Judge Stephen Williams on Friday threw out the too-high EPA estimates in response to a challenge filed by the American Petroleum Institute, which represents the oil industry.
There have been high hopes in Washington that the cellulosic industry would take off as farmers, food manufacturers, and others blamed the skyrocketing production of corn ethanol fuel for higher food prices. Lawmakers hoped that nonfood sources such as switchgrass or corn husks could be used instead, though the industry hadn't yet gotten off the ground.
The 2007 law mandated that billions of gallons of annual production of corn ethanol be mixed with gasoline, eventually transitioning those annual requirements to include more of the nonfood, cellulosic materials to produce the biofuels. As criticism of ethanol has increased, lawmakers and even Presidents George W. Bush and Barack Obama have talked of the cellulosic materials as the future of biofuels.
But the cellulosic industry stalled in the bad economy and still hasn't produced much. According to final EPA estimates, no cellulosic fuel was produced in 2010 or 2011. Last year's estimates aren't yet available.
The court faulted the EPA for setting last year's projections at 8.7 million gallons even though the two previous years had shown no production, and also for writing in the rule that "our intention is to balance such uncertainty with the objective of promoting growth in the industry."
An EPA spokeswoman would say only that the agency will "determine next steps." The oil industry praised the decision.