EPA proposal shines light on hot-button imports

Source: Marc Heller, E&E News reporter • Posted: Sunday, July 9, 2017

The Trump administration’s proposal not to boost the amount of biodiesel that’s blended into fuel in 2019 draws attention to a sensitive point in the country’s approach to renewable energy: Companies sometimes rely on imports to meet the renewable fuel law’s requirements.

In its proposal, U.S. EPA asked stakeholders for suggestions on how to curb imports, saying that bringing more biodiesel and ethanol into the country might conflict with the program’s goal of reducing reliance on foreign fuel.

“Due to their origin outside the United States, imported renewable fuels may not have the same impact on energy independence as those produced domestically,” the agency said in Wednesday’s proposal, which calls for 2.1 billion gallons of biodiesel in 2019, unchanged from the level mandated for next year.

“EPA is interested in stakeholder views on this topic and on what steps EPA might take to ensure energy independence and security,” the agency said.

One possibility, EPA said, is to reduce the amount of biodiesel mixed into the fuel supply under the renewable fuel standard. The agency can do that through a waiver authority Congress granted it in the RFS law, enacted in 2005 and updated in 2007.

The agency could also reduce the overall amounts of advanced biofuel required for 2019, when EPA writes a final rule later this year, the agency said in its proposed rule.

The RFS proposal, open to public comment for 45 days, would also trim the amount of advanced biofuel and hold conventional ethanol about steady for 2018 from this year. Volumes for biodiesel are set two years ahead, while other renewable fuels are typically set the year before they take effect.

Industry groups said that they were surprised EPA delved into the import issue and that officials have limited options for curtailing imports — if that’s an important goal, which some groups dispute.

“It’s kind of overstated,” said Brooke Coleman, executive director of the Advanced Biofuels Business Council, a trade group.

In the broad picture, little renewable fuel is imported into the United States. California plants import some ethanol because sugar cane from Brazil meets that state’s carbon standards. And while imports of biodiesel from countries such as Argentina have risen sharply, they’re small in the context of all biofuel in the United States, Coleman said.

In 2016, ethanol imports totaled 46 million gallons, while companies imported 731 million gallons of advanced biodiesel and renewable diesel, EPA said. Most of the diesel, around 561 million gallons, was advanced biodiesel, the agency said, a sharp increase from 382 million gallons imported the prior year.

The agency’s statistics show that ethanol imports fell, however, from the prior two years. And ethanol boosters yesterday touted a report showing that U.S. ethanol exports — which far exceed what the country buys elsewhere — remain strong, climbing to 119.2 million gallons in May, a 37 percent increase from April, according to the Renewable Fuels Association.

“Imported ethanol has accounted for less than 1 percent of U.S. consumption for the last three years in a row, and our industry has enjoyed an open and efficient bilateral trade relationship with Brazil and other ethanol-producing nations,” said RFA President and CEO Bob Dinneen in a statement.

The relationship with Brazil isn’t without complications, though, as that country is considering imposing a 17 percent tariff on imported U.S. ethanol. Brazil’s Chamber of Foreign Trade said Wednesday it would delay a decision on that proposal.

In any case, using the RFS to address a matter between the United States and other countries doesn’t make much sense, renewable fuel advocates said.

“It’s a trade-related issue,” Coleman said. “We don’t have an RFS import problem. We have a market problem.”

Ethanol imports could be resolved by a closer look at how the U.S. and states measure the carbon-related impact of Brazilian sugar cane, Dinneen said. Those imports are attractive, people in the industry say, because California’s clean air initiative ranks sugar cane higher than ethanol derived from corn.

The RFA said that approach is outdated and that recent studies suggest corn- and sugar-based ethanol each produce about 40 percent less greenhouse gas emissions than traditional gasoline.

Groups divided

Imports of biodiesel divide U.S. renewable fuel advocates. The National Biodiesel Board, representing U.S. producers, has fought imports and complains that countries such as Argentina and Indonesia subsidize shipments to the U.S.

The U.S. could dampen imports by switching a federal biodiesel tax benefit from a blender’s credit to a producer’s credit, the NBB has said. That would limit the benefit to domestic production. The group has support from Sen. Chuck Grassley (R-Iowa) and others, but the proposal doesn’t show much immediate sign of advancing.

The tax credit expired in 2016 and could be revived in Congress later this year.

But the Advanced Biofuels Association, representing U.S. and foreign companies, said advanced biofuel is a route to cleaner air, wherever it’s made, reducing greenhouse gas emissions by 50 percent compared with gasoline. The ABA has urged Congress to keep the tax credit as it was written.

Oil and gas companies welcomed EPA’s request for comments on the imports issue.

The American Fuel and Petrochemical Manufacturers, a trade association for makers of gasoline, diesel and other petroleum-based fuel, praised EPA in a statement by President and CEO Chet Thompson.

Thompson said the group was pleased by EPA’s proposed reduction in some biofuels and by indications that the agency “wants to ensure we are not incentivizing imported biofuels over American refined gasoline and diesel.”