The Environmental Protection Agency has changed its cellulosic biofuel requirements for 2012 from 8.65 million gallons to zero.  The U.S. Court of Appeals for the District of Columbia Circuit recently vacated EPA’s cellulosic target for 2012, ruling that EPA had erred by being too aggressive in setting production levels of cellulosic biofuels.

The court decided in favor of the American Petroleum Institute when it said the EPA’s process for estimating cellulosic biofuel output “did not take neutral aim at accuracy” and “was an unreasonable exercise of agency discretion.”  The ruling said in effect that EPA’s overall aggressive estimate was set with the goal of promoting the growth of cellulosic fuel to spur investment rather than making an accurate prediction of how much could be produced.  The petroleum industry has long argued that the fact that so little cellulosic biofuel was produced in a given year should mean that the industry should not have to purchase credits for noncompliance.

Under the Renewable Fuel Standard, EPA sets annual levels of each fuel that refiners and others must blend into the nation’s fuel supply in order to meet overall statutory mandates for various biofuels.  If producers are not able to meet EPA’s targets, the law created a system for purchasing and trading credits, which are generated when biofuels refiners produce fuels that meet greenhouse profiles estimates over the entire production life-cycle.  Cellulosic biofuels, which are made from nonfood biodegradable stock like corn husks, wood, or household trash, had initially been thought as a promising way to cut greenhouse gases, but commercial-scale facilities have been slow to develop.

As a result of the  court decision, obligated parties–oil companies required to show EPA that they blend biofuels in their fuel supply–will not need to provide information on their compliance.  EPA will process refunds to companies that have submitted payments for 2012 cellulosic waiver credits.

In 2009, the federal renewable fuel standard called for 500 million gallons of cellulosic fuels to be made in 2012.  EPA later revised that number to 8.65 million gallons, which is a fraction of the statutory requirement.  Last year, 20,069 gallons of cellulosic biofuel was made, according to EPA data.  On January 31, EPA, in its 2013 RFS blending requirements, set a target of  14 million gallons of cellulosic biofuel to be blended in the retail fuel supply.

Representatives Gregg Harper (R-MS) and Jim Matheson (D-UT) introduced a bill earlier this month that would make EPA base its annual cellulosic targets on actual output levels, rather than goals.