* Oil industry had petitioned EPA to lower mandate
* 2013 mandate was 6 mln gallons, only 1 mln produced
(Adds ethanol industry response)
By Timothy Gardner
WASHINGTON, Jan 23 The U.S. environmental
regulator informed oil industry groups on Thursday that it will
reconsider the 2013 target for advanced ethanol made from
grasses, trees and crop waste as producers struggle to make
enough of the fuel.
Oil industry groups had petitioned the Environmental
Protection Agency, or EPA, last year to lower the target because
oil refiners would be required to buy millions of dollars worth
of credits if cellulosic was unavailable.
"Your petition demonstrates that the statutory criteria for
granting a petition for reconsideration are satisfied," Gina
McCarthy, the administrator of the EPA, said in a letter to the
oil industry groups on Thursday.
Cellulosic producers were on track to make only about 1
million gallons (3.8 million liters) of cellulosic last year,
well short of the federal mandate of 6 million gallons. In
addition, oil refiners have to purchase credits on the open
market if they do not find enough cellulosic ethanol to blend
The American Petroleum Institute, one of the groups that
called for a lower target, estimated on Thursday that the
mandate could cost refiners more than $2.2 million in fees for
The U.S. government had envisioned that cellulosic would be
an alternative to ethanol made from corn, which has been blamed
by some groups for higher grocery prices and damage to the
But costs for the advanced enzymes and high-tech equipment
to make cellulosic have led to production delays and forced the
EPA to slash mandates for several years running. The agency cut
the target in 2011 and in 2012 when cellulosic was supposed to
make up 500 million gallons of the overall renewable fuel
KiOR, a producer of the advanced fuel, said in late
2013 it would produce less than 1 million gallons instead of 5
million to 6 million gallons that year and that operations would
be limited in early 2014 as well.
Charles Drevna, the president of the American Fuel &
Petrochemical Manufacturers, one of the two groups that had
petitioned the EPA, said he was pleased by the decision.
"The agency's optimism for cellulosic biofuel appears to
have been tempered by reality," Drevna said in a release.
The American Petroleum Institute also cheered the move.
"It's refreshing that EPA has finally agreed to reconsider bad
public policy, mandating biofuels that do not exist," said Bob
Greco, who works on refining issues at the group. "We continue
to ask that EPA base its cellulosic mandates on actual
production rather than projections that - year after year - have
fallen far short of reality."
A spokesman for the ethanol industry acknowledged that
development of cellulosic has had some delays, but said the
industry should be on track soon.
"Our industry is just reaching commercial scale," said
Brooke Coleman, a spokesman for the Advanced Ethanol Council.
"These blending targets are based on expected output from a very
small number of companies. A short delay, not uncommon for any
new refinery, can change the landscape with regard to
The EPA said in the letters on Thursday it would initiate a
notice and comment rule making period to reconsider the
(Reporting by Timothy Gardner; Editing by Ros Krasny, Lisa Von
Ahn and Marguerita Choy)