WSJ Editorializes Against Cellulosic Ethanol

by Brian McGraw on December 13, 2011

in Blog

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The Wall Street Journal ran an editorial commenting on the cellulosic ethanol mandate, which CEI has written extensively about in the past. They write:

Most important, the Nancy Pelosi Congress passed and Mr. Bush signed a law imposing mandates on oil companies to blend cellulosic fuel into conventional gasoline. This guaranteed producers a market. In 2010 the mandate was 100 million barrels, rising to 250 million in 2011 and 500 million in 2012. By the end of this decade the requirements leap to 10.5 billion gallons a year.

When these mandates were established, no companies produced commercially viable cellulosic fuel. But the dream was: If you mandate and subsidize it, someone will build it.

Guess what? Nobody has. Despite the taxpayer enticements, this year cellulosic fuel production won’t be 250 million or even 25 million gallons. Last year the Environmental Protection Agency, which has the authority to revise the mandates, quietly reduced the 2011 requirement by 243.4 million gallons to a mere 6.6 million. Some critics suggest that even much of that 6.6 million isn’t true cellulosic fuel.

The WSJ notes that 6.6 million gallons have been produced this year, though I do not think that this is correct. As far as I can tell, from EPA’s own data, no qualifying cellulosic ethanol has been produced through the end of October, 2011. They do note that some do not believe that the 6.6 million gallons is true cellulosic fuel.

They also cover the bizarre tax that the EPA has forced refiners to pay: $1 per gallon of cellulosic ethanol requirement in the form of a waiver or renewable fuel credit:

It gets worse. Because there was no cellulosic fuel available, oil companies have had to purchase “waiver credits”—for failing to comply with a mandate to buy a product that doesn’t exist. In 2010 and this year, the EPA has forced oil companies to pay about $10 million for these credits. Since these costs are eventually passed on to consumers, the biofuels mandate is an invisible tax paid at the gas pump.

Read the whole editorial here.

In related ethanol news, a recent cellulosic ethanol project, Range Fuels, declared bankruptcy after failing to produce cellulosic ethanol:

The plant was closed after a technical defect limited it to run at half rates and it produced cellulosic methanol, a fuel the Environmental Protection Agency doesn’t consider eligible for use to meet federal biofuel targets.

Range Fuels had also received millions of dollars in government loans (or loan guarantees) from the Department of Energy and the Department of Agriculture. The Range Fuels bankruptcy did not receive nearly as much traction as Solyndra, perhaps because Republicans are often as bad on ethanol as Democrats have been in the past. Hopefully, events like this will shift attitudes away from supporting projects like this.

Finally, in yet another fiasco caused by the ethanol mandates, over $9 million was spent by industrial refiners on the purchases of fake renewable identification numbers (RINs). Essentially, someone set up a fraudulent company and sold these RINs (which refiners are required to purchase in order to show EPA that they are meeting the mandate), which are supposed to be tied to individual gallons of ethanol. However, this individual didn’t actually produce any of the ethanol, and refiners are now being held liable for huge fines. As I understand it, the RIN market is often separate from the actual market for the fuel, which allowed for scams like this to take place.

Keep your eye out on a subsequent letter to the editor from some ethanol proponent who promises that a decade from now it will save the U.S. from its addiction to oil.

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