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EPA proposals add layer of uncertainty for soybean farmers

Article cover photo
Dave Walton says the EPA's decision on RFS volumes, released today, underestimates U.S. producers' willingness and ability to produce. (Joseph L. Murphy/Iowa Soybean Association)

By Bethany Baratta, ISA senior writer

The Environmental Protection Agency’s (EPA) proposed rules for the 2020 Renewable Fuel Standard (RFS) and 2021 Biomass-based Diesel Volume only adds uncertainty to an already difficult year for Iowa’s soybean farmers.

 In its rule proposed today, EPA sets the 2021 Biomass-based Diesel (BBD) volume at 2.43 billion gallons -- the same volumes set for 2020. EPA is proposing to raise the 2020 Advanced Biofuel volume to 5.04 billion gallons, a slim increase from the 4.92 billion gallons in 2019 due to a small increase in the Cellulosic volumes set in the proposal. The proposed volumes are similar to those finalized for 2019.

 “I’m disappointed in the ruling to maintain flat volumes in 2020 and 2021; it’s not at all what we asked for or hoped for,” said Iowa soybean farmer Dave Walton of Wilton. He’s the secretary of the executive board for the Iowa Soybean Association and also serves on the board of directors for the Iowa Biodiesel Board.

The EPA's ruling, Walton said, "is far below what the industry is willing and more than capable of producing.”

It will have an impact on the biofuel industry, though not immediately known, said Grant Kimberley, executive director of the Iowa Biodiesel Board and director of market development for the Iowa Soybean Association.

“The agency’s proposed advanced biofuel volume of 5.04 billion gallons provides no additional market growth for biomass-based diesel. Similarly, the proposal to set the 2021 biomass-based diesel volume at 2.43 billion gallons – the same as the 2020 volume – flatlines growth for the industry,” Kimberley said.

Increased volumes would support the 11 blenders in Iowa which produced 365 million gallons of biodiesel last year. It would also support Iowa soybean farmers like Walton by generating more demand for soybeans as a feedstock to biodiesel plants.

 “This news comes at a time when we can’t afford to have any more hits on our market,” Walton said. “The EPA is essentially capping the market, so we won’t see any increased demand for soy oil which is a concern, especially with everything else going in the landscape.”

Iowa’s soybean farmers have faced a year full of adversity considering an ongoing trade impasse with China, unfavorable weather for planting and ongoing uncertainty surrounding the future of the biodiesel tax credit. On top of all that, the U.S. Department of Commerce on Tuesday made a preliminary decision to reduce existing counter-vailing duties on imports of unfairly subsidized biodiesel from Argentina, according to the American Soybean Association. Scaling up of the volumes under the EPA’s rules could have made for some good news for Iowa’s soybean growers.

Instead, it adds another level of uncertainty, said Kurt Kovarik, vice president of federal affairs for the National Biodiesel Board.

  “EPA’s proposed rule would turn the RFS program on its head. It is likely to reduce America’s use of cleaner, lower-carbon biodiesel and renewable diesel for transportation over the next several years, encouraging more petroleum use,” Kovarik said in a statement.

Biofuel plants are running below plant capacity. EPA's decision further reduces demand and production. (Joseph L. Murphy/Iowa Soybean Association)

The EPA’s proposal underestimates producers’ ability to produce biodiesel, he said.

“The proposal sends a chilling signal to America’s biodiesel and renewable diesel producers of EPA’s intent to limit market growth for cleaner fuels. EPA appears to have simply repeated the previous biomass-based diesel volume of 2.43 billion gallons for 2021 without analyzing our industry’s ability to achieve higher volumes,” Kovarik continued.

An Informa study shows that biodiesel adds 63 cents a bushel to the price of soybeans. Soybean oil is a main ingredient in biodiesel making up over 50 percent of the total feedstock mix, but other agricultural byproducts and co-products like recycled cooking grease, inedible corn oil, canola oil, beef tallow, choice white grease (pork fat), and poultry fat are also used.

 Hardship waivers

In its ruling, the EPA made no mention of limiting the number of gallons for small refinery hardship waivers.

The decision to grant the small refinery exemptions has long been criticized because some exemptions have been granted to petroleum giants like Exxon.

“For years, Big Oil and its advocates on and off Capitol Hill have worked hard to undermine the RFS and dole out ‘hardship’ waivers to oil companies without regard to actual need. Hardship waivers should be the exception, not the rule, and they have been abused for far too long,” Senator Charles Grassley (R-IA) said in a statement earlier this week.

Not including small refinery waivers will cut into the limited number of gallons the EPA has allowed in the rules, Walton said.

“There doesn’t seem to be any accounting for small refinery exemptions, so it’s taking our volumes backwards,” Walton said.

Kovarik continued, “Even one small refinery exemption has the potential to put a biodiesel plant out of business, impacting hundreds of jobs in the surrounding community. Consider a so-called small refinery such as Exxon’s in Billings, Montana, which reportedly received an RFS hardship exemption. It can process more than 60,000 barrels of oil each day – producing 1.9 million gallons of gasoline and diesel every day and 712 million gallons every year. The annual RFS obligations for that fuel would provide a market for more than 17 million gallons of biodiesel and renewable diesel for the year. There are dozens of biodiesel producers who produce less than that on an annual basis and who could be put out of business.”

 Contact Bethany Baratta at bbaratta@iasoybeans.com.

For media inquiries, please contact Katie Johnson, ISA Public Relations Manager at kjohnson@iasoybeans.com or Aaron Putze, ISA Communications Director at aputze@iasoybeans.com

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