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Cellulosic ethanol has long been a particularly prized panacea among environmental groups. As any moonshiner knows, conventional ethanol has long been produced by fermenting naturally grown sugars. These sugars are readily available and relatively easy to get at in corn for example, which is why ethanol production plants commonly use corn as their feedstock.  However, even Al Gore eventually realized that it was rather idiotic to take millions of acres of farmland out of food and feed production in order to “grow” a fuel that (in many gases) actually ends up on the deficit side of the energy ledger. Cellulosic ethanol theoretically addresses those concerns.

There are sugars theoretically available in cellulose, a naturally-occurring polymer found in all sorts of plant life. If you can figure out how to get at those sugars, then you can make ethanol out of things that don’t have a lot of intrinsic value and that don’t compete with food and feed crops, like tree trimmings and corn cobs. Unfortunately, getting at those particular sugars is (for a lot of reasons that would bore the heck out of the average reader) extremely difficult. Like the Chevy Volt, the concept of cellulosic ethanol is very attractive, but the reality is expensive and impractical.

Expense and practicality are hardly matters of concern to environmentalists though. Environmentalists prefer the pixie dust approach to dealing with energy policy: if they believe hard enough, their wishes will come true. They wanted cellulosic ethanol and once Democrats took control of Congress after the 2006 elections, Nancy Pelosi and Harry Reid duly granted their wish. The Energy Independence and Security Act of 2007 mandated the use of certain minimum quantities of cellulosic ethanol that started at 100 million gallons in 2009 and ends at 16 billion gallons is 2022. (Annual US gasoline sales are about 130 billion gallons, by way of comparison). In 2011, oil companies were mandated to sell at least 250 million gallons of cellulosic ethanol.

This was a problem for oil companies, because there are no plants currently producing cellulosic ethanol. And so, using her authority under the Clean Air Act, USEPA Administrator Lisa Jackson duly issued penalty demands of $6.8 million to oil companies for not using a non-existent fuel.  If the rallying cry in 1776 was “No Taxation Without Representation!”, perhaps the equivalent in 2011 ought to be “No Penalty Without Reality!”

Interestingly, the act that started this chain of ridiculousness included an alternative that allowed companies to actually pay a tax – in the form of “credits,” whose price the EPA would set – in lieu of actually buying cellulosic ethanol. In EPA-land, this would be an alternative form of compliance, even though it would do absolutely nothing to address the concerns about greenhouse gas emissions and dependence on foreign oil that the act supposedly solved. The “credit” scheme smells, in other words, like a back-door carbon tax cleverly disguised in a “green” bill that Democrats pushed through and the all-too-eager-too-please George W. Bush dutifully signed.

When oil companies didn’t bite at the credit deal, Jackson decided to get the cash anyway, in the form of the fines that the EPA is allowed to levy thanks to the power that Congress has given this out-of-control agency. Indeed, the fines could have been a lot larger, but when going after big companies that might fight back, the EPA has to balance what they figure they can get without a prolonged court battle versus the time and expense of going through such a judicial exercise. In the grand scheme of things, one expects that the oil companies will do the same math and decide it’s easier to pay the EPA than to pay yet another army of lawyers. If that sounds a lot like legal racketeering, it’s probably because it is.

Did the EPA have to demand penalties in this case? No. That was a choice and, given the extreme leftist ideology of this administration and its EPA chief and given Obama’s desperate need to generate revenue by any means possible, it’s sadly no surprise that Lisa Jackson did what she did. But it’s beyond reason that we ever got to this point in the first place. The Energy Independence and Security Act of 2007 gave the EPA administrator the power to waive or change the requirements for cellulosic ethanol if supplies were not available or if the cost was too high. Jackson could have – and should have – waived the requirement, but she chose not to.

There are those who would counter the equity and reasonableness arguments presented above by saying that the EPA should be forcing technological advancements and that these kinds of penalties accomplish that end. To this I would respond: nice thought, but perhaps you should step over here into the real world for a moment.

First of all, oil companies are not going to be the ones to develop cheap means of producing cellulosic ethanol. Oil companies employ geologists and engineers; they know about refining and exploration. They don’t have the people or the expertise to explore complex bio-chemical processes. There are companies out there with that kind of expertise and the government is pumping hundreds of millions of our tax dollars into them in the effort to discover this latest version of the energy world’s Holy Grail. The Energy Independence and Security Act of 2007 alone included $50 million in grant funding specifically targeted toward cellulosic ethanol research. Levying punitive fines on oil companies to penalize them for the failures of all that government-mandated and funded research makes no sense. But, the EPA and the Obama administration have long since abandoned common sense altogether.

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