Biodiesel Producers Want Fairness

From the Fall 2019 print edition of Biodiesel Magazine, National Biodiesel Board CEO Donnell Rehagen provides his perspective on small refinery exemptions and what they are doing to U.S. biodiesel producers.
By Donnell Rehagen | October 02, 2019

Earlier this summer, oil refiners threatened to sue the U.S. EPA for failing to retroactively issue 2018 small refinery waivers in a timely manner. The group claims that the uncertainty “tied up” small refineries’ working capital and prevented them from investing in their refineries to make efficiency improvements to remain competitive and profitable. This assertion is ironic, since those are the exact harms that retroactive small refinery waivers have been causing to biodiesel and renewable diesel producers for the past several years.

The U.S. adopted the Renewable Fuel Standard, signed by President George W. Bush in 2007, to encourage investment in advanced biofuels such as biodiesel, renewable diesel and renewable jet fuel. Biodiesel producers responded by investing billions of private dollars and building an industry that produces more than 2 billion gallons of transportation fuel each year. 

These great fuels are better for engines and cleaner for the environment while providing a vital market for surplus and recycled animal fats, agricultural oils and used restaurant greases—all products that are considered waste or coproducts of food production.

The RFS was designed to increase the volume of advanced biofuels being introduced into the marketplace year after year. For biodiesel and renewable diesel, the annual increase is established directly by the EPA after fact finding and data collection. This volume-setting exercise then gives the U.S. industry the clear signals it needs to increase its investment, buy more feedstock and hire more people to produce an increased volume. 

The fact is that biodiesel and renewable diesel growth has consistently exceeded EPA’s estimates of what can be achieved. Year after year, the two fuels fill more than 90 percent of the RFS volumes reserved for advanced biofuels. The EPA complains that advanced biofuels have not materialized quickly enough to meet the goals of the RFS. But the agency itself is holding its thumb on the industry and blocking growth. These blocking actions are specifically counter to the intent of Congress when the law was passed. And many of the lawmakers who were intimately involved in drafting the RFS have told the EPA so.

These small refinery waivers act as an “after-the-fact” reduction in the annual volume the EPA has previously set and codified. The annual volume commitment the EPA made, many times nearly a year before, is reduced by hundreds of millions of gallons in order to provide “relief” to some of the largest and most profitable companies in the entire world. This comes  at the expense of the small companies around the country that originally invested in the biodiesel and renewable diesel industry when the government sent out its “call to action” by passing the RFS in the first place. 

The EPA has made clear that it will stand in the way of future growth for biodiesel and renewable diesel under the RFS. In proposing  its 2021 volume for biodiesel and renewable diesel, EPA simply repeated the exact same numbers from its 2020 volume, without any analysis of the biodiesel industry’s ability to continue sustainable growth. How is this consistent with congressional intent to grow advanced biofuels?

According to University of Illinois economist Scott Irwin, virtually all of the demand destruction from small refinery waivers is falling on the biodiesel industry. This summer, EPA granted 31 more of these petitions. The damage to the U.S. biodiesel and renewable diesel industry will soon reach $7.7 billion or 2.54 billion gallons, according to Irwin. Consider that the annual volume of our industry is approximately 3 billion gallons.

Consider as well that a “small” oil refinery, one that is eligible for an RFS hardship waiver—one that can make up to 3 million gallons a day or more than 1 billion gallons a year—would have an RFS obligation to use just 20 million gallons of biodiesel or renewable diesel in a year. Dozens of U.S. biodiesel plants produce less than 20 million gallons a year—just one small refinery exemption would eliminate their entire market.

In response to the unfairness in Washington, D.C., Davie Stephens, American Soybean Association president, and I requested a meeting with President Donald Trump to discuss small refinery exemptions and the RFS. Our request emphasized the need to include biodiesel-specific measures in any proposed resolution.

Biodiesel producers have suffered the greatest impact from the administration’s small refinery exemptions. We are seeing biodiesel producers across the country—from Pennsylvania to Iowa to Georgia and Texas—shutting their doors and laying off workers as a result of demand destruction. The RFS was designed to support the growth of advanced biofuels, but the small refinery exemptions have turned the program upside down.

Biodiesel and renewable diesel producers have been playing by the rules the EPA established in 2007. It appears a couple of years ago the rules were changed, and refinery waivers became extremely easy to acquire—you simply just have to ask. This is all at the expense of those small companies that answered the original call to action and have now invested billions of dollars to grow a renewable fuels industry in the U.S. It’s hard to find the fairness in that.

Donnell Rehagen
National Biodiesel Board

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