Phantom Fuels Rise Again

Bob Greco
Posted August 12, 2013

The EPA just can’t seem to deal with reality. Disregarding both experience and evidence, the agency chose to once again mandate a phantom fuel: cellulosic biofuel. Instead of setting fuel requirements at a realistic volume, as directed by Congress and a court order, the EPA ordered the use of 4 million gallons of cellulosic biofuel this year, even though it has yet to be produced in commercial volumes.

What was the EPA thinking?

With ample experience behind it, the EPA had plenty of chances to create a realistic policy. In 2011, it set the mandate at 6.6 million gallons. That year, no cellulosic biofuel was commercially produced. In 2012, it increased the mandate to 8.65 million gallons.  Last year, all of 1,000 gallons were commercially produced.

What did EPA learn? Nothing, apparently. Turning its back on reality, it has mandated 4 million gallons of cellulosic biofuel (or 6 million “ethanol-equivalent” gallons) for 2013. And it looks like history will repeat itself. So far this year only 73,000 gallons have been produced – 1.8 percent of the mandate.

In doing this EPA went against experience and hard evidence.  At the beginning of the year KiOR, a renewable fuels company working on a cellulosic plant start-up, stated that it was hoping to produce 300,000 to 500,000 gallons in the second quarter and 3-5 million gallons of cellulosic biofuel by the end of 2013. The company’s optimistic target was part of the flimsy foundation on which the EPA based its final mandate. But that foundation was flawed.  In the second quarter KiOR produced 70,000 gallons, only 25 percent of its low-end prediction – a strong clue that the company would have lots of trouble reaching its 2013 target.

Even so, EPA disregarded KiOR’s situation as it finalized the 2013 mandate. And two days after EPA’s announcement,   KiOR said that its expected production total for 2013 would only be in the 1-2 million gallon range, washing away any connection between EPA’s mandates and reality.

The EPA had ample opportunities to base its mandates on reality, but none of the evidence or EPA’s dismal previous experience seems to have affected the agency’s projections. For the fourth year in a row, EPA has set the mandate for cellulosic biofuel at an unrealistic target. Refiners will be forced to spend millions to buy credits for these fuels that don’t exist, and the consumer ultimately loses.

Even when faced with a “gimme putt” - the EPA was making its prediction for 2013 with the year more than half over – the agency still managed to blow it. EPA’s continued cavalier administration of the RFS is yet another reason why the RFS is fundamentally broken and needs to be repealed by Congress.