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EPA Angers Farmers Again

It might not seem possible that the Environmental Protection Agency could do more to anger farmers than it has already, but on Tuesday of this week, the agency succeeded.

On the same day when leaders of the Iowa Renewable Fuels Association were complaining about the EPA’s two-year delay in issuing ethanol and biodiesel blending levels under the Renewable Fuel Standard, the EPA announced a decision that critics say will make it easier for biodiesel plants in Argentina to export to the U.S.

“Not only does this threaten U.S. businesses and jobs, it could also undermine our sustainability goals aimed at preventing deforestation from the production of renewable fuels,” said Anne Steckel, the National Biodiesel Board’s vice president of federal affairs. “It opens the floodgates for Argentinian biodiesel with very little oversight or verification that the resources used to make the fuel was grown in accordance with strict RFS sustainability requirements.”

To prevent deforestation and other harmful land-use changes, feedstocks used under the RFS generally must be grown on land that was cleared or cultivated prior to December 18, 2007 – when the RFS was implemented, according to the Biodiesel Board. Typically, foreign producers must closely map and track each batch of feedstock used to produce imported renewable fuels.

According to the Biodiesel Board, EPA’s decision Tuesday allows Argentinian biodiesel producers to use a survey plan for certifying the feedstocks used – in this case, soybean oil. The change – effectively leaving it to the foreign producer to pay an independent third party to survey their feedstock suppliers – is far less stringent than the current map-and-track requirement and more difficult to verify.

The biodiesel board estimates that up to 600 million gallons of biodiesel could be imported from Argentina as a result of this change. (In 2014, the U.S. produced more than 1 billion gallons of biodiesel in the first 10 months of the year, according to the U.S. Energy Information Administration’s most recent monthly report.)

When asked how they came up with that number, NBB spokesperson Ben Evans told that “we talked to some of the bigger players in the industry and came up with that number.”

Market prices vary, but biodiesel from Argentina is cheaper than U.S. biodiesel, he said. That’s partly because Argentina taxes exports of biodiesel at a lower rate than exports of either raw soybeans or soybean oil, in effect creating a subsidy for biodiesel. There may be overcapacity, too. Argentina used to export biodiesel to the European Union but has been blocked by antidumping tariffs, as is U.S. biodiesel formerly shipped to the EU.

The Argentinian consortium of renewable fuels producers, CARBIO, asked for a faster method of exporting in August of 2012.

“It’s been floating around for a couple of years. We knew the decision was coming at some point,” Evans said.

But the U.S. biodiesel industry was surprised.

“It’s a puzzling decision, given what’s going on with the RFS,” Evans said, referring to the EPA delay in announcing renewable volume obligations for blenders for 2014, 2015, and 2016. EPA made a proposal to lower blending levels in November of 2013, then delayed its final rule after an outcry from farm groups and the biofuels industry in the Midwest. 

During his weekly press conference, Senator John Thune (R-SD), chairman of the Senate Commerce Committee and a member of the Senate Agriculture Committee, said he needed to learn more about why the EPA announced its decision on biodiesel imports before the agency has issued the final blending obligations.

“It seems to me that’s really getting the cart ahead of the horse,” he said.

The American Soybean Association also weighed in on EPA’s decisions late Tuesday.

“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.”

Later, EPA supplied a response to some of our questions about its approval of the biodiesel exporting process. 

“The CARBIO program will be implemented on this year’s soybean harvest, which will start sometime in March and run through June or July. The earliest that fuel might be exported under this program is later this fall (September or later), after soybeans currently in the field have been harvested, crushed, and refined to produce biodiesel,” said Byron Bunker, Director of the Compliance Division of EPA’s Office of Transportation and Air Quality. “Any volumes that would qualify under this plan would need to have all steps verified by the approved third-party auditor before a RIN can be generated.”

“The newly approved alternate biomass tracking program will enhance EPA’s oversight of biodiesel that may come from Argentina by requiring a third-party auditor to review the entire supply chain - from the soybean in the field through harvest, crushing and final biodiesel production,” Bunker said. “This third-party auditor will be active eyes and ears on the ground with a responsibility to promptly report any issues to the Agency.  The program is expressly designed to ensure that only soybeans from approved fields and cultivated prior to 2007 are included in fuel verified through the program. The CARBIO Alternative Plan only applies to beans grown in Argentina.  Beans grown in other countries are not qualified under the plan…” 

And by Wednesday, other members of Congress besides Thune were speaking out.

Senator Heidi Heitkamp (D-ND) criticized EPA “for prioritizing foreign biodiesel imports over domestic producers.” And Heitkamp had even higher estimates of the potential damage to the U.S. industry, which she said scaled back production in 2014 without a clear renewable fuel standard.

“The EPA is planning to allow Argentina to ship as much as 1 billion gallons of biodiesel into the United States without first fulfilling its legal duty to provide certainty to American farmers and producers by setting clear production levels,” Heitkamp’s offices said in a statement. Questioning the EPA’s priorities, Heitkamp slammed the agency for neglecting its legal obligation to provide certainty to biofuels and agriculture and the workers they employ by setting biodiesel volumes under the Renewable Fuel Standard (RFS). Lacking proper federal guidance, biodiesel producers across the country have been forced to slow production, she said, negatively impacting farmers whose crops supply the industry, hurting jobs, and harming rural communities. 

What's next for biodiesel?

Thursday evening, ASA president Cowan told that his group has visited with Senators Chuck Grassley and Joni Ernst of Iowa and Pat Roberts of Kansas.

"We're working within the agency and we're working with members of Congress to work with the agency," he said.

Although members of Congress are supportive, Cowan said he's not certain that it will be possible to get EPA to reverse its decision on biodiesel imports from Argentina.

"We have to hope it doesn't affect us too negatively down the road," he said.

The best hope for biodiesel might be ending the uncertainty over how much will be required to blend with diesel for last year, 2015 and 2016. EPA hasn't said when it will release its long-delayed final RFS rule for 2014 or proposals for this year and next.

"There's no timetable we can get out of them," Cowan said.

ASA and other ag groups might even get support from the oil industry for releasing the RFS blending obligations, he said.

"How do you know what your blend rate is when you don't what the number has to be?" Cowan asked. 

Ultimately, President Barack Obama may need to pressure EPA, Cowan said. The agency's action "just seems to run counter to the message he's put out about biofuels. It would be a chance for Obama to stand up and support the agricultural community."

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