Court rules EPA can't mandate nonexistent biofuels

The Hill:

A federal court delivered a blow to the biofuel industry Friday when it ruled the Environmental Protection Agency (EPA) must lower certain targets in a key biofuel-blending rule.

The U.S. Court of Appeals for the District of Columbia Circuit sided with the American Petroleum Institute (API), saying the EPA cannot set forward-leaning blending projections for cellulosic biofuel when supplies aren't available to meet the requirements.

“[W]e agree with API that EPA’s 2012 projection of cellulosic biofuel production was in excess of the agency’s statutory authority. We accordingly vacate that aspect of the 2012 RFS (renewable fuel standard) rule and remand for further proceedings consistent with this opinion,” the court said in its decision.

A biofuel trade group official familiar with the case told The Hill that the court decision creates uncertainty for investment in cellulosic biofuels, a type of “advanced” biofuel made from non-edible feedstock.

The cellulosic portion is one component of the renewable fuel standard, the linchpin for the domestic biofuel industry. The petroleum trade group is trying to get Congress to repeal the rule while also fighting it on the legal front.

The Friday court decision on the cellulosic portion amounts to the oil-and-gas lobby's first major victory in that effort.

The rule requires refiners to blend 36 billion gallons of biofuel into traditional transportation fuel by 2022. Of that total, the EPA had called for refiners to blend 10.45 million ethanol equivalent gallons last year — but producers pumped out just 22,000.

API said refiners were forced to buy credits for phantom gallons of cellulosic biofuel to meet the EPA’s targets. It said the EPA should bring its projections in line with actual production levels.

The court agreed with that opinion on Friday.

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The EPA requirement made no sense and appear to be a way to generate revenues for the failure to use the nonexistent fuels and a blatant attempt to try to get gas producers to help generate the fuel.  The main reason it is not being produced is that it is not cost effective to produce it.

In a response to the ruling the API said:

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The Clean Air Act requires EPA to determine the mandated volume of cellulosic biofuels each year at “the projected volume available.” There was no commercial supply of the fuel in 2012, according to EPA’s own records. EPA’s mandate would have required refiners and importers of gasoline and diesel to pay over $8 million for credits to cover the 2012 mandate of 8.65 million gallons of the nonexistent biofuels. The court said that EPA is not allowed “to let its aspirations for a self-fulfilling prophecy divert it from a neutral methodology.” The court also pointed out the fundamental flaw with the overall biofuel mandates when it summarized this part of the program as, “[d]o a good job, cellulosic fuel producers. If you fail, we’ll fine your customers.”

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I think the court should have invoked sanctions against the EPA for this extortion attempt.  This is another example of the regulatory overreach of the EPA under the Obama administration.