http://online.wsj.com/article/SB10001424...17098.html

Quote:One of the biggest debacles has been the law's requirement that the oil and gas industry mix cellulosic ethanol—made from the likes of switch grass and wood chips—into gasoline. The original law mandated the use of one billion gallons of cellulosic fuel in 2013, with even higher levels through 2022. This may have been the worst government forecast in history, which is saying something. Even with taxpayer subsidies, total cellulosic volume in 2012 was about 20,000 gallons. The government was off by a mere 99.9%.

In its annual program review this month, EPA reduced the mandate to six million gallons from 14 million. But even that is several million gallons above what can be bought anywhere. So the oil and gas industry has to pay what amounts to a fine (mostly passed on to consumers) for not buying enough cellulosic fuel that doesn't exist.

In January the D.C. Circuit Court of Appeals struck down EPA's 2012 cellulosic mandate as unrealistically high. The court also slapped EPA's enforcement as: "Do a good job, cellulosic fuel producers. If you fail, we'll fine your customers." The program should be terminated.

The EPA also updated its corn ethanol mandates. This year the overall biofuel quota stands at 16.55 billion gallons, up from 15.2 billion in 2012. As we explained in "The Ethanol Tax" on July 20, because gasoline consumption over the past six years has been much lower that the government predicted, refiners are now nearing a "blend wall" of a maximum 10% ethanol (E10) per gallon.

A survey by AAA found that only 5% of vehicles are approved for higher levels of ethanol under manufacturer warranty, so many motorists won't buy gas with higher ethanol content. In order to comply with the federal law, the oil and gas industry has to buy credits that spiked at more than $1 a gallon for the ethanol it can't use. This raises the cost of gasoline at the pump by an estimated five to 10 cents a gallon.

The EPA acknowledged that its ethanol mandate exceeds the level that can be reasonably blended, but it told refiners: tough luck, buy credits on the market. This is a back-door tax on gasoline and Congress should call the Administration on it.

Isn't Mach always insisting that oil companies pay more taxes? Oops, looks like they are. Except it turns out that companies don't pay taxes, people do. That means us.