The American Soybean Association (ASA) testified today before the U.S. House of Representatives Small Business Subcommittee on Regulations, Healthcare and Trade on the impacts of outstanding regulatory policy on small biofuels producers and family farmers. Uncertainty over federal policy, such as the extension of the biodiesel tax credit, implementation of the Renewable Fuel Standard (RFS-2), and implementation of the U.S. Department of Agriculture’s (USDA) Bioenergy Program is undermining investor confidence in the biodiesel industry.

At the top of ASA’s list of regulatory policy concerns is the Environmental Protection Agency’s (EPA) Notice of Proposed Rulemaking for implementation of the expanded RFS-2. This Proposed Rule, released on May 5, includes several very obvious and immediate flaws and concerns.

“The proposed rule as released contains unprecedented, untested and far-reaching indirect land use assumptions and projections which will adversely impact markets for U.S. farmers and impede our national efforts to reduce dependence on foreign oil and thus impede efforts to improve our environmental footprint,” said ASA Vice President Ray Gaesser, a soybean producer from Corning, Iowa. “We are concerned that EPA has attributed an undue degree of land use causation to U.S. biofuels production and that EPA’s assumptions do not adequately consider the other market factors (population growth, food and feed demand, timber prices, etc.) that have historically driven international land use decisions.”

ASA believes that an expanded RFS-2 that includes a specific minimum use requirement for biomass-based diesel is a necessary and beneficial program. A workable RFS-2 is necessary to move the country toward our goals of energy independence and clean, renewable energy production. The current market demonstrates that the production and use of biofuels is not economically viable when petroleum prices are low. Combined with the extension of the biodiesel tax credit, and the implementation of the Bioenergy Program, the RFS-2 could provide some much-needed market certainty for U.S. biodiesel production.

“We are also very concerned with the potential under the EPA Proposed Rule to require renewable fuel manufactures to prove that their feedstocks meet the definition of renewable biomass,” Gaesser said. “The Energy Independence and Security Act included a prescriptive definition of renewable biomass and the EPA Proposed Rule would limit eligibility to biofuels produced only from feedstocks grown on existing cropland. This requirement could result in the need to provide feedstock certification. Such feedstock certification would be onerous and unworkable.”

Soybean processors likely do not know precisely where their soybeans come from unless they are direct delivered by the farmers. Most processing plants buy soybeans from local elevators as well as direct from farmers. The local elevator does not know who delivered what soybeans once they go into storage. In the case of some processors, they buy all of their soybeans from local cooperatives with very little direct delivery. Under the EPA Proposed Rule, they would need to get certifications from the hundreds of thousands of producers who deliver soybeans to a cooperative, who in turn deliver soybeans to the processor.

“EPA does not provide a clear method to implement this feedstock certification, and they must recognize the challenge it would present,” Gaesser said. “This is a great concern for farmers and our industry partners and will be the subject of significant attention as we develop formal comments and response to the EPA Proposed Rule.”

In addition to ASA’s concerns with significantly flawed indirect land use assumptions and unworkable feedstock certification proposals, ASA is seeking implementation by the USDA of the Bioenergy Program for Advanced Biofuels, which was funded in the Energy Title of the 2008 Farm Bill. The Bioenergy Program, if implemented properly, could provide much needed assistance to U.S. biodiesel producers.

“The purpose of the Bioenergy Program for Advanced Biofuels is to provide payments to eligible producers to support and ensure an expanding production of advanced biofuels,” Gaesser said. “USDA has not issued proposed rules or a notice of funding availability for the program as of yet. Our primary requests are to have the program implemented in a timely manner and provide payment on all gallons of eligible biodiesel produced retroactive to October 1, 2008.”

Soy biodiesel is one of the cleanest burning biofuels in commercial existence today. It is a renewable and sustainable energy source that can play a significant role in our national efforts to increase our energy security and improve our environmental footprint. Biodiesel has also provided a significant market opportunity for U.S. soybean farmers and jobs and economic development for rural communities.

ASA’s complete testimony is available here.