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2018 AFOA ANNUAL MEETING
State of the U.S. Biodiesel Market: RFS, Tax Credit, and Politics
Kurt Kovarik Vice President, Federal Affairs
NBB OVERVIEW
¡ NBB is the U.S. trade association representing the biodiesel and renewable diesel industry:
¡ Producers,
¡ Feedstock suppliers,
¡ Fuel distributors.
¡ 160 members:
¡ Companies,
¡ Facilities – nearly 3 billion gallon capacity,
¡ State soybean and biodiesel trade associations.
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BIODIESEL IS THE RFS SUCCESS STORY
¡ EPA estimates 2.8 billion gallons is achievable in 2019.
¡ Growth from 400 million gallons in 2010.
¡ Animal fats and recycled cooking oil are significant and growing feedstocks.
¡ Distiller’s corn oil would not have been commercialized without the RFS.
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315
1147 1160
1985 1976 2093
2890 2630
103 414 486 513 591 596
0 500
1000 1500 2000 2500 3000 3500
2010 2011 2012 2013 2014 2015 2016 2017
U.S. Biodiesel & Renewable Diesel Market
(millions of gallons) Source: EPA EMTS*
Biodiesel and Renewable Diesel Renewable Diesel
NEED FOR RFS GROWTH
2015 2016 2017 2018 2019 2020
Cellulosic 0.123 0.230 0.311 0.288 0.381
Biomass-based Diesel (BBD) 1.73 1.9 2.0 2.1 2.1 2.43
Overall Advanced 2.88 3.61 4.28 4.29 4.88
Overall Renewable Fuel 16.93 18.11 19.28 19.29 19.88
Small Refinery Exemptions 0.29 0.79 1.46
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¡ After years of flatlined volumes, EPA proposed increases in BBD and advanced volumes.
¡ The volumes are meaningless if EPA does not address small refinery exemptions.
¡ NBB estimates small refinery exemptions reduced BBD demand by 300 million gallons.
¡ Independent analysis and EPA data verify our estimate.
¡ EPA continues to use flawed methodologies, including its “feedstock diversion” theory, and to disregard the importance of the BBD volume.
RFS SUPPORT IN CONGRESS
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¡ Senators and Congressmembers across the country support the biodiesel industry.
¡ In August, 39 Senators wrote EPA Administrator Wheeler, asking for:
¡ Higher Biomass-based Diesel volumes;
¡ Accounting for small refinery exemptions.
¡ Led by Sens. Patty Murray (D-WA), Roy Blunt (R-MO), Heidi Heitkamp (D-ND), Chuck Grassley (R-IA).
¡ Signatures from Hawaii (Sen. Mazie Hirono) to Maine (Sens. Susan Collins and Angus King).
RFS “REFORM” IN CONGRESS
¡ Congressional efforts:
¡ Rep. John Shimkus (R-IL), Chair, House Energy & Commerce Subcmte. on Environment.
¡ Sen. John Cornyn (R-TX).
¡ Could be undercut by executive efforts:
¡ Oct. 9: President Trump announces directive for E15 approval process.
¡ Unspecified RIN trading reforms.
¡ API/AFPM wrote to President Trump – approval of E15 undercuts their “reform” efforts.
¡ Threatening lawsuits.
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E15 DOESN’T HELP BIODIESEL
¡ NBB engaging to make sure biodiesel is included in any “deal”.
¡ Joint letter with American Soybean Association to President Trump.
¡ Ad in Des Moines Register thanking President Trump, encouraging additional support for biodiesel.
¡ Op-ed in Des Moines Register from NBB Board Member Ron Heck: “Help soybean farmers, too: Expand biodiesel.”
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RFS RESET RULE
¡ When the 2019 RFS rule is finalized, EPA will have cut the overall volumes by more than 20 percent in two consecutive years.
¡ EPA is expected to rewrite the statutory volumes for 2020 – 2022.
¡ Rewrite could be concurrent with 2020 RFS rule.
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Year Statutory Volume (billion)
Set Volume (billion)
% Reduction
2017 24 19.28 >20
2018 26 19.29 25
2019 28 19.88 (proposed)
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RFS LITIGATION ON EXEMPTIONS
¡ Administrative petition to EPA regarding EPA’s failure to account for small refiner exemptions in annual RVOs. ¡ NBB and other trade associations.
¡ EPA must reconsider its 2010 regulations because they do not adjust RVOs when EPA grants retroactive small refinery exemptions.
¡ Lost RVOs: ¡ 2015 = 292.5 million
¡ 2016 = 790 million ¡ 2017 = 1,460 million
¡ Lawsuit in D.C. Circuit regarding EPA’s failure to account for exemptions. ¡ NBB and other trade associations have filed
a lawsuit in the D.C. Circuit on the same grounds.
¡ The case is currently stayed pending EPA’s decision on the petition for reconsideration.
¡ Lawsuit in D.C. Circuit – challenging 2018 RVOs and small refinery exemptions. ¡ Oct. 25 – EPA response to NBB brief.
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BIODIESEL TAX INCENTIVE
¡ NBB now working in unison with NRA, ATA, NATSO, NACS, PMAA, SIGMA, ABFA to support blender incentive – no longer seeking producer credit.
¡ NBB ask:
¡ Congress should extend the $1 per gallon incentive for 2018 and 2019;
¡ Provide long-term certainty – a permanent incentive at a level that fosters growth.
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TAX EXTENDERS
¡ NBB engaging Congressional champions.
¡ Sept. 27: Rep. David Young (R-IA) and Rep. Dave Loebsack (D-IA) organize bipartisan letter supporting biodiesel tax extension;
¡ Signed by 46 Members of Congress.
¡ Anticipating legislative action in November post-election.
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UNFAIR TRADE ENDS
¡ NBB’s Fair Trade Coalition filed trade complaints against Argentina and Indonesia.
¡ Favorable findings announced in August 2017;
¡ Imports from both countries stopped.
¡ U.S. biodiesel producers stepped up to capture the open market space.
¡ 16% increase in BBD gallons in 2018, compared to 2017
¡ Argentina and Indonesia have dropped challenges to USITC’s finding of harm to U.S. producers;
¡ Companies still challenging Dept. of Commerce duty rates in U.S. Court of International Trade.
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BIODIESEL IMPORTS/EXPORTS
¡ U.S. maintaining a rough balance in monthly imports and exports of biodiesel since summer 2017.
¡ Most biodiesel trade is regional, cross-border with Canada.
¡ U.S. imports consistent volumes of renewable diesel.
¡ Primarily imports from Singapore to California.
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0
500
1,000
1,500
2,000
Jan-17 Jul-17 Jan-18 Jul-18
Tho
usan
d ba
rrel
s
U.S. monthly imports and exports
U.S. Imports of Biodiesel U.S. Imports of Renewable Diesel
U.S. Exports of Biomass-Based Diesel
BIODIESEL SUSTAINABILITY
¡ Soybean oil represents just under half of U.S. feedstocks for biodiesel.
¡ Animal fats, recycled cooking oil represent nearly one-third.
¡ Distiller’s corn oil was commercialized only because of the RFS.
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¡ Food manufacturers’ use of soybean oil is declining as they move away from partially hydrogenated oils.
¡ Biodiesel adds value to the oil that is left over from meal processing.
Canola Oil 11%
Distillers Corn Oil
15%
Soybean Oil 46%
Animal Fats 13%
Yellow Grease
15%
BIODIESEL CROP LAND USE
¡ Demand for soybean meal is increasing due to demand for animal feed.
¡ Increased production is driven by:
¡ slight increase in acreage,
¡ substantial increase in yield.
¡ Soybeans have a lower lifecycle assessment score than various biodiesel feedstocks:
¡ Canola = 19
¡ Soybean = 15
¡ Palm = 29
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ADVANCED BIOFUEL
¡ EPA classifies biodiesel as an advanced biofuel.
¡ Multiple studies estimate the reduction at or above 50%.
¡ According to EPA, NREL, and other studies, biodiesel reduces:
¡ engine particulate emissions by more than 45%;
¡ hydrocarbon emissions by 67%;
¡ processing wastewater by 79%; and
¡ hazardous waste by 96%
¡ when compared to petroleum diesel.
Author % Reduction Year
EPA 57 2010
USDA 76 2012
CARB 50 2015
Purdue University 60 2017
Argonne National Lab
66-76 2018
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CALIFORNIA LCFS
2030, 1,800 2020, 1,000
2026, 1,750
2030, 2,150
0
500
1,000
1,500
2,000
2,500
Mill
ion
gallo
ns
Projected LCFS BBD Volumes
Low BMBD High BMBD
¡ California recently extended the LCFS through 2030, with new carbon intensity (CI) benchmarks.
¡ New CI calculators – CA-GREET 3.0.
¡ Addresses POET v CARB lawsuit regarding higher CI scores for out-of-state biofuels.
¡ State biodiesel capacity ~80 million gallons.
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Source: CARB Illustrative Supply Scenario Calculator (https://www.arb.ca.gov/fuels/lcfs/rulemakingdocs.htm)
WASHINGTON STATE
¡ In 2018, Washington legislature considered LCFS bill.
¡ HB 2338 patterned after California & Oregon.
¡ Passed Environment & Transportation Committees.
¡ State biodiesel/renewable diesel capacity >100 million gallons;
¡ Overall state diesel market = 789 million gallons.
¡ Initiative 1631 on November ballot.
¡ $15/metric ton carbon tax.
¡ 61% of voters support the carbon tax (including Microsoft’s Bill Gates).
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QUESTIONS?
Thank you!
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