The American Petroleum Institute recently renewed its attack on the US government’s Renewable Fuels Standard after the Environmental Protection Agency said it would not waive the requirement that uses some 40 percent of the US corn crop to make ethanol.

The main oil and gas trade association said the RFS, which is designed to blend increasing amounts of ethanol with gasoline, is “increasingly unrealistic and unworkable” because it has been adopted without regard for its compatibility with some vehicles, and if fully implemented would exceed what API says is the maximum safe limit of 10 percent in gasoline.

“API did not take a position on the RFS waiver, but EPA applied an improper and unnecessary high bar, which makes it questionable if any waiver could ever be granted,” API senior adviser Patrick Kelly said in a statement.

Kelly said the standard requires refiners to use a higher proportion of ethanol – a limit known as the “blendwall” – than API says is possible. If fully implemented, the RFS would raise the ethanol concentration in gasoline to 20 percent, the API said.

“API is focused on the impending ethanol blendwall and the underlying problems with the RFS that impact our members’ ability to remain in compliance,” Kelly said.

Farmers and other food producers who depend on corn called earlier this year for the EPA to waive RFS as corn prices rose to record levels after sustained high temperatures and widespread drought hit corn crops across the US Midwest.

Governors of several states called for a waiver, and some economists predicted prices of meat, milk, eggs and other products dependent on corn and soybean prices would rise as the grain-price surge works its way through the system.

But a waiver was opposed by Renewable Energy Group, the largest U.S. producer of biodiesel, which welcomed the decision and said it upholds the standard’s successor, RFS2.

“We appreciate the EPA reaffirming that RFS2 and biodiesel are working effectively as part of an ‘all of the above’ strategy for energy security,” said REG Chief Executive Daniel Oh, in a statement.

REG previously argued that any easing of the corn-ethanol requirement would create uncertainty for all biofuels, raising concerns in the industry about the sustainability of market demand.
Although REG does not produce ethanol, it said a waiver of that requirement could lead to the same action for other fuels covered by RFS2, which it said is expected to generate thousands of jobs and boost national energy security.

API is focused on the impending ethanol blendwall and the underlying problems with the RFS…” – Kelly

In its announcement, the EPA said it was leaving the RFS in place because it had not found evidence that doing so would lead to severe economic harm.

A waiver would reduce corn prices by only 1 percent, and would have no impact on household energy costs, the agency said, citing economic analyses by the US Department of Agriculture and the US Department of Energy.

“We recognize that this year’s drought has created hardship in some areas of the economy, particularly for livestock producers,” said Gina McCarthy, assistant administrator for the EPA’s Office of Air and Radiation. “But our extensive analysis makes clear that Congressional requirements for a waiver have not been met, and that waiving the RFS will have little, if any impact.”

EPA also rejected calls to waive its standards on biomass-based diesel (BBD) requirements after a study found that such a waiver would increase the price of soybean meal, commonly used for livestock feed, by 4.2 percent, thus raising food prices and exacerbating the effects of the drought.

The American Council on Renewable Energy welcomed the EPA’s decision, saying it sustains increases in energy security. “The biofuels industry produced 15 billion gallons of biofuels in 2011, decreasing our dependence on foreign oil, creating quality jobs, and helping insulate our economy from the consequences of increased oil prices, said the council’s president Dennis McGinn.

In August, the US Department of Agriculture predicted this season’s average corn price will jump to a record $7.50-$8.90 a bushel, up sharply from $5.40-$6.40 projected only a month earlier.

Corn production for the 2012/13 crop year will fall to 10.8 billion bushels, the lowest since 2006/07, while total supplies, including imports, will fall to a nine-year low, the USDA said.