Importing to Meet California Demand

by Ron Kotrba (Biodiesel Magazine) The U.S. imported a record volume of biomass-based diesel in 2015. ... This increase in imports is particularly interesting because 2015 was a year with no forward-looking $1-per-gallon blender’s tax credit, and, for 11 months of the year, no RFS targets were in play. In 2013, however, an increased RFS mandate over 2012 coupled with a forward-looking tax credit made for another record year of imports. ... (M)ore than 200 million gallons of renewable diesel from Neste Corp.’s Singapore production facility alone entered U.S. ports.

“The core factors influencing this are RFS increases, California’s low carbon fuel standard (LCFS), foreign exchange rates and the existence—or nonexistence—of the blender’s tax credit,” she (Susan Olson, who leads the ag and biofuels division at Genscape Inc.) says. In 2013, imports saw a big jump, from less than 50 million gallons in 2012 to nearly 350 million in 2013. The make-up of countries exporting biodiesel to the U.S. has changed since 2013, too. Argentina and Canada have increased their flows while the EU is not exporting much to the U.S. at all now, Olson says.

U.S. imports are expected to grow even more this year over 2015’s record volumes, Olson says, primarily because of the forward-looking tax credit that is in effect through the end of this year, and the additional 170 million gallons of biomass-based diesel growth in RFS volume obligations. Olson adds that diesel prices continue to be too low for exports from Argentina to North Africa to be economical, and entrants into the CARBIO survey program—an EPA-approved alternative feedstock tracking mechanism for RFS registration to generate RINs—have implemented the program over the past year. Imports from Argentina are expected to increase by 20 to 25 percent in 2016, totaling upwards of 240 million gallons this year, Olson says. She adds, however, that Argentina’s recent increase in export taxes is worth watching, as it could affect projected volume increases.

“California Air Resources Board is doing things differently now,” Neal (Shelby Neal, director of state governmental affairs for the National Biodiesel Board) says. “Before, it had default pathways, but now every producer goes in and enters their own numbers, and each fuel has its own CI.” This new approach takes more variables into account, such as individual processing techniques and transportation, to name a few. “Having said that,” Neal says, “they do have reference values because people want an idea of what it is, but these are generally worst-case scenarios.”

Soy, canola and distillers corn oil biodiesels were the most affected by the changes; soy and canola CI reference values improved compared to their previous CIs—moving from 83.25 to 51.83 and 62.99 to 50.23, respectively—while distillers corn oil increased significantly from a CI of 4 to 28.68. Tallow also improved from 40.18 to 32.83. Used cooking oil increased slightly from 18.44 to 19.87.

“California is the only market in the U.S. at the moment that allows producers to differentiate pricing based on the carbon credentials of their product, and this has already had a tangible effect on import flows,” Stone says.

The discussion on imports of advanced biofuels into California would not be complete without highlighting the importance of Brazilian sugarcane ethanol to meeting the LCFS mandate.

“Five years ago, in-state production was just 3 million gallons a year,” Neal says. “Then, last year, it was above 30 million gallons. On a percentage basis, that’s a tenfold increase in five years. In-state capacity is now 75 MMgy.” He says the LCFS never really took off like people thought. “People made investments and they thought it would be smooth, but it got stuck in neutral for a few years. This had a significant effect on our members. Now, implementation is going well, the lawsuits have been dealt with and the future is more certain. But we’re facing an onslaught of imports. The dollar is strong, there’s weak demand in China and India for diesel, we have robust RIN and LCFS prices, and the blender’s tax credit. Add all those up and it makes sense why California is swamped with foreign product.” Neal says restructuring the federal biodiesel and renewable diesel blender’s tax credit to a producer’s credit “would go a long way in straightening out this issue.” Domestic product still has the advantage, he says, and there is a lot of growth to be had in California. READ MORE and MORE (AGriMoney.com)