A Swift Kick, or a Polite Tap on the Shoulder

January 17, 2012 | 6:27 pm
Jeremy Martin
Senior Scientist and Director of Fuels Policy

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.