Big Oil sues over cellulosic ethanol mandate

Source: Dan Piller, De Moines Register • Posted: Thursday, July 26, 2012

Oil companies have never liked the federal Renewable Fuels Standard, but they have a special ire for the requirement for the use of non-corn, cellulosic ethanol that is virtually nonexistent.

The American Petroleum Institute, which represents the largest oil companies, filed a lawsuit with the D.C. Circuit Court late Tuesday challenging the Environmental Protection Agency’s mandated use of cellulosic biofuels in the 2011 Renewable Fuel Standard (RFS).

Cellulosic biofuels, made from crop residue or grasses, have been slower to develop than originally hoped and for the last two years the EPA has acknowledged that federal targets for the noncorn ethanol have not been met.

In Iowa, two corn stover plants at Emmetsburg and Nevada are scheduled to begin construction this year in time for the 2013 harvest. They will be the first noncorn ethanol plants in what is the nation’s largest ethanol producing state.

“EPA’s unattainable and absurd mandate forces refiners to pay a penalty for failing to use biofuels that don’t even exist,” said API Director of Downstream and Industry Operations Bob Greco. “The mandate is effectively an added tax on gasoline manufacturers that could ultimately burden consumers.”

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 2011, according to EPA’s own records. However, EPA required refiners and importers of gasoline and diesel to use or pay for credits to cover 6.6 million gallons of the nonexistent biofuels.

The Renewable Fuel Standard has become a target by livestock producers as corn prices reached record levels this summer due to the drought, causing fears of shortages and high food prices. A bill introduced this week in the U.S. House of Representatives by Reps. Bob Goodlatte (R-Va.) and Jim Costa (D-Calif.) would cut the RFS by as much as 50 percent if corn surplus stocks fall below certain levels.

Corn surpluses have been at 15-year lows for most of the last two years due both to export demand and the fact that ethanol now consumes about 35 percent of the U.S. corn crop. In Iowa, home of the nation-leading 41 ethanol plants, ethanol consumes about 60 percent of the crop.