EPA adds to controversial biofuel mandate

A week after a federal appeals court rejected a government mandate that refineries buy millions of gallons of alternative fuel though almost none was available for sale, the U.S. Environmental Protection Agency said it plans to require companies to buy even more of it this year.

The EPA on Thursday  said it would require refineries to buy 14 million gallons of cellulosic biofuel in 2013 as part of the government’s efforts to grow the nascent alternative fuels industry.

But a federal appeals court in Washington said last week that the EPA’s 2012 requirement of 8.65 million gallons was flawed, especially since virtually none of the fuel was commercially available for sale. It is not yet clear how the EPA will react to the court’s rejection of the 2012 mandate, and its 2013 proposal for the fuel is likely to draw challenges as well.

Cellulosic biofuel is ethanol fermented from grasses, solid waste and other non-food materials. Most ethanol in the United States is made from corn. According to the EPA, just 20,069 gallons of cellulosic biofuel were available for sale in 2012, all of it produced in the month of April. There was no other production that would have been available to refiners to meet the 8.65 million gallon mandate, according to the EPA.

The Renewable Fuels Association cheered the proposed 2013 mandate as a step forward for alternative fuels.

“The proposed standard in no way exaggerates the volumes that will be available in 2013 based on current information, and may ultimately prove to be conservative,” Bob Dinneen, CEO of the Renewable Fuels Association, said in a statement. “Cellulosic ethanol is being produced today at commercial scale in Florida, and with construction nearing completion at several other commercial sites, we fully expect 2013 to be the breakthrough year for cellulosic ethanol.”

Fuels America, in a statement, said the EPA mandates have helped to encourage the renewable fuel industry in the past and will likely continue to do so.

“The policy is working: cellulosic biofuels are being produced now and millions of gallons of cellulosic fuel are expected to come online in the next two years,” the group said in a statement.

The EPA requires refiners to buy and blend set volumes of alternative fuels into their overall supply as part of the Renewable Fuel Standard efforts to reduce dependence on fossil fuels and cut emissions.

To generate its volume projections, the agency considered data from the U.S. Energy Information Administration and “collected information on individual facilities that have the potential to produce qualifying volumes for consumption as transportation fuel, heating oil, or jet fuel in the U.S. in 2013,” according the EPA.

As a result of the Renewable Fuel Standard, refiners have purchased and blended billions of gallons of corn-based ethanol, biodiesel and other alternative fuels into their products in recent years.

But since virtually no cellulosic biofuels have been available for sale, the refiners have had to buy waiver credits from the EPA, at a rate of 78 cents a gallon.

That waiver fee would have cost the industry about $8 million in 2012, according to oil industry trade group the American Petroleum Institute, which cheered the court ruling a week ago vacating the 2012 requirement.

But the organization appeared frustrated by the new volume projections.

“The court recognized the absurdity of fining companies for failing to use a nonexistent biofuel,” said Bob Greco, the API’s downstream group director. “But EPA wants to nearly double the mandate for the fuel in 2013. This stealth tax on gasoline might be the most egregious example of bad public policy, and consumers could be left to pay the price. EPA needs a serious reality check.”

The EPA, in a press release, said the proposal would take into account public feedback during a 45-day comment period.

“EPA continues to support the use of renewable fuels within the transportation sector through the (Renewable Fuel Standard) program, which encourages innovation, strengthens American energy security, and decreases greenhouse gas pollution,” the agency said.

The requirements call for a total of 16.55 billion gallons of renewable fuels, including biodiesel, corn-based ethanol, and other biofuels, to be purchased by refiners in 2013, an increase of 1.35 billion gallons from the 2012 requirement.