Dear Administrator Jackson and Secretary Vilsack:

I am writing to thank you for your unwavering commitment to the Renewable Fuels Standard (RFS) and your continued efforts to rebuff alarmist calls to waive or alter the RFS. Without question, the RFS is among the most successful energy policies ever enacted in America. Not only has the program played a pivotal role in reducing oil imports to the lowest levels since 1996, but it has also lowered gas prices, enhanced the economic health of rural America, and improved our air quality. As you well know, persisting drought conditions across the country have stressed crops and reduced yield potential, causing apprehension and concern about prices and availability among all consumers of grain. This apprehension has caused some in the livestock, poultry, meat processing, and feed industries to use this summer’s unfortunate circumstances to further their campaign against the RFS. These groups have suggested major modifications to the RFS are needed to ensure that grain is available for the animal feed market. Some have even proposed repealing the RFS program entirely. Both of your agencies have responsibly answered the panicked appeals to modify or dismantle the RFS, stating plainly that consideration of waiving the program is simply not warranted. Your comments have provided the kind of certainty and security that is necessary to ensure the renewable fuels industry continues to evolve. Further, your agencies’ recent remarks regarding the RFS serve as important signals to the investment community that the nation’s commitment to diversifying our fuel supply and creating a future market for new advanced biofuel technologies remains intact. 425 Third Street SW, Suite 1150 Washington, DC 20024 The central argument being waged against the RFS by livestock and feed groups is that the policy creates an inflexible, inelastic demand for grain that must be satisfied before other uses, such as feed and exports. These groups suggest that the ethanol industry will not participate in demand rationing because of the RFS, while other users will be forced to dramatically restrict their grain consumption. These exaggerated arguments totally belie the facts and ignore the tremendous flexibility built into the RFS program to accommodate marketplace anomalies like this summer’s drought. The ability of obligated parties under the RFS to “bank” excess Renewable Identification Number (RIN) credits and use them for compliance in the following year provides a significant measure of flexibility that takes pressure off of the corn market in the event of a short crop. These RINs can be used in lieu of actual gallons to demonstrate compliance with the annual RFS requirements. It is estimated that some 2.4 to 2.6 billion excess renewable fuel RIN credits are currently available to obligated parties, equivalent to nearly 20 percent of this year’s RFS renewable fuel requirement. Therefore, if this fall’s corn crop turns out to be short, ethanol producers can significantly reduce production rates without putting RFS compliance at risk. This flexibility also means that waiving the RFS would not have a meaningful impact on corn prices. A recent analysis by Professor Bruce Babcock at Iowa State University simulated the corn price impacts of a 100% waiver of the RFS during the upcoming 2012/13 corn marketing year, finding that a waiver might result in only a 4.6% reduction in corn prices. Professor Babcock concluded that, “The desire by livestock groups to see additional flexibility in ethanol mandates may not result in as large a drop in feed costs as hoped.” He further found, “…the flexibility built into the Renewable Fuels Standard allowing obligated parties to carry over blending credits (RINs) from previous years significantly lowers the economic impacts of a short crop, because it introduces flexibility into the mandate.” In addition to the excess RINs available, it is important to note that ethanol stocks remain robust, and gasoline blenders can draw on those stocks to help meet demand in the event production is curtailed. Ethanol stocks currently stand at 800 million gallons, slightly above year-ago levels and 2 percent larger than the 2011 annual average. Moreover, ethanol exports—which reached record levels in 2011—are slowing dramatically to compensate in response to current market conditions. Other factors need to be taken into consideration as well. While drought in the United States is likely to curtail our nation’s grain output from early season estimates, global grain production and supply are still expected to achieve a new records this year, according to the latest U.S. Department of Agriculture estimates. Given the global nature of the grain market, until the fall crop is “in the bins” around the world, it would be irresponsible to speculate on the extent of the drought’s impact and its potential effects on end users. Finally, and directly contradicting the arguments of RFS opponents, it is in fact the ethanol industry that has borne the brunt of corn demand rationing thus far. Since the first week of June, which is when corn prices began to surge in response to worsening drought conditions, ethanol 425 Third Street SW, Suite 1150 Washington, DC 20024 consumption of corn has fallen nearly 14 percent and is at a two-year low. In this same period, corn export inspections actually increased 15 percent. When all the facts are on the table, it becomes abundantly clear that waiving or altering the RFS in any way at this time would not be prudent, nor would it have any meaningful impact on corn prices or availability for feed use. Clearly, market signals and the flexibility of the RFS are already working to ration demand in anticipation of a shorter-than-expected grain crop. Still, even if ethanol production is significantly reduced as a result of tighter supplies of corn in 2012/13, obligated parties should have very little difficulty in meeting their obligations under the RFS for 2012 and 2013. Again, we commend you for recognizing the flexibilities in the RFS that make compliance possible even with a short crop, and for bringing facts, logic and context to the discussion over the potential impacts of the drought on renewable fuels production and the RFS. We urge you to stay the course on the RFS and to continue to reject the alarmist appeals of renewable fuel opponents who wish to undermine what has proven to be a tremendously successful program. As always, the members and staff of the RFA stand ready to work with you to build on the success of the RFS and to ensure decisions affecting the future of the program are based on sound science, reliable data, and a composed and transparent process. Should you have any additional questions, please feel free to contact me at any time. Sincerely, Bob Dinneen, President and CEO Renewable Fuels Association

July 27, 2012
425 Third Street SW, Suite 1150 Washington, DC 20024
The Honorable Lisa P. Jackson
Environmental Protection Agency
Ariel Rios Building
1200 Pennsylvania Avenue, N.W.
Washington, DC 20460
The Honorable Thomas J. Vilsack U.S. Department of Agriculture 1400 Independence Ave., S.W. Washington, DC 20250