Fined for Failing to Do the Impossible

Posted by: 

Back in 2007, Congress created a biofuels mandate under which oil companies are required to use a minimum amount of cellulosic ethanol each year.  The mandate was supposed to encourage the development of a domestic cellulosic ethanol industry.  This has not happened.  Several years after the mandate was imposed, there is still no commercial cellulosic ethanol production.  This gets the oil companies off the hook, right?  Nope.  As the New York Times reports, companies are still paying fines, totaling nearly $7 million, for failing to meet a blending quota for a substance that does not exist.  Were that not bad enough, this year the cellulosic ethanol quota will increase, as will the fines for failing to meet it.

Who would defend mandating the use of a substance that, for all practical purposes, does not exist?  Not the renewable fuel industry.  As the NYT reports, they acknowledge that commercial production of cellulosic ethanol remains years away.

“From a taxpayer/consumer standpoint, it doesn’t seem to make a lot of sense that we would require blenders to pay fines or fees or whatever for stuff that literally isn’t available,” said Dennis V. McGinn, a retired vice admiral who serves on the American Council on Renewable Energy.
The EPA, on the other hand, defends the mandate:
Cathy Milbourn, an E.P.A. spokeswoman, said that her agency still believed that the 8.65-million-gallon quota for cellulosic ethanol for 2012 was “reasonably attainable.” By setting a quota, she added, “we avoid a situation where real cellulosic biofuel production exceeds the mandated volume,” which would weaken demand.
AEI’s Ken Green has trouble making sense of the EPA’s rationalization:
So what’s most important about biofuel quotas is that they prevent us from over-producing a product that we can’t produce so we don’t weaken demand for the product that the government mandates we use.
As Green notes, Congress might as well have mandated oil companies blend gasoline with rainbows and unicorn sweat.

Originally posted at The Volokh Conspiracy.

Jonathan Adler is Professor of Law and Director of the Center for Business Law & Regulation at the Case Western Reserve University School of Law. He is a prolific scholar, publishing on such topics as regulatory takings, water marketing, fisheries management, and the judicial limits of federal environmental regulation. He is the author,...
Read More > More Articles by Jonathan Adler >