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A Swift Kick, or a Polite Tap on the Shoulder

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Last week, Mathew Wald of the New York Times wrote an article about small fines that are being levied against the oil companies for failure to comply with Renewable Fuel Standard (RFS) mandates for cellulosic biofuels. Wald reasoned that it was odd or perhaps unreasonable for the EPA to fine oil companies for failure to buy cellulosic biofuels, given that none of it is available in the marketplace.

Beyond Rhetoric

But that’s not the real story. Let’s put the scale of the targets in perspective: An 8.65 million gallon mandate for 2012 is much less than a large oil refinery puts out in a day. Why so little, you ask? It’s because the EPA has had to cut back on our cellulosic targets for the past couple years due to a production shortfall. And the principal cause of the shortfall is the lack of financing available for cellulosic producers in the terrible economic climate we’ve had for the last five years. Financing that—wait for it—the oil companies really should be providing.

The oil industry has had a long time to prepare to meet the RFS, which was signed into law by a certain Texas oilman back in 2007. And to hear the oil companies advertisements, you would think they would be ready. As they frequently remind us, the oil companies are not simply customers of the biofuels industry, they are taking a stake in the future of the fuels that move us beyond petroleum. BP is moving beyond petroleum as the owner of Vercipia. Shell Oil is an investor in Iogen. ExxonMobil’s is supporting Craig Venter’s company, Synthetic Genomics. Total has invested in Coskata, and Valero in Mascoma.

What’s a Few Million Dollars Between Oil Tycoons?

Kick in the pants

So while the $6.8 million fine for failing to meet the mandate is a lot of money to you and me, remember this is the whole oil industry footing the bill. The top three U.S. companies, Exxon Mobile, Chevron, and ConocoPhillips, brought in profits of $150K per minute over the last 12 months. Their fine for failing to meet the RFS mandates can be paid from the profits they make in an hour.

The mandates and fines in the RFS are intended to move the oil industry to a cleaner mix of fuels. It will take a swift kick in the pants to get these oil guys to look beyond their Texas Tea to clean, low carbon cellulosic biofuels. The small mandates in the RFS are just a polite tap on the shoulder. If anything, they need to be a lot larger.

Regulators should be as aggressive as the law allows, and lawmakers should keep the pressure on energy companies to clean up their act.

 

Photo credit U.S. Government.

Posted in: Biofuel, Fossil Fuels

About the author: Jeremy Martin is a scientist with expertise in the technology, lifecycle accounting, and water use of biofuels. He is working on policies to help commercialize the next generation of clean biofuels (made from waste and biomass rather than food) that can cut U.S. oil dependence and curb global warming. He holds a Ph.D. in chemistry with a minor in chemical engineering. See Jeremy's full bio.

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2 Responses

  1. Steve Meyers says:

    I’m no friend of Big Oil, but I respectfully disagree.
    The problem here is the penchant of the government to set unrealistic targets and to try to pick winners among alternative fuels.
    Better policy approaches are possible, and UCS should be advocating them.

    • Steve,

      Thanks for the comment. I agree that better policy approaches are possible, California’s low carbon fuel standard is a great example. But I am working in Washington DC, where the art of the possible is also an important consideration. So the way I see it we have three options.

      • We could try to replace the sub-optimal renewable fuels standard with a technology neutral performance based policy. This was something we could not accomplish in 2007, and in 2011 the outlook had not improved.
      • We could try to get rid of the renewable fuels standard and work towards better policies down the road.
      • We could build on the renewable fuels standard and try to meet the goals we advocated for in 2007, moving increasingly away from oil, reducing heat trapping emissions from transportation and also making a transition from corn ethanol to truly clean biofuels made from environmentally responsible materials like perennial grasses rather than food.

      After evaluating the magnitude and urgency of the problem with oil dependence and climate change and the legislative prospects for bold new energy approaches, we at the Union of Concerned Scientists have concluded that the last path is the one we need to take. Besides political pragmatism, this rests on the expectation that technology neutral policies that allow different low carbon fuels to compete will be easier to pass when we have a real low carbon fuels industry, with established companies producing low carbon fuels at a commercial scale. This is why we are focused on meeting the Billion Gallon Challenge first, to lay the groundwork for better broader policies in days to come.

      I hope that helps explain our position.