Application of America-first Approach to RVOs Well-intended, But Misses the Mark

It will be up to our industry to make our voices heard during the comment period, with the administration, and through every avenue available until the rule is finalized later this year. It is clear that we have our work cut out for us.
By Donnell Rehagen | August 09, 2017

The first action by the Trump administration on the Renewable Fuel Standard was much anticipated. The National Biodiesel Board and the entire biofuels industry eagerly awaited the 2018 renewable volume obligations (RVO) proposal released in July. The RFS was intended to move this country toward advanced biofuels, and the biodiesel industry has risen to the challenge of the RFS program every year with the potential to continue growing with the right policy signals.

After much consideration and input from our members, our industry working group dedicated to making recommendations on the RVOs and our governing board, NBB recommended U.S. EPA propose a 2018 advanced-biofuel volume of 5.25 billion ethanol-equivalent gallons and a 2019 biomass-based diesel volume of 2.75 billion gallons.

Increased volumes would enhance stability in the marketplace, provide room for growth in our industry, increase opportunities for U.S. producers, and provide a clear signal that American-made advanced biofuels are a key component of President Trump’s plan for “energy dominance.”

While the July announcement was just a proposal, we felt the disappointment of maintaining the minimum required biomass-based diesel volume at 2.1 billion gallons from 2018 for 2019 and a proposal that slightly decreases the 2018 volume for advanced biofuels to 4.24 billion gallons from the 4.28 billion gallons EPA set for 2017. While the decrease in advanced biofuels corresponds with lower cellulosic biofuel volumes from 2017, EPA’s proposal does not show the growth in advanced biofuels that Congress intended or the growth in biomass-based diesel we know can be achieved.

BBD the Floor, AB the Ceiling. Raise the Ceiling.
In the proposal, EPA argues that the biodiesel industry’s ability to exceed the requirements of the biomass-based diesel category means that the proposed volumes are adequate:

“For 2019, EPA continues to believe that it would still be appropriate to provide a floor above the statutory minimum of 1 billion gallons to provide a guaranteed level of support for the continued production and use of BBD. However, we also believe that the volume of biomass-based diesel supplied in previous years demonstrates that the advanced biofuel standard is capable of incentivizing additional supply of these fuels above the volume required by the biomass-based diesel standard.”

But the RFS was intended to ensure growth of advanced biofuels to compete against petroleum, and the biomass-based diesel category ensures that growth occurs in the diesel sector. Market growth and new investments are stimulated by the policy signals sent by increased volumes. Without the market stability provided by higher volumes, investors are less likely to fund infrastructure needs or new employee hires—curtailing the ability of biodiesel to create new domestic jobs.

If we want to advance the primary goal of the law—to expand the country’s renewable fuels sector—the volumes in the advanced-biofuel category must be increased each year. Decreasing this volume will neither increase competition in advanced biofuels nor drive growth in biomass-based diesel fuel.

Domestic Producers Can Achieve Higher Volumes
The domestic biodiesel industry has made substantial investments and is being drastically underutilized. EPA acknowledges in the proposal that there is additional capacity and available feedstock for more American-made biomass-based diesel. Simultaneously, it cites growing biofuels imports as a concern and a reason for not increasing volumes. The RFS is simply not the appropriate place, nor is it an effective way to address this concern.

Currently, the U.S. Department of Commerce and the U.S. International Trade Commission are investigating whether to impose antidumping and countervailing duties against Argentina and Indonesia, because a flood of subsidized and dumped biodiesel imports have stolen market share from U.S. producers. The NBB Fair Trade Coalition filed petitions with these agencies in March to level the playing field for U.S. producers. Preliminary determinations on estimated rates of subsidization and dumping are expected from the commerce department as early as late August and October, respectively.

Because subsidized biodiesel that is dumped in the U.S. is currently cheaper than American-made biodiesel, these will be the first gallons bought to meet the RFS volumes. Therefore, lower RFS volumes only exacerbate the harms to the domestic industry. If EPA wants to increase our energy independence, it needs to raise, not lower, the advanced biofuel requirements. Reducing these volumes will simply limit American producers’ share of the market even more until these trade issues are resolved.

It will be up to our industry to make our voices heard during the comment period, with the administration, and through every avenue available until the rule is finalized later this year. It is clear from this proposal that we have our work cut out for us, but I’m confident we will be successful in showing the value our industry brings to the economy, environment, and American energy independence.

Donnell Rehagen
National Biodiesel Board

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