The U.S. biodiesel industry was the first success story of the advanced renewable fuels economy. Sourced from waste fats, oils, greases as well as soybean and corn oil, it’s a small industry when compared to corn ethanol and even the nascent cellulosic industry, but has still managed to exceed volumes outlined by the Renewable Fuel Standard (RFS) for three years running. Despite these successes, biodiesel has felt the chilling effects of the uncertainty of the RFS going forward. Therefore, it was no surprise that the U.S. biodiesel industry replied with consternation when the EPA approved a streamlined process for imports of Argentinian biodiesel, requested by Argentina’s biofuels association, CARBIO, in January. It is estimated that the move could bring 600 million gallons of Argentinian biodiesel into the U.S. market a year, approximately 34 percent of total U.S. production in 2014 (at 1.75 billion gallons).
To qualify as an advanced renewable fuel, biodiesel must reduce greenhouse gas emissions by 50 percent as compared to diesel. It is estimated that the actual carbon reduction of biodiesel ranges between 57 to 86 percent as compared to diesel. Biodiesel is unique in the renewable fuels industry; it is produced in every state in the country, and supports 60,000 jobs. Biodiesel has exceeded production levels set by the RFS for the past three years, and does not share the same political or technical challenges that ethanol faces. Along with all other categories of renewable fuels, the biodiesel industry has been hanging in the balance since EPA decided to revisit the renewable fuel volumes prescribed by the RFS.
While EPA’s approval of a streamlined process for biodiesel imports may be legal under the 2007 Energy Independence and Security Act, it flouts the spirit and intent of a law intended to foster a domestic renewable fuels industry. It is especially hard to swallow at a time when the administration still has not yet released 2014, 2015 or 2016 renewable fuel volumes as required by RFS. According to Anne Steckel, Vice President of Federal Affairs for the National Biodiesel Board (NBB), “The U.S. biodiesel industry is in a state of crisis right now as a result of EPA’s continued delays in finalizing RFS volumes. An influx of Argentinian biodiesel will only exacerbate the domestic industry’s troubles at the worst possible time.” The pain felt by the U.S. biodiesel industry is especially acute, since unlike ethanol and other gasoline replacements, biodiesel has few export markets; in 2009 the European Union levied duties on biodiesel in an anti-dumping measure. Therefore, the layoffs and plant closures in the biodiesel industry may have been more acute than other sectors of the renewable fuels industry.
According to the National Biodiesel Board, there isn’t enough transparency regarding how Argentinian producers will meet sustainability requirements of the RFS. On March 31, NBB filed a petition for reconsideration and request for administrative stay to EPA. In it, NBB argues that the EPA’s approval of a streamlined process for imports from Argentina “does not provide greater oversight over those imports, but rather, it alleviates their regulatory requirements, giving Argentinian biodiesel producers even greater access to the U.S. market.” NBB argues that the quality assurance that U.S. producers are subject to could be more stringent than those proposed for Argentinian imports. In addition to questions about feedstock source and sustainability, Argentina uses a Differential Export Tax that allows Argentinian biodiesel producers to undercut U.S. prices. A Differential Export Tax is a trade mechanism that is largely a response to export tariffs. Ironically, Argentina may freely practice dumping in the United States, hurting domestic producers in the process.
EPA’s ruling allows Argentinian producers to use a third-party survey plan to demonstrate that feedstocks are sustainable, in order to ease the process on regulating feedstocks grown outside the United States and Canada. Within the United States and Canada, an aggregate approach -- where total amount of agricultural land is monitored -- is used to comply with the RFS. NBB argues that the EPA process has not been transparent in its rulemaking, and it is unclear whether the soybean-oil biodiesel from Argentina actually meets the requirements for advanced biofuels feedstocks under the RFS. Argentina will have access to this streamlined process, but U.S. producers do not have access to the same compliance mechanism. While EPA recognized in 2009 that the compliance mechanism under the RFS presented “unique challenges related to the implementation and enforcement of the definition of renewable biomass for foreign-produced renewable fuel,” at the time, they decided to hold foreign producers to the same standard as U.S. producers.
In February, a bipartisan group of 32 Senators urged the Administration to release RFS biodiesel volumes, noting that the fuel receives different treatment under the law, which requires biodiesel volumes to be released 14 months prior to the applicable year. The EPA has the authority, and is expected, to set biodiesel levels at actual production levels. This is because, as the group of Senators note, “unlike other fuel categories under the RFS, the law did not include a pre-determined volume schedule for Biomass-Based Diesel. Instead, it directed the EPA to establish annual volumes based on industry capacity, feedstock availability, and other factors.”
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