One Reason To Feel Sorry For Oil Companies...Really

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It's pretty difficult to feel sorry for oil companies.

Why should we? They're in control of a resource we all depend upon, one way or another, and can essentially charge whatever they like for it. As a result, they make massive profits every year. Nobody pities the rich guy.

But maybe we feel a little sorry for them in this case. Why? Because last year, reports The New York Times, companies that supply motor fuel paid $6.8 million in penalties to the EPA for not mixing a special type of biofuel - that doesn't exist - into their gasoline and diesel.

Call us crazy libertarians if you will, but it seems perhaps a little unfair to be fined for a situation you have absolutely no control over.

They'll probably be fined at the end of this year, too, if the situation continues. And maybe even the next. "It belies logic," said Charles T. Drevna, president of the National Petrochemicals and Refiners Association.

He has a point.

The biofuel, known as cellulosic biofuel, is made from wood chips or inedible parts of plants, such as corncobs. Refiners were required to blend 6.6 million gallons into gasoline and diesel in 2011 - with none available. 2012's quota stands at 8.65 million gallons.

The biofuel requirement is part of the 2007 Energy Independence and Security Act, aimed at reducing greenhouse gas emissions, reliance on oil from hostile sources like Iran, and the export of dollars to pay for it.

The same law requires that 36 billion gallons of ethanol be blended into U.S. fuel by 2022, even though congress has ended taxpayer-funded subsidies on ethanol, and banned E15 gasoline - gas blended with 15 percent ethanol.

Cellulosic biofuel has so far been difficult to produce in meaningful quantities, but important in meeting the 2022 biofuel targets. Diesel made from biomass and fuel made from biological materials is already available and in use, though it remains to be see whether oil companies are meeting their quotas for these fuels.

Cathy Milbourn, an EPA spokeswoman, says that the EPA still believed the 2011 quota was "reasonably attainable" - despite the experts' assertion to the contrary.

Companies like Poet in Iowa are working on using corn kernels to produce cellulosic biofuel. Mascoma, part-owned by General Motors, will be receiving an $80 million grant from the Energy Department to help build a plant in Kinross, Michigan, to make bio-ethanol from wood waste.

The tax on non-existent biofuel and reduction of support for ethanol are further evidence of the difficulties faced in weaning the nation off fossil fuels.

In the meantime, the oil companies are pointing to new reserves of oil and natural gas in the U.S. as evidence that there's no rush in getting cleaner, low-carbon biofuels to the market.

And they're still making billions of dollars in profit each year. So on second thoughts, maybe we shouldn't feel too sorry for them...


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