WASHINGTON, Jan. 28, 2015 – Although the U.S. remains the world leader in soybean production and exports, it also imports biodiesel and recent decisions by the U.S. EPA and the European Community are making matters worse, according to U.S. soybean growers.
Several factors played into the U.S. shift in 2013 from a net exporter to a net importer of the biofuel, which is mostly made from soybean oil. Speaking to members of the National Biodiesel Board in Fort Worth, Texas, Mindi Farber-DeAnda with the U.S. Energy Information Administration said a European regulation played a big role in change.
“We believe this was a result to the change in a European Union anti-dumping duty that was imposed,” Farber-DeAnda said. “Argentine exports of biodiesel – prior to coming to the United States – were headed to the European Union.”
The E.U. imposed duties on Argentine and Indonesian biodiesel in November 2013 after a 15-month study found producers from the two countries “were dumping their products on the EU market,” according to a release from the 28-nation trading bloc. Last October, the National Biodiesel Board (NBB) filed comments with the European Commission challenging what it calls unfair trade duties that have blocked U.S. biodiesel exports to Europe since July 2009.
Imports from Argentina will likely only increase after a Tuesday announcement from the EPA giving the South American country what NBB called “streamlined” imports. The EPA will allow Argentine biodiesel producers to use a survey plan - basically an independent third party - for certifying the soybean oil used as a feedstock for biodiesel production. In a release, NBB said this could make the sustainability of Argentine biodiesel more difficult to verify and estimates it will bring an additional 600 million gallons of the country’s biodiesel to the U.S. as a result. The EPA said Argentina’s plan to conduct an annual review of the entire biofuel supply chain “enhances existing regulatory oversight requirements currently applied to qualifying renewable fuels being imported from Argentina.”
The EPA decision prompted American Soybean Association leaders to express their “exasperation, confusion and anger,” over the Argentine announcement that they say allowed for no public comment and apparently faced no deadline.
“Today’s decision issued by EPA on Argentinian biodiesel shows a lack of coordination and alarming tone-deafness regarding the purposes of the Renewable Fuels Standard,” said ASA President and Brownfield, Texas, farmer Wade Cowan. “EPA has put the interests of our foreign competitors above those of soybean farmers here in the U.S. At this point, we can only scratch our heads and wonder what EPA’s priorities are when it comes to the domestic renewable fuels industry.”
U.S. biofuel production was also hampered in 2014 by uncertainty in a federal tax credit key to the industry. That $1-per-gallon credit was included in the tax extenders legislation passed late in 2014 and applied retroactively for the entire year, but its status in 2015 remains uncertain. Farber-DeAnda said when the tax credit was in place in 2013, it was key to triggering solid numbers for the industry. Biodiesel imports were also eight times higher than in 2012, for a total of about 210 million gallons.
While the U.S. looks to still be a net importer, Farber-DeAnda said imports have not recovered to 2013 levels. Imports now make up about 12 percent of biomass-based diesel consumption, which includes biodiesel made from soybeans and other renewables, down from 23 percent in 2013. Despite the drop in imports, she said consumption is still “pretty strong,” with domestic consumption at about 1.25 billion gallons for the first 10 months of 2014, compared with 1.38 billion gallons in all of 2013.
The EU’s anti-dumping duties were intended to allow the region’s “green energy sector” to develop, and it appears to be working. However, Kevin McGeeney, CEO of the Swiss biofuel brokerage company SCB Group, said European biofuel mandates will likely expire in 2020. This could turn a strong, EU-enforced mandate into a patchwork of requirements from the 15 member countries. “Once you start having countries issue national mandates, they do things like print them in German and you end up getting more and more and more regional,” McGeeney said.
He said that the production in Europe is mostly staying in Europe, and there is “very little in the way of imports.” Logistical concerns are preventing European biofuel producers from reaching the California market, known for its sizable biodiesel usage because of requirements in its Low Carbon Fuel Standard Program.
Future imports will depend on things like certainty in the Renewable Fuels Standard and how Indonesia handles the anti-dumping duty. If China becomes a major user of the product, Indonesia could take advantage of lower transportation costs and send product there instead of to California or other parts of the U.S. Pricing issues continue to prevent expansion into African countries that could use diversity in the fuel supply, limiting the global reach of the biofuel.
While there is some hope for improved RFS regulations in 2015, the industry’s critical tax credit will likely be stuck in limbo again this year. Paul Oesterreich with Western Petroleum Company said many big oil companies are treating 2015 just as cautiously as in 2014 from a regulatory perspective. Plunging oil prices are adding even more uncertainty to what 2015 will look like for biofuel use. “The market price is only what somebody is willing to pay, so inevitably what I’ve seen in the last month or so is some of that product has gotten discounted just to be able to move it, get it in the hands of somebody who can actually afford to get it into the fuel supply,” Oesterreich said.
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