NEW YORK (Dow Jones)--The Texas governor's office is considering seeking an exemption to a national standard that requires renewable fuels use. Because corn-based ethanol is the most widely available renewable fuel, Texas Gov. Rick Perry's office says it fears that use of the fuel is driving up food prices.
The Renewable Fuels Standard requires companies that blend ethanol and other additives into gasoline to sell a certain volume of renewable fuels each year until 2022.
Congress expanded the requirement under the Energy Independence and Security Act of 2007, legislation that aimed to reduce dependence upon fossil fuels and to boost America's reliance on domestic resources.
The revised standard requires the sale of 9 billion gallons a year by the end of this year. The standard ramps up the requirement annually until 2022, when 36 billion barrels of renewable fuels are mandated annually.
Corn-based ethanol and other biofuels derived from food products have come under scrutiny in the past year because their production strains food resources, resulting in price hikes around the world.
"Ultimately, food prices are reaching high levels, so we're looking at this as an option for reducing that burden," said Allison Castle, a spokeswoman for Gov. Perry. Texas is the leading producer of beef, she said, so elevated prices of corn for cattle feed place a burden on the state's economy. Ethanol producers have countered that their fuel doesn't drive up beef prices because byproducts of ethanol distillation can be used as cattle feed.
But simply exempting Texas from the mandate may not be an easy move. The legal grounds upon which such an appeal would be made are unclear. The mandate is a federal obligation without specific benchmarks for each state, so if Texas seceded from the mandate, the overall quantity of ethanol required might remain unchanged.
While Texas and other states have sought waivers from other requirements handled by the U.S. Environmental Protection Agency, those have been short-term waivers to seasonal fuel specifications, during times of particular hardship. For example, after hurricanes Katrina and Rita in 2005, some states sought waivers that allowed them to produce gasoline that did not comply with the normal seasonal summer standards for the fuel.
Those moves stemmed from an inability to meet demand, not a desire to control prices. Castle said the measure was being undertaken primarily to alleviate an agricultural problem. Castle said the governor's office is working with the state's department of agriculture to study the matter.
"We don't want to make a decision in a vacuum," she said. However, departing from the Renewable Fuels Standard, or RFS, might not entirely free the state from ethanol. Because blenders receive a federal credit of 51 cents for each gallon of ethanol they blend, the economics encourage them to continue to use the fuel, even without the mandate.
"The RFS is somewhat meaningless, if blending economics continue to incentivize the petroleum side to do it," said one New York-based gasoline trader. Additionally, other environmental legislation requires major Texas metropolitan areas like Houston and Dallas to blend ethanol to reduce their emissions of pollutants.
Castle said the governor's office was not currently seeking a waiver from those provisions. No timeline has been announced for Gov. Perry's decision. Missouri legislators and a U.S. senatorial candidate in Virginia are seeking similar exemptions, according to local media reports.
-By Jessica Resnick-Ault, Dow Jones Newswires; 201-938-4435; jessica.resnick-ault@dowjones.com
(Rose Marton in New York contributed to this article.)
(END) Dow Jones Newswires