Why does America's economy feel like an SUV running on fumes? The Obama administration's laughably rigid enforcement of a Baby Bush-era ethanol mandate typifies today's regulatory climate. When Uncle Sam governs with a tire iron in his hand, U.S. companies wisely pull off the road and pray for new management.
The Environmental Protection Agency has slapped a $6.8 million penalty on oil refiners for not blending cellulosic ethanol into gasoline, jet fuel and other products. These dastardly petroleum mongers are being so intransigent because cellulosic ethanol does not exist. It remains a fantasy fuel. EPA might as well mandate that Exxon hire leprechauns. So far this year, just as in 201l, the supply of cellulosic biofuel in gallons totals zero.
"EPA's decision is arbitrary and capricious. We fail to understand how EPA can maintain a requirement to purchase a type of fuel that simply doesn't exist," said Charles Drevna, president of American Fuel & Petrochemical Manufacturers, the Washington-based association representing the oil-refining industry.
President George W. Bush idiotically signed the Energy Independence and Security Act of 2007. Beyond prohibiting Thomas Edison's groundbreaking incandescent light bulb by 2014, the act's renewable fuel standard (RFS) mandated cellulosic ethanol. Under that standard, refiners had to blend 6.6 million gallons of cellulosic ethanol in 2011. Although this substance is not extant, EPA then demanded to see 31 percent more of it. This year's quota is 8.65 million gallons. Somehow, EPA expects cellulosic ethanol to leap magically from test tubes into storage tanks.
Bush and President Barack Obama have pumped some $1.5 billion in grants and guarantees into converting cellulosic ethanol from dream into reality. As Thomas Pyle of the Institute for Energy Research reports, Team Obama handed a $105 million loan guarantee to POET, a leading U.S. ethanol producer, to create cellulosic fuel. (The South Dakota-based firm turned it down.) Last September, Abengoa Bioenergia scored a $134 million loan to build a Kansas cellulosic factory. Last August, Obama gave the Navy $510 million to develop biofuels for the U.S. armed forces.
Way back in 2010, some 70 percent of fantasy fuel was supposed to spring from Cello Energy in Alabama. Unfortunately, in 2009, a jury determined that Cello falsified its production capacity. Cello went dark in October 2010 when it filed for bankruptcy.
The National Academy of Sciences predicted last year that by 2022, EPA's mandated cellulosic supplies would not materialize "unless innovative technologies are developed that unexpectedly improve the cellulosic biofuels production process." In other words, if you don't build it, they will not come.
The oil refiners absorbed all of this and chose, at first, to play nice. The fuel-manufacturing association and the American Petroleum Institute petitioned EPA in February 2011 and, again, on Jan. 20, 2012 -- this time joined by the Western States Petroleum Association. As the administration gave labor unions and entire states waivers from the Affordable Care Act, the refiners asked for waivers from the RFS mandate.
Fully 15 months after the first petition and four months beyond the second, EPA administrator Lisa Jackson finally rejected the refiners' appeals, reaffirming that they must obey this regulation -- never mind that they more easily could defy gravity. "We thank you for your interest in these issues," Jackson's May 22 letter cheerily added.
Thus, on June 11, the fuel manufacturers (AFPM) and Western States Petroleum Association sued EPA in D.C. Circuit Court. The plaintiffs hope that a federal judge will blend some sanity into a scenario that resembles the work of Salvador Dali.
Rather than focus on expanding operations and creating jobs, lawful American companies now must spend money to sue the federal government for relief from unobservable rules. This fact demonstrates how boneheaded and bullheaded Washington has become. Even worse, business people beyond the oil industry watch this charade and wonder when the regulatory tumbrels will roll by for them.
Washington's unyielding, heavy-handed and nonsensical behavior nonetheless may obscure a sliver of silver lining. The Bush-Obama administration indeed has invented a hybrid fuel: cellulosic ethanol is one-half industrial policy and one-half comedy routine.
(New York commentator Deroy Murdock is a columnist with Scripps Howard News Service and a media fellow with Stanford University's Hoover Institution on War, Revolution and Peace. Email deroy.Murdock@gmail.com.)
Copyright 2012 Scripps Howard, Inc.All Rights Reserved.
(Originally published July 12, 2012, by Scripps Howard News Service.)