Industry Sues EPA Over Biofuel Requirement

On Friday, the American Petroleum Institute (API) filed a petition with the D.C. Circuit to review EPA’s cellulosic biofuel requirements.

The 2007 Energy Independence and Security Act (EISA) requires companies that supply motor fuel to mix in specified amounts of cellulosic ethanol, a biofuel produced from plant materials. The only problem is that the fuel is not yet commercially available in the U.S. As I noted in a commentary at The Daily Caller in January:

Originally, EISA required companies to produce a combined 250 million gallons of cellulose by 2011 and 500 million gallons by 2012. Because no company has been able to produce the fuel commercially, the EPA decided to reduce the quotas to 6.6 and 8.65 million gallons. Though the new, much lower quotas are certainly an improvement, oil companies were still fined $6.8 million for not meeting their 2011 target.

Even though it is unavailable, EPA will require 8.65 million gallons of cellulosic biofuel this year or companies will have to purchase “renewable fuel credits” to meet the obligation. In other words, a tax for not using a product that does not exist. API, the oil and gas industry’s largest trade group, calls the 2012 requirements “unrealistic” and what has essentially been turned into a tax on industry that “could ultimately burden consumers.” In its early draft of its 2012 Annual Energy Outlook, the U.S. Energy Information Agency noted that it has become “somewhat more pessimistic” about the prospects for commercially available cellulosic biofuel sometime soon.

In their press release, API supports an EPA policy that bases requirements on “at least two months of actual cellulosic biofuel production in the current year when establishing the mandated volumes for the following year.” This seems like a more reasonable approach than just picking requirements out of thin air.

As I’ve argued, this is not even a matter of lawmakers and bureaucrats choosing the wrong target, it is an example of lawmakers who think they can outsmart the private market and overzealous regulators put in charge of enforcing unrealistic laws.