Refiners Fined for Failing to Use Non-Existent Fuel

Refiners expect to pay about $6.8 million in government penalties for failing to mix cellulosic biofuel into their gasoline and diesel – even though the supplies don’t exist, the New York Times has reported.

The 2007 Energy Independence and Security Act requires the use of three types of fuel: diesel fuel made from biomass; biofuel that achieves a 50 percent reduction in greenhouse gases; and car and truck fuel made from cellulosic biofuel, which comes from inedible plant parts such as wood chips and corncobs.

This last type is commercially unavailable, although it is being developed in a number of laboratories and pilot projects.

But the law sets a cellulosic vehicle fuel goal of 250 million gallons for 2011 and 500 million gallons for 2012. The oil companies were supposed to blend 6.6 million gallons of it into their gasoline and diesel last year, and are required to blend in 8.65 million gallons this year. The EPA finalized the 2012 quota at the end of December.

The companies say they expect penalties to be higher in 2012 than in 2011.

“It belies logic,” Charles T. Drevna, the president of the National Petrochemicals and Refiners Association, said. And even some renewable fuel proponents, such as Dennis V. McGinn of the American Council on Renewable Energy, say the fines don’t make sense.

But EPA spokesperson Cathy Milbourn said the agency still thinks the 8.65-million-gallon quota is “reasonably attainable.”

Last autumn a National Research Council study found that the U.S. will likely fail to reach its mandate for making 16 billion gallons of ethanol-equivalent cellulosic biofuels from trees, grasses and crop waste by 2022, and a report from the National Academies on the Renewable Fuel Standard expressed impatience that cellulosic biofuel production has not grown fast enough to meet the RFS goals. But according to Environmental Leader columnist Brent Erickson of the Biotechnology Industry Organization, the report is marred by significant errors, and shouldn’t convince readers to give up on advanced biofuels.

Last August Chrysler and ZeaChem Inc. entered into a memorandum of understanding aimed at accelerating the development and market adoption of advanced cellulosic ethanol. Through the alliance the companies say they hope to establish cellulosic ethanol as a cost-effective green transportation alternative.

And last July, Energy Secretary Steven Chu announced conditional commitment for a $105 million loan guarantee to support development of the nation’s first commercial-scale cellulosic ethanol plant. Project Liberty, sponsored by Poet, LLC, plans produce up to 25 million gallons of ethanol per year and will be located in Emmetsburg, Iowa.

Pictured: Poet’s pilot cellulosic biofuel plant in Scotland, South Dakota.