those 

cases, the RFS would have an impact on 

ethanol use and the food and fuel 

markets in the United States. 

For the primary analysis, the ISU 

model assumes corn ethanol would 

account for ten billion gallons of the 

RFS mandate during the 2008/2009 corn 

crop year. Because the corn crop year is 

split over two RFS compliance years, 

the 10 billion gallons is based on the 

fraction of the corn crop year that would 

occur in the 2008 compliance year (onethird) and the 2009 compliance year 

(two-thirds). EISA requires 9 billion 

gallons of renewable fuels in 2008 and 

11.1 billion gallons in 2009; however, 

600 million gallons of the 2009 volume 

must be advanced biofuels (including 

500 million gallons of biomass-based 

biofuels). This advanced biofuel volume 

is not included in the calculation of the 

2008/2009 marketing year mandate, 

since the ISU model does not include 

cellulosic or biodiesel renewable 

fuels.23 As a sensitivity analysis, ISU 

researchers also evaluated different 

scenarios in which some of the 2008/ 

2009 mandate was also met with 

additional biodiesel production and 

renewable identification number (RIN) 

credits earned from excess ethanol 

production in the 2007 and 2008 

compliance years.24 Both of these 

changes essentially make the RFS 

mandate less binding. We also 

conducted a sensitivity analysis that 

used a distribution curve for crude oil 

prices based on a mean crude oil price 

of $146/barrel. For that model run, the 

probability that the mandate would be 

binding decreased to 12%. Clearly, this 

assumption makes a difference in the 

modeling results. We believe the $125/ 

barrel mean crude oil price scenario 

incorporates the best information 

available at this time, but we recognize 

that conditions may change in the 

future. For purposes of simplicity, only 

the results of the primary analysis using 

$125/barrel mean crude oil ISU scenario 

are presented in this document. 

However, the results from the full range 

of scenarios are included in the 

docket.25

We believe the results provided by the 

ISU model are more robust than Elam’s 

and TAMU’s estimates for a number of 

reasons. Many of the assumptions used 

by Elam’s model do not appear to 

accurately reflect market forces. 

According to Elam’s March paper,26

U.S. gasoline and diesel prices impact 

the prices of corn and soybeans, but do 

not influence the demand for biofuels. 

In other words, the agricultural sector 

portion of the model does not appear to 

be directly linked to a fuel market 

module. Since higher crude oil prices 

are one of the major reasons for the 

increase in biofuel production, we 

believe this assumption is a major short 

coming of the model. Furthermore, the 

model used by Elam appears to value 

ethanol on an energy equivalent basis.27

We believe that ethanol will continue to 

be priced on a volumetric basis as long 

as most of the ethanol is being blended 

as E10. 

In his June paper, Elam estimated the 

impact of waiving the RFS under two 

different scenarios: One based on the 

June WASDE projections and one based 

on a ‘‘severe weather’’ scenario with a 

lower corn crop. Under both scenarios, 

Elam predicts ethanol production will 

decrease by 2.1 billion gallons with a 

50% waiver of the mandate. However, 

under both scenarios Elam estimates 

that ethanol production will exceed the 

mandated levels when the mandate is in 

place. We do not find this analysis 

plausible, since waiving the mandate 

should have little to no effect on ethanol 

production if the projected levels of 

ethanol demand exceed the mandate. In 

addition, we would not expect the same 

change in ethanol production to occur 

as a result of the waiver when corn 

prices are $8.00/bushel and when they 

are $5.80/bushel. When corn costs 

$8.00/bushel, we would expect more 

ethanol producers would not be able to 

cover their operating costs and would 

choose to reduce production. Therefore 

there would be a larger potential change 

in ethanol production at $8.00/bushel 

than at $5.80/bushel, which in turn 

would lead to a larger impact from 

waiving the mandate. Finally, we 

believe the severe weather scenario 

presented by Elam overstates the impact 

of the recent floods in the Midwest. This 

scenario assumes a significant reduction 

in corn acres harvested and corn yields 

relative to the WASDE estimates. Under 

this severe weather scenario, Elam’s 

projected corn crop would be 10.85 

billion bushels, compared to the higher 

July WASDE estimate that 11.7 billion 

bushels will be produced in 2008/2009. 

Similar to the ISU model, the TAMU 

model is a hybrid stochastic simulation 

model that estimates the probabilistic 

price of corn and production levels of 

ethanol with and without various 

government biofuel policies over the 

next few years. However, we believe 

some of the inputs used in the model 

are not as current as the inputs used by 

the ISU model. In addition, the TAMU 

model likely overstates the probability 

that the mandate will be binding for two 

reasons. First, the projected corn prices 

are significantly higher than either the 

June or July WASDE reports. Whereas 

the July WASDE report (which assumes 

the mandate is still in place) predicts 

corn prices will be between $5.50–

$6.50/bushel, the TAMU model predicts 

that corn prices with the mandate in 

place will be between $6.70–$7.96/ 

bushel depending on the size of the corn 

crop. If the TAMU model was re-run 

with the July WASDE data, we believe 

the results would be closer to the 

estimates provided by the ISU model. 

Second, we believe that the TAMU 

model undervalues ethanol, since it 

assumes ethanol must compete with 

gasoline on an energy equivalent basis 

for all volumes over the quantity 

projected to be used to meet 

reformulated gasoline (RFG) 

requirements (approximately 3 billion 

gallons). As discussed in more detail in 

the following section, ethanol continues 

to be priced in the market at a premium 

over its energy content since it is 

primarily used as a gasoline extender. 

We expect this trend to continue until 

significant quantities of ethanol can no 

longer be blended as E10 and must be 

sold as E85. If the TAMU valued ethanol 

on a volumetric basis, we would expect 

the model would predict higher 

production levels of ethanol, both with 

and without the waiver. 

TAMU provides information for three 

different scenarios: a ‘‘mean corn crop’’, 


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28These estimates are for the ethanol production 

capacity and are higher than the volumes of ethanol 

that are projected to be produced. See 

Memorandum to Docket entitled, ‘‘Ethanol Capacity 

Estimates.’’

a ‘‘95% of mean corn crop’’, and a ‘‘90% 

of mean corn crop’’. Using historical 

information, TAMU estimates that 79 

million acres of corn will be harvested 

in 2008/2009 and corn yields will be 

153.9 bushels/acre, resulting in a ‘‘mean 

corn crop’’ production of 12.1 billion 

bushels. The ‘‘95% of mean corn crop’’

scenario evaluates the effects of a 5% 

shortfall in corn production (relative to 

the mean corn crop scenario), which 

corresponds to a crop of 11.5 billion 

bushels. The ‘‘90% of mean corn crop’’

scenario evaluates the effects of a 10% 

shortfall relative to the mean corn crop, 

which corresponds to a corn crop of 

10.9 billion bushels. In the mean corn 

crop scenario, the TAMU estimates that 

the probability that the mandate will be 

binding is 42%. In the 95% of mean 

corn crop scenario, the TAMU model 

predicts that the probability that the 

mandate will be binding is 67%, and in 

the 90% of mean corn crop scenario, the 

probability that the mandate will be 

binding is 88%. 

Although this mean corn crop 

scenario production level is higher than 

the July WASDE estimates, the impacts 

of this scenario are directionally 

consistent with the ISU results. For 

example, the TAMU model predicts that 

the average expected amount of ethanol 

that will be produced in 2008/2009 will 

be 10.8 billion gallons, which is higher 

than the RFS mandate. In their 

comments, however, Texas asserts that 

a shortfall in the range of the 5% or 10% 

of production ‘‘now appears highly 

likely.’’ Therefore, Texas concludes that 

the mandate will ‘‘most likely 

contribute significantly to causing corn 

price increases.’’ In light of the July 

WASDE data, which predicts a corn 

crop that is larger than both the 90% 

mean corn crop and the 95% mean corn 

crop scenarios, we believe the 90% 

mean corn crop scenario significantly 

overestimates the potential impact of 

the flooding. We believe the mean corn 

crop and the 95% of mean corn crop 

scenarios are more credible than the 

90% mean corn crop scenario. 

TABLE 1—COMPARISON OF KEY STUDIES ESTIMATING CORN AND ETHANOL PRICES AND PRODUCTION LEVELS

Elam scenario 

based on 

WASDE 

TAMU mean 

corn crop 

Iowa state 

mean estimate 

USDA 

benchmark* 

Mean Corn Prices with Mandate ($/bushel) ............................................ $5.80 $6.70 $6.00 $5.50–$6.50 

Mean Corn Prices with Waiver ($/bushel) ............................................... $4.75 $6.36 $5.93 ..........................

Change in Corn Prices with Waiver ........................................................ ¥$1.05 ¥$0.34 ¥$0.07 ..........................

Mean Corn Production (Billion bushels) .................................................. 11.74 12.14 11.70 11.70 

Mean Ethanol Price with Mandate ($/gal) ............................................... $2.76 $2.89 $2.59 ..........................

Mean Ethanol Price with Waiver ($/gal) .................................................. $2.76 $2.76 $2.57 ..........................

Mean Domestic Ethanol Demand w/Mandate (Billion gallons) ............... 11.00 10.78 11.05 ..........................

Mean Domestic Ethanol Production w/Waiver (Billion gallons) .............. 8.94 10.05 10.90 ..........................

Probability that Mandate is Binding ......................................................... N/A 42% 24% ..........................

Since Congress enacted the Energy 

Policy Act in 2005, biofuel production 

has consistently been higher than the 

RFS mandated levels, which is an 

indication that factors other than the 

RFS requirements have been the 

primary drivers of biofuel growth. In 

addition, in its 2007 Annual Energy 

Outlook (AEO), the Energy Information 

Administration (EIA) projected that 

even without the recent renewable fuels 

requirement in EISA, ethanol use would 

increase to 12 billion gallons in 2010. 

This dramatic increase in ethanol use 

was estimated to occur despite 

assuming crude oil prices in the $50 to 

$60 dollar per barrel range. Assuming 

other factors remain constant, the higher 

oil prices that we are experiencing now 

would provide an even greater incentive 

to produce and use additional ethanol 

from corn. 

ISU’s estimate for the maximum 

ethanol capacity in 2008/2009 is 13.5 

billion gallons, which is similar to 

EPA’s estimate that over 13 billion 

gallons of plant capacity was on-line or 

under construction as of December 19, 

2007 when EISA was passed.28 Once 

ethanol production capacity is built, we 

expect ethanol producers will continue 

making ethanol to the extent that they 

can cover their operating costs. 

Therefore, ethanol production in the 

short term is highly dependent on the 

built capacity of the ethanol industry 

rather than the mandate. 

Certain empirical data also supports 

the projection that the RFS is unlikely 

to be binding in the 2008/2009 

timeframe. For example, the price of 

tradable renewable identification 

number (RIN) credits remains relatively 

low: Below five cents per gallon as of 

July 1, 2008. Refiners and importers 

verify their compliance with the RFS by 

collecting and expending 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. 

When the mandate 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 price for RINs. 

The RIN banking and rollover 

provisions of the RFS also allow 

obligated parties to use or trade current 

RINs in the next compliance period. 

Therefore, we would expect the current 

RIN price to reflect the market’s current 

and near-term expectations about how 

binding the RFS is likely to be. The 

most recent available data shows that 

the RIN price was below 3 cents per 

gallon of ethanol on July 18, 2008. This 

RIN price represents 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 2008 or 2009. It is possible 

that RIN prices have been depressed by 

market uncertainty generated by Texas’

waiver request. However, the record 

high RIN price before the Texas waiver 

request was only approximately 6.5 

cents per gallon. Unlike the previous 

discussion in this section which 

involved different agricultural sector 

models that seek to evaluate the impacts 

of the RFS, the RIN price is the result 

of actual market outcomes, as opposed 

to a modeled result. EPA believes the 

RIN price information is one additional 

way to evaluate the likelihood of an 

impact from implementation of the RFS. 

In this case, the RIN price information 

corroborates the modeled impacts of the 

RFS. 


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29The Food CPI as measured by the Bureau of 

Labor Statistics (BLS) consists of two components—

the ‘‘CPI for food at home’’ and the ‘‘CPI for food 

away from home’’ with the ‘‘CPI for food away from 

home’’ having a weight of 0.45 and the ‘‘CPI for 

food at home’’ having a weight of 0.55. 

30The Food CPI has a weight of 0.14 in the All 

Item CPI. This implies that for every 1 percent 

increase in the Food CPI the All Item CPI would 

increase by 0.14 percent. 

31The lowest quintile (20%) of households, as 

described in the Bureau of Labor Statistics’ 2006 

Consumer Expenditure Survey, has an average 

income after taxes of $9,969. The average annual 

household income after taxes for all households is 

$58,101. 

32See Memorandum to Docket entitled, ‘‘USDA 

Food CPI and Feed Cost Methodology’’. 

2. Severity of Impact 

(a) Corn Price Impacts 

When evaluating the economic 

impacts of waiving the mandate, our 

analysis centered on four major areas: 

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 

limited 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 

provide a useful framework for 

determining the potential severity of the 

impact of the RFS mandate. 

As described in the previous section, 

we believe that implementation of the 

RFS would not have a significant impact 

on expected ethanol production in 

2008/2009, with the most likely result 

being no impact on ethanol production. 

We have analyzed the impacts of 

waiving the mandate under a wide 

variety of scenarios, ranging from worst 

case scenarios to the more likely 

situations. Based on the ISU modeling 

results, the average expected impact of 

waiving the mandate over all the 

potential outcomes, both those binding 

and those non-binding, would be a 

decrease in the price of corn by $0.07/ 

bushel. In the limited subset of potential 

outcomes in which the mandate is 

binding (24% of the results), waiving 

the mandate would result in an average 

expected decrease in the price of corn 

of $0.30/bushel. 

However small the probability, we 

also recognize it is possible that all the 

market outcomes could converge to 

result in a worst case scenario, 

therefore, we also provide this example 

to help bracket the range of potential 

outcomes. The ‘‘Worst Case’’ example 

demonstrates the largest potential 

change in corn price predicted by the 

ISU model as a result of the waiver, 

which is a decrease in corn prices of 

$1.38/bushel. Table 2 presents the three 

ISU scenarios. 

TABLE 2—RANGE OF ESTIMATED CORN PRICES AND PRODUCTION LEVELS

Iowa state 

mean estimate 

Iowa state when 

mandate binds 

Iowa state 

‘‘worst case’’

example 

Mean Corn Prices with Mandate ($/bushel) ...................................................................... $6.00 $6.40 $6.85

Mean Corn Prices with Waiver ($/bushel) ......................................................................... $5.93 $6.10 $5.47 

Change in Corn Prices with Waiver ($/bushel) ................................................................. ¥$0.07 ¥$0.30 ¥$1.38 

Mean Corn Production (Billion bushels) ............................................................................ 11.70 11.22 10.57 

Percentage of Times Mandate is Binding ......................................................................... 24% 100% N/A 

(b) Food Price Impacts 

In consultation with USDA, EPA 

estimated how the changes in corn 

prices influence U.S. food prices. The 

results of the modeled corn price 

impacts discussed above appear to be 

quite modest for both the mean estimate 

and the subset of scenarios in which the 

mandate is binding. A $0.07/bushel 

decrease in corn prices would result in 

a 0.07% decrease in Food CPI 29 and a 

0.03% decrease in All Item CPI.30 A 

$0.30/bushel decrease in corn prices 

would result in a 0.28% change in Food 

CPI and a 0.04% 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 $4.01 in 

2008/2009, while a $0.30/bushel 

decrease in corn prices would result in 

a savings of $17.13. In the scenario with 

the largest change in corn price, a $1.38/ 

bushel decrease in corn prices would 

decrease the Food CPI by 1.29% and All 

Item CPI by 0.19%. The average 

household would in turn save $78.57 in 

2008/2009 on food expenditures. 

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.31 When comparing 

the changes in food expenditures 

relative to income, the impact on low 

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.32

TABLE 3—IMPACTS ON FOOD PRICES, CPI INDICATORS, AND HOUSEHOLD EXPENDITURES

Units Iowa state 

mean estimate 

Iowa state 

mandate binds 

Iowa state 

worse case 

Change in Corn Price with Waiver ............................................................. $/bushel ........ ¥$0.07 ¥$0.30 ¥$1.38 

Change in Food CPI with Waiver .............................................................. percent .......... ¥0.07% ¥0.28% ¥1.29% 

Change in All Item CPI with Waiver ........................................................... percent .......... ¥0.01% ¥0.04% ¥0.19% 

Change in Annual Food Expenditures for Average Households with 

Waiver.

$ .................... ¥$4.01 ¥$17.13 ¥$78.57 

Change in Annual Food Expenditures for Lowest Quintile Households 

with Waiver.

$ .................... ¥$2.09 ¥$8.95 ¥$41.05 

Change in Food Expenditures as a Percentage of Consumer Expenditures for Average Households with Waiver.percent .......... ¥0.01% ¥0.04% ¥0.16% 


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33 In the subset of scenarios in which the mandate 

is binding, corn prices are generally higher than for 

the mean estimate. We would therefore expect 

average feed costs to be higher than the WASDE 

estimates. 

34See Memorandum to Docket entitled, ‘‘USDA 

Food CPI and Feed Cost Methodology’’. 35These estimates assume there are no changes in 

quantities (e.g., early slaughter) based on higher 

feed costs. 

36The $919 million change is from a worst case 

scenario that EPA considers highly unlikely. 

TABLE 3—IMPACTS ON FOOD PRICES, CPI INDICATORS, AND HOUSEHOLD EXPENDITURES—Continued 

Units Iowa state 

mean estimate 

Iowa state 

mandate binds 

Iowa state 

worse case 

Change in Food Expenditures as a Percentage of Consumer Expenditures for Lowest Quintile with Waiver.percent .......... ¥0.01% ¥0.44% ¥0.20% 

Change in Food Expenditures as a Percentage of Income for Average 

Households with Waiver.

percent .......... ¥0.01% ¥0.03% ¥0.14% 

Change in Food Expenditures as a Percentage of Income for Lowest 

Quintile with Waiver.

percent .......... ¥0.02% ¥0.09% ¥0.41% 

(c) Feed Price Impacts 

Using WASDE projections (which 

assume the mandate is in place) for feed 

costs in 2008/2009, we estimated that 

U.S. feed prices are projected to be 

$233.13/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. 

We estimated the potential impact of 

granting the waiver on feed costs for the 

three change in corn price scenarios 

described in the previous sections: The 

ISU mean estimate of a $0.07/bushel 

decrease in corn price, the subset of ISU 

scenarios in which the mandate is 

binding ($0.30/bushel decrease in corn 

price), and the ISU worst case scenario 

($1.38/bushel decrease in corn prices).33

TABLE 4—U.S. FEED PRICES

2005/06 2006/07 2007/08 2008/09 

Feed Cost *: 

Cost ($/ton) without waiver ............................................................................................... $87.75 $125.72 $152.71 $233.13 

Decrease in Feed Costs, $/ton ($0.07/bushel corn price change scenario) ................... .................. .................. .................. ¥2.72 

Decrease in Feed Costs, $/ton ($0.30/bushel corn price change scenario) ................... .................. .................. .................. ¥10.56 

Decrease in Feed Costs, $/ton ($1.38/bushel corn price change scenario) ................... .................. .................. .................. ¥46.97 

Source: July 11, 2008 WASDE. 

* 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, 

pigs, fed cattle, cow-calfs, and milk 

production. Details on the methodology 

used to calculate feed impacts are 

included in the docket.34 Using USDA’s 

production and slaughter estimates, we 

aggregated the potential feed cost 

impacts of a waiver for the U.S. and 

Texas.35 In dollar terms, the single 

largest sector of the livestock industry 

that benefits from the waiver is the fed 

cattle industry. As Texas points out in 

its comments, Texas has the largest 

cattle industry in the U.S., and accounts 

for approximately 25% of the U.S. herd. 

A $0.07/bushel change in corn prices 

would decrease total livestock feed costs 

in Texas by $53 million (1.2% change). 

A $0.30/bushel change in corn prices 

would decrease total livestock feed costs 

in Texas by $207 million (4.7% change), 

while a change of $1.38/bushel would 

decrease total feed costs in Texas by $19 

million (20% change). Compared to 

Texas’s $1 trillion dollar economy, these 

impacts appear to be relatively small. 

Even looking at the cattle and poultry 

industry in Texas specifically, we 

believe $53–$207 million is a small 

impact compared to the over $10 billion 

livestock industry.36

TABLE 5—TOTAL FEED COSTS AND ESTIMATED DECREASE WITH RFS WAIVER FOR CATTLE, POULTRY, PIGS, AND DAIRY

PRODUCTION

US Texas 

Cow Slaughter: 

Feed cost without waiver, $ million ...................................................................................................................... $842.8 $40.1 

Decrease in Feed Costs, $ million ($0.07/bushel corn price change scenario) .................................................. 9.8 0.5 

Decrease in Feed Costs, $ million ($0.30/bushel corn price change scenario) .................................................. 38.2 1.8 

Decrease in Feed Costs, $ million ($1.38/bushel corn price change scenario) .................................................. 169.8 8.1 

Fed Cattle: 

Feed cost without waiver, $ million ...................................................................................................................... 9,923.4 2,491.1 

Decrease in Feed Costs, $ million ($0.07/bushel corn price change scenario) .................................................. 115.8 29.1 

Decrease in Feed Costs, $ million ($0.30/bushel corn price change scenario) .................................................. 449.7 112.9 

Decrease in Feed Costs, $ million ($1.38/bushel corn price change scenario) .................................................. 1,999.2 501.9 

Poultry: 


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47178 Federal Register / Vol. 73, No. 157 / Wednesday, August 13, 2008 / Notices 

37 In the subset of scenarios in which the mandate 

is binding, when the mandate is in place it 

artificially increases demand for ethanol (and 

artificially decreases the demand for gasoline). 

Therefore, removing the mandate in those scenarios 

allows for lower demand of ethanol which results 

in an increase in demand for gasoline Over the one 

year period for which this model addresses fuel 

price impacts, the model assumes gasoline 

production is relatively inelastic and import 

supplies are fixed. As a result, the increase in 

gasoline demand is associated with a slight increase 

in blended fuel prices. In a longer time frame, if the 

supply of gasoline were more elastic, it is possible 

that we could get a different impact on blended fuel 

prices as a result of the waiver. 

TABLE 5—TOTAL FEED COSTS AND ESTIMATED DECREASE WITH RFS WAIVER FOR CATTLE, POULTRY, PIGS, AND DAIRY

PRODUCTION—Continued 

US Texas 

Feed cost without waiver, $ million ...................................................................................................................... 7,571.6 586.7 

Decrease in Feed Costs, $ million ($0.07/bushel corn price change scenario) .................................................. 88.3 6.8 

Decrease in Feed Costs, $ million ($0.30/bushel corn price change scenario) .................................................. 343.1 26.6 

Decrease in Feed Costs, $ million ($1.38/bushel corn price change scenario) .................................................. 1,525.4 118.2 

Pork: 

Feed cost without waiver, $ million ...................................................................................................................... 10,874.8 134.1 

Decrease in Feed Costs, $ million ($0.07/bushel corn price change scenario) .................................................. 126.9 1.6 

Decrease in Feed Costs, $ million ($0.30/bushel corn price change scenario) .................................................. 492.8 6.1 

Decrease in Feed Costs, $ million ($1.38/bushel corn price change scenario) .................................................. 2,190.8 27.0 

Dairy: 

Feed cost without waiver, $ million ...................................................................................................................... 37,028.8 1,307.2 

Decrease in Feed Costs, $ million ($0.07/bushel corn price change scenario) .................................................. 432.0 15.3 

Decrease in Feed Costs, $ million ($0.30/bushel corn price change scenario) .................................................. 1,677.9 59.2 

Decrease in Feed Costs, $ million ($1.38/bushel corn price change scenario) .................................................. 7,459.8 263.3 

Total Feed Costs (cattle, poultry, pigs, dairy): 

Without waiver, $ million ...................................................................................................................................... 66,241.4 4,559.2 

Decrease in Feed Costs, $ million ($0.07/bushel corn price change scenario) .................................................. 772.8 53.2 

Decrease in Feed Costs, $ million ($0.30/bushel corn price change scenario) .................................................. 3,001.6 206.6 

Decrease in Feed Costs, $ million ($1.38/bushel corn price change scenario) .................................................. 13,345.0 918.5 

To produce a pound of poultry live weight, about 1.5 pounds of feed required. 

The State of Texas did not attempt to 

quantify the impact of waiving the RFS 

on the livestock industry, although they 

did submit reports by the Agricultural 

and Food Policy Center (AFPC), the 

Texas Department of Agriculture, and 

McVean Trading & Investments (a 

company that specializes in monitoring 

the health of the livestock industry), 

which conclude that the livestock 

industries, including poultry, are 

experiencing financial losses due to 

increases in the cost of production due 

to higher corn prices. 

While most of these impacts are 

outside the scope of our analysis since 

they do not focus on the impacts 

directly related to the RFS, we have 

attempted to compare our methodology 

with the methodology used by Texas. 

The Texas Department of Agriculture 

report cites the March study by Elam in 

which he estimates that the increase in 

biofuels will result in an increase in cost 

to the Texas livestock and poultry 

industries of approximately $2.4 billion 

in calendar year 2008. This impact was 

based on an estimated increase of $2.04/ 

bushel in corn prices due to the increase 

in biofuels policies as a whole. 

Although the increase in corn price 

cited by Elam is higher than the 

modeling results by ISU and TAMU 

discussed in the previous section, the 

methodology for estimating the impact 

on feed costs employed by Elam appears 

to be generally consistent with our 

analysis. When the cost increases for 

cattle, poultry, pork, and dairy 

production are separated out, Elam 

estimates a $1.3 billion dollar increase 

in feed costs in 2008. If Elam had used 

a change in corn price that was 

approximately two thirds of his $2.04/ 

bushel estimate ($1.36/bushel), his 

methodology would have estimated an 

increase in feed costs in Texas of 

approximately $867 million dollars. 

This figure is similar to our estimate of 

a $919 million increase in feed costs in 

Texas, which corresponds to our worst 

case scenario of a $1.38/bushel increase 

in corn prices. 

As described in the previous sections, 

the corn price increase attributable to 

the RFS is likely to be much smaller. 

Texas’s own ‘‘95% of mean corn crop’’

scenario predicts a change of only 

$0.73/bushel as a result of the RFS 

waiver, which would make the impact 

on the livestock industry even less than 

the $918 million calculated here. 

(d) Fuel Price Impacts 

The ISU model also predicts the 

change in U.S. ethanol, gasoline, and 

blended fuel prices based on changes in 

ethanol production volumes. The ISU 

model assumes that both the demand 

and supply of gasoline are relatively 

inelastic. Therefore, reducing the 

ethanol production levels will increase 

gasoline demand and increase gasoline 

prices.37 Although the decrease in 

ethanol demand is associated with a 

decrease in ethanol prices, the total 

blended fuel price is dominated by the 

change in gasoline price since it is a 

much larger portion of the fuel pool. 

The ISU model predicts that the most 

likely outcome is that waiving the RFS 

mandate would have no impact on fuel 

prices. The ISU modeling predicts that 

the average impact across all modeled 

scenarios is that waiving the RFS 

mandate would increase blended fuel 

prices by 3/10 of one cent. When 

looking at the smaller subset of 

instances in which the mandate is 

binding, the average impact of granting 

the waiver would be to increase blended 

fuel prices by $0.01/gallon. Even in the 

case where ethanol production volumes 

change the most, the impact on blended 

fuel prices would be no more than an 

increase of $0.03/gallon. 


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38See docket for the memorandum from U.S. DOE 

to U.S. EPA. 

39EPA–HQ–OAR–2008–0380–0479. 40EPA–HQ–OAR–2008–0380–0526. 

TABLE 6—RANGE OF ESTIMATED ETHANOL AND BLENDED FUEL PRICES

Iowa state 

mean estimate 

Iowa state when 

mandate binds 

Iowa state 

‘‘worst case’’

example 

Mean Ethanol Price with Mandate ($/gal) ................................................................... $2 .59 $2 .52 $2 .62 

Mean Ethanol Price with Waiver ($/gal) ...................................................................... $2 .57 $2 .43 $2 .22 

Mean Domestic Ethanol Demand w/Mandate (Billion Gallons) .................................. 11 .05 10 .00 10 .00 

Mean Domestic Ethanol Production w/Waiver (Billion Gallons) ................................. 10 .90 9 .40 7 .27 

Blended Fuel Price with Mandate ($/gal) .................................................................... $3 .021 $2 .692 $1 .987 

Blended Fuel Price with Waiver ($/gal) ....................................................................... $3 .024 $2 .704 $2 .017 

Change in Blended Fuel Price ($/gal) ......................................................................... $0 .003 $0 .012 $0 .030 

Based on these small predicted 

changes in blended fuel prices, the 

overall impacts on the economy are also 

expected to be modest, and in the 

opposite direction from any impact on 

the livestock industry and food prices in 

general. 

Our analysis shows that a $0.003/ 

gallon increase in blended fuel price for 

the Iowa State mean scenario would be 

expected to change the Energy CPI by 

0.049%. For the subset of scenarios in 

which the mandate is binding, a $0.01/ 

gallon increase in blended fuel price 

would be expected to change Energy CPI 

by 0.219%. A $0.03/gallon increase in 

blended fuel price in the worst case 

scenario would be expected to change 

Energy CPI by 0.739%. Details on the 

methodology for determining these 

impacts are included in the docket.38

TABLE 7—IMPACTS ON ENERGY CPI AND GASOLINE EXPENDITURES FOR AVERAGE AND LOW INCOME HOUSEHOLDS

Units Iowa state 

mean estimate 

Iowa state 

mandate binds 

Iowa state 

‘‘worst case’’

example 

Change in Blended Fuel Price with Waiver ............................................... $/gallon ......... $0.003 $0.012 $0.030 

Change in Energy CPI with Waiver ........................................................... percent .......... 0.49% 0.219% 0.739%

Change in Annual Expenditures on Gasoline for Average Household 

with Vehicles.

$ .................... $3.43 $13.72 $34.29 

Change in Annual Expenditures on Gasoline For Lowest Quintile Households with Vehicles.$ .................... $2.02 $8.07 $20.18 

Change in Gasoline Expenditures as a Percentage of Consumer Expenditures for Average Household with Vehicles.percent .......... 0.007% 0.028% 0.071% 

Change in Gasoline Expenditures as a Percentage of Consumer Expenditures for Lowest Quintile of Vehicle Owners.percent .......... 0.010% 0.040% 0.099% 

Change in Gasoline Expenditures as a Percentage of Income After 

Taxes for Average Household with Vehicles.

percent .......... 0.006% 0.024% 0.059% 

Change in Gasoline Expenditures as a Percentage of Income After 

Taxes for Lowest Quintile with Vehicles.

percent .......... 0.020% 0.081% 0.202% 

For the average household that owns 

a vehicle, the $0.003/gallon change in 

fuel prices would result in a $3.43 

increase in annual gasoline 

expenditures in 2008/2009. A $0.01 

gallon increase in fuel prices translates 

to a $13.72 increase in household 

expenditures on gasoline. Finally, a 

$0.03/gallon increase in fuel prices 

translates to a $34.29 increase in 

household expenditures on gasoline. 

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. Since people in 

the lowest income groups are least able 

to absorb changes in fuel prices, we also 

analyzed these changes in expenditures 

as a percentage of consumer 

expenditures. Our analysis shows a 

slightly larger impact on lower income 

households as a percentage of consumer 

expenditures. When calculating the 

change in gasoline expenditures as a 

percentage of income, the impact on low 

income households is noticeably larger 

than the corresponding impact on the 

average household, although the 

magnitude of the change is still small 

(less than a 1% change for all scenarios). 

Some commenters argued to the 

contrary, claiming that waiving the RFS 

would significantly impact the price of 

fuel. These commenters rely on papers 

by Urbanchuk 39 and Verleger and 

Chodorow 40, which both estimate large 

changes in gasoline prices as a result of 

waiving the mandate, although the 

estimated impacts are opposite in sign. 

The fundamental assumption in both 

the Urbanchuk and Verleger and 

Chodorow papers is that granting the 

waiver would lead to a relatively large 

change in U.S. ethanol production. We 

disagree. As described in the previous 

sections, our analysis suggests that other 

market factors such as high crude oil 

prices are driving the current increase in 

ethanol production, not the RFS 

mandate. 

Urbanchuk estimates the impact of 

removing 4.5 billion gallons of ethanol 

from the fuel pool over a short time 

frame, which would have to be made up 

by approximately 3.1 billion gallons of 

gasoline on an energy equivalent basis. 

Assuming the demand and supply for 

gasoline is largely inelastic, Urbanchuk 

estimates this increase in gasoline 

demand would lead to an increase in 

gasoline price of about $1.14/gallon. 

While we agree in principle that 

increasing the demand for gasoline by 

approximately three billion gallons 

would significantly increase short term 

gasoline prices, EPA does not believe 


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47180 Federal Register / Vol. 73, No. 157 / Wednesday, August 13, 2008 / Notices 

41http://www.iea.org/w/bookshop/ 

add.aspx?id=402. 42EPA–HQ–OAR–2008–0380–0574. 

granting the waiver would result in an 

increase in gasoline demand by over 

three billion gallons. Furthermore, 

Urbanchuk estimates the percent change 

in price relative to a percent change in 

the quantity of U.S. gasoline supply. We 

believe this assumption overstates the 

price impact, because it would be more 

appropriate to estimate the price change 

relative to a percent change in the world 

gasoline supply. 

Verleger and Chodorow use a very 

different analytical approach to predict 

that an increase in U.S. gasoline 

production would lead to lower U.S. 

gasoline prices. Their paper assumes 

that an RFS waiver would reduce 

demand for ethanol by between 4.5 and 

5.55 billion gallons in 2008 and 2009 

respectively, and that the increased 

demand for motor fuel would be made 

up entirely by gasoline on an energy 

equivalent basis. This would increase 

crude oil demand so that gasoline 

would replace ethanol. The increased 

crude refining would produce more 

diesel fuel, which would reduce diesel 

fuel prices by approximately $0.70/ 

gallon (15 percent). In turn, Verleger 

and Chodorow assert that decreased 

diesel prices would cause prices for 

light sweet crude to decline by 

approximately $16/barrel (12 percent), 

and that the decrease in crude prices 

would lower finished motor gasoline 

prices by approximately $0.15/gallon (4 

percent). 

This analysis depends on several 

assumptions that we believe are likely 

to be incorrect (or at least overstate the 

potential impact of granting the waiver). 

Verleger and Chodorow assume that 

ethanol is priced in the market based on 

its energy content in comparison to 

gasoline; therefore on an energy 

equivalent basis ethanol is currently 

more expensive than gasoline. In reality, 

ethanol has historically been priced 

based on volume displacement of 

gasoline and will be until it has to be 

sold as E85 in large quantities and E10 

has saturated the U.S. gasoline market. 

At that time, any additional ethanol will 

be sold as an E85 blend. Today, we are 

not at the point of E10 saturation, 

therefore, on a volumetric basis, ethanol 

is still cheaper than gasoline. We 

believe that the market will continue to 

demand a higher quantity of ethanol 

than the mandate under most future 

market conditions. Thus, even if the 

Verleger and Chodorow paper were 

directionally correct, the magnitude of 

the impact would be significantly 

overstated. 

The second major assumption in the 

Verleger and Chodorow paper that we 

believe is not accurate is the proposition 

that current high crude oil prices are 

caused by high diesel fuel prices. While 

there appears to be evidence that tight 

distillate markets are contributing to 

higher world crude oil demand and 

crude oil prices,41 crude oil prices are 

a function of supply and demand for 

crude oil and specifically the demand of 

all the products made from it, not just 

diesel fuel. Without this questionable 

assumption by Verleger and Chodorow, 

their projected increase in demand for 

crude oil would likely increase crude oil 

prices and prices for both gasoline and 

diesel fuel, thus reversing the 

conclusion of their study that increasing 

diesel production would decrease crude 

oil prices. 

Empirically, diesel prices have risen 

along with diesel consumption over the 

last few years. Verleger and Chodorow 

attempt to quantify this effect through 

the use of regression analysis over a 

limited time period for one market. 

Such a regression cannot determine the 

causation, and its use may have 

numerous other technical problems. We 

therefore believe this relationship is 

unsupported. 

3. Summary of Technical Analysis 

For the 2008/2009 corn crop 

marketing year, our analysis shows that 

the likelihood that the RFS will 

determine ethanol demand in the U.S. is 

low, and that the most likely result is 

that the RFS would have no impact on 

ethanol demand. Furthermore, our 

analysis shows that potential changes in 

U.S. corn and fuel prices resulting from 

a waiver would have at most a limited 

impact on the food, feed, and fuel 

markets. 

VI. Other Issues 

EPA received comment on several 

areas of concern, in addition to the 

economic impact of the RFS mandate. 

Comments were received on the general 

impacts of biofuels, the environmental 

impacts of RFS, the effect that granting 

or denying the waiver request would 

have on commodity markets, and the 

impact of granting a waiver on the 

future of ethanol production in the U.S. 

Although this section summarizes and 

provides general responses to the 

comments concerning these issues, EPA 

notes that several of the issues are either 

not relevant to EPA’s consideration of 

the current waiver request or do not 

provide a full record by which to 

analyze the issue. 

1. General Impacts of Recent Increase in 

Biofuels 

Many commenters focused on the 

recent increase in corn prices from 

approximately $2.00 in 2005 to almost 

$8.00 this spring. Most of the 

commenters stated that biofuels have 

contributed to the recent increase in 

U.S. corn prices, although estimates of 

the magnitude of this impact varied. 

Commenters referencing Dr. Joe 

Glauber, Chief Economist at the USDA, 

in testimony presented before the 

Committee on Energy and Natural 

Resources in the U.S. Senate, noted 

estimates that increased ethanol 

production in the U.S. has raised U.S. 

corn prices by approximately $0.24/ 

bushel in the 2006/2007 time frame (9 

percent) and approximately $0.65/ 

bushel in the 2007/2008 (18 percent) 

timeframe. Alternatively, in a report 

prepared for Kraft Foods Global Inc., Dr. 

Keith Collins suggests that the increase 

in U.S. biofuels since 2006/7 has 

increased U.S. corn prices by a larger 

amount, with a range of 29% to 60% 

(EPA–HQ–OAR–2008–0380–0514.2). 

While EPA recognizes that there has 

been a large increase in corn prices that 

has coincided with the recent expansion 

of biofuels, the individual contribution 

of the RFS mandate has been much 

smaller. A number of factors have 

contributed to the recent increase in 

corn prices, such as foreign demand for 

coarse grains, sustained drought in 

major international crop producing 

regions, and historically high energy 

prices. 

In a similar vein, comments and 

supporting analyses generally agreed 

that the recent increase in U.S. biofuels 

production has increased food prices in 

the U.S., although the magnitude of this 

impact varied throughout the 

comments. Collins suggested that if 

biofuels accounted for 60% of the 

increase in corn and soybean prices 

between the 2006/2007 marketing year 

and expected 2008/2009 levels, food 

ingredient costs would be 

approximately $20.5 billion higher. In 

turn, ingredient costs will be passed on 

in higher meat and food prices to U.S. 

consumers. In total, Collins predicts that 

increased biofuels will increase U.S. 

food prices by approximately 1.8%. The 

1.8% increase is a 23–25% increase in 

the normal rate of food price inflation in 

a two to three year period. Alternatively, 

Purdue University Extension suggests 

that for the year 2007, the increased use 

of biofuels have increase food costs by 

approximately $15 billion compared to 

the 2005 crop year.42 At the low end of 


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43 72 FR 23899 (May 1, 2007). 

44See 72 FR 23900, 23969–978. 

45 In our RFS ozone modeling, we found that the 

CO decreases would likely offset the potential 

ozone air-quality impacts of a two percentage point 

adjustment to VOCs. We found that reduced CO 

emissions ranged from 0.9% to 2.5% depending on 

the volume of renewable fuels increased. 

Concerning VOCs and NOX , we expected to see 

increases of 4 to 5 percent and 5 to 7 percent 

respectively in some areas. Overall, we found that 

the average impact on summer ambient ozone levels 

for all areas is a 0.057 ppb increase or about 0.06 

percent of the ozone NAAQS (80.0 ppb). 

Additionally, in areas with significant increases 

(greater than 50 percent) in ethanol use between 

now and 2015, the increase on summer ambient 

ozone levels is 0.153 ppb (72 FR 23977). 

46Searchinger, Timothy; Heimlich, Ralph; 

Houghton, R. A.; Dong, Fengxia; Elobeid, Amani; 

Fabiosa, Jacinto; Tokgaz, Simla; Hayes, Dermot; et 

al., ‘‘Use of U.S. Croplands for Biofuels Increases 

Greenhouse Gases Through Emissions from LandUse Change’’, Science, No. 319 (Feb 29, 2008): 

1238–1240. 

47See 72 FR 23978–984. 

the spectrum, several commenters cited 

a report prepared by Dr. Richard Perrin 

of University of Nebraska-Lincoln, that 

estimated ethanol is responsible for no 

more than 15–20 percent of overall grain 

price increases over the last two years 

and that increases from ethanol have 

had a negligible impact on U.S. 

consumer prices. 

EPA also received many comments 

discussing how the recent increase in 

corn price has had a negative impact on 

the livestock industry. The State of 

Texas provides several reports that 

conclude that the livestock industries, 

including poultry, are experiencing 

financial losses due to increases in the 

cost of production due to higher corn 

prices. Several other commenters 

provide detailed descriptions of the 

financial impact on cattle, poultry or 

broiler companies from rising feed costs. 

EPA is aware of the overall impact 

that biofuels have had in recent years on 

the food and feed markets, and we are 

also cognizant of the current 

macroeconomic conditions in the U.S. 

that have exacerbated some of these 

impacts. While we generally agree that 

the issues raised by commenters are 

important considerations, we think that 

some commenters may have overstated 

the magnitude of the impacts. In 

addition, as discussed previously, the 

issue before EPA is a narrower one—

what impact if any the RFS mandate 

itself would have over the time period 

at issue, not the impact of the overall 

production and use of biofuels in the 

U.S. 

2. Environmental Concerns 

A number of commenters expressed 

concerns that the RFS mandate severely 

harms the environment. As discussed 

below, EPA believes that the RFS 

mandate is not expected to lead to an 

increased use of ethanol during the time 

period at issue. In addition, EPA has 

considered and evaluated the 

environmental impact of an increased 

use of renewable fuels in the RFS1 

rulemaking.43 In addition, EISA also 

made several important changes to the 

RFS program, many of which directly 

address some of the environmental 

concerns raised below. EPA is preparing 

a proposed rulemaking to update the 

RFS program to reflect the EISA 

changes, and in this rulemaking EPA 

will further evaluate the environmental 

concerns raised below. 

Specifically, commenters outlined 

four major environmental harms related 

to the expansion of the RFS mandate. 

First, a few commenters expressed 

concern about increased emissions of 

volatile organic compounds (VOCs) and 

oxides of nitrogen (NOX ) associated 

with increased use of ethanol. They 

claimed that when an area that currently 

blends little or no ethanol into gasoline 

starts to use such blends, significant 

increases in the amounts of VOCs and 

NOX occurs. 

The agency has evaluated the impact 

of increased use of ethanol a number of 

times (See 66 Federal Register 37256–

37161). Most recently, we conducted a 

thorough analysis of the impact of 

increased ethanol usage in the final rule 

for implementation of the Renewable 

Fuel Standard Program, for levels up to 

approximately 10 billion gallons of 

renewable fuel use a year.44 We have 

shown through the use of the ozone 

Response Surface Model that changes in 

ambient ozone levels are small when 

moving to these volumes of ethanolblended gasoline and those slight 

increases would be smaller when 

factoring carbon monoxide reductions 

from increased ethanol use.45

Second, some commenters stated that 

ethanol’s lifecycle greenhouse gases 

(GHGs) substantially increase once 

greenhouse gases released from indirect 

land use are considered in ethanol’s 

GHG lifecycle. These comments rely on 

evidence from Searchinger, et al. which 

utilized the GREET and the Food and 

Agricultural Policy Research Institute 

(FAPRI) models to show a manifold 

increase in lifecycle GHGs as marginal 

cropland, forests, and native grasslands 

are converted to agricultural lands as a 

result of ethanol production.46 This is 

an important issue. EPA has analyzed 

the greenhouse impacts of various 

renewable fuels, most recently in the 

RFS1 rulemaking.47 EPA will further 

address this issue with an updated 

analysis in its upcoming proposed 

rulemaking to implement the RFS 

changes called for by EISA 2007. These 

RFS changes include GHG thresholds 

for certain fuels, based on lifecycle 

emissions of GHG gases, including 

significant indirect emissions resulting 

from land use changes. 

Third, others argue that current 

agricultural production will put around 

100 million tons of soil and 300,000 

tons of nitrogen-based fertilizers in 

Midwestern waters. The soil erosion 

and fertilizer runoff are major 

contributors to the Gulf of Mexico’s 

‘‘Dead Zone.’’ These commenters argue 

that the RFS mandate, at a minimum, 

prevents the implementation of 

solutions to issues in the Gulf and 

would ultimately exacerbate the 

situation as farmers grow more crops for 

energy production in the future. We 

acknowledge that impacts to water 

quality may result from increased 

biofuel crop production, and we intend 

to provide information about this issue 

as part of the upcoming RFS 

rulemaking. 

Fourth, commenters expressed 

concern over the effect on natural 

habitats and biodiversity from clearing 

critical habitats like forests, wetlands, 

and grasslands for biofuels production. 

They argue that these habitats are 

necessary to preserve biodiversity, and 

the RFS provides an incentive to use 

these lands and other lands in 

conservation programs for use to 

produce energy crops. 

Other commenters noted the 

environmental benefits from blending 

ethanol into gasoline. Most notably, 

commenters point to the reductions in 

carbon monoxide emissions from using 

ethanol blends, decreased emissions of 

greenhouse gases, and the use of ethanol 

as an oxygenate that helps to break 

down harmful chemicals before being 

released into the atmosphere. 

For these comments, as with the prior 

comments, EPA notes that the Agency 

will be evaluating these and other 

environmental issues in the upcoming 

proposed rulemaking to implement the 

changes to the RFS program required by 

EISA. EPA is conducting a significant 

amount of analyses for this upcoming 

rulemaking to implement EISA, and we 

will further investigate both the positive 

and negative environmental impacts 

and costs of increased renewable fuel 

production and consumption. In 

addition, EISA changes the definitions 

of renewable fuel, and precludes use of 

renewable fuel in the RFS program if it 

was produced from feedstocks from 

certain lands. EPA will address these 

changes in the upcoming RFS2 

rulemaking. 


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48Abbot, Hurt, and Tyner, July 2008, What’s 

Driving Food Prices? http:// 

www.farmfoundation.org/news/articlefiles/404–

FINAL%20WDFP%20REPORT%207–21–08.pdf; 

http://www.cftc.gov/stellent/groups/public/ 

@newsroom/documents/file/ 

itfinterimreportoncrudeoil0708.pdf 

49 ‘‘Electronic Corn Quotes.’’ 08 July 2008. 

Chicago Board of Trading. 05 Aug 2008 

www.cbot.com/. 

3. Potential Impacts on Commodities 

Markets 

We received comments that supported 

and opposed granting the waiver request 

on the grounds that the RFS mandate 

contributes to investment speculation in 

the commodities markets. The State of 

Texas argues that the RFS mandate is 

causing and will continue to cause 

unnecessary harm to the economy by 

facilitating speculative investment in 

corn futures. EPA recognizes that the 

RFS requirements may be influencing 

the U.S. corn futures market in years 

beyond the 2008/2009 time period, 

which may in turn influence prices 

today. However, research to date has not 

been able to link future corn prices from 

the larger RFS required volumes to 

current 2008/2009 corn prices.48 We 

intend to continue to review and 

monitor this issue as appropriate. 

Conversely, one commenter argued 

that granting the waiver would 

introduce a level of uncertainty in the 

biofuels markets that could adversely 

impact investment decisions, research 

and development initiatives for 

advanced biofuels, and/or how future 

RFS requirements are enforced. 

Furthermore, other commenters point 

out that expanded ethanol production 

increases available livestock feeds and 

may lead to corn price stabilization 

through the use of distiller’s grains. 

Some economists note that 

speculation provides a vital role in the 

price discovery process with a chance of 

‘‘overshooting’’ the equilibrium because 

the balance between supply and 

demand is never precisely known. The 

prices are corrected as new information 

becomes available. This appears to be 

the case with corn futures as prices have 

fallen as the recent flooding in the 

Midwest has shown to have marginal 

national impact, as discussed above. 

Many commenters noted corn futures 

prices surpassing $8.00/bushel peaks 

during the uncertainty of the effect of 

the flood, compared with the current 

$5.25/bushel futures price.49

As discussed above, the RFS mandate 

is not expected to cause any increase in 

the use of ethanol during the time 

period at issue, and therefore is not 

expected to have any impact on corn 

prices. 

4. Future of Renewable Fuels 

A number of commenters raised 

concerns over the impact that granting 

the waiver would have on the future of 

ethanol production. Many commenters, 

especially those related to the ethanol 

industry, stated that granting the waiver 

would send a signal to ethanol and 

other biofuels producers that 

investments in production and 

distribution of renewable fuels were 

uncertain. Additionally, these 

commenters note that granting a waiver 

this soon after raising the standard 

raises questions concerning future 

investments in advanced biofuels 

mandated by EISA beginning in 2009. 

On the other hand, some commenters 

raise questions about whether the 

current production capacity of ethanol 

would be able to meet the revised 

standards and whether distribution 

facilities would be able to accommodate 

the increased amount of renewable fuels 

required. These commenters argue that 

granting the waiver request would allow 

a smoother transition to biofuels in 

terms of production capacity and 

distribution by allowing more realistic 

development of infrastructure to 

support the renewable fuels industry. 

Additionally, they argue that granting 

the waiver request might create an 

incentive to develop more advanced 

biofuels more quickly and move away 

from grain-based ethanol. 

Many commenters point out that a 

significant amount of production 

capabilities are scheduled for 

completion during 2009 with over 13 

billion gallons of production capacity 

scheduled to come online. 

EPA will be considering these and 

other issues in a comprehensive fashion 

in the upcoming rulemaking to 

implement the changes called for by 

EISA. However they are not relevant to 

the threshold issue in this waiver 

proceeding—whether implementation of 

the RFS mandate, during the time 

period at issue, would severely harm the 

economy. Given the basis for the 

decision described below in Section VII, 

the issues raised in this section VI are 

more appropriately considered in the 

upcoming rulemaking to implement the 

changes called for by EISA. 

VII. Decision 

EPA is authorized to grant Texas’s 

waiver request if EPA determines that 

implementation of the RFS mandate 

would severely harm the economy of a 

State, region, or the United States. As 

discussed in section IV, this calls for a 

determination that implementation of 

the mandate itself would severely harm 

the economy; it is not enough to 

determine that implementation would 

contribute to such harm. The required 

determination has two basic parts. The 

first criterion is that there must be a 

generally high degree of confidence that 

severe harm would occur from 

implementation of the RFS. The second 

criterion is a high threshold for the 

nature and degree of harm that would 

support issuance of a waiver, indicating 

a point that is quite far along a 

continuum of harm, though short of 

extreme. EPA recognizes that Texas and 

many parties, both those supporting the 

waiver and those opposing the waiver, 

have raised issues of great concern to 

them and to others in the nation 

concerning the role of the increased use 

of biofuels. However the issue before the 

Agency in this case is a much more 

limited one, as described above. 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 

mandate during the time period at issue 

would harm the economy, EPA notes 

that the overall weight of the evidence 

indicates that implementation of the 

mandate itself would have no 

significant impact on the economy 

during this time period, and the most 

likely result is that implementation of 

the mandate itself would have no effect 

on the economy of a State, region, or the 

United States. All parties agree that any 

claimed economic harm would derive 

from the increased use of ethanol, and 

any associated increase in the price of 

corn. However the weight of evidence 

strongly indicates that waiving the 

mandate would not be expected to 

change the amount of ethanol that 

would be used. The ISU modeling 

projects that waiving the mandate 

would have no impact at all on the use 

of ethanol in 76% of the scenarios 

modeled. The ISU results are also 

generally supported by the modeling 

performed by TAMU, which indicates 

that under scenarios similar to the ISU 

modeling, a waiver of the mandate 

would have less than a 50% chance of 

impacting the use of ethanol. Current 

market conditions that foster ethanol 

production and the low price currently 

in the market for renewable fuel RINs 

also supports the conclusion that 

waiving the mandate would not be 

expected to have a significant effect on 

the use of ethanol. 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 


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validity of key assumptions in the 

analyses and models. After considering 

all of the evidence and weighing it 

appropriately, EPA believes that 

waiving the RFS mandate would not 

significantly affect the use of ethanol 

during the time period at issue, and the 

most likely result is that 

implementation would have no effect. 

Therefore it is unlikely that 

implementation of the mandate would 

cause harm to the economy. There is 

insufficient evidence before the agency 

to support a finding that 

implementation of the RFS would likely 

or even probably cause harm to the 

economy for that 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). 

With respect to the second criterion, 

the Agency examined the evidence to 

evaluate the potential impact of 

implementation of the RFS mandate on 

corn prices and the impacts of such corn 

prices on various sectors of the economy 

and the overall economy, both within 

Texas 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 76% of the scenarios there would be 

no change in ethanol use or corn price 

from a waiver of the mandate, with only 

24% 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 

24% of scenarios where a waiver would 

have an effect was $0.30 per bushel of 

corn. As discussed in section V, a price 

change in corn of this magnitude would 

have only a limited 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 there is most 

likely no impact on ethanol use or corn 

prices from implementation of the RFS 

mandate over the time period at issue, 

and if an impact were to occur, it would 

likely be on average $0.30 per bushel of 

corn. EPA believes this range of price 

increases for corn, even without 

considering the accompanying impact 

on fuel prices, would not support a 

finding of severe harm to the economy, 

whether considering the livestock 

industry of Texas, the livestock industry 

of the nation, the economy of Texas, 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 criterion of a high 

threshold for severe economic harm. 

In conclusion, EPA finds that the 

evidence in this case does not support 

a determination that implementation of 

the RFS mandate during the time period 

at issue would severely harm the 

economy of a State, a region, or the 

United States. 

VIII. Guidance on Future Requests for 

Waivers 

In considering waiver requests, EPA 

takes seriously its responsibility to 

evaluate whether circumstances 

warranting a waiver have arisen, while 

providing the necessary level of stability 

for this program that Congress intended. 

In order to meet these objectives, the 

Agency is providing guidance on its 

expectations for future waiver requests. 

Section 211(o)(7)(A) of the Act 

requires notice and comment before the 

Administrator may grant a waiver of the 

RFS volume requirements. For 2008, 

only a state governor may request a 

waiver, however beginning in 2009 ‘‘any 

person subject to the requirements’’ of 

the RFS may also request a waiver. 

Thus, refiners and importers of gasoline, 

as well as producers and importers of 

renewable fuels such as ethanol and 

biodiesel, may request a waiver. 

The statute provides that EPA ‘‘may 

waive [the RFS requirements] * * * 

based on a determination by the 

Administrator, after public notice and 

opportunity for comment,’’ that certain 

circumstances exist. It does not, 

however, specify that notice and an 

opportunity for comment are required 

for EPA denial of a petition. While EPA 

always has the discretion to proceed 

through public notice and comment 

prior to acting on a waiver request, we 

believe that there could well be 

circumstances where it is appropriate 

for EPA to deny a petition without 

notice and opportunity for comment. 

For example, petitions that clearly do 

not contain information and analysis of 

a type and quality sufficient to support 

a grant of a waiver may not justify 

public consideration prior to issuance of 

a denial by EPA. EPA is concerned that 

time and resources of both the Agency 

and stakeholders should not be 

unnecessarily devoted to a public notice 

and comment process if a clearly 

meritless petition is filed, including a 

petition that is not supported by an 

appropriate level of information and 

analysis. In such a case, EPA can make 

an appropriate decision without public 

input. In addition in those 

circumstances a public notice and 

comment process would detract from 

the time and resources of all 

stakeholders, including the resources 

that may be available to address 

petitions that are adequately supported 

by an appropriate level of information 

and analysis. To assist future 

petitioners, EPA offers the following 

guidance on the types of information 

and analysis that we expect would 

accompany a waiver request. EPA notes 

that this guidance 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 the Secretaries 

of Agriculture and Energy. 

By example, in section IV of this 

decision EPA provides its interpretation 

of the criteria for deciding a waiver 

request based on a claim that 

implementation of the RFS would 

severely harm the economy of a State, 

a region, or the United States. In section 

V EPA explains how it weighs the body 

of evidence on the issues that are 

relevant for this waiver request. Based 

on this, EPA expects that future 

applicants for a waiver will provide 

information and analyses that address 

what is the impact of implementation of 

the RFS, and what is the nature and 

degree of harm associated with the 

impact of the RFS. The information and 

analyses discussed in section V, such as 

appropriate modeling, provides 

guidance on the kind of information and 

analyses that EPA expects would be 

provided by an applicant. EPA expects 

that it will evaluate a waiver request by 

weighing all of the evidence; hence no 

one specific kind or form of evidence or 

analyses is necessarily dispositive. At 

the same time, EPA expects that 

applicants would provide a 

comprehensive and robust analytical 

basis for any claim that the RFS itself is 

causing harm, and the nature and degree 

of that harm. 

In the future, EPA will review a 

request for a waiver and first determine 

whether to proceed with public notice 

and comment. EPA will not grant a 

waiver without such notice and 

comment, but in appropriate 

circumstances EPA reserves the right to 

deny a waiver request without going 

through that process. Where an 

applicant does not address the relevant 

issues or does not provide adequate 

evidence to support their claims, EPA 

may decide to deny the request without 

notice and comment. 

In this case the initial submission by 

the State of Texas provided little 

analytical or evidentiary basis for their 

request. EPA proceeded through a 

notice and comment process as this was 


ebenthall on PRODPC60 with NOTICES
47184 Federal Register / Vol. 73, No. 157 / Wednesday, August 13, 2008 / Notices 

the first such request and EPA had 

provided no prior guidance on these 

issues. EPA believed all parties to the 

process would benefit from a complete 

public airing of the issues involved in 

the first waiver request. Texas properly 

submitted substantive and detailed 

comments during the comment period 

to support its request. However during 

the public comment period other 

commenters were necessarily focused 

on addressing just the limited 

information provided in the initial 

request submitted by Texas. They did 

not have the opportunity to respond to 

Texas’ more substantive submission 

until after the comment period had 

closed. This is not the most efficient use 

of EPA’s or the public’s resources, 

especially given the short time specified 

in the Act for EPA to make a decision. 

The guidance in this section is designed 

in part to avoid this kind of situation in 

the future and better allow the Agency 

to meet the statutory deadlines provided 

in EISA. 

EPA may grant a waiver for no more 

than one year unless renewed by the 

Administrator. EPA expects that 

applicants would state the requested 

start date and duration of the waiver, 

with waiver applications received 

generally at least six months before the 

requested start date, and to the extent 

that applications cannot be submitted in 

such timeframe an application should 

include an explanation why such 

expectation could not be met. EPA 

expects that applicants would notify the 

Administrator approximately three 

months before the termination of a 

waiver period if renewal of the waiver 

is desired. The request for an extension 

would include an update of the 

information and rationale submitted 

with the original waiver request. 

The Administrator may also grant a 

waiver based on severe harm to the 

environment of a State, a region, or the 

United States, or inadequate domestic 

supply. At this time the Agency is not 

providing any more specific guidance 

for these types of waiver requests, but 

anticipates that the guidance discussed 

in this section would apply in general 

terms to these requests as well. 

My decision will affect not only 

refiners, importers and other regulated 

parties in Texas but also refiners, 

importers, and other regulated parties 

throughout the nation who must comply 

with the renewable fuel standards and 

other requirements in order to produce 

gasoline and renewable fuel for use in 

the United States. A waiver would affect 

the national volume of renewable fuel 

that is required, and would therefore 

affect parties all across the nation who 

produce gasoline or renewable fuel, as 

well as other regulated parties who are 

involved in the distribution of such 

fuels. For this reason, I hereby 

determine and find that this is a final 

action of national applicability. 

This action is not a rule as defined by 

Executive Order 12866. Therefore, it is 

exempt from review by the Office of 

Management and Budget as required for 

rules and regulations by Executive 

Order 12866. 

Dated: August 7, 2008. 

Stephen L. Johnson, 

Administrator. 

[FR Doc. E8–18738 Filed 8–12–08; 8:45 am] 

BILLING CODE 6560–50–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

[EPA–HQ–OPP–2008–0046; FRL–8376–8] 

Notice of Receipt of Several Pesticide 

Petitions Filed for Residues of 

Pesticide Chemicals in or on Various 

Commodities 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Notice. 

SUMMARY: This notice announces the 

Agency’s receipt of several initial filing 

of pesticide petitions proposing the 

establishment or modification of 

regulations for residues of pesticide 

chemicals in or on various commodities 

DATES: Comments must be received on 

or before September 12, 2008. 

ADDRESSES: Submit your comments, 

identified by docket identification (ID) 

number and the pesticide petition 

number (PP) of interest as shown in the 

body of this document, by one of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the on-line 

instructions for submitting comments. 

• Mail: Office of Pesticide Programs 

(OPP) Regulatory Public Docket (7502P), 

Environmental Protection Agency, 1200 

Pennsylvania Ave., NW., Washington, 

DC 20460–0001. 

• Delivery: OPP Regulatory Public 

Docket (7502P), Environmental 

Protection Agency, Rm. S–4400, One 

Potomac Yard (South Bldg.), 2777 S. 

Crystal Dr., Arlington, VA. Deliveries 

are only accepted during the Docket 

Facility’s normal hours of operation 

(8:30 a.m. to 4 p.m., Monday through 

Friday, excluding legal holidays). 

Special arrangements should be made 

for deliveries of boxed information. The 

Docket Facility telephone number is 

(703) 305–5805. 

Instructions: Direct your comments to 

the docket ID number and the pesticide 

petition number of interest as shown in 

the body of this document. EPA’s policy 

is that all comments received will be 

included in the docket without change 

and may be made available on-line at 

http://www.regulations.gov, including 

any personal information provided, 

unless the comment includes 

information claimed to be Confidential 

Business Information (CBI) or other 

information whose disclosure is 

restricted by statute. Do not submit 

information that you consider to be CBI 

or otherwise protected through 

regulations.gov or e-mail. The 

regulations.gov website is an 

‘‘anonymous access’’ system, which 

means EPA will not know your identity 

or contact information unless you 

provide it in the body of your comment. 

If you send an e-mail comment directly 

to EPA without going through 

regulations.gov, your e-mail address 

will be automatically captured and 

included as part of the comment that is 

placed in the docket and made available 

on the Internet. If you submit an 

electronic comment, EPA recommends 

that you include your name and other 

contact information in the body of your 

comment and with any disk or CD-ROM 

you submit. If EPA cannot read your 

comment due to technical difficulties 

and cannot contact you for clarification, 

EPA may not be able to consider your 

comment. Electronic files should avoid 

the use of special characters, any form 

of encryption, and be free of any defects 

or viruses. 

Docket: All documents in the docket 

are listed in the docket index available 

at http://www.regulations.gov. Although 

listed in the index, some information is 

not publicly available, e.g., CBI or other 

information whose disclosure is 

restricted by statute. Certain other 

material, such as copyrighted material, 

is not placed on the Internet and will be 

publicly available only in hard copy 

form. Publicly available docket 

materials are available either in the 

electronic docket at http:// 

www.regulations.gov, or, if only 

available in hard copy, at the OPP 

Regulatory Public Docket in Rm. S–

4400, One Potomac Yard (South Bldg.), 

2777 S. Crystal Dr., Arlington, VA. The 

hours of operation of this Docket 

Facility are from 8:30 a.m. to 4 p.m., 

Monday through Friday, excluding legal 

holidays. The Docket Facility telephone 

number is (703) 305–5805. 

FOR FURTHER INFORMATION CONTACT: A 

contact person is listed at the end of 

each pesticide petition summary and 

may be contacted by telephone or email. The mailing address for each 

contact person listed is: Registration 


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