EPA considers biodiesel cuts amid tariff action
Houston, 26 September (Argus) — Federal regulators could reduce US renewable fuel blending mandates by hundreds of millions of gallons on concerns that import tariffs will reduce supplies or increase the cost of biodiesel.
The Environmental Protection Agency (EPA) today sought comment on reductions to minimum blending requirements for 2018 and 2019 in light of pending US trade cases against Argentinean and Indonesian biodiesel.
The agency also sought comment on whether to only consider US renewable fuel production when evaluating annual supply, a distinction that could reduce future minimum blending mandates under the Renewable Fuel Standard (RFS).
The idea could further reduce biofuel mandates that EPA in July proposed lowering for the first time in the ten-year-old program's history.
The request for comment sent prices on the credits used to prove compliance with the mandates tumbling and drew angry responses from biofuel proponents. Prices for ethanol credits fell by as much as 10pc from the previous day, settling down by 5pc at around 79¢/RIN. Credits for biodiesel fell by as much as 9pc and settled at roughly 100¢/RIN, down by 4.25¢/RIN from yesterday, based on initial Argus assessments.
"It is outrageous that the EPA would change course and propose a reduction in renewable fuel volumes," senator Chuck Grassley (R-Iowa) said. "This all gives me a strong suspicion that Big Oil and refineries are prevailing, despite assurance to the contrary."
US refiners, fuel importers and other companies must each year ensure minimum volumes of renewable fuels enter the domestic transportation fuel supply. EPA mandates set volumes for cellulosic, biodiesel, overall advanced renewable fuels and total fuel blending.
The cumulative nature of the requirements and saturation of ethanol blending in gasoline make biodiesel and renewable diesel essential to satisfying the mandates.
EPA under President Donald Trump has questioned the use of imported fuels to meet biofuel blending standards meant to provide a secure energy supply. And an August preliminary finding by the Department of Commerce that Argentina and Indonesia — both major biodiesel suppliers to the US — unfairly subsidized their production could reduce economic supply of the fuel and trigger waivers for "severe economic harm," EPA said today.
The agency sought comment on potential waivers reducing a 2.1bn USG biodiesel requirement for 2018 by 315mn USG, lowering the proposed advanced blending mandate to 3.77bn USG and total blending mandate from 19.24bn USG to 18.77bn USG. The agency left open future reductions to a statutory minimum of 1bn USG of biodiesel.
The National Biodiesel Board, which earlier this year filed the complaint that triggered the Argentina and Indonesia trade cases, today said the the request for comment was "even more disappointing" than the July proposal.
"NBB will be working with EPA to demonstrate the industry's proven success record, continued growth and impacts to American workers who were promised that this administration had their back," chief operating officer Doug Whitehead said.
Ethanol trade group Renewable Fuels Association said the agency risked violating trade obligations and exceeding its jurisdiction.
"Congress never intended for RFS waiver authorities to serve as tools for managing trade flows," chief executive Bob Dinneen said.
Refiner trade group American Fuel and Petrochemical Manufacturers (AFPM) said the proposal appropriately focused on US energy independence.
"American drivers should not have to shoulder more costs to help foreign biofuel producers," president Chet Thompson said.
EPA's "entirely predictable" proposal followed years of lobbying by biodiesel producers to keep tax benefits and push out foreign competition, said David Fialkov, vice president of government relations for travel center trade group NATSO. The agency considered policy would instead raise biodiesel prices and reduce blending, benefiting companies that had opposed the program for years, he said.
"Rather than accept a guaranteed demand for their product and a tax credit for their customers who purchase and sell their product, domestic biodiesel producers got greedy," Fialkov said.