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EPA rejects ethanol waiver request

Environmental agency says it will not curtail the government's ethanol production requirement despite request by Texas Gov. Rick Perry.

By David Goldman, CNNMoney.com staff writer
Last Updated: August 7, 2008: 3:59 PM EDT

NEW YORK (CNNMoney.com) -- The U.S. Environmental Protection Agency announced Thursday it will not curtail a rule requiring that ethanol be added to gasoline, turning back a claim that the additive was artificially raising food prices.

Texas Gov. Rick Perry petitioned the EPA in late April to grant a 50% waiver on the nation's Renewable Fuel Standard (RFS), which calls for 9 billion gallons of corn-based ethanol to be added to gasoline supplies this year.

"I am greatly disappointed with the EPA's inability to look past the good intentions of this policy to see the significant harm it is doing to farmers, ranchers and American households," said Perry in a statement. "For the EPA to assert that this federal mandate is not affecting food prices not only goes against common sense, but every American's grocery bill."

After a weeks-long delay in its ruling, EPA Administrator Stephen Johnson said the government agency denied the waiver request because it did not find that the RFS caused "severe economic harm."

"The EPA's professional staff conducted a detailed analysis ... and found that the Renewable Fuel Standard mandate is not causing severe economic harm, but rather strengthening the nation's energy security and farm communities," Johnson said on a conference call with reporters.

The EPA held a period of public comment about the standard in June and received over 15,000 comments, according to the government body. Though many came out in favor of the standard, others said the RFS will contribute to a sharp rise in food prices if not reduced.

"Rising food prices are a problem, and as a nation we must work together on these challenges," said Johnson. "But is that the result of the RFS mandate, and are those price increases meeting the statutory requirement of severe detriment to the economy? That answer is no."

The EPA acknowledged that the RFS has resulted in a rise in corn feed prices, but said the mandate has only added 7 cents to each bushel.

But Gov. Perry said the RFS has put undue pressure on the already struggling livestock business.

"Denying Texas' request is a mistake that will only increase the already heavy financial burden on families while doing even more harm to the livestock industry," said Perry. "Any government mandate that artificially props-up a single industry to the detriment of millions of Americans is bad public policy."

Good intentions harming economy?
The EPA currently requires that 7.76% of gasoline products be blended with ethanol in 2008. That amounts to about 9 billion gallons that U.S. ethanol producers have to put out this year. Next year, they will have to produce 11.1 billion gallons of corn-based ethanol.

"The RFS is designed to expand annual biofuel use to 36 billion gallons by 2022 with 21 billion gallons from switch grass, wood chips, municipal garbage, and other cellulosic sources," said Renewable Fuels Association President Bob Dinneen in a statement. "We applaud the EPA for keeping America squarely on the path toward greater energy independence."

But Perry said the EPA is missing a chance to help American families who have unintentionally been hurt by the EPA's mandate.

"Good intentions and laudable goals are small compensation to the families, farmers and ranchers who are being hurt by the federal government's efforts to trade food for fuel," said Perry. "Congress specifically created an emergency waiver provision for situations like these and EPA refuses to implement it."

The EPA had originally said it would make a decision on the waiver by July 24, but last month said it needed more time to review the comments and consult with the departments of Agriculture and Energy.

First Published: August 7, 2008: 12:17 PM EDT