Biodiesel

ASA supports the biodiesel tax credit and favorable implementation of the Renewable Fuel Standard (RFS).

Biodiesel is a key market for U.S. soybean oil. A significant amount of the soy oil that traditionally was used in food products was displaced after the Food and Drug Administration (FDA) identified partial hydrogenation as a cause of trans fats. Without biodiesel as an alternative market, surplus soy oil would have a major negative impact on soybean prices. With the multiyear tax credit in place, it is important that we seek other means to keep biodiesel competitive in U.S. fuel markets.

 

Photo Courtesy of USB

ASA specifically supports:

  • Improvements to the Renewable Fuel Standard (RFS), including increasing annual volumes for biodiesel and advanced biofuels and securing implementation of a mechanism for EPA to account for actual RFS volumes waived through Small Refinery Exemptions (SREs).
  • Support of funding for the Biodiesel Fuel Education Program in annual appropriations legislation.

Issues Background

The U.S. Department of Commerce (DoC) and International Trade Commission (ITC) ruled in favor of the anti-dumping (AD) and countervailing duty (CVD) cases filed by the U.S. biodiesel industry in response to unfairly subsidized biodiesel imports from Argentina and Indonesia. The AD and CVD imposed by the DoC and ITC have resulted in significant reductions of imports and increased opportunities for domestic biodiesel production. However, in response to a request for reconsideration submitted by the government of Argentina citing, “changed circumstances,” the U.S. Department of Commerce has proposed reducing the countervailing duties.

Under the preliminary decision, countervailing duties on unfairly subsidized biodiesel imports from Argentina would be reduced significantly, while antidumping rates would remain the same. If finalized, the existing countervailing duty rates would be reduced from their current average of 72% to 10%. The antidumping duty rates currently in effect, which average 75%, would remain and would be applied in addition to the counter-vailing duty rates, resulting in a total average rate of 85%.

ASA farmer-leaders participated in several meetings with the Commerce Department, including Secretary Wilbur Ross, to reiterate the impact of the subsidized imports on U.S. biodiesel producers and soybean farmers. ASA, along with the National Biodiesel Board (NBB)-led Fair Trade Coalition, emphasized that there is no material change in the export tax rate for soybeans or its depressing effect on Argentine soybean prices relative to world market prices.

ASA urges the Department of Commerce to maintain the anti-dumping and countervailing duty rates on unfairly subsidized biodiesel imports from Argentina and Indonesia.

ASA supports funding the Biodiesel Fuel Education Program alongside the National Biodiesel Board. From 2002 to 2018, this program received mandatory funding in farm bill legislation. However, Section 9006 of the 2018 Farm Bill authorized $2 million for the program and made it subject to annual appropriations.

The most recent threat to the RFS that remains uncertain is the practice of granting unwarranted Small Refinery Exemptions (SREs).

On January 24, 2020, the U.S. Court of Appeals for the 10th Circuit ruled that EPA exceeded its statutory authority in granting RFS compliance exemptions in 2016.

Although all indications pointed to a decision of EPA responding to the court ruling in a favorable way toward producers, press reports in March suggested that EPA instead would appeal the ruling. Since that time, the U.S. Department of Justice has filed for an extension until March 24 to file a petition for a rehearing. While this was not filed, the biodiesel industry continues to closely monitor legal developments.

Biodiesel is an important market outlet for soy oil. Increasing the RFS volume requirements for biomass-based diesel helps farmers and rural communities by providing a market for surplus soy oil while also creating jobs, diversifying our fuel supply, and reducing our greenhouse gas emissions.

In December, Congress provided a 5-year extension of the biodiesel tax incentive. The incentive expired at the end of 2017, so the extension applies retroactively to 2018 and 2019 and forward through 2022.

When the tax credit is in place at the beginning of the year, the biodiesel industry grows with confidence. For example, in 2013 and 2016 – the last two times the industry could look forward to the tax credit – U.S. biodiesel production grew by 400 million gallons and demand increased by 800 million gallons.

Every 100-million-gallon increase in production supports 3,200 U.S. jobs and $780 million in economic opportunity, according to LMC International (2019). Biodiesel production also adds 13% to the value of every bushel of soybeans, according to INTL FCStone (2019) – an average of $1.10 in 2019.