Order Code RS22870
May 5, 2008
Waiver Authority
Under the Renewable Fuel Standard (RFS)
Brent D. Yacobucci
Specialist in Energy and Environmental Policy
Resources, Science, and Industry Division
Summary
Transportation fuels are required by federal law to contain a minimum amount of
renewable fuel each year. This renewable fuel standard (RFS), established by the Energy
Policy Act of 2005 (EPAct, P.L. 109-58) and amended by the Energy Independence and
Security Act of 2007 (EISA, P.L. 110-140), requires that 9.0 billion gallons of
renewable fuels be blended into gasoline and other transportation fuels in 2008. Most
of this mandate will be met using corn-based ethanol. However, high prices and tight
supplies for oil, gasoline, and food/feed grains have raised concerns over whether the
current RFS should be modified or eliminated. Some policymakers are arguing that
demand for corn-based ethanol has contributed significantly to price increases for food.
The Environmental Protection Agency (EPA) has the authority to waive the RFS
requirements, in whole or in part, if certain conditions outlined in the law are present.
The governor of Texas recently requested a waiver of the RFS because of high grain
prices, and there is growing congressional interest in the EPA waiver authority. This
report provides a brief overview of the RFS program and discusses the process and
criteria for EPA to approve a waiver petition.
Introduction
The Energy Policy Act of 2005 (EPAct, P.L. 109-58) established a renewable fuel
standard (RFS), requiring the blending of biofuels (such as ethanol) in the nation’s fuel
supply. The Energy Independence and Security Act of 2007 (EISA, P.L. 110-140)
significantly expanded this mandate. The RFS mandate has been a major impetus to the
development of the U.S. ethanol industry. As a result, ethanol production capacity and
the demand for corn as a biofuel feedstock have grown dramatically over the past few
years. In 2005, the United States produced 3.9 billion gallons of ethanol, requiring
roughly 1.4 billion bushels of corn; in 2007, those numbers had increased to 6.5 billion
gallons and 2.3 billion bushels. In 2007, roughly one-quarter of the U.S. corn crop was
directed to ethanol production.

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Increasing demand for corn for biofuels, the rise in energy prices, and other supply
concerns in grain markets have led to rapid increases in corn and other grain prices.
These higher grain prices have raised concern globally over food prices and availability.
Because of these concerns, there is growing interest among some policymakers to amend
or eliminate the RFS. Under the provisions of EPAct and EISA, the administrator of the
Environmental Protection Agency (EPA) has the authority to waive the RFS requirements
in whole or in part, in response to a petition by a state or a fuel provider, or on his own
motion.
On April 25, 2008, Texas Governor Rick Perry sent a letter to EPA Administrator
Stephen Johnson, petitioning for a 50% waiver from the RFS requirements.1 EPA must
approve or disapprove the waiver within 90 days of receipt of the petition — by July 24,
2008. In his letter, Governor Perry states that he initiated the petition because of the
negative effect of the requirements on the Texas economy and on global food prices.
Current RFS Requirements
Currently, the RFS requires the blending of 9.0 billion gallons of renewable fuel in
transportation fuels in 2008, increasing to 36 billion gallons in 2022. Of this mandate, an
increasing share must be met with “advanced biofuels” — biofuels produced from
feedstocks other than corn starch — including cellulosic biofuel and bio-based diesel
substitutes. However, these advanced biofuel mandates do not begin to be phased in until
2009 and 2010.2 As has been the case in previous years, in 2008 the vast majority of the
mandate is expected to be met with U.S. corn ethanol (and a smaller amount of sugarcane
ethanol from Brazil). The 9.0-billion-gallon mandate for 2008 is roughly double the
mandated amount in 2007 (4.7 billion gallons) and roughly 30% higher than 2007
consumption (6.8 billion gallons).
In future years, corn ethanol’s share of the RFS is effectively capped at 15 billion
gallons per year. The EISA amendments to the RFS specifically mandate the use of
cellulosic biofuel (16 billion gallons by 2022) and biomass-based diesel fuel (1.0 billion
gallons annually by 2012).
Waiver Provisions
As amended by EISA, section 211(o)(7) of the Clean Air Act3 gives the EPA
administrator the authority to waive, in whole or in part, the total volume of renewable
fuel mandated by the RFS if, in his determination, there is inadequate domestic supply to
meet the mandate, or if “implementation of the requirement would severely harm the
1 Rick Perry, governor of Texas, Letter to The Honorable Stephen L. Johnson, Administrator,
U.S. Environmental Protection Agency
, April 25, 2008.
2 For more information, see CRS Report RL33290, Fuel Ethanol: Background and Public Policy
Issues
, by Brent D. Yacobucci.
3 42 U.S.C. 7545(o)(7).

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economy or environment of a State, a region, or the United States.”4 Further, under
certain conditions, the EPA administrator may waive (in whole or in part) the specific
carve-outs for cellulosic biofuel and biomass-based diesel fuel.
General Waiver. On the petition of a state or a fuel provider, or at his own
discretion,5 the administrator may waive the overall RFS requirement for a given year.
If a waiver is granted, any adjustment applies to total national requirement. Regardless
of who initiates the waiver petition, all fuel suppliers’ quotas would be reduced by a
similar percentage. As the law is written, EPA may not waive the requirement for an
individual state or supplier within a state, but must reduce the entire national mandate.
To grant the waiver, the EPA administrator must determine, in consultation with the
Secretaries of Agriculture and Energy, that one of two conditions has been met:
! there is inadequate domestic renewable fuel supply; or
! implementation of the requirement would severely harm the economy or
environment of a State, a region, or the United States.
However, it is unclear how EPA will interpret these criteria. In its May 1, 2007, final rule
for 2007 onward,6 EPA explicitly stated that it would not establish more specific criteria
for the waiver.
While EPA realizes that the criteria provided by the statute are quite general, the
rationales of severe environmental or economic harm or inadequate domestic supply
are sufficient for a basic framework upon which a petition can be built and evaluated.
Each situation in which a waiver may be requested will be unique, and promulgating
a list of more specific criteria in the abstract may be counter-productive.7
Within 90 days of receipt of the waiver petition, EPA must act to approve or
disapprove the petition, after public notice and opportunity for comment.8 If EPA does
grant a waiver, the waiver expires after one year, but may be extended by the EPA
administrator in consultation with the Secretaries of Agriculture and Energy.
Cellulosic Biofuel Waiver. As part of the RFS, EISA established a specific
mandate for the use of cellulosic biofuels — ethanol or other fuels produced from woody
or fibrous materials such as grasses, trees, etc. The cellulosic carve-out starts in 2010 at
0.1 billion gallons, and increases to 16.0 billion gallons by 2022. Current cellulosic
4 42 U.S.C. 7545(o)(7)(A)(i).
5 Under EPAct, only states could petition EPA for the waiver. EISA amended the RFS to allow
fuel providers to file a petition, and to give the EPA administrator authority to initiate the process
on his own motion.
6 EPA, Regulation of Fuels and Fuel Additives: Renewable Fuel Standard Program; Final Rule,
May 1, 2007. 72 Federal Register 23899-24014.
7 72 Federal Register 23928.
8 As of May 1, 2008, EPA had not yet established the public comment period for the Texas
waiver request.

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biofuel production is virtually nonexistent, but several demonstration-scale projects have
broken ground or are expected to break ground relatively soon.
If the EPA administrator determines that the projected production volume of
cellulosic biofuel for a given year is less than the mandated amount, he may reduce the
carve-out. If he is going to do so, the administrator must reduce the required amount by
November 30 of the preceding calendar year. If the administrator does reduce the
mandated amount of cellulosic biofuel, he may also reduce the total volume required for
that year under the RFS by an equal or lesser amount, but he is not required to do so.
Unlike the general wavier, only the EPA administrator may initiate a decision on a
cellulosic biofuel waiver.
Biomass-Based Diesel Waiver. Similar to the cellulosic biofuel carve-out,
EISA also established a specific mandate for the use of biomass-based diesel fuel.
Currently, most of this fuel is “biodiesel” — a diesel fuel substitute produced from
soybean oil and other vegetable oils through a process called “transesterification” — but
other fuels, some of which are termed “renewable diesel,” would also qualify. The
biomass diesel carve-out starts in 2009 at 0.5 billion gallons and increases to 1.0 billion
gallons by 2012. Approximately 450 million gallons of biodiesel were produced in the
United States in 2007.
If the EPA administrator (in consultation with the Secretaries of Energy and
Agriculture) determines that there are significant market circumstances (including
feedstock disruptions) “that would make the price of biomass-based diesel fuel increase
significantly,” the administrator may reduce the amount mandated for up to 60 days.9 The
administrator may extend the waiver for no more than an additional 60 days.
Reductions in the RFS. If the administrator waives a significant share of the
above requirements, he must reduce the required volumes in all subsequent years.
Specifically, he must reduce the applicable amounts in future years if he waives any of the
above requirements by
! 20% or more for two consecutive years; or
! 50% or more in a single year.
For example, if the administrator reduced the overall RFS requirement by 6.0 billion
gallons in both 2017 and 2018, then he would be required to reduce the total RFS
requirement by 6.0 billion gallons in 2019 and beyond. The one exception is that these
reductions in the RFS would not apply to the requirements before calendar year 2016.
Effects of a Waiver
Questions have been raised over how a waiver approval would affect food and fuel
markets. As these markets are extremely complex, there is no simple answer. The effects
of a waiver would likely depend on many factors:
9 However, the amount may not represent more than 15% of the total required amount for that
year.

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! the degree to which the RFS requirements are relaxed under the waiver;
! the duration of the waiver;
! the scope of the waiver (cellulosic biofuel, biomass-based diesel, or the
entire program);
! whether the waiver is extended;
! prevailing supply and prices for oil, gasoline, biofuels, and grain
commodities; and
! whether the current tax incentive system for biofuels has been maintained
or modified.10
10 In addition to the RFS mandate, biofuels are also subject to tax incentives for their production
and use. Most significantly, fuel providers who blend ethanol into gasoline receive a tax credit
of 51 cents for every gallon of ethanol they blend. In addition, small ethanol producers receive
a tax credit of 10 cents per gallon on the first 15 million gallons they produce in a give year.
Biodiesel and renewable diesel producers receive a tax credit of up to $1.00 per gallon of fuel
they produce. For more information, see CRS Report RL33572, Biofuels Incentives: A Summary
of Federal Programs
, Brent D. Yacobucci.