MURDOCK: High cost of fantasy fuel
Team Obama fines companies for not buying fuel that doesn’t exist
Why does America's economy feel like an SUV running on fumes? The Obama administration's laughably rigid enforcement of a Bush-era ethanol mandate typifies today's regulatory climate. When Uncle Sam governs with a tire iron in his hand, U.S. companies wisely pull off the road and pray for new management.
The Environmental Protection Agency (EPA) has slapped a $6.8 million penalty on oil refiners for not blending cellulosic ethanol into gasoline, jet fuel and other products. Those dastardly petroleum mongers are being so intransigent because cellulosic ethanol does not exist. It remains a fantasy fuel. The EPA might as well mandate that Exxon hire leprechauns. So far this year -- just as in 2011 -- the supply of cellulosic biofuel in gallons totals zero.
"EPA's decision is arbitrary and capricious. We fail to understand how EPA can maintain a requirement to purchase a type of fuel that simply doesn't exist," said Charles Drevna, president of American Fuel and Petrochemical Manufacturers (AFPM), the Washington-based association for the oil-refining industry.
President George W. Bush idiotically signed the Energy Independence and Security Act (EISA) of 2007. Beyond prohibiting Thomas Edison's groundbreaking incandescent light bulb by 2014, EISA's Renewable Fuel Standard (RFS) mandated cellulosic ethanol. Under the RFS, refiners had to blend 6.6 million gallons of cellulosic ethanol in 2011. Although this substance is not extant, EPA then demanded to see 31 percent more of it. This year's quota is 8.65 million gallons. Somehow, EPA expects cellulosic ethanol to leap magically from test tubes into storage tanks.
Presidents Bush and Obama have pumped about $1.5 billion in grants and guarantees into converting cellulosic ethanol from dream into reality. As Thomas J. Pyle of the Institute for Energy Research reports, Team Obama handed a $105 million loan guarantee to POET LLC, "the world's largest ethanol producer," to create cellulosic fuel. Last September, Abengoa Energy scored a $134 million loan to build a Kansas cellulosic factory. Last August, Mr. Obama gave the Navy $510 million to develop biofuels for the U.S. armed forces.
Way back in 2010, about 70 percent of fantasy fuel was supposed to spring from Cello Energy in Alabama. Unfortunately, in 2009, a jury determined that Cello had falsified its production capacity. Cello went silent in October 2010 when it filed for bankruptcy.
The National Academy of Sciences predicted last year that by 2022, EPA's mandated cellulosic supplies will not materialize "unless innovative technologies are developed that unexpectedly improve the cellulosic biofuels production process." In other words, if you don't build it, they will not come.
The oil refiners absorbed all of this and chose, at first, to play nice. AFPM and the American Petroleum Institute petitioned EPA in February 2011 and again on Jan. 20 -- that time joined by the Western States Petroleum Association (WSPA). As the administration gave labor unions and entire states waivers from Obamacare, the refiners asked for waivers from the RFS mandate.
Fully 15 months after the first petition and four months beyond the second, EPA Administrator Lisa P. Jackson finally rejected the refiners' appeals, reaffirming that they must obey this regulation -- never mind that they more easily could defy gravity. "We thank you for your interest in these issues," Ms. Jackson's May 22 letter cheerily said.
Thus, on June 11, the AFPM and WSPA sued EPA in D.C. Circuit Court. The plaintiffs hope a federal judge will blend some sanity into a scenario that resembles the work of Salvador Dali.
Rather than focus on expanding operations and creating jobs, lawful American companies must spend money to sue the federal government for relief from unobservable rules.
This fact demonstrates how boneheaded and bullheaded Washington has become. Even worse, businessmen beyond the oil industry watch this charade and wonder when the regulatory tumbrels will roll by for them.
Washington's unyielding, heavy-handed and nonsensical behavior nonetheless may obscure a sliver of silver lining. The Bush-Obama administration indeed has invented a hybrid fuel: Cellulosic ethanol is one-half industrial policy and one-half comedy routine.
Deroy Murdock is a columnist with the Scripps Howard News Service and a media fellow with Stanford University's Hoover Institution.