Fueling Up for a Fight Biodiesel Industry Under Threat from Proposed Volume Limits ALISON NEUMER LARA
THE U.S. ENVIRONMENTAL Protection Agency’s (EPA) proposal to reduce renewable fuel volumes is a major setback to the growing biodiesel industry and a blow to feedstocks such as canola, according to biodiesel producers. In January, thousands of biodiesel supporters filed comments with the EPA, urging the agency to reconsider. They warned that the new policy would destroy businesses and jobs in a sector experiencing explosive growth, damage vegetable oil markets and ultimately, hurt farmers. “All of agriculture wins with biodiesel and this proposal means that all of agriculture loses,” said Joe Jobe, CEO of the National Biodiesel Board (NBB). “We doubled the size of the industry in a year and the president should be standing on tables shouting about it. Instead, the administration is rewarding that success by crushing us. It’s so uncalled for.” Pointing to reduced U.S. demand for gasoline overall, the EPA said the proposed rule is meant to address excess production of renewable fuels, which must be blended into the country’s fuel supply under the Renewable Fuel Standard (RFS). The EPA’s proposal sets the 2014 RFS volume for biodiesel, an “advanced biofuel,” at 1.28 billion gallons – the same as 2013 – and reduces advanced biofuel volumes overall to 2.2 billion, further limiting biodiesel production. In fact, the actual 2014 biodiesel volume limit could be as low as 1 billion gallons as the agency may take into account some of the excess 2013 production in calculating 2014 capacity. The industry produced almost 1.8 billion gallons in 2013, according to EPA estimates, of which 6 percent was canola-based.
Damage Done
The EPA’s proposal alone may be enough to stall the biodiesel industry by introducing uncertainty across the value chain, said Todd Ellis, vice president of sales and development at Hoquiam, Wash.-based Imperium Renewables. “If the EPA continues to signal this kind of backsliding, it’s going to impact us,” he said. “The message that’s being sent is that biodiesel is not as important as it used to be and that’s not the message we want send to growers.”
Imperium’s primary biodiesel feedstock is canola and the company has helped build a canola industry in the Pacific Northwest region. Establishing a 2014 volume limit lower than 2013 production will have wide repercussions, he added. “If these guys hear the EPA doesn’t support it, they won’t want to grow it,” Ellis said. “It really goes back to the farm.” The RFS and biofuels industry IN REVISING THE Renewable Fuel Standard, which benefit growers by linking energy affects all categories of renewable fuel – cellulosic prices to commodity prices, explained biofuel, biomass-based diesel, advanced biofuel Alan Weber, a senior advisor to the and total renewable fuel, the U.S. Environmental NBB and farmer in Missouri. Protection Agency (EPA) cited the “ethanol blend “To me, as a producer, it’s helped well,” the point where ethanol exceeds 10 percent to create a hedge against energy inflaof the total fuel supply and the level approved for tion,” he said. “If energy prices go up, all vehicles. our input prices go up, but our comSince overall gasoline consumption is going modity prices go up, too … it trades down, while renewable fuel volumes are going up, at its energy value.” the production levels must be addressed, accordLower the RFS and it’s a chain ing to the EPA. The agency proposed a target of reaction, biofuel supporters argue. 15.2 billion gallons of renewable fuel to be blended Entrepreneurs will be less likely to into the U.S. fuel supply, reducing the mandate by launch a business and investors will almost 3 billion gallons. be less likely to pony up capital. Renewable fuel producers and some lawMoreover, existing biofuels processors makers now argue that this proposal violates the and producers, many of whom own Clean Air Act because the agency is factoring in small and medium-sized businesses reduced market demand as a reason to lower the and already made large investments, mandate, rather than inadequate supply, as outcould be crippled.
EPA PROPOSAL EXPLAINED
Shrinking an Industry
lined by the law. Advanced biofuels (including biodiesel), they argue, are caught in the crosshairs of these across-the-board cuts and their production mandate should not be rolled back. The EPA is expected to make a decision in the next few months. Meanwhile the industry remains hopeful it will not put the brakes on biofuel production.
Reducing biodiesel production to the proposed levels could eliminate more than 10 percent of industry’s 62,000 jobs, according to the NBB. Northstar Agri Industries operates a canola processing and refining facility in Kittson County, Minn., and plans to build another plant in Oklahoma. A reduced RFS, however, would certainly dampen enthusiasm for the expansion project as well as endanger the 55 fulltime jobs in rural Minnesota, said company President Neil Juhnke. “Smaller amounts of canola are sold for biodiesel, but it’s the overall oils and fats sector that’s helped by biodiesel and if you remove that demand, these other, lower grade oils will have to find a place in the food chain somewhere and it would have a tendency to
soften vegetable oil prices,” he said. “It’s disappointing for the government to enact legislation like the RFS and then create uncertainty in the industry that has invested such large amounts in meeting those expectations. They’re tweaking the numbers unnecessarily.” And for producers, it’s a change with potentially devastating implications. ALISON NEUMER LARA IS MANAGING EDITOR OF U.S. CANOLA DIGEST.
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U.S. CANOL A DIGEST
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