Court rules EPA ethanol mandate “unreasonable”

Source: By CHRISTOPHER DOERING, Gannett Washington Bureau • Posted: Saturday, January 26, 2013

Read D.C. Court of Appeals Decision here.  DC Court of Appeals Opinion


WASHINGTON — A federal court delivered a defeat to the biofuels industry Friday, ruling the U.S. government exceeded its authority by requiring refiners to purchase cellulosic biofuel despite the fact the next-generation fuel is not commercially available.

The U.S. Court of Appeals for the District of Columbia decided in favor of the American Petroleum Institute when it ruled that the Environmental Protection Agency’s process for estimating cellulosic biofuel output “did not take neutral aim at accuracy” and “was an unreasonable exercise of agency discretion.”

The court’s ruling in effect said the EPA’s overly aggressive estimate was set with the goal of promoting the growth of cellulosic fuel to spur investment rather than making an accurate prediction of how much could be produced.

Cellulosic ethanol, made with crop residue, grasses or wood chips, has advanced more slowly than envisioned in the 2007 Renewable Fuels Standard (RFS) enacted by Congress. The EPA has acknowledged that cellulosic output targets in recent years were not being met because of insufficient domestic production.

Last year alone, the EPA said 8.7 million gallons of the advanced fuel must be blended into gasoline. The ethanol industry produced a fraction of that total, about 20,000 gallons, in 2012. The EPA has yet to issue its 2013 mandate for cellulosic production, a decision that could be complicated by the court’s ruling on Friday.

“We agree with API that EPA’s 2012 projection of cellulosic biofuel production was in excess of the agency’s statutory authority,” the three-judge panel said. “We accordingly vacate that aspect of the 2012 RFS rule and remand for further proceedings consistent with this opinion.”

The EPA said in a statement it is reviewing the court’s decision.

The ruling was a victory for the API, the organization that represents major oil and gas producers such as energy giants ExxonMobil and ConocoPhillips. The group has pushed Congress to repeal the Renewable Fuel Standard, a requirement they have called unworkable and ill-conceived.

“This absurd mandate acts as a stealth tax on gasoline with no environmental benefit that could have ultimately burdened consumers,” said Bob Greco, API’s downstream director. “This decision relieves refiners of complying with the unachievable 2012 mandate and forces EPA to adopt a more realistic approach for setting future cellulosic biofuel mandates.”

The court ordered the EPA to reevaluate the 2012 cellulosic standards and have a more realistic mandate in future years. Since no cellulosic was commercially produced in 2012, API contends the mandate for 2012 should be set at zero. For 2013 and beyond, API has asked that EPA base projections on at least two months of actual production, rather than “wishful thinking.”

Earlier this month, supporters of advanced biofuels said cellulosic ethanol is on the verge of coming into its own after a slow start. The groups said that – after years of significant investment and advances in technology to overcome hurdles that have stymied development – there is finally visible progress. As more projects come on line, they said it will spur additional investments in the technology.

In a statement, a group of biofuel groups including Growth Energy and the Renewable Fuels Association said they are “reviewing the court’s decision and assessing next steps in the matter.”

“The biofuels organizations strongly disagree with the court’s characterization of what EPA did — EPA did not determine a reasonably achievable volume and then inflate it,” the groups said in a statement. “Rather, it set the volume based on the best information available to it at the time.”

Monte Shaw, executive director of the Iowa Renewable Fuels Association, downplayed the impact of the ruling.

“It really doesn’t change things because all the EPA has to do is clarify when they roll out the next number and justify . . . they will have to say here is our 2013 number and this is the number that we think will be produced, period. There is no fluff. There is no bonus. There is no added gallons because we want the industry to grow.”

“I think that’s what the EPA did in 2012, but the court disagreed,” Shaw said.

Cellulosic ethanol is considered key to Iowa in order to maintain its position as the nation’s largest ethanol producer. DuPont Industrial Biosciences is building a 30 million-gallon-capacity refinery in Nevada, Iowa. A second cellulosic plant, a joint venture of Poet and Dutch-based DSM Advanced Biofuels, is under construction adjacent to Poet’s corn-fed ethanol plant at Emmetsburg. Other companies have plants in the late stages of development or under construction in more than 20 states and other countries.