Monday, March 12, 2012

Mandates vs. Opportunities

As the final accounting for 2011 draws to a close, the U.S. Treasury Department will report that gasoline and diesel refiners paid roughly $6.8 million in penalties because they failed to blend their fuel with federally-required levels of cellulosic ethanol. Why did these refiners allegedly ignore Congress’ mandate to blend approximately 250 million gallons of cellulosic ethanol into their fuel for 2011?  It’s pretty simple, because there’s not enough of the product.

Despite some promising lab results, cellulosic ethanol is not in commercial production and nowhere near reaching your corner gas pump. In fact, it barely exists at all. How much more out of touch can our federal mandates get? I’m afraid to find out.

Possibly foreseeing the painful scenario, that often results when government tries to manipulate the marketplace, Congress allowed the Environmental Protection Agency to adjust the renewable fuel standards to better align consumption mandates and production capability. EPA revised the mandates, reducing the artificial demand for non-existent cellulosic ethanol to 6.6 million gallons for 2011 and 8.65 million gallons for 2012, far short of the 500 million gallons originally envisioned by Congress. Correct me if I’m wrong, but reducing the requirement for something that doesn’t exist does not make it magically appear.

The money paid in fines may be put to good use, however, when it helps repay the federal deficit from failed investments in cellulosic ethanol companies now in bankruptcy or mothballed due to technology failures.

There is a solution, however, in the form of a very different biofuel that is readily available and produced right here in Texas: biodiesel. Action by the Texas Commission on Environmental Quality removed a mandate requirement on costly fuel additives that had limited growth of the biodiesel market and raised the end costs to consumers. This change provides consumers with a less expensive product and one that is actually rooted in reality. Perhaps it is time to take advantage of existing opportunities rather than paying penalties for Congress’ unrealistic mandates.

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