Despite court ruling, EPA raises biofuel estimate

A chemical engineer holds up a test-tube of biofuel at the Oleoplan factory in Brazil. (REUTERS/Bruno Domingos)

Days after a federal appeals court said the Obama administration is setting overly optimistic production quotas for the struggling biofuels industry, the government issued new standards Thursday that raise production estimates for 2013.

New standards announced by the Environmental Protection Agency require production of 14 million gallons of so-called cellulosic biofuels made from grasses and woody material. That's up from an 8.7 million-gallon requirement in 2012 -- when actual production was near zero.

An oil industry representative said the Obama administration was thumbing its nose at a ruling last week by the U.S. Court of Appeals for the District of Columbia. The court threw out the 2012 mandate for cellulosic biofuels, saying it was based on wishful thinking rather than accurate estimates for an industry the Obama administration wants to encourage. Administration officials have said that increased use of biofuels could lower greenhouse gas emissions that contribute to global warming, as well as lower U.S. dependence on foreign fuel.

"The court recognized the absurdity of fining companies for failing to use a nonexistent biofuel," said Bob Greco, director of downstream operations for the American Petroleum Institute, the principal lobbying group for the oil and gas industry.

Greco said he was astonished that EPA would nearly double the mandate for biofuel in 2013. "EPA needs a serious reality check," he said, calling the mandate a "stealth tax on gasoline" and an "egregious example of bad public policy."

EPA spokeswoman Julia Valentine said the agency believes the proposed standards "are a reasonable representation of expected production" of biofuels this year.

"This projection reflects EPA's current estimate of what will actually happen in 2013," she said, adding that EPA will consider public comments before setting the final cellulosic standard.

The biofuels mandate is part of a 2007 renewable fuels law that requires a certain amount of ethanol and other renewable fuels to be mixed in with gasoline each year. Despite annual EPA projections for millions of gallon of biofuels made from switchgrass, corn husks or wood pulp, little production has materialized.

According to final EPA estimates, no cellulosic fuel was produced in 2010 or 2011. Only about 25,000 gallons was produced last year.

Despite that track record, a spokesman for the renewable fuel industry called the 2013 mandate realistic, citing recent breakthroughs in which several long-delayed biofuel projects have come online.

Two companies, in Mississippi and Florida, have recently begun production of cellulosic biofuel, and dozens more are moving forward, including plants under construction in Iowa, Kansas and Michigan, said Bob Dineen, president of the Renewable Fuels Association.

Dineen said he understands skepticism from those who have seen promised production of biofuels fail to materialize, but said that after years of setbacks caused by the financial downturn and other issues, the industry is poised for a major breakthrough in 2013.

"The skeptics should go take a look at the plants" in Mississippi and Florida, he said. "They are in operation."

Dineen called the EPA's 14 million gallon estimate "conservative." If anything, production should exceed that level, he said, especially if a major project by Abengoa Bioengergy to convert crop residues into ethanol in southwest Kansas goes into operation this year as expected. The $550 million plant is expected to generate 75 megawatts of electricity and 15 million gallons of ethanol per year.

Dineen said the API and others in the oil industry were "desperately afraid" that biofuels will succeed and threaten the oil industry's dominance.

"They are trying to sow the seeds of doubt so people don't make investment in these future technologies and they can maintain their grip on the fuel pump," he said.