The Imports Cometh

April 05, 2017

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by Ron Kotrba (Biomass Magazine) U.S. imports of biomass-based diesel hit extreme heights in 2016, fulfilling a third of the consumption market, driving the domestic biodiesel industry to more actively seek counteracting measures to protect its own investments. -- The U.S. imported nearly three times more biodiesel and renewable diesel in 2016 than what the entire domestic industry produced in 2010. According to import data from the Energy Information Administration, combined biodiesel and renewable diesel imports last year totaled more than 915 million gallons (692.87 million gallons of biodiesel and 222.77 million gallons of renewable diesel), far surpassing annual import volumes of any previous year on record. In fact, biomass-based diesel imports in 2016 were higher than domestic production every year from the industry’s inception in the 1990s through 2010, and they nearly matched domestic volumes produced in 2011 and 2012.

Despite rising imports, U.S. production is also hitting new heights. The figures vary, depending on which data are used—U.S. EPA’s EMTS domestic D4 RIN generation data or EIA’s Form EIA-22M survey production data—but both sets show an appreciable uptick in domestic production last year. According to EIA data, U.S. biodiesel production is up 23.5 percent from 2015-’16, moving from nearly 1.27 billion gallons to almost 1.57 billion. EMTS data shows more impressive growth, and overall production volumes in 2016 at more than 1.9 billion gallons vs. 1.45 billion gallons in 2015, or more than 31 percent growth.

Part of the variance in domestic production volumes could be explained by the nature of the two data collection methods—RIN generation vs. a production survey. The discrepancy could also be reconciled, in part, because EMTS D4 RIN generation includes the U.S.’s two large renewable diesel facilities, Diamond Green Diesel and REG Geismar. Both plants are located in Louisiana and have a combined production capacity of 235 MMgy. Once DGD completes its expansion, the cumulative capacity at REG Geismar and DGD will top 350 MMgy. It is certain EIA biodiesel production data do not include renewable diesel, since the agency’s map shows no production in Louisiana.

Import Data Discrepancies
While production tallies differ depending on which agency and method is utilized, import reports also vary from government agency to agency, and company to company.

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Biodiesel and renewable diesel made from palm oil do not qualify for D4 RIN generation because they do not meet EPA’s threshold for greenhouse gas (GHG) emissions reductions of 50 percent compared to the baseline diesel fuel. These products can, however, qualify for the less stringent D6 RIN generation, which only requires 20 percent GHG reduction.

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Martin (Will Martin, an analyst with Genscape Inc.) says DGD and REG Geismar are not using palm oil and are not generating D6 RINs. Paul Nees, director of the operations control team for REG Services Group LLC, confirms that Renewable Energy Group Inc. does not use palm oil for renewable diesel production in Geismar, Louisiana.

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Argentina alone exported 129 million more gallons of biodiesel to the U.S. in 2016 than what the U.S. industry produced in 2010. Last year, U.S. ports received approximately 444 million gallons of Argentine biodiesel, according to EIA data. To put this in perspective, that is 64 million gallons more than what Argentina shipped to the U.S. in the previous three years combined. Argentine biodiesel represents the single largest source of imported biodiesel, accounting for 64 percent of biodiesel imports and more than 48 percent of combined U.S. biodiesel and renewable diesel imports.

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Anecdotally, in late May 2015, when EPA released its much-anticipated proposed RFS rule for 2014-’17 biomass-based diesel, U.S. imports of biodiesel more than tripled in two months, jumping from a meager 14.1 million gallons in May to 48.6 million gallons in July. With a growing RFS is the economic incentive of the associated RIN values purchased by obligated parties for regulatory compliance. Furthermore, companies such as Neste that export to California can cash in on LCFS credits on top of RINs and the federal tax credit.

“The biodiesel blenders tax credit is the top reason that motivates more imports,” Zhang (Heather Zhang, an analyst with Prima Markets) says.

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On a more granular level, countries such as Argentina and Indonesia encourage exportation of finished biodiesel from soy and palm oils, respectively, with differential export taxes (DETs), through which decreased export tax rates are applied to various stages of the oilseed value chain. These tax schemes are designed to incentivize domestic manufacturing whereby the economic benefits associated with value-added production are retained in-country. According to a Global Agricultural Information Network report by USDA’s Foreign Agricultural Service, titled, “Argentina Biofuels Annual 2016,” in June 2016, the Argentine government taxed exports of biodiesel at 5.04 percent while whole soybean exports were taxed at 30 percent and soybean oil at 27 percent. Zhang says Argentina’s biodiesel export tax ranged from a low of 1.62 percent to a high of 7.15 percent last year.

Also, in late 2013, the EU imposed antidumping duties on Argentine and Indonesian biodiesel that significantly reduced exports to the EU.

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In January 2015, NBB stated, “EPA’s Jan. 27 decision allows Argentinian biodiesel producers to use a survey plan for certifying that feedstocks used, in this case soybean oil, are sustainable. The change—effectively leaving it to the foreign producer to pay an independent third party to survey their feedstock suppliers—is far less stringent than the current map and track requirement and more difficult to verify.” In 2014, before this approval, Argentine biodiesel exports to the U.S. were roughly 52 million gallons. A year later, after the approval, they quadrupled. Moreover, Argentine biodiesel exports to the U.S. were more than eight times higher in 2016 than in 2014.

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According to a study conducted by LMC International, a 2.9 billion gallon biodiesel and renewable diesel market—roughly the 2016 U.S. consumption market—divided between domestic and foreign supply supports about 64,000 U.S. jobs and $11.42 billion in total impact. Economic benefits increase substantially with growing domestic production, rather than imports. For example, just 2.5 billion gallons domestic production would support at least 81,600 U.S. jobs and $14.7 billion in total economic benefit.

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Another piece of legislation that could have an effect on biodiesel imports is the border adjustment tax, a complicated system to financially encourage exportation of goods while financially discouraging exportation of jobs and importation of products.

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“A Finnish renewable diesel producer can take advantage of selling its product into the EU and at the same time selling it to the U.S., but also receiving subsidies from the American tax payer,” Rehagen says. READ MORE and MORE (Biodiesel Magazine)

Excerpt from Biodiesel Magazine: “Customers who chose to use internationally sourced biodiesel for transportation fuels or heating oil are significantly impacted by this petition, particularly in the Northeast Corridor,” said Michael McAdams, president of the Advanced Biofuels Association (ABFA). “This piggybacks on NBB’s efforts to change the existing blenders tax credit to a production credit. Both of these actions will have the effect of raising the cost of biodiesel to those selling the fuels to American drivers, while further lining the pockets of those who grow soybeans in the United States. These actions by a few large U.S. producers and U.S. soybean growers puts the entire renewable volume obligations (RVO) system at risk, as the current Renewable Fuel Standard program depends on security of supply from foreign markets to ensure the 2-billion-gallon mandate can be achieved.”

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McAdams said ABFA members vehemently oppose the petition to levy duties on Argentine and Indonesian biodiesel. ABFA members include multinational commodities entities and biodiesel producers operating in Argentina, Indonesia and the U.S., such as Louis Dreyfus Co. and Wilmar, and consignees of U.S. imports including Louis Dreyfus, Wilmar, Targray and Musket Corp., which is affiliated with major consignee Biosphere Fuels LLC through Love’s Travel Stops.

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Another ABFA member is Neste Corp., which exported 223 million gallons of renewable diesel to the U.S. in 2016, according to EIA data, most of which arrived and was used in California where it was eligible for the federal blenders tax, RIN and LCFS credits.

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NBB stated that, based on its review, Argentine and Indonesian producers are dumping their biodiesel in the U.S. by selling at prices that are substantially below their costs of production, reflected in the petition’s alleged dumping margins of 23.3 percent for Argentina and 34 percent for Indonesia. The petition also alleges illegal subsidies based on numerous government programs in those countries, including DETs. READ MORE

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advanced biofuels production Alabama Argentina Australia biodiesel biodiesel prices biodiesel production biodiesel tax credit BioRefineries/Renewable Fuel Production Blenders Credit California Canada D-4 (bio-based diesel) RINs D-6 (renewable fuel) RINs Energy Information Administration (US EIA) European Union (EU) Finland Florida Georgia Germany Green Jobs import/export Indonesia International Trade Legislation-Federal Litigation-Federal Louisiana markets/sales Massachusetts New York Oregon palm oil Pennsylvania producer tax credit Regulations-Federal Renewable Diesel/Green Diesel/HVO/Paraffinic Diesel renewable volume obligation (RVO) RINs (Renewable Identification Numbers) Singapore South Korea soybeans Sustainability tax policy Texas Transportation Fuels Policy Renewable Diesel/Green Diesel price

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