American Elephants

Millions in Penalties for Not Using a Biofuel That Doesn’t Exist by The Elephant's Child

A basic theme of liberalism is that big government is better government, because wise people from the better schools can do a more efficient job of managing and regulating the economy, because they’re smarter than the rubes out there with their Bibles and guns.  They seldom say it straight out, but it does pop up accidentally every so often.

The powers-that-be have estimated that gasoline prices will rise significantly this summer, and some have suggested that it might be time to dip into the strategic reserve again.  The reserve that was called a “reserve” and “strategic” because it was supposed to be there in the event of a real catastrophe. Higher prices may be hard on the pocketbook, but they are not a catastrophe.

One of the reasons that gas prices may be higher this summer is that oil companies will, when they close the books on 2911, have to pay about $6.8 million in penalties to the Treasury, because they failed to mix cellulosic biofuel into their gasoline and diesel fuel as required by law.  In 2012, the penalties will be even higher.  Cellulosic ethanol is made from wood chips or the inedible parts of plants like corncobs. Refiners were required to blend 6.6 million gallons of biofuel into gasoline and diesel in 2011 and face a quota of 8.65 million gallons this year.

Trouble is, there isn’t any. Cellulosic biofuel exists in a few laboratories, but not commercially. It doesn’t exist. Small details like that have never stopped the EPA in its bid to reduce the nation’s greenhouse gas emissions, and reduce the country’s “dependence on foreign oil.”

Michael McAdams, executive director of the Advanced Biofuels Association acknowledged that the technology for turning biological material into hydrocarbons is advancing, but not ready for commerce.

Retired Vice Admiral Dennis McGinn who serves on the American Council on Renewable Energy defends the statute. Even if the standards for 2011 and 2012 are not met, he said:

I am absolutely convinced from a national security perspective and an economic perspective that the renewable fuel standard, writ large, is the right thing to do. With oil insecurity and climate change related to greenhouse gas emissions as worrisome as ever, advocates say, there is strong reason to press forward.

Well, not so much. The entire case for a worrisome climate change is falling apart. Climate change appears to be absolutely normal rather than something to worry about. The amount of CO2 in the atmosphere is far less than it has been in the past, and mostly rises from the seas rather than the tailpipes of SUVs. There has been no warming since 1998, records of temperature have been falsified. We have discovered huge quantities of recoverable oil and gas in shale deposits across the country. What is depriving us of energy and keeping the cost of energy high is President Obama’s war on energy.

The Keystone XL pipeline delays have cost thousands of jobs and millions in economic activity. The president claims that even though it has been approved by every agency involved, it could imperil aquifers in the area, but doesn’t explain why all the other pipelines in the area are perfectly safe. The president delivered a real blow to the economies of the Gulf just when they could least afford it. All of the operators in the Gulf do not need to be shut down because there was a mistake on one rig. The administration has issued a ban on new uranium mining operations in the Colorado River Basin, citing “environmental” concerns.  The “environmental” concerns seem to be a threat from Big Environment to withhold campaign contributions.

History shows that the money that individuals and businesses invest and spend, if left alone to do so, generates far more wealth and new jobs than any government-directed spending.  The most successful cities and states dedicate their resources to creating the kind of conditions that attract private investment, rather than pouring public money into centrally planned visions of economic development.                                                                                                             (Brian C. Anderson, City Journal)

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Again, don’t blame liberalism, blame corruption and cronyism in Congress. It was Congress that established the Renewable Fuel Standard, Version 2.0, including the requirement that oil companies blend in increasing amounts of cellulosic ethanol.

And who were those members of Congress? Senators like Saxby Chambliss (R – GA), Chuck Grassley (R – IA), Richard G. Lugar (R – IN) and John Thune (R – SD).

Blame them and the rest of their ilk who saw bacon coming home in the form of federal subsidies for cellulosic ethanol made from their corn stover, garbage or trees.

It is really tiresome to read right-wing blogs continue to blame liberalism rather than the real root cause — rent-seking — which knows no party bounds (except, perhaps, Libertarian).


Comment by Subsidy Eye

From the Renewable Fuel Association itself:

The U.S. Environmental Protection Agency (EPA) is required by Congress to adjust the RFS cellulosic biofuel blending volumes based on forecasted future available supplies. For both 2011 and 2012, EPA reduced those volumes by over 90 percent to provide relief for regulated parties and simultaneously implement the very type of credit system the oil industry requested to address the inherent market uncertainties of deploying new fuel technologies in the marketplace.

And, by the way, almost nobody any more is justifying ethanol for its purported greenhouse-gas-reducing benefits. It’s all about rural jobs, energy security, and maintaining high corn prices, don’t you see?

You are so wildly off in blaming “liberals” and the EPA for this mess it isn’t funny.


Comment by Subsidy Eye

So are you claiming that the New York Times article is incorrect and nobody has to pay these immense fines? And that the fines would not raise the cost of gasoline? If so, it won’t be the first time the NYT was incorrect. They have so many corrections that they can hardly be called a news-paper any more.

I am quite aware that you want the Congressmen from corn states taken out and hung. But that is what Congressmen do, is try to, where they can, make laws favorable to their constituents. It is hardly confined to the denizens of the corn states. In my piece, you will see that Admiral McGinn who serves on the American Council on Renewable Energy says “with oil insecurity and climate change related to greenhouse gas emissions as worrisome as ever, advocates say, there is a strong reason to press forward.” I keep insisting that it has nothing to do with “greenhouse gasses” but the idea is far from dead, and remains the motivating force for most governments.

What I do blame is the Obama administration’s War on Energy which is putting us in a precarious position, raising the costs of energy, destroying jobs, and depriving our economy of the energy it needs to thrive. Plentiful energy means growing wealth. Scarce energy means poverty. The EPA is an out-of-control agency trying to regulate all sorts of things that require no regulation in a grasp for administration power. Their regulations are not science based, but based on fraudulent claims. Last I heard, this is a liberal administration, or far-left if you will, actively engaged in growing government, growing regulation and control over the economy and its citizens. When his bid for cap-and-trade failed, Obama determined to accomplish what he wanted by going around Congress. The EPA and it’s erroneous interpretation of the Clean Air Act, and of it’s “right” to call anything moist “navigable waters” are way out in illegal and unconstitutional territory. The entire organization needs to be shut down, and if necessary replaced with something with far fewer powers.


Comment by The Elephant's Child

So are you claiming that the New York Times article is incorrect and nobody has to pay these immense fines?

Not at all! I’m contesting where you’re laying the blame, which is on “liberals” and the EPA, rather than squarely on Congress, including Republicans in Congress, as you seem (I think) to sense. What I do find strange is your excusing the practice of bringing home the bacon. So, if it is not ideologically motivated, that makes it OK, but if it is motivated by an idea that you disagree with, it isn’t? In my world, a bad idea is a bad idea, period.

Are there people in high places, like retired Vice Admiral Dennis V. McGinn, who haven’t bothered to read the science about biofuels and their poor record of reducing greenhouse-gas emissions? Of course. And they’ll continue saying it if they believe there are members of Congress who will nod when they do. But most environmental groups long ago turned against biofuels, at least those made from corn.

The attempt to replace fossil fuels with biofuels did not begin with the Obama administration, by the way. It was strongly backed by the Bush Jr administration, all through the administration. I know from personal experience: these people were vehement in their support for biofuels, and any dissent was dealt with harshly.

I am not going to get into a general debate with you about the EPA. I am quite aware that you want it taken out and hung. But I have followed its actions on biofuels, and it is abundantly clear that Congress watches everything they do in this area like a hawk. On several occasions they have threatened to pull its funding if they did not dance to its tune on biofuels.


Comment by Subsidy Eye

I’m quite aware of George W.Bush’s enthusiasm for switchgrass. Governmental interest in alternate fuels was derived from fears of global warming, and the fear that CO2 in the atmosphere was the cause of the warming.
James Hansen put on quite a dog and poly show on the hottest day of summer. Michael Mann’s hockey-stick graph emphasized the horrendous increase in “greenhouse gasses” and if a world disaster was approaching governments had to take action.

The first subsidies for ethanol were created by Congress in 1978, and I’m sure the idea that the world could be saved from global warming by making ethanol out of corn was like manna from heaven for the congressmen from corn states. It has taken a lot of hard work and hard science to demonstrate that Hansen was and continues to be wrong and the hockey stick graph was simply bad math. Public opinion is changing, there has been no warming since 1998, ClimateGate exposed the greed of a bunch of scientists who were more excited by the flow of government money than doing pure science, and they worked hard at suppressing the work of other scientists who raised questions about the validity of their claims.

Biofuels were originally defined as being produced from oils and fats, but didn’t include other non-food sources of feedstock. The first regulatory change occurred in 2006 in an update to the Energy Policy Act of 2005 which included a provision for biomass-based diesel contributed by Senator Lugar and Senator Obama. Secretary Chu sees biofuels in 4 phases the first produced from food crops, the second from crop waste, the third from dedicated energy crops such as cane sorghum, miscanthus and switchgrass, and the fourth from algae and duckweed. Department of Energy is still subsidizing new biofuel plants.


Comment by The Elephant's Child

The EPA should stick to real world products like Kryptonite


Comment by hey_sherm

You are stubborn, Child. Like an elephant. I repeat, the rationale in 1978 had ABSOLUTELY NOTHING TO DO WITH CLIMATE CHANGE. For cripes sake, if you don’t believe me, read this article from 1995 by James Bovard:


Comment by Subsidy Eye

I did not say that the rationale in 1978 had anything to do with climate change. You are consistently a careless reader. I said that George W. Bush’s enthusiasm for switchgrass was derived from governmental fears that global warming was something to worry about. The global warming panic began in late June of 1988, when James Hansen made a notorious speech to Congress on one of the hottest days in Washington. It was notorious bunk and led to ongoing irrational psuedoscientific global warming hysteria. It was bunk then and is bunk 24 years later. The ‘need’ for alternative fuels has been justified by the need to save the planet from a warming that is perfectly natural.

I am quite aware of Archer Daniel Midland’s rent-seeking, and of the boon to corn farmers that ethanol meant. There’s a lot of rent-seeking that goes on, and ADM has always been a star example. You were spouting off about my blaming liberals. It is liberals, the Democratic Party, and the Obama administration in particular who consistently advocate for big government. They think they can regulate the country into their idea of a socially just European-style utopia. Yes, Republican congressmen from corn states advocate for corn, from wheat states advocate for wheat, from energy states advocate for oil, etc. The only possible answer to that is education. There are always trade-offs.

Our country depends on cheap, abundant energy. At present there is no replacement for petroleum. Hydropower is great, but because of pressure from enviro-groups we are actually tearing out dams. There aren’t many places left for new dams. Nuclear plants are hugely expensive, and Obama is denying permits for uranium mining. There is potential in small nuclear plants, but much opposition. The liberal Obama administration is trying to shut down the coal industry. Canadian oil may well go to China because Obama is scared to rile his Big Green supporters before the election. Any the high-paying jobs that have been killed with his War on Energy number in the thousands. There is a bigger picture than indignation about Congressmen from corn states.


Comment by The Elephant's Child

And, no, the first biofuels were not originally produced from oils and fats (unless you’re referring to whale oil). Biodiesel didn’t come along until the 1990s.

You are not going to change my mind on climate change, and I’m certainly not going to pay any attention to your uninformed attempts at describing the history of biofuel policy, a history that you clearly need to read up on.

Sorry for the blunt language, but in this case you really don’t know what you are talking about.


Comment by Subsidy Eye

Child, no I was not a careless reader. You wrote:

Governmental interest in alternate fuels was derived from fears of global warming, and the fear that CO2 in the atmosphere was the cause of the warming.

That was not the case when Carter pushed for synfuels, it was not the case when they started subsidizing ethanol, nor biodiesel, nor (much more recently) aviation biofuels for the military. For the movers and shakers in this, over successive governments, the prime motivation has been fears that petroleum fuels will become scarce in the future … and to throw money at rural constituencies, be it oil-shale workers in Colorado, corn farmers in Iowa or camelina producers in Montana. The GHG justification is just gravy they ladle on when they think they can get away with it.

When you and I get in these dialogues, you constantly want to expand the discussion to your view of the “big picture”. If your remarks at aimed at me, you are wasting your breath. I am interested in discussing specifics of each policy, but not in engaging in a wide-ranging debate on the science of climate change or whether or not Obama hates the oil industry.

I am not saying that these are not important topics, just that I don’t have the necessary time to engage with you on these issues in a proper manner. Sorry.


Comment by Subsidy Eye

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