A request by eight states including Arkansas and North Carolina to waive the renewable fuel standard has been denied by the Environmental Protection Agency.
Governors from those states petitioned the EPA for a waiver from the mandate in August.
They claimed the renewable fuel standard mixed with a small corn crop was driving up prices to feed livestock.
Conditions for a waiver were not met.
The mandate requires oil companies to blend over 13 billion gallons of bio-fuel in 2013.
Iowa leads the nation in bio-fuel production, producing 25% of total ethanol.
State leaders say the bio-fuel industry means $13.1 billion dollars for Iowa’s economy.
“Corn fields yielded a lot more corn than people thought they might early in the year. The ethanol industry will pull back and produce less ethanol, but there will still be enough corn to produce the ethanol and support the livestock that we need,” said Monte Shaw, the executive director for the Iowa Renewable Fuels Association.
Iowa Governor Terry Branstad applauds the EPA for its decision.
In a statement, he said that waiving the renewable fuel standard would add uncertainty to the agriculture sector.