Unicorns Twist Science and Corrupt the Rule of Law

Section 201 of the Energy Independence and Security Act of 2007 (EISA), Pub.L. 110-140, signed by President Bush on December 19, 2007 (codified at 42 U.S.C. § 7545(o)), amended the Clean Air Act to require the EPA mandate that domestic transportation fuel contain a specified volume of renewable fuel, including "cellulosic biofuel." Cellulosic biofuel is made from cellulose, "the leaves, stems, and other fibrous parts of a plant." EISA originally set average annual cellulosic fuel targets of (Section 7545(o)(2)(B)(I)(iii)) 100 million gallons in 2010, 250 million 2011 and 500 million for 2012. A failure to meet the cellulosic standards in any year would oblige fuel providers to buy "waivers" from the EPA at "the higher of $0.25 per gallon or the amount by which $3.00 per gallon exceeds the average wholesale price of a gallon of gasoline," adjusted for inflation since 2008 (42 U.S.C. § 7545(o)(7)(D)).

Environmentalists were ecstatic about the mandate, certain that the volume of cellulosic biofuels available by 2010 would "far exceed the mandate." Whoops. It turned out that processing leaves to fuel wasted nearly half the cellulosic biomass, yielding only about 4 percent ethanol. The EISA law allowed the EPA to reduce the alternative fuel quotas. Recognizing reality, the EPA reduced the cellulosic fuel requirement for 2010 first to 12.95 million gallons then down to 6.5 million for 2010, and 6.6 million gallons in 2011.

Whoops twice: the EPA acknowledged that, through July 2011, exactly zero gallons of cellulosic biofuel were produced. 77 Fed. Reg. 1320, 1323 (Jan. 9, 2012). But that's not going to stop the EPA from forcing fuel producers to buy cellulosic fuel "waivers" (a euphemism for "paying fines"), according to the New York Times:

When the companies that supply motor fuel close the books on 2011, they will pay about $6.8 million in penalties to the Treasury because they failed to mix a special type of biofuel into their gasoline and diesel as required by law.

But there was none to be had. Outside a handful of laboratories and workshops, the ingredient, cellulosic biofuel, does not exist.

The $6.8 million figure is based on the waiver price EPA set last year: $1.13/gallon. (Obligated companies can carry over un-met quotas for one year, but not a second year, a problem since no cellulosic biofuel existed in 2010 either.)

Undeterred, the EPA perpetuated its "misguided optimism" by upping this year's cellulosic fuel additive quota to 8.65 million gallons. 77 Fed. Reg. at 1323. Yet, few believe this goal can be reached: one possible producer, Range Fuels, wasted $65 million in state and federal subsidies and closed its cellulosic fuels plant before being sold for pennies on the dollar. Another company, Poet, isn't scheduled to begin commercial cellulosic fuel production until 2013.

A third possible source is Mascoma, a company partly owned by General (i.e., Government) Motors--but Mascoma only completed construction financing on December 14th, courtesy of an $80 million Department of Energy grant. Given that timing and ownership, Mascoma is more likely to experience a Solyndra-style bankruptcy than produce a barrel of cellulosic fuel this year. Maybe they should switch to dilithium crystals.

So I'm betting on a third "whoops." Fortunately, the EPA is dropping the price of cellulosic fuel waivers (fines) to $0.78 for 2012.

Conclusion: This isn't just crony capitalism. It's not merely starry-eyed EPA Administrator Lisa Jackson joining Obama on the unicorn, rather than real, world, to the detriment of the economy. And it's beyond a parody of the President's promise to "restore science to its proper place."

Most importantly, punishing companies for failing to sell non-existent fuel also is a complete breakdown in the rule of law. Criminal laws with which citizens or companies cannot conform, however hard they try, are unconstitutionally vague. City of Chicago v. Morales, 527 U.S. 41 (1999). Calling a multi-million dollar administrative sanction a "waiver fee" can't change the result without turning law -- and law enforcement -- into a cruel joke.

I didn't think this was encouraged at Harvard Law.

(via reader Warren)