Court ruled EPA set cellulosic ethanol mandate too high

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Last week, a U.S. Appeals Court rejected the Environmental Protection Agency’s 2012 mandate for refiners and blenders to use 8.7 million gallons of cellulosic ethanol. The court vacated the mandate because it believed that EPA set the level too high with the objective of promoting growth in the industry.

The fact is that commercially produced cellulosic ethanol production was essentially zero in 2012 making it nearly impossible for blenders and refiners to meet the mandate. But the court ruling does not mean that the cellulosic mandate will be eliminated, or even that it must match production in the future. EPA is free to reinstate the volumes that it had established as long as the information available at the time supports the conclusion that the volumes are reasonably achievable.

The EPA mandate was far below the original target for the biofuel. The original ethanol mandates were included in the Energy Independence and Security Act (EISA) of 2007. The law sets the annual ethanol mandates in four categories, with total ethanol use rising to 36 billion gallons by 2022. The law applies to refiners and blenders of ethanol, not producers. So the blender or refiner must satisfy the mandate, even if the fuel is not produced. Since Congress did not know how fast the cellulosic ethanol industry would develop, the law has an escape hatch. EPA can reduce the mandated quantity based on projected production, a step EPA has taken in each of the last three years.

The court case was about how EPA comes up with their adjusted mandate. Under the law EPA bases the adjusted mandate on the cellulosic ethanol production estimate generated by the Energy Information Administration (EIA), the general progress of the cellulosic biofuel industry, EPA’s own assessment of the progress and public comments. The EIA estimate for 2012 was 6.9 million gallons of cellulosic ethanol production. The court ruled that EPA’s technical approach was okay but that EPA tilted the mandate up in an effort to promote the growth of the industry.

Cellulosic ethanol may never reach the original goals set in the RFS. So, the EPA can continue to consider the various factors in setting the mandates for future years, but the results of the efforts will probably put the level closer to the EIA estimates. However, EPA’s mandates can still be significantly different from those of the EIA as long as EPA can justify the deviations based on the information available at the time. The mandates will probably still be set high enough to boost the cellulosic ethanol industry, but it is not clear if production of the biofuel will ever be high enough to reach the original targets set in the 2007 RFS law.

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