EPA Mandates 25% More Biodiesel This Year

This story appears in the Jan. 9 print edition of Transport Topics.

Diesel refineries must produce 1 billion gallons of biodiesel in 2012, a 25% increase from last year, the Environmental Protection Agency said last month, but the agency decided to delay its planned 2013 mandate.

Setting the 2012 standard, EPA rejected American Trucking Associations’ argument in written comments that the 1 billion-gallon requirement would be “a new billion dollar hidden tax on the trucking industry.” The agency said the expiration of a tax credit for biodiesel does not warrant lowering the standard.

“We do envision that the higher the number, the more likely the increase in the cost of fuel,” Glen Kedzie, ATA’s environmental counsel, told Transport Topics.

The 1 billion-gallon mandate matches the level of biomass-based diesel that EPA envisioned requiring when it proposed the mandate in 2011. In the same proposal, EPA said it wanted a 1.28 billion-gallon requirement for 2013.

“We are continuing to evaluate the many comments on the [proposal] from stakeholders and will issue a final rule setting the applicable biomass-based diesel volume for calendar year 2013 as expeditiously as practicable,” EPA wrote in the final rule it released Dec. 22.

In comments filed in August, ATA asked EPA to waive the 2012 mandate and rethink its 2013 mandate, citing economic conditions and the tax-credit expiration. EPA mandated that 800 million gallons be produced in 2011 and 650 million gallons the previous year.

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

Kedzie predicted that the mandate delay will cause prices of biodiesel blends, which usually contain 2% to 5% biodiesel, to increase. He did not speculate how much the prices would rise.

Biodiesel costs more to produce than the standard ultra-low-sulfur diesel, but a $1-per-gallon tax credit to diesel refiners who blend bio-diesel into their fuel helped bring the cost down and make it competitive with standard fuel.

That tax credit expired at the end of 2011. Several bills were proposed to extend it, but “time just ran out at the end of the year,” said Ben Evans, spokesman for the National Biodiesel Board.

“We don’t have the blender’s credit,” Kedzie said. “According to what we hear, Congress is going to try to revisit that and try to push it through.” ATA pushed to renew the credit before the end of the year, but Congress did not pass the law before starting its winter recess.

NBB slammed Congress’s inaction, saying that it put thousands of jobs at risk.

“Jobs and the economy are supposed to be the top priority in Washington, yet Congress has left thousands of workers in limbo heading into the holidays by failing to extend this tax incentive,” Anne Steckel, the group’s vice president of federal affairs, said in a December statement. “It’s a missed opportunity, and we are urging Congress to pass an extension immediately next year [in 2012] to limit the economic damage.”

The $1 credit, enacted in 2005, has been in effect every year since then, except 2010, and so far this year, Evans said.

Though EPA is legally required to set renewable fuel standards yearly, it has the authority to temporarily waive rules for biodiesel if market conditions would make the price of biodiesel rise significantly. Citing the potential for the tax credit to expire, ATA asked EPA to use that authority for the 2012 standard, but EPA rejected the argument.

“The waiver authority . . . is based on an EPA determination that there ‘is’ a feedstock disruption or other market circumstance that would make the price of

biomass-based diesel rise significantly,” EPA wrote. “If Congress had intended that we project future market circumstances that might lead to significant prices increases, it could have used ‘will be’ in place of ‘is’ . . . ”.

In its rule, which EPA released Dec. 22, the agency called it “conjecture” to predict that the biodiesel credit would expire without being renewed.

No federal law requires that biodiesel be blended into diesel sold at the pump, but Minne-sota, Oregon, Pennsylvania and Washington all have their own mandates for blends from 2% to 5%.