Since even this smaller amount of cellulosic ethanol does not exist, firms are paying fines of about $7 million annually to the Treasury for not using the fuel.
America is having trouble using the required amount of ethanol. Only 10 percent of motor fuel is ethanol, and as cars become more fuel efficient, Americans are projected to use less fuel, rather than more.
To complicate matters, natural gas is becoming the alternative fuel of choice for vehicle fleets. Companies such as FirstCNG in Wayzata, Minnesota, are converting fleets of vehicles to natural gas and setting up charging stations without government subsidies. Approximately 250,000 vehicles in America run on natural gas.
This will only increase. Globally, 15 million vehicles run on natural gas. In Argentina, 19 percent of vehicles run on natural gas. GM and Ford are making dual-fuel natural gas and gasoline pickup trucks.
For over thirty years, taxpayers funded ethanol subsidies, paid to corn growers and ethanol producers, amounting to nearly $6 billion in 2011.
Several high profile cellulosic ethanol enterprises have failed in recent years. EPA had originally projected that Cello Energy would provide 70 percent of the 100 million gallons of cellulosic ethanol required in 2010. However, Cello went into bankruptcy in October 2010 after being fined over $10 million for defrauding investors.
Another example is Range Fuels, which received a $76 million Energy Department grant, went through bankruptcy in 2011. Just last month, BP announced it was cancelling its plans to build an ethanol plant in Highlands County, Florida, and "ending its pursuit of commercial-scale cellulosic ethanol production in the U.S."
With high gasoline prices, motorists are driving less and purchasing more fuel-efficient cars, reducing gasoline-and ethanol-consumption. In August, the Department of Transportation and the Environmental Protection Agency issued new corporate average fuel economy standards, requiring fleets to have an average of 55 miles per gallon by 2025. Unless standards are revised, that means lower fuel use-and less ethanol use.
Then, ethanol adds to gasoline prices, and lowers vehicle fuel efficiency. It is costly to ship, because it separates from gasoline in the presence of water. So, unlike gasoline, blends of ethanol and gasoline that motorists put in cars cannot be transported through pipelines. Instead, ethanol is shipped by rail, and mixed with gasoline near the point of distribution.
EPA wants to force more ethanol consumption by allowing ethanol levels in gasoline to rise from 10 percent to 15 percent for cars from model years 2001 onward. Since higher ethanol blends are harmful to older car engines-some believe to newer engines also-gas stations would have to operate different pumps for the 10 percent and 15 percent blends. And if a motorist put the 15 percent blend in his older car by mistake-an accident that would likely occur not infrequently-the engine would be damaged.