In 2007, Congress passed and President George W. Bush signed the Energy Independence and Security Act (EISA). In keeping with Bushs 2006 State of the Union pledge to make ethanol not just from corn but from wood chips and stalks of switch grass practical and competitive within six years, the law included subsidies for ethanol production and mandates for its use. By 2011, oil companies were required to blend 250 million gallons of this cellulosic ethanol into their gasoline. The mandate doubled for 2012, and by 2022 it will be 16 billion gallons. Theres just one problem: Outside a handful of laboratories and workshops, the New York Times reports, cellulosic ethanol does not exist. This has not, however, prevented the Environmental Protection Agency from levying penalties on petroleum companies for failing to purchase this nonexistent fuel. The EPA engages in verbal sleight of hand. Instead of being fined for failing to make the agencys pipe dreams come true, refiners are required to purchase credits from the EPA, explains Brian McGraw of the Competitive Enterprise Institute. Essentially, the EPA is requiring them to send them money in lieu of meeting the cellulosic ethanol mandate. The product they are required to use does not exist, and rather than giving them a pass, the EPA requires that they pay for phantom credits, despite not getting anything out of it. These fines er, credit purchases are, of course, passed on to consumers in the form of higher gas prices; and when gas prices go up, so do the prices of most other products. The Times argues that the EPA is being lenient by the standards of the law, and there is some truth to that. The agency has vastly reduced the original ethanol targets; the 2011 target was dropped to just 6.6 million gallons, and for 2012, it is 8.65 million. As lenient as this may appear, critics say it is still too harsh in light of the fact that, as McGraw writes, no companies have to this date been able to produce cellulosic ethanol that qualifies by EPAs definition. Yet, presumably to save face, he adds, the EPA has not lowered the cellulosic ethanol mandate to zero gallons. Oil Companies Fined for Not Buying Nonexistent Cellulosic Ethanol I always get a kick out of Catch-22 Logic.