Whatever the merits of ethanol as a fuel or a gasoline additive--and it's taken some hits lately--it's still in the running.

The same cannot be said, however, for cellulosic biofuels, those derived from advanced crops or waste products.

On Friday, a Federal appeals court ruled that an EPA mandate requiring fuel refiners to incorporate increasing percentages of cellulosic fuels into their products should be tossed out.

But production has been slower to ramp up than expected, putting the refiners in a no-win position: They were subject to fines for not included fuels they couldn't buy anywhere.

Last year, in fact, reported The New York Times, those refiners paid $6.8 million in penalties to the EPA for not mixing the unobtainable biofuels into their gasoline and diesel.

It's almost enough to make you feel sorry for them--and the three-judge panel agreed that it was unfair.

“Apart from their role as captive consumers," read their decision, "the refiners are in no position to ensure, or even contribute to, growth in the cellulosic biofuel industry."

The EPA rule had required that fuel refiners blend the cellulosic biofuels into their gasoline, at levels that would have to totaled 20 million gallons since 2010, according to coverage of the decision in The New York Times.

The rules struck down were among those written by the EPA to implement the Energy Security and Independence Act of 2007, which mandates greatly increased volumes of ethanol be blended into gasoline--and included the separate mandate for cellulosic biofuels.

The court's language was pointed, saying, "We are not convinced that Congress meant for EPA ... to let the wish be father to the thought."

That is, the intent of Congress to promote an industry--production of cellulosic biofuels--should not necessarily have led EPA to impose regulations on a different industry, fuel refiners.

For the moment, advanced biofuels as a broader category are still mandated, which means that non-cellulosic advanced fuels could be substituted for the no-longer-mandated cellulosic fuels.

Those include both biodiesel from soybeans and from fats and nuts, and ethanol imported from Brazil, which refines it from sugarcane in a process that produces roughly twice as much fuel per acre as corn does.

If the decision stands, it raises the possibility that larger parts of the Act could be subject to the same scrutiny.

Federal subsidies to fuel refiners of 60 cents per gallon of ethanol used expired in December 2011, after Congress declined to extend them.

Corn Ethanol Pump

Corn Ethanol Pump

U.S. ethanol is made almost entirely from corn at the moment, and that feedstock has been much criticized on the grounds that it uses a great deal of water, displaces production of food for humans and feed for animals, and raises the price of corn.

The American Petroleum Industry, which brought the suit on behalf of fuel refiners, ultimately seeks a rollback of the entire regulation.

Indeed, almost a year ago, a study indicated that the ethanol mandate rules could not possibly be met.

The study, US & Brazil Ethanol Outlook to 2022, noted that to meet the required volumes of ethanol--36 billion gallons by 2022--the U.S. would have to import substantial quantities from Brazil.

That volume of Brazilian ethanol, the consulting firm says, simply won't be available at the times it will be needed.

There will undoubtedly be more to come on this issue. Where the politics of fuel and agriculture intertwine, the laws and the maneuverings are Byzantine.

But what do you think? Should Congress be in the business of mandating what volumes of different types of fuels must be used in the country? Did the EPA regulate the wrong party? Do non-petroleum fuels have a viable future in the U.S.?

Leave us your thoughts--politely, please--in the Comments below.


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