The People of America's Oil and Natural Gas Indusry

Does EPA Have the Authority to Levy Taxes?

Jane Van Ryan

Jane Van Ryan
Posted December 27, 2010

Did you know that the U.S. Environmental Protection Agency (EPA) has the authority to levy taxes? If you're scratching your head over this tidbit of information, you're not alone.

Here's the issue: A couple of weeks ago, the EPA determined that the amount of cellulosic ethanol that should be included in the nation's gasoline pool should be increased from five million to six million gallons in 2011. The goal is to ensure there is a market for this new fuel that is supposed to be made from switchgrass, wood chips, or other forms of cellulose-rich materials.

The problem is that there is virtually no cellulosic ethanol on the market today. The technology hasn't developed to the point where large quantities of this fuel can be produced.

Still, the oil and natural gas industry is expected to comply with the EPA's order. If it doesn't--or can't--comply, it must pay a fee amounting to about $6 million.

"This is a stealth tax on the industry," said API Downstream Director Bob Greco. "The oil and natural gas industry is not opposed to a reasonable, mandated cellulosic-ethanol volume that represents a true production capability, but for EPA to increase the mandate in 2011 when there has been effectively no commercial production in 2010 is mind-boggling."

Of course, this isn't the first time that EPA has overreached its authority to take a questionable action. Last week the EPA won a court case allowing it to issue orders retroactively.

A U.S. Appeals Court decided that EPA did not err when it missed its own end-of-the-year 2009 deadline and didn't announce the type or amount of biofuels that had to be added to the nation's fuel mix in 2010 until March 2010. EPA's tardiness gave the industry only 9 months, instead of the full 12 months, to comply with the mandate.

API is concerned about the precedent being set by the court's ruling. "It potentially gives license to Congress to set unrealistic timelines and for [the] EPA to start regulating something halfway through the year and apply it retroactively," said API Fuels Manager Patrick Kelly.

As we've mentioned previously on this blog, EPA continues to reach beyond its statutory authority. More evidence of this ongoing pattern of behavior is available on