By mandating unrealistic ethanol policies, Congress is driving up the cost of fuel and making life hard on oil refiners. (Getty Images)
After years of criticism and wasted tax dollars, Washington last year finally cut its 45-cents-per-gallon subsidy for corn ethanol fuel, saving taxpayers $6 billion a year. That was a good move, but ethanol meddling has continued.
When it comes to ethanol, the federal government is determined to interfere. The mandate for plant-based, cellulosic ethanol in your gas is a good example.
The plot was hatched by President George W. Bush in 2006 as part of a self-conscious oil-man's pledge to end America's "addiction to oil." This coincided with emerging evidence that corn ethanol may be bad for the environment and that it's production diverts precious food to fuel. The 2007 Energy Act mandated that oil refiners use 100 million gallons of cellulosic ethanol by 2008 and 36 billion gallons by 2022.
The biggest roadblock? The product — which is derived from switch grass or farm waste — did not yet exist commercially. To jump-start production, Congress dished out $1.5 billion in tax money to companies to develop the fuel. Washington figured that if it built a mandated market, somebody would surely come.
The effort was not lacking in investors, most notably General Motors, which made a big splash at the 2008 Detroit Auto Show when it announced it had partnered with Coskata Inc. to develop cellulosic ethanol from biomass. Anticipating the fuel mandated for its vehicles, GM was keen to reap profits as well.
"We look to put as much as 10 billion gallons of ethanol on the market by 2022," said a Coskata spokesman after GM's investment.
Four years later and Coskata has abandoned its cellulosic efforts, having failed to develop a competitive product. British Petroleum has also abandoned ambitious plans launched in 2008.
Indeed, the cellulosic ethanol industry has not produced a single gallon of fuel for the commercial gasoline market.
Yet, Congress's mandate remains.
In 2012, the Environmental Protection Agency required oil refiners to blend 8.7 million gallons of cellulosic fuel into gasoline. And since the product doesn't exist, the agency then handed out millions of dollars in oil industry fines for non-compliance.
John Griffin of the Associated Petroleum Industries of Michigan says this is harmful. "The renewable fuels mandate is one of our chief concerns," he says. "If we fall short, then we're fined." And those fines are being passed on to American consumers who are already struggling to pay nearly $4 for a gallon of gas.
The industry has sued the EPA and won a temporary reprieve from the mandate under a provision of the law that allows the agency to set a more reasonable mandate based on "the projected volume available." But a reasonable mandate for a product that doesn't exist is another justification for more government mischief-making.
"Refiners are in no position to ensure, or even contribute to, growth in the cellulosic biofuel industry," said Washington, D.C., Court of Appeals Judge Stephen Williams, noting the absurdity of enforcing the cellulosic law.
Only in Washington. Given reality, Congress ought to repeal its useless cellulosic ethanol mandate.