Editor’s note – With this June issue of Render, we introduce a new writer for the biofuels column. Joe Gershen is president of Encore BioRenewables and has been involved with the biodiesel, renewable energy, and clean technology sectors for 16 years. He serves as vice president of the California Biodiesel Alliance and sits on the Advisory Committee for the California Energy Commission’s Alternative and Renewable Fuel and Vehicle Technology Program.
On April 10, 2017, California’s Fifth District Court of Appeal’s much-anticipated final ruling came down in the Poet LLC vs. California Air Resources Board (CARB) case. The outcome was less harsh for the biodiesel industry than expected compared to a preliminary ruling previously issued by the court. Poet, a producer of ethanol and other biorefined products, filed the lawsuit in an attempt to prevent CARB from implementing its Low Carbon Fuel Standard (LCFS), which gives corn ethanol a higher carbon intensity score (which is less favorable) due to indirect land use changes. Although biodiesel is generally unrelated to corn ethanol, Poet alleged an increase in nitrogen oxide (NOx) emissions caused by biodiesel violated the California Environmental Quality Act (CEQA).
A preliminary ruling released in late March had the biofuels industry, especially biodiesel producers in California, concerned as the court indicated CARB had made errors in its environmental assessment of NOx emissions from biodiesel. Based on the preliminary ruling, it appeared biodiesel could be severed from California’s LCFS program while CARB took any necessary corrective actions.
In its final ruling, the court found that CARB was in violation of CEQA with respect to its assessment of NOx emissions from biodiesel when it approved the re-adopted LCFS regulations. However, rather than remove biodiesel from the program as was anticipated, the court ruled that the regulations could remain intact in the interest of protecting the environment while CARB took the proper actions to comply with CEQA. The court recognized the benefits of biodiesel, including reducing greenhouse gas emissions and criteria pollutant emissions.
If CARB does not take the necessary corrective actions by the end of 2017, then LCFS carbon reduction targets for the alternative diesel fuel category will be held at 2017 levels until corrective actions are complete. Once that requirement is met, however, the program will be back on track. Meanwhile, since LCFS credits are generic, biodiesel can continue to be used for compliance in all categories, not just diesel.
In late March, the National Biodiesel Board (NBB) filed an antidumping and countervailing duty petition with the United States (US) Department of Commerce and the US International Trade Commission (ITC) claiming that Argentine and Indonesian companies are in violation of trade laws by dumping subsidized biodiesel on the US market. Three weeks later, ITC launched an investigation into imports of biodiesel from these two countries for possible dumping and subsidization.
On May 5, ITC determined there is “reasonable indication” that the US biodiesel industry has been “materially injured” by imports of biodiesel from Argentina and Indonesia that are allegedly subsidized and sold in the United States at less than fair value. The next step is for the Department of Commerce to conduct its investigation and release preliminary countervailing and antidumping duty determinations, which are expected on or about June 16, 2017, and August 30, 2017, respectively.
“The National Biodiesel Board and US biodiesel industry are committed to fair trade, and we support the right of producers and workers to compete on a level playing field,” said Donnell Rehagen, NBB chief executive officer. “This is a simple case where companies in Argentina and Indonesia are getting advantages that cheat US trade laws and are counter to fair competition. NBB is involved because US biodiesel production, which currently supports more than 50,000 American jobs, is being put at risk by unfair market practices.”
Biodiesel imports from Argentina and Indonesia surged by 464 percent from 2014 to 2016. That growth has taken 18.3 percentage points of market share from US manufacturers.
“The resulting imbalance caused by unfair trade practices is suffocating US biodiesel producers,” Rehagen explained. “Our goal is to create a level playing field to give markets, consumers, and retailers access to the benefits of true and fair competition.”
Based on NBB’s review, Argentine and Indonesian producers are dumping their biodiesel in the United States by selling at prices that are substantially below their cost of production. This is reflected in the petition’s alleged dumping margins of 23.3 percent for Argentina and 34 percent for Indonesia. The petition also alleges illegal subsidies based on numerous government programs in those countries.
This is not the first time that Argentine and Indonesian biodiesel producers have been charged with violating international trade laws. In 2013, the European Union imposed duties anywhere from 41.9 to 49.2 percent on Argentina and 8.8 to 23.3 percent on Indonesia. Last year, Peru imposed both antidumping and countervailing duties on Argentine biodiesel.
The United States represented 90 percent of Argentina’s biodiesel exports last year. The NBB petition and subsequent government investigation have already had a chilling effect on the Argentine biodiesel industry, bringing US exports to a standstill. Only cargos that were part of deals agreed to prior to these announcements are being loaded. Due to a lapse in the dollar-per-gallon blender’s federal tax credit at the end of 2016, no new export deals are being discussed. A similar effect can be expected in Indonesia.
A drop in imports from Argentina and Indonesia would be a boost to the US biodiesel industry, which could see a spike in demand of hundreds of millions of gallons per year for domestic producers.
US Senator Maria Cantwell (D-WA), ranking member on the Senate Energy and Natural Resources Committee, Senator Chuck Grassley (R-IA), and 14 other senators have introduced a bipartisan tax credit bill that would convert the expired blender’s tax credit for biodiesel and renewable diesel into a dollar-per-gallon producer’s tax credit for these fuels produced in the United States as well as extend the new policy for three years. The American Renewable Fuel and Job Creation Act also provides an additional 10-cent-per-gallon credit for small US biodiesel producers. A similar bill was introduced in the US House of Representatives, led by Representatives Kristi Noem (R-SD) and Bill Pascrell (D-NJ). The switch ensures the tax credit incentivizes domestic production and that US taxpayers are not subsidizing imported fuel.
Biofuel imports from Argentina, Indonesia, Singapore, the European Union, South Korea, and others are projected to exceed 1.8 billion gallons in 2016 and 2017 combined. In many cases, imported biodiesel benefits both from the existing US tax credit and additional foreign subsidies, making it difficult for American biodiesel facilities to compete. In 2015 alone, the US Department of Treasury spent over $600 million on tax credits for imported biodiesel and renewable diesel.
“The biodiesel tax credit already has a sterling track record of reducing emissions and greening our economy, removing the equivalent of 16 million cars from the road,” said Cantwell.
“US tax policy should support US products and US jobs,” Grassley added.
US taxpayer dollars and energy policies are typically aimed at incentivizing domestic production, not foreign production. The current structure of the biodiesel tax incentive as a blender’s credit allows foreign producers to access the credit if their fuel is blended in the United States. This tax reform would not block imported biodiesel from entering the US market; in fact, significant imports would likely continue coming into the United States and receiving incentives under the US Renewable Fuel Standard and California’s Low Carbon Fuel Standard.
Co-sponsors on the Cantwell/Grassley bill are Senators Pat Roberts (R-KS), Mazie Hirono (D-HI), Roy Blunt (R-MO), Sheldon Whitehouse (D-RI), Joni Ernst (R-IA), Heidi Heitkamp (D-ND), John Thune (R-SD), Tom Udall (D-NM), Martin Heinrich (D-NM), Jeanne Shaheen (D-NH), Amy Klobuchar (D-MN), Al Franken (D-MN), Joe Donnelly (D-IN), and Patty Murray (R-WA).
Consumers are not expected to be impacted by this modification as the credit value is anticipated to be passed through to the blenders and ultimately to consumers. The US biodiesel industry has about one billion gallons of unutilized annual production capacity and access to affordable feedstocks to meet the demand of US consumers.
In mid-May, the Environmental Protection Agency (EPA) sent its proposed draft rule establishing renewable volume obligations (RVOs) under the Renewable Fuel Standard (RFS) for 2018 and 2019 to the Office of Management and Budget (OMB) for review. Part of the White House, OMB has the final say on this important rule for biodiesel producers and renderers. The regulatory proposal recommends RVOs for 2018 along with RVOs for biomass-based diesel in 2019. EPA administers the volume obligations for use of renewable fuels, including biodiesel and renewable diesel. The agency said it is on track to issue the proposed RFS rule in June, which means final standards could be issued in November.
Renderers provided 30 percent of the feedstock for biodiesel production in the United States in 2016. Yellow grease accounted for 16 percent and animal fats 14 percent last year.
The National Renderers Association (NRA) recognizes this important and growing market for rendered fats and used cooking oil, and has supported annual increases in the RFS. The program has helped the relatively young biomass-based diesel industry expand successfully in recent years. NRA is communicating the importance of high RFS levels under the expected draft rule to the administration. The association will also submit regulatory comments in support of a strong RFS for both biodiesel and renewable diesel after the proposed rule is made public.
Singapore Airlines began operating 12 biofuel-powered flights between San Francisco, California, and Singapore on May 1, 2017, for a three-month period. The flights will be powered by a combination of hydro-processed esters and fatty acids, a sustainable biofuel produced from used cooking oil (UCO) and conventional jet fuel. The biofuel is produced by AltAir Fuels and will be supplied and delivered to San Francisco International Airport by SkyNRG in collaboration with North American Fuel Corporation, a wholly owned subsidiary of China Aviation Oil (Singapore), and EPIC Fuels.
According to the International Air Transport Association, sustainable biofuel is a promising technological solution that will reduce the airline industry’s carbon emissions. It has been certified safe for commercial aviation since 2011 and has been used by airlines around the world.
Malek Jalal, the 52-year-old owner of a New Jersey feedstock company, was sentenced in April for his role in a scheme that generated over $7 million in fraudulent Environmental Protection Agency (EPA) renewable identification numbers (RINs) and tax credits connected to the production of biodiesel and his subsequent attempts to obstruct a grand jury investigation. According to his plea, Jalal, who owned Unity Fuels of Newark, New Jersey, engaged in a scheme with other co-conspirators to fraudulently claim RINs and tax credits multiple times on the same fuel. He did this by buying fuel from a New York-based company, blending it with other materials, and selling it back to the same New York-based company.
Jalal also admitted to obstruction of justice. According to his plea, he knowingly modified and destroyed records after receiving a grand jury subpoena from the Southern District of Ohio. Jalal also directed an employee of Unity Fuels to fabricate false records that were provided to the grand jury in an attempt to hide the fraud scheme.
In a separate case, a Pennsylvania biofuel producer and two of its officers have been indicted on conspiracy and false statement charges for participating in a scheme that generated over $10 million in RIN credits at Keystone Biofuels Inc., a company that purported to produce and sell biodiesel for use as transportation fuel.
Ben Wooton, 52, of Enola, Pennsylvania, Race Miner, 48, of Buena Vista, Colorado, and Keystone Biofuels were indicted by a grand jury in Harrisburg, Pennsylvania. Wooton, serving as president, and Miner, serving as chief executive officer, were co-owners of Keystone Biofuels located in Shiremanstown and later in Camp Hill, Pennsylvania. Both are alleged to have participated in a scheme with other co-conspirators to fraudulently claim RIN credits on non-qualifying renewable fuel. The grand jury alleges that the fuel produced at Keystone did not meet ASTM International standards, which is required in order to qualify for RIN generation, and was placed into commerce despite being “off-spec.” The conspirators also allegedly generated fraudulent documentation, manipulated samples sent to laboratories for testing, and made false entries into an EPA tracking system in violation of the Clean Air Act as part of their scheme.
Major companies across the United States (US) are urging President Donald Trump to keep the country in the Paris Agreement on climate change. In a letter to the president organized by the Center for Climate and Energy Solutions, 16 companies stated that continued US participation in the agreement would help them manage rising climate risks and compete in the growing global clean energy markets.
Signatories to the letter include Apple, BHP Billiton, BP, Dupont, General Mills, Google, Intel, Microsoft, National Grid, Novartis Corporation, PG&E, Schneider Electric, Shell, Rio Tinto, Unilever, and Walmart. BP, Dupont, and Shell are all involved in biofuels.
June 2017 RENDER | back