ATA Says Biodiesel Prices May Increase, Asks EPA to Rethink 2012-13 Mandates

American Trucking Associations said the federal government’s proposed 2012-2013 renewable fuel standards could become “a new billion-dollar hidden tax on the trucking industry” because Congress is unlikely to continue underwriting biodiesel’s production costs.

In comments filed Aug. 11 with the U.S. Environmental Protection Agency, ATA said the proposed production rules ignore “economic realities” and place “the interests of biodiesel producers above the interests of consumers.”

EPA is proposing mandates that would have the nation’s refineries produce 1 billion gallons of biomass-based diesel in 2012 and 1.28 billion gallons in 2013.

ATA is asking that EPA waive the 2012 production mandate and then review the 2013 mandate proposed for biomass-based diesel, the EPA category for biodiesel.

ATA said in its comments that, “Given the high cost and operating challenges associated with biodiesel, demand for biomass-based diesel would evaporate absent government mandates.”

Only four states mandate the sale of biodiesel, which means truckers pulling up to fuel pumps in Minnesota, Oregon, Washington and Pennsylvania can buy only biodiesel in blends varying from 2% to 5%.

Biodiesel, however, costs more to produce than trucking’s main fuel, ultra-low-sulfur diesel. To keep biodiesel competitive at the pump, taxpayers underwrite its higher production costs with a $1-a-gallon federal tax credit for producers.

ATA said that the current budget-cutting mood in Congress means the tax credit will not be renewed when it expires Dec. 31. Without the credit but with production mandates still in place, refiners could pass the higher production costs onto consumers of biodiesel and other fuels, ATA said.

“In the absence of this federal tax credit the price of biodiesel is exorbitant compared to the price of ULSD,” said the trucking federation.

Without the tax credit, the wholesale cost of biodiesel could be as much as $1.70 more a gallon, ATA said in its 15-page commentary on the proposed fuel standards rule — which EPA is scheduled to adopt this fall.

Ben Evans, spokesman for the National Biodiesel Board, did not dispute that biodiesel costs more to produce.

“Obviously, there’s a premium on biodiesel over petroleum diesel and a modest price increase in B2 or B5 without the tax incentive,” Evans told Transport Topics.

“But we believe the benefits of biodiesel far outweigh the costs and we remain confident that Congress will recognize the value that the tax incentive offers the country and will reinstate it,” he said.

B2 is a blend of 2% biodiesel; B5 is a blend of 5% biodiesel.

In addition to environmental benefits, biodiesel produces American jobs and makes the country less dependent on foreign oil sources, factors that also generate support for the tax credit in Congress, Evans said.

“The recent oil price spikes have taught everyone that we shouldn’t put all our eggs in one basket,” Evans said. “We need a diverse supply of energy.”

Last year, however, Congress let the tax credit expire, devastating a biodiesel industry already reeling from the recession. More than 50 biodiesel plants closed before Congress restored the credit retroactively this year (1-3, p. 12).

ATA said the downturn raises questions about production capabilities.

“EPA dismisses the biodiesel industry’s track record on shuttered and diminished production capacity that resulted when the economics of biodiesel failed upon expiration of the blender tax credit in 2010,” ATA said.

ATA also noted that some states, among them Massachusetts last year, suspended impending biodiesel sales mandates when expiration of the tax credit cut down the production and supply of biodiesel (7-19-10, p. 4).

Biodiesel board spokesman Evans agreed that without the $1 tax credit, 2010 was painful for the industry but said biodiesel producers can easily meet EPA’s proposed mandates for the next two years.

“We’ve already produced in the first six months of this year more biodiesel than we did in all of last year,” Evans said.

“Through the first six months, we’ve done 378 million [gallons]. That is after a slow January to March as plants were ramping back up after 2010,” he added.

“In recent months we’ve been doing 70 to 80 million gallons per month, which is the pace we expect to continue,” he said. The EPA biodiesel production mandate for this year is for 800 million gallons.

ATA reiterated truckers’ complaints about biodiesel, saying the fuel “has a lower energy content, poor cold weather performance and higher vehicle maintenance costs.”

Evans said: “Biodiesel’s quality and performance has been proven in the marketplace for years, which is why virtually every major engine manufacturer warranties it in their engines.”