On Energy: EPA’s Ethanol Mandates Are Costing Consumers

February 8, 2013

Daniel Kish, Feb. 7- On Friday, the D.C. Circuit chastised the Environmental Protection Agency for favoring the biofuel industry instead of objectively projecting cellulosic ethanol production. You would think that the EPA would have been slightly cowed by the court, but they were not. Less than one week after the ruling, the agency has released new projections that are even more out of touch with reality than the projection that the court struck down. Sadly, the EPA's decision has consequences and in this case, it means higher gasoline prices at the pump.

In 2007, Congress and President Bush passed a law mandating fantastically large volumes of cellulosic ethanol. For example, for 2013 the law requires refiners to buy 1 billion gallons of cellulosic ethanol. But Congress understood that reality might not match their expectations and authorized the EPA to annually consult with the Energy Information Administration to project the amount of cellulosic ethanol that will be produced the next year. The EPA's projection would then be the mandated amount of cellulosic ethanol.

The EPA's projections have been out of whack with reality and because oil refineries are required to buy this phantom fuel or purchase credit (in effect a tax), the refiners took the EPA to court for skewing its projections in favor of cellulosic ethanol producers to the detriment of refineries and gasoline-buying Americans.