The Cellulosic Ethanol Fraud

By Editors

One of the more ridiculous efforts going on right now is the Environmental Protection Agency’s cellulosic ethanol mandates on gasoline producers. The mandate was written in 2007 in anticipation that cellulosic ethanol would soon be available. But there is none. Fermenting cellulosic ethanol on a commercial scale is an extremely difficult process that no one has yet been able to master. Yet the mandate goes on. The EPA has reduced the requirement by 95 percent but still says that oil refiners must blend in 8 million gallons of non-cellulosic ethanol a year. And it forces them to buy “waiver credits” for not doing so. Thus, the whole program has just become another quiet method of raising revenue for the government.

The graph illustrates the mandate, EPA rulings and actual cellulosic ethanol production over the past three years. The horizontal axis represents the three years, 2010, 2011, and 2012. The vertical axis represents quantities of cellulosic ethanol from zero to 500 million. The blue bar is the original Congressional mandate. The orange bar is the EPA’s proposed rule for each year. The green bar (barely visible) if the quantity the EPA eventually decided upon for the rule. The non-existent red bar (indicated by the red arrow) is the actual amount of cellulosic ethanol produced each year.

The Congressional mandate was originally for 100 million gallons in 2010, 250 million in 2011 and 500 million in 2012. The EPA went along for the first year until it realized there was no production. Then it adjusted its ruling down to 3 million, still an unrealistic number. In 2011 it proposed only 10 million and eventually lowered it to 6.8 million. Still nothing available. This year the EPA targeted the same 10 million and eventually settled on 8 million. Go figure.

Two companies, Range Fuels of Georgia and Cell Energy of Alabama have opened plants claiming to have mastered a technique for fermenting ethanol from wood products.  Both closed quickly after finding out it didn’t work. Range managed to protect its investors by raising $160 million from the federal and state governments and sticking the governments with the loss. Last week a company named KiOR opened yet another plant in Mississippi claiming it has hit upon the magic formula for turning wood into gasoline. Will it work? Who knows?

Meanwhile, the EPA continues to force refiners to buy “waiver credits” for $1 a gallon on the premise that some day they will be able to cash them in if cellulosic fuel ever arrives. At the current rate, that costs refiners $8 million a year. To add to that, the EPA has also decided to hold refiners responsible if they buy fraudulent biodiesel credits from the hive of little “green fuel” companies that have sprung up to meet a similar biodiesel mandate. These companies have gotten into the habit of selling credits for biodiesel they don’t have, even though it’s very difficult for the refiners to check. Clean Green Fuel of Maryland, Absolute Fuels of Texas and Green Diesel LLC have all been prosecuted for selling a total of 140 million gallons’ worth of fake credits but the EPA has also fined 22 refiners for being defrauded by them. The cost to the refineries has been an additional $200 million. Smarter Fuel Future, which prepared this graph, says the program has simply become another way of taking money out of the pockets of consumers and producers and putting it in the hands of the government.

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