United States Senator Jeff Flake (R-AZ) along with Senators David Vitter (R-LA), and Mike Crapo (R-ID) today introduced the Phantom Fuel Reform Act (S. 251) to reform an Environmental Protection Agency (EPA) regulation that adds millions of dollars each year to the cost of energy production. This mandate is part of the Renewable Fuels Standard (RFS). Senator Flake first introduced the Phantom Fuel Reform Act in the House in 2012.
Under current law and based on annual EPA estimates, United States refiners are required to blend millions of gallons of cellulosic biofuel into the U.S. fuel supply, even if no cellulosic biofuel is produced. Only 1,024 gallons of product that could have been used to meet the cellulosic biofuel mandate were produced in 2012. Yet in 2013, EPA is requiring 14 million gallons of cellulosic biofuel to be blended, which is almost double the 8.65 million gallons initially required in 2012. The EPA's solution to this problem of a lack of product is to force U.S. energy producers to buy paper credits for this "phantom fuel" directly from EPA at a cost of millions. If U.S. energy producers do not buy these credits, they risk large fines from EPA.
In January, the DC Circuit Court recognized the absurdity of the EPA cellulosic biofuel mandate as part of the RFS by vacating it, explaining that the cellulosic production estimate was not based in reality and was therefore at odds with congressional intent.
Building on what the DC Circuit Court has already acknowledged, the Phantom Fuel Reform Act would simply require EPA to rely on actual industry production rather than bureaucratic prediction when setting the annual cellulosic biofuel mandate.
"Mandating the production of cellulosic biofuel has netted millions for the federal government for a product that barely exists, but it has placed a heavy financial burden on energy producers who simply pass along that cost to consumers. This regulation must be reformed to reflect reality," said Flake. "The cellulosic mandate is perhaps the best example of the absurdity of the RFS. Congress must take steps to roll back the unintended consequences of this flawed policy."
"Eliminating the EPA's ability to force energy producers, and ultimately consumers, to pay for something that doesn't exist, is a no brainer. EPA continues to ignore the cold hard facts and despite a recent court decision vacating EPA's 2012 cellulosic biofuel mandate, they nearly doubled the mandate for 2013. This bill brings the EPA back to down to earth," said Vitter.
"This is yet another example of excessive federal regulations stemming from the EPA," Crapo said. "Requiring industry to use millions of gallons of a substance that does not exist and in turn fining them for noncompliance is irrational and unfair. The tax penalties associated with these regulations will ultimately be passed down the chain and negatively impact the consumer. The EPA should use requirements based on facts and actual productivity, rather than predictions."