By Todd Neeley
DTN Staff Reporter
OMAHA (DTN) -- The U.S. Environmental Protection Agency's decision to relax sustainability standards for biodiesel is opening the import market for Argentine producers. That couldn't have come at a worse time for a U.S. biodiesel industry already on the ropes from EPA delays on the Renewable Fuel Standard.
Industry representatives told reporters Friday the U.S. biodiesel industry is in full shutdown mode, at a time when the U.S. soon could begin to see an influx of Argentine biodiesel. Anti-dumping duties imposed on Argentina by the European Union in recent years effectively closed off Argentine biodiesel to the EU. That means about 450 million gallons could find its way to the U.S. market initially. One representative said the industry is not ruling out legal action.
"We're in our second year in functioning without RFS policy," said Anne Steckel, vice president for federal affairs at the National Biodiesel Board. "As the delay has dragged on, the EPA seems like it is ho-hum business as usual. We are actually going backwards and companies are filing bankruptcy. It is seriously damaging the biodiesel industry. We literally have dozens of producers hanging on by a thread."
Steckel said the Argentine industry has a 1.4-billion-gallon production capacity -- meaning there is potentially a lot more biodiesel that could make its way to the U.S. Even if the RFS was fully functioning for the biodiesel industry, Steckel said Argentine producers already have a price advantage. It is unclear how many U.S. biodiesel plants have shut down or how many filed bankruptcy at this point, she said.
Joe Jobe, chief executive officer of the National Biodiesel Board, said U.S. industry production of about 1.75 billion gallons in 2014 had little to do with the RFS.
"The only reason our industry kept going is EPA indicated it was going to fix this RFS," Jobe said. "...They could get the 2014 rule out this afternoon. The volumes are already known. They are now three years behind. They should have all three finalized. Why they would decide this week to lower sustainability requirements for a foreign Argentinian product when they are behind on a basic thing of finalizing the rule... They decided to make the decision without notice or public comment."
Jobe said NBB sent a letter to EPA Administrator Gina McCarthy Friday asking the agency to reconsider the decision. "This is a discretionary decision they made," he said. "They could reverse the decision at any time. If they choose not to do that, we have a number of legal options... This is of great consequence. The volumes we produced in 2014 were produced in part by people now out of business. It is mind-boggling why it is they believe they don't need to comply with the law. The volumes are already out. That is their legal obligation."
Prior to EPA's decision on Argentina biodiesel, producers from that nation were required to meet what Jobe said were "significant" sustainability requirements such as not allowing new land to be cleared to produce biodiesel.
EPA said publicly it actually made the sustainability requirements more stringent with the decision. "How does that make sense?" Jobe said. "...It makes no sense that producers got together and asked for more stringent regulations."
Byron Bunker, director of the compliance division in EPA's Office of Transportation and Air Quality, said Argentine producers came to EPA for clarification.
"It's like someone asking a professional tax preparer to do your taxes," he said in a statement. "They know the codes, the regulation and how to manage the documentation. People want certainty and protection that they are complying with the extensive laws, which most common people don't know or understand, and so they want the protection of the professional tax preparer. This is no different for the parties in Argentina."
Bunker said the agency intends to take action on the 2014, 2015 and 2016 RFS volumes this spring.
"We understand industry's desire for certainty," he said. "EPA is committed to getting the RFS program back on track."
Bunker said claims by the U.S. biodiesel industry that sustainability standards were relaxed for Argentine producers "is flatly wrong."
"...The sustainability standards are exactly the same for all parties. This alternate biomass tracking plan is simply one mechanism by which Argentinian producers can meet the record-keeping requirements of the program."
The standards were defined in the 2007 Energy Independence and Security Act. In order to qualify for the RFS program, planted crops and crop residue used as biofuel feedstock must be harvested from agricultural land cleared or cultivated prior to December 2007.
"The RFS regulations Congress established in 2007 apply to both foreign and domestic producers," Bunker said. "Any foreign or domestic renewable fuel producer or renewable identification number-generating importer may meet the recordkeeping requirements for tracking feedstock from qualified lands with an alternative biomass tracking program that has been approved by the EPA."
Several countries already import biofuel via the existing regulations, he said, and the EPA decision would not necessarily lead to opened floodgates for Argentine biodiesel.
"Producers decide where to sell their feedstock based on multiple market factors, including where they can get the highest price," Bunker said.
Argentina's biodiesel program will be implemented based on this year's soybean harvest, he said, which will start sometime in March and run through June or July.
"The earliest that fuel might be exported under this program is later this fall (September or later), after soybeans currently in the field have been harvested, crushed, and refined to produce biodiesel," Bunker said.
Ben Wootton, former owner of now-bankrupt Keystone BioFuels, a biodiesel producer based in Pennsylvania, said his company filed Chapter 11 in 2013 because of RFS uncertainty. While the corn-based ethanol industry continues to thrive despite uncertainty, the same cannot be said for biodiesel.
"The lack of guidance by EPA on the RFS is hurting real people," Wootton said. "The industry always lives up to what it says it will do. Having an influx of (Argentine) biodiesel into our market now -- I'm concerned about the remaining producers. When a company like Green Earth files bankruptcy, it is a major statement we need to get this RFS policy on track." The much-respected Galen Park, Texas-based biodiesel producer Green Earth Fuels, LLC, filed for Chapter 7 on Jan. 7, 2015.
Wootton wrote a letter to McCarthy in which he slammed the administrator for a statement she made last year indicating the RFS delay had not appeared to slow the industry.
"I would invite administrator McCarthy to come to my shuttered plant and talk to some of the laid-off workers or to visit practically any biodiesel plant across the country to see the damage that is taking place," Wootton said.
"It is obvious that this administration doesn't understand the severe damage that the uncertainty surrounding this rule has caused our industry and the thousands of employees it represents. It is beyond frustrating that an administration I have strongly supported has inflicted so much harm on an industry it says it supports."
Todd Neeley can be reached at firstname.lastname@example.org
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