EPA defends program for Argentinian biodiesel amid industry backlash 

Source: Amanda Peterka, E&E reporter • Posted: Monday, February 2, 2015

U.S. EPA is defending its approval earlier this week of a program for Argentinian imports of biodiesel against withering criticism by the U.S. biodiesel industry.

In a sit-down interview with Greenwire, EPA senior adviser Paul Argyropoulos called the program “more rigorous” than systems in place in other countries for biodiesel producers.

Under the program, a third party would certify that biodiesel produced in Argentina for export to the United States meets renewable fuel standard requirements. Other countries’ qualification systems are based on a review of records meant to ensure that agricultural land does not expand as a result of the RFS (Greenwire, Jan. 28).

“This particular alternative biomass tracking program is even more stringent than that. It’s more robust because it has a commitment from a third party to actually audit the entire biofuels supply chain,” Argyropoulos said yesterday at EPA headquarters in Washington, D.C. “Absolutely it’s more rigorous because it’s not just providing a document. It’s having everybody verify the documents, verify by physical visits and audits of the biofuel supply chain, and they are overseeing it.”

When EPA announced the decision Tuesday, the National Biodiesel Board characterized it as “easing” requirements on Argentinian biodiesel producers to qualify for the federal renewable fuel standard. The group says that the program would result in a glut of Argentinian biodiesel coming into the United States.

In the wake of EPA’s defense of the program, NBB has doubled down on its criticism. It sent a letter to EPA Administrator Gina McCarthy today asking the agency to reconsider its decision. NBB also today hosted a call with reporters in which it slammed EPA’s handling of the RFS as a “failed” policy and blamed EPA for biodiesel plant shutdowns and diminishing profits over the past year.

“The point of the RFS is to help with the domestic industry and to help with energy independence, if you look back when it was signed into law — not to be the Argentine jobs act,” Anne Steckel, NBB’s vice president of federal affairs, said in an interview yesterday.

The 2007 renewable fuel standard mandates that refiners blend certain amounts of conventional ethanol and advanced biofuels, including biodiesel, into petroleum gasoline and diesel each year. At issue are the RFS’s requirements that foreign imports of fuels for use in the program are made from only renewable biomass.

Other countries typically use a “map-and-track” system that’s largely a record-keeping exercise in which foreign biofuel producers must produce documents such as land-use records showing that plant inputs came from land that was already being used to grow crops when the RFS was enacted in 2007.

EPA’s implementing regulations for the renewable fuel standard, however, laid out an alternative option for foreign producers to certify their fuel. Argentina is the only country so far to have applied to use the alternative option, according to Argyropoulos. EPA determined that it met all the requirements of the RFS regulations.

Under the approved program, the Argentine Chamber of Biofuels, or CARBIO, will classify “go areas” in Argentina where land was cleared or cultivated prior to 2007. A third party, the Peterson Control Group, would certify that feedstocks used in biodiesel exports to the United States for use in the RFS program come from those areas.

“We believe that having that third party oversee all of that process is certainly more robust than just having records made available to do so,” Argyropoulos said.

Biofuel producers arrayed under CARBIO would fund the third-party reviews under contract. EPA did not participate in setting up the contract but reviewed it as part of its approval process for the program, Argyropoulos said.

Argentinian biofuel producers wanting to qualify under the RFS would only be allowed to use soybeans and other feedstocks that have been grown in Argentina, he added. Feedstocks imported from other countries, even where they’ve been certified under the map-and-track system, would not be allowed for inclusion.

The National Biodiesel Board, though, has countered that the new survey system would be “far less strenuous and stringent” than the map-and-track approach because it leaves reviews of feedstocks to a party that’s being paid by the producers it audits. Whether feedstocks qualify under the renewable fuel standard program would be difficult to verify, according to NBB.

“It makes absolutely no sense that a group of biofuel producers would get together and ask for more stringent regulations on them,” National Biodiesel Board CEO Joe Jobe said on today’s press call.

The board estimates that the new survey system would lead to exports of up to 600 million gallons of Argentinian biodiesel to the United States. NBB spokesman Ben Evans said that the number was based on Argentina’s historical exports to Europe before the European Union slapped an anti-dumping duty on Argentinian imports. Argentina also operates under a tax export program that incentivizes exports of biodiesel.

“This is going to displace U.S. production because the product coming in from Argentina has a strong tax advantage,” Steckel said today.

At the heart of complaints by the National Biodiesel Board is frustration over EPA’s failure last year to complete a rulemaking establishing refiners’ mandates for renewable fuels. In late 2013, the agency proposed to roll back the mandates for the first time in the RFS’s history but did not finalize the proposal after receiving criticism from both the biofuels and oil industries.

The RFS has been essential for creating a market for biodiesel producers. Without the annual requirement, the trade group says that biodiesel production has slipped and producers have been forced to close their doors. Congress also allowed the industry’s $1-a-gallon tax credit to expire through most of last year.

The group today highlighted Green Earth Fuels, a large biodiesel plant outside Houston that filed for bankruptcy earlier this month. NBB says that EPA should be focusing first on completing the annual volume requirements over the approval of the Argentina program.

“This is absolutely outrageous, and it is not without consequence. This failure on the part of EPA is costing people their livelihoods,” Jobe said. “It is just without understanding why they would decide this week that they should prioritize a decision to lower sustainability requirements for foreign Argentinian subsidized product.”

Argyropoulos said that the agency has heard NBB’s concerns. But he labeled “speculative” any attempts to project how many gallons of Argentinian biodiesel would enter the United States under the new program.

“We don’t know,” he said. “There’s a lot of things that happen in the market which provide the people in those businesses to make a determination if they’re going to produce a product, No. 1, either for food or for fuel production, and No. 2, whether they’re going to keep the product domestic or export it to some other country for other reasons.”

EPA, Argyropoulos said, is still planning to go through with a rulemaking this year that combines the refiners’ volume requirements for 2014, 2015 and 2016 in a bid to get the program back on track.

He said that the Argentina decision had no relation to the agency’s work in establishing the yearly volume obligations.

“They are two separate things,” he said. The Argentina decision was “an administrative action that is allowed for under the regulation, and the annual volumes rules are something we have to do every year, and certainly we know we are late and we have messages out there that we intend to get on track this year, but they really are two separate actions.”

In an interview earlier this year with Greenwire, EPA acting air chief Janet McCabe said that the agency was “committed” to “getting the program back on track” and in supporting the development and use of advanced biofuels. The major issue has been EPA’s legal authority to consider the practical limits to the amount of biofuel that can be used in the market, she said.

“That’s what we have been focused on, how to best accomplish Congress’ goal in determining what those volumes should be, how the categories should be divided up and what’s the right legal authority to use,” McCabe said.

Though tensions boiled over this week, the National Biodiesel Board and EPA have been going back and forth on Argentina’s application for the survey system since at least 2013. In November of that year, NBB wrote a letter expressing concerns and asking EPA to initiate a formal public comment period on CARBIO’s request. NBB followed up with a letter reiterating its concerns Feb. 6.

Jobe said that NBB was not ruling out the possibility of taking legal action to challenge the Argentina decision.