Lawsuits Challenge Unrealistic RFS Mandate

The American Fuel & Petrochemical Manufacturers (AFPM) and the American Petroleum Institute (API)  have filed lawsuits with the D.C. Circuit Court challenging EPA’s unrealistic 2013 cellulosic biofuel requirement under the Renewable Fuel Standard (RFS)—requirements that were released nine months late.

This year’s cellulosic mandate requires refiners to blend 6 million gallons into the nation’s fuel supply, but cellulosic ethanol remains essentially nonexistent. The actual amount of cellulosic ethanol available to refiners so far this year is closer to 142,000 gallons, far from the EPA’s 6 million gallon mandate. Despite the disparity between the mandate and reality, refiners are forced to pay fines for not meeting the requirements.

This gross overestimate is nothing new for EPA. Earlier this year, the D.C. Circuit Court rejected the agency’s 2012 mandate on the grounds that EPA “let its aspirations for a self-fulfilling prophecy divert it from a neutral methodology.”[i] This decision came after EPA fined refiners almost $7 million in 2011 for failing to blend fuels that did not exist.

As we have reported on several occasions, and as shown in the graph below, there has been a consistent gap between the amount of cellulosic ethanol mandated by EPA and the amount actually produced.

Naturally, supporters of the RFS are crying foul over the lawsuit. Bob Dinneen, president of the Renewable Fuels Association, went as far as to call API’s actions “frivolous” and “slavish.” He also said the following about the 2013 requirements:

“While the 2013 [Renewable Volume Obligations] were issued later than anyone would have liked, the fact is the statute is crystal clear, and all stakeholders have been producing and blending at levels that will unquestionably meet the 2013 requirements.”[ii]

Dineen is correct, the statute is crystal clear, but he is wrong about what it means. The statute clearly gives EPA the ability to waive the ethanol requirements and the statute clearly requires EPA to use a “neutral methodology” as the D.C. Circuit stated to actually estimate the RFS requirements. EPA has failed to do this.

Dinneen’s claim that all stakeholders will “unquestionably” meet the 2013 requirements is far from reality. As IER has pointed out before, cellulosic ethanol production continues to fall short of expectations. For example, the KiOR Inc. plant in Columbus, Mississippi, which was projected to produce the bulk of the 2013 mandate[iii], missed its second quarter production forecast by 75 percent. How can refiners blend a fuel that is not being produced?

The RFS, and the cellulosic ethanol mandate in particular, has no basis in reality. The EPA continually overestimates cellulosic ethanol production, but refuses to adjust the mandate accordingly. It is absurd to force refiners to pay a fine for failing to blend a fuel that is basically nonexistent. This is yet another example of why the government should step aside, end the harmful ethanol mandate, and allow the market to function.

IER Press Secretary Chris Warren authored this post.