API protests ‘unrealistic mandate’ for cellulosic ethanol

The Wichita Eagle  • Posted: Monday, April 2, 2012

WICHITA — The American Petroleum Institute filed a lawsuit Monday in Washington D.C. challenging the EPA’s mandate for oil companies to the buy 8.65 million gallons of ethanol made from cellulosic materials and blend it into their gasoline for retail sale. Oil companies say there isn’t nearly enough cellulosic ethanol being made, forcing them to bid up the price — or just violate the law.

“EPA’s standard is divorced from reality and forces refiners to purchase credits for cellulosic fuels that do not exist,” said API Director of Downstream and Industry Operations Bob Greco. “EPA’s unrealistic mandate is effectively a tax on manufacturers of gasoline that could ultimately burden consumers.”

The vast majority of U.S. made ethanol comes from corn but the federal government has tried to encourage the ethanol industry to develop the ability to make ethanol out of wheat straw, corn stalks, switch grass and other inedible plant material. The idea is that cellulosic material is more plentiful and less valuable. The problem is that, at this point, it’s a lot more expensive to unlock the energy from cellulosic materials. The industry is only doing the research and expanding production when they can make money at it, which means there’s not much commercial scale ethanol production at this point.

The oil industry plainly thinks the federal government has unleashed another mandate built on wishful thinking. Probably, but the government may get its way anyway: As oil companies bid up the price of cellulosic ethanol — driving up the cost of gasoline at the pump — it becomes more valuable and ethanol companies will get more serious about investing in it, eventually bringing the price down. That’s what happened with corn ethanol, which is now as cheap as gasoline. The question is how long is “eventually”?