Federal Policies Increased US Biofuel Imports 761 Percent In Just One Year

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Michael Bastasch DCNF Managing Editor
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A policy intended to promote American energy independence has failed, as the U.S. has gone from being a net exporter of biodiesel and renewable diesel to being a net importer of the fuels.

The Energy Information Administration (EIA) reports that imports of two biomass-based diesel fuels –biodiesel and renewable diesel — increased 761 percent in just one year primarily due to the Renewable Fuel Standard (RFS), which requires blending ever increasing amounts of biofuels into the U.S. fuel supply.

“Last year, total U.S. imports of these two varieties of biomass-based diesel fuel reached 525 million gallons, compared to 61 million gallons in 2012,” EIA reports, adding that federal policies and access to growing biofuel production abroad have driven the huge increase in imports.

“As a result, the United States switched from being a net exporter of biomass-based diesel in 2012 to a net importer in 2013 by a wide margin,” EIA adds.

The main driver of the growth in biomass-based diesel demand has been the RFS, which increased the amount of biofuels to be blended into the fuel supply from 15.20 billion gallons in 2012 to 16.55 billion gallons in 2013.

The RFS increased biomass-based diesel blending target from 1 billion gallons in 2012 to 1.28 billion gallons in 2013. Advanced biofuel blending requirements rose from 2 billion gallons to 2.75 billion gallons over that same time period. Biodiesel and renewable diesel qualify for both of these categories.

Government-driven demand, combined with the help of a $1 per gallon biodiesel tax credit, have boosted U.S. production 35 percent from 2012 to 2013. But domestic production was not enough to meet federal mandates, thus increased imports were required. EIA also notes that because the biodiesel tax credit wasn’t extended through 2014, imported biodiesel could play a bigger role this year in meeting federal blending targets.

The RFS was originally passed in 2005, but was expanded in 2007 to include a biodiesel mandate. The idea received bipartisan support, but is now under fire for not delivering on the promised benefits.

“This is just another reason why Washington should get the hell out…and stay the hell out…of anything having to do with energy,” Dan Kish, vice president of policy at the free-market Institute for Energy Research, told the Daily Caller News Foundation.

“Everything they touch turns to excrement,” Kish said.

The RFS requires 36 billion gallons of renewable fuels to be blended into the U.S. fuel supply by 2022. But last year the RFS came under fire from refiners who say that they were reaching the limits of what could be safely blended into the fuel supply — the so-called “blend wall”.

Increasing federal fuel economy standards, the RFS and a lagging economy decreased gasoline demand in the U.S., meaning refiners began producing less of it. But the RFS required more and more biofuels to be blended into the fuel supply, meaning refiners faced rising renewable fuel credit prices and safety concerns from blending ethanol at higher than a 10 percent ratio.

“[The Environmental Protection Agency] shouldn’t try to micromanage ethanol mandates based on slight changes in gasoline demand forecasts,” said Bob Greco, downstream director at the American Petroleum Institute.

“These mandates set the minimum amount of ethanol that must be used each year—not the maximum,” Greco said. “So it’s better to err on the side of caution with the final rule rather than force more ethanol into gasoline than is safe.”

The EPA eventually caved to pressure from refiners, environmentalists, the livestock industry and others who were concerned about the environmental and economic impacts of increased biofuel production around the world.

Anti-hunger groups argue that biofuels production raises food prices as more crops are diverted towards fuel production and away from feeding people, hurting the poor the most. This effect was most pronounced by the increased diverting of corn crops to ethanol production.

“Ethanol from corn also is concerning to many due to its global warming impact and the use of natural resources such as water and native grassland for producing fuel,” environmental and anti-hunger groups wrote to Congress last year. “The corn-based ethanol mandate is also having a devastating impact in communities throughout the world, where people living in poverty are facing increased food prices that threaten their food and land security.”

Biodiesel is made from combining vegetable oils or animals fats and alcohol to get fatty acid methyl esters. It’s generally blended into petroleum diesel at volumes of 5 percent or 20 percent.

Renewable diesel is produced from vegetable oils and animals fast using a hydrotreating process. EIA says it meets the same American Society for Testing and Materials standards as petroleum diesel and isn’t subject to blending limits put on biodiesel.

Both of these biomass-based diesels have a higher energy content that ethanol and generate more renewable fuel credits — which refiners can purchase to meet federal blending rules. They each also qualify for California’s Low Carbon Fuel Standard (LCFS) because of their lower carbon dioxide intensity.

U.S. biomass diesel imports came primarily from Argentina, says EIA, partly due to European trade laws that made it costlier for Europeans to buy Argentine biofuels last year which drove more of product to the U.S.

“Just over 77% of total U.S. renewable diesel imports came from Singapore and entered the United States on the West Coast (PADD 5), likely for California LCFS compliance,” EIA says.

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