The swinging pendulum of US biodiesel policy

The absurdity of unstable U.S. federal biodiesel policy
By Ron Kotrba | November 20, 2013

National governments of the world, if you want to learn how to repel investment in renewable fuels like biodiesel, just follow the U.S. government’s lead over the past four years.

In 2007, the U.S. passed RFS2 as part of the Energy Independence and Security Act, which contained the first federal biomass-based diesel requirement. It took EPA until mid-2010 to implement it. U.S. Congress let the biodiesel blenders tax credit expire on Dec. 31, 2009.

Biodiesel producers, eager to get producing but challenged by the late implementation of RFS2 and the lapsed federal tax credit, began idling plants and some unfortunately went out of business. The industry was on the brink of collapse.

Then, late in the year, Congress passed the retroactive tax credit through 2011, and the industry, despite the changes and hardship producers endured, appeared back on track. When the tax credit expired again on Dec. 31, 2011, many producers were able to stay open because of the RIN credit values, even though small producers were retrieving less for their RINs than larger ones, thanks to the fraudsters who sought illegal exploitation of the system for their own personal gain.

In 2012, EPA announced it would boost the biomass-based diesel carve-out to 1.28 billion gallons, a move lauded by the industry. In early January 2013, Congress reinstated the tax credit retroactive back to January 2012 and through December 2013.

Finally, with the tax credit and a big increase in the mandate, the tide had seemed to be changing. Some producers scooped up idled plants and invested millions in retrofitting them. Others expanded production at their own facilities, and invested in new technologies, equipment and personnel. It was all coming together. The greatest year for U.S. biodiesel was upon us.

The future looked particularly bright for biodiesel, but great, powerful forces were at play to horse draw and quarter RFS. Relentless attacks from Big Oil and Big Food, aimed chiefly at ethanol, empowered anti-biofuel constituents. But these had to do with ethanol, right? Surely any adjustment to the RFS either through Congressional measures or EPA’s own authority would not put biodiesel growth in the crosshairs because of Big Oil and Big Food’s contempt for ethanol.

Then the e-Biofuels investigation culminated in charges, and while the alleged fraud was the largest seen yet at $100 million, it was coming to a head and would soon be behind us.

Despite these challenges, biodiesel production soared to new, never-before-seen heights. Projections indicated 1.7 billion gallons would be produced by year’s end.

Then EPA’s draft proposal was leaked in October, in which the agency proposed stalling the biomass-based diesel standard at 1.28 billion gallons and reducing the advanced biofuel target from the statutory requirement of 3.75 billion ethanol-equivalent gallons to 2.2 billion, and industry stakeholders wondered, could it be? Is this real? It didn’t make any sense. Some suggested the document was a fraud. Others suggested it was an old draft, perhaps not reflective of what EPA will actually propose. Others yet even speculated that EPA is intentionally attempting to squeeze out the small producers to simplify RIN tracking and accounting.

When the actual proposal came out last Friday, and it mirrored what the leaked draft indicated, you could literally feel the frustration and angst pour out of producers. I contacted several plants and stakeholders, and some of the things that were relayed to me were not fit for print, expressions that were wholly legitimate and understandable, but expletive. For industry reaction to the proposal, read my story here

Isn’t it ironic that Big Oil’s own George W. Bush signs into law the legislation that sparks tremendous biodiesel industry growth, and the administration of Barrack Obama, the man who leveraged biodiesel so many times in his 2008 campaign, is attempting to crush it through this proposed RVO rule for 2014?

But it’s not in the nature of biodiesel producers to play the victim card. Make sure you provide comments to EPA backed with data and evidence that these biomass-based diesel and advanced proposals are unjust and unsound policy. Press the agency for answers to why biodiesel growth is being scaled back for issues unrelated to biodiesel.

As many have suggested to me, it is time to recommit to state-level policy efforts that would provide a buffer against unstable federal policies. Before EPA’s leaked draft came out in October, Biodiesel Magazine developed a webinar concept stemming from the 2013 attacks on RFS to conduct a state policy roundup and update. I will be moderating the webinar, which will feature Shelby Neal, NBB’s state policy director; Kevin Hennessy, Minnesota’s Biofuel Manager under the state department of agriculture; Emily Reyna with the Environmental Defense Fund, who will discuss opportunities for biodiesel in California under the low carbon fuel standard (LCFS); and Paul Nazzaro, CEO of the Nazzaro Group and NBB petroleum liaison, who will discuss Bioheat efforts in the Northeast. The date is Dec. 5 at 2pm Central time. To register for this free webinar, click here

Some people tell me the U.S. needs to implement a LCFS. Others say if the final RVO rule is similar to the proposal, then the fate of the industry will rest on low-cost production, and those who have made wise investments in their facilities will fare the storm. And if the U.S. cannot find a home for biodiesel, the export markets can.

But the bottom line is this: The U.S. government cannot be allowed to backslide on biodiesel policy for no good reason when billions of investment dollars, tens of thousands of jobs, people’s livelihoods, a cleaner environment and a more secure energy future are all on the line. It isn’t right, and none of us should stand for it.