Multiple-Authorship blog platform on issues related to sugarcane cultivation and industrial applications
As Congress continues holding hearings on the future of America’s Renewables Fuels Standard (RFS), calls keep coming in for common-sense regulation and oversight of foreign renewable fuel producers by the Environmental Protection Agency (EPA).
When combined with formal comments submitted by other notable biofuel proponents and stakeholders, the din is hard to ignore. A growing chorus is raising concerns about EPA’s unnecessary proposed requirements on foreign biofuel producers and sounding the alarm that these changes could raise domestic fuel prices and threaten U.S. supplies of sugarcane ethanol, one of the cleanest and most advanced biofuels available to American drivers.
The latest comments come from both Shell and BP America, producers and importers of renewable fuel, and a joint letter by the American Fuel & Petrochemical Manufacturers (AFPM) and the American Petroleum Institute (API), two trade associations that represent many importers of renewable fuel in the United States.
- New requirements are unnecessary – Shell, a global group of energy and petrochemical companies with more than 90,000 employees in more than 80 countries and territories, calls EPA’s proposal “overly complex, unworkable and unreasonably retroactive.” The company also points out these changes are not necessary:
- Impractical segregation requirements will hinder supplies and increase costs – Shell also predicted segregating sugarcane ethanol could halt U.S.-bound shipments for a full year:
- Assessing retroactive financial penalties is unreasonable – AFPM and API echoed Shell’s concerns. The trade associations also weighed in on EPA’s proposal to retroactively require compliance with new regulatory requirements on all fuel produced and exported as of January 1, 2013:
- Stifling impact on new technologies. The Biotechnology Industry Organization (BIO), shared our concerns that while EPA’s aim is laudable the unintended consequences of the proposed rule could have a chilling effect on development of new biofuel technologies:
“There is quite simply no basis to conclude that the additional requirements are necessary to ensure that the regulations can be enforced against these [foreign] parties. The current version of the rule puts the responsibility on the RIN generator to ensure that all of the regulations are met, including the provisions related to the definition of renewable biomass. We carefully adhere to the current rules and understand our obligation there under. The additional proposed requirements are simply unnecessary…
“Each foreign producer, in our experience and per our internal requirements, has provided substantial land-use traceability documentation, and separated food waste and animal fat traceability documentation, of feedstock tied specifically to volume of each parcel processed into renewable fuel, in support of each cargo volume loaded for US import and RIN generation, so that we can be assured that RINs that we generate from such ethanol are valid.”
“This proposal is an extreme measure that would place the importers of these foreign-produced renewable fuels at a significant competitive disadvantage and could effectively prevent the importation of such fuels – contrary to the overall objective of the RFS Program. [...] U.S. importers are already subject to U.S. jurisdiction, are fully registered with the EPA and are responsible to ensure the generation of valid RINs. No additional safeguards are required.”
“EPA’s proposal would require additional segregation of renewable fuels. This is problematic because insufficient renewable fuel tankage exists in foreign ports to segregate each foreign producer’s biodiesel or ethanol as gathered via trucks, rail, and barges, until an oceangoing cargo size volume is accumulated for export to US. The likely result of EPA’s proposal is that foreign renewable fuel producers, and the US importers of those renewable fuels, would be forced to suspend activity for approximately one year while additional tankage is constructed on foreign soil to accomplish the Agency’s desired degree of load port segregation.
“In addition, even if additional tankage could be built in foreign ports, such a requirement would delay receipt of foreign renewable fuels needed to meet RFS mandate, and raise cost of foreign renewable fuels relative to domestic fuels, inflating cost of all US renewable fuels.”
BP America echoed Shells concerns, highlighting “serious logistical barriers” to segregate ethanol in the proposed rule:
“BP strongly opposes this proposed change to the RFS rules … This would likely result in decreasing the amount of biofuel available and reducing the pool of advanced and cellulosic ethanol volumes available for compliance with the RFS program. Keeping each Mill’s product segregated to vessel and then on vessel is overly burdensome and costly. Segregation will be very difficult given logistics constraints in foreign countries.”
“We are hopeful that this is simply a printing error and that EPA will correct this before finalizing the rule. It is not reasonable for EPA to impose such requirements retroactively. It is simply impossible for EPA to enforce a regulation looking back on actions foreign renewable fuel producers and RIN generators should have taken throughout 2013, when at the time of production, transportation, import and RIN generation, those foreign renewable fuel producers and RIN generators had no knowledge of any proposed rule change.”
“We would encourage the [EPA] to ensure its enforcement of the rule does not inadvertently discourage legitimate feedstocks and fuels developed by producers who are already complying with section 80.1466 from being able to import to the U.S. Doing so may unintentionally impact domestic producers who use these feedstocks or fuels from developing domestic gallons of advanced or cellulosic biofuels.
In fact, a small ethanol producer in Canada, Growing Power Hairy Hill, noted this impact saying the proposed rule’s costs are:
“... prohibitive to small plants such as ours. The proposed bond multiplier for Advanced RINs of $0.8/gallon is simply too high. Such requirement can, in our opinion, only result in the further escalation of the Advanced RIN values and hence increase the cost of ethanol and resulting gasoline for US consumers.”
EPA’s quest to ensure regulatory accuracy of U.S. biofuel consumption is noble, but ultimately quixotic. If the proposed rulemaking were finalized without the sensible changes suggested by these formal comments, the cost of producing sugarcane ethanol and the price of pumping it into American vehicles would both rise, with no apparent benefits.
Congress has already heard EPA say it won’t be able to meet the RFS mandate for advanced biofuels without Brazilian sugarcane ethanol – so why would the agency want to test its own theory?
Sugarcane Ethanol Producers Aren’t Alone Opposing Unnecessary EPA Policy Change
Last week we weighed in with formal comments opposing a proposed rulemaking by the Environmental Protection Agency (EPA) that could effectively end U.S. imports of Brazilian sugarcane ethanol, a clean renewable fuel key to meeting the Renewable Fuels Standard (RFS).
But this week, debate on the future of biofuels in America will reach a new level when Congress considers the issue. The House Energy and Commerce’s Energy and Power Subcommittee will hold hearings on potential RFS changes tomorrow and Wednesday, with testimony from industry groups and environmental organizations.
Our position is clear – language in EPA’s proposed rulemaking is unnecessary and threatens American access to one of the few advanced biofuels on the market today that reduces greenhouse gases by more than 60 percent compared to gasoline.
But don’t take our word for it. Many important economic and environmental causes for concern were echoed in other formal comments submitted to EPA by biofuel proponents and stakeholders. We’ve parsed these filings and highlighted a few below to reveal exactly what’s at stake.
- Expensive changes for both producers and consumers – Adecoagro, one of South America’s leading renewable energy companies and a foreign producer of undenatured sugarcane ethanol who has exported to the U.S. since 2011, said EPA’s proposed rules would boost costs for advanced biofuel producers and consumers:
- Redundant requirements could price out supplies with no benefit – Chevron, a major refiner and marketer of petroleum products in the U.S., and an obligated party under the RFS, reported redundant bureaucratic reporting would hike ethanol prices with no net benefits:
- Unnecessary Oversight Could Harm Future Biofuel Supplies – the Advanced Biofuel Association, representing over 40 member companies who produce advanced biofuels and biofuels feedstocks, mentioned EPA’s unnecessary regulations could limit the future of biofuel supplies in the U.S.:
“All exported ethanol from Brazil to U.S. will have to be segregated by producer…meaning increased costs and operational difficulties. According to ship operators, one ship is loaded with product coming from five different producers on average. In our case, we will not be able to mix product produced by our two registered mills, even being under the same company. To make the transport economically and operationally feasible, either will (sic) be excluded from business or there will be need for smaller cargos or incurrence of losses in dead freight, both of which will increase costs and prices for sugarcane ethanol…consequently increasing prices for final consumers in the U.S.
“Chevron does not agree with EPA’s proposal to require both foreign ethanol producers and importers to meet the requirements…we believe this blurs the line that had previously been established between foreign producers who generate RINs and domestic producers and importers who already have compliance requirements under the program.”
“Requiring foreign ethanol producers and importers to meet the requirements…will result in duplicate reporting of the same information by both parties. This will increase the cost of supplying ethanol from foreign locations and will complicate enforcement by having multiple sets of records for the same transactions.”
“The requirement to segregate shipments of ethanol from the foreign producers will also increase the cost of supply and may not be possible in certain circumstances… The net effect of this proposal will increase the cost of supply of renewable fuels under the RFS. Under certain circumstance, it may also reduce the supply of renewable fuels from overseas providers.”
“The proposed amendment…would significantly impact not just advanced ethanol producers (mainly in Brazil, where no denaturant is added to sugarcane ethanol) but also other cellulosic biofuel producers currently building plants around the world. By requiring complete segregation of the biofuel until it reaches the port of entry, the proposed amendments unnecessarily increase compliance costs particularly for ethanol. While the goal of reducing potential RIN fraud is laudable, we are unaware of any alleged fraud related to RINs associated with imported advanced biofuels.”
“In addition, and of greater concern to the nascent advanced biofuel industry, the required bonds are unreasonably and prohibitively high... Such expenditures would most likely make the export of advanced biofuels to the United States infeasible from a commercial standpoint, particularly for startup companies.”
“Based on our analysis of the negative impact to advanced biofuels trade, the ABFA recommends that EPA withdraw these proposed provisions from the final rule in order to consult with industry on a better approach to ensure the robustness of the RFS is maintained without increasing cost and emissions. We are also greatly concerned about the trade implications of these provisions as well as the ramifications with our relationship which we have been fostering over the last 5 years in the area of biofuels with Brazil.”
As Congress and EPA consider the future of the RFS, we hope they’ll hear the chorus of voices from across the biofuels community urging common sense for America’s renewable fuel policy, and ensure a continued supply of reliable and renewable sugarcane ethanol flowing into U.S. vehicles.
Yesterday, sugarcane ethanol producers submitted formal comments to the Environmental Protection Agency (EPA) opposing a proposed rulemaking that could effectively end U.S. exports of clean renewable fuel.
Under the Renewable Fuels Standard (RFS), Brazilian sugarcane ethanol exports have become an important part of America’s advanced biofuels supply, providing 23% of the entire U.S. supply in 2012, nearly 700 million gallons in 2013, and up to one billion additional gallons in 2014.
Biofuels thrive on the global market, and more than half of Brazil’s sugarcane ethanol exports currently head to the U.S. – a formula for RFS success. But EPA’s proposal would cause several problems that could increase greenhouse gas emissions, spike the cost of this low-carbon biofuel by 20 cents per gallon, and drive future exports into other international markets.
We’re hopeful EPA will agree with us that increasing biofuel costs and associated transport emissions isn’t the right way to implement the RFS, and keep our reliable supply of clean and renewable sugarcane ethanol following into U.S. vehicles.
Our concerns were previewed yesterday, but we’re including a few highlights from the formally submitted comments below. If you agree with us that Brazilian sugarcane ethanol is an important part of America’s clean transportation future, make sure the EPA hears from you.
Brazilian sugarcane ethanol imports are critical to RFS targets:
Nearly all of the 1.5 billion gallons of fuel ethanol imported by the U.S. since EISA was passed have been from Brazilian sugarcane. This support continues today, as EPA has projected that 666 million gallons of Brazilian sugarcane ethanol will be required to achieve the EISA’s advanced biofuels requirement for 2013. The United States’ demand for Brazilian sugarcane ethanol will only increase in coming years, given the aggressive increases in the advanced biofuels mandate that Congress included in the EISA. In fact, even after taking Brazilian sugarcane ethanol imports into account, EPA has already expressed concern that producers may be unable to produce the additional 1 billion gallons of advanced biofuel needed to [meet] the 2014 requirement. Thus, as EPA has recognized, it cannot meet Congress’ aggressive goals for renewable fuel consumption without the continued assistance of Brazilian sugarcane renewable fuels producers.
EPA’s proposal would create cost-prohibitive requirements:
Applying this new bonding requirement to Brazilian sugarcane mills will add a substantial new cost that many mills may not be able to bear. For example a mill which exports 5 million gallons of sugarcane ethanol per year to the United States would be required to post a $1 million bond, or twenty cents per gallon. Put another way, based on EPA’s projections for Brazilian sugarcane ethanol imports for 2013, the industry would have to post a collective bond of $133 million. While some associate the Brazilian sugarcane industry with large integrated companies, much of the ethanol sent to the United States comes from small, independent producers. These bonding requirements will have the effect of pricing the small, independent producers out of the export market and will also create a significant barrier to entry for new mills.
EPA’s proposal would increase associated greenhouse gas emissions:
All batches [of] Brazilian sugarcane ethanol would effectively have to be shipped separately from hundreds of different mills to the port of entry to the United States if they originate from separate facilities, fundamentally disrupting the actual production of ethanol from the actual infrastructure in Brazil for transporting ethanol. The logistical demands associated with such detailed fuel segregation cannot be overstated and, as a practical matter, may render the export of Brazilian sugarcane ethanol infeasible.
Requiring the complete segregation of each batch of Brazilian sugarcane ethanol destined for export to the United States will require the exclusive use of trucks to transport the ethanol from the mill directly to the port of exit, in either Santos or Paranagua, because other transportation options all involve the commingling of ethanol from different facilities. While transportation by truck is not uncommon today, it is not often a straight shipment from the mill to the port of exit. For example, the use of transshipment storage tanks has been growing in recent years and offers a number of advantages as it increases the logistical efficiency of truck fleets in various regions. However this method as well the use of railcars typically involves the comingling of ethanol from different facilities and would, therefore, be rendered impracticable under the proposed amendments to 40 C.F.R. § 80.1466. Likewise, the shipment of ethanol to the ports by pipeline, which is scheduled to commence in the next 18 months, would effectively be barred, as pipeline shipments necessarily result in some commingling of fuels. In addition to the cost benefits that shipment by rail or pipeline can offer to ethanol producers, they produce fewer GHG emissions than transportation by truck. Thus, contrary to the overarching goal of the RFS2 program, applying 40 C.F.R. § 80.1466 to Brazilian sugarcane ethanol producers will have the perverse effect of increasing GHG emissions associated with Brazilian sugarcane ethanol and decreasing efficiencies.
EPA ‘s regulatory oversight would be impossible to achieve:
Despite the fact that EPA did not publish the proposed rule until June 14, 2013, it has inexplicably proposed to apply the rule retroactively by requiring all non-RIN generating foreign producers to demonstrate compliance by January 1, 2013 … If EPA were to finalize the rule with this compliance date in place, all Brazilian sugarcane ethanol producers would immediately be deemed out of compliance, jeopardizing future Brazilian sugarcane ethanol imports to the United States. Such an approach would impose new requirements on prior RINs generation and RINs transactions that have already taken place in 2013, calling into question the validity of the RINs generated from Brazilian sugarcane ethanol so far this year. Moreover, there can be no argument that Brazilian sugarcane ethanol producers had adequate notice of the changes, since the effective date predates the proposed rule by more than four months. As an example of the challenges that this compliance date would pose, Brazilian sugarcane ethanol producers would be required to immediately post a collective bond of $40 million or more, corresponding to the more than 200 million gallons of Brazilian sugarcane ethanol that have been imported to the United States so far this year.
Extending EPA regulations to foreign producers may conflict with WTO policy:
Three provisions would be vulnerable to challenge under WTO rules: (i) the requirement that foreign producers be subject to RIN certification, which is currently impossible for Brazilian producers to comply with, as RIN certification applies to ethanol that is denatured after the ethanol has left the Brazilian producers’ control; (ii) the requirement to retire RINs to account for evaporative losses of ethanol for which RINs were never generated in the first instance, and which, as a practical matter, will provide Brazilian producers with fewer RINs than for equivalent fuel from domestic producers; and (iii) the requirement to post a bond (and thus incur financial costs), which will be imposed on Brazilian producers but will not [be] required of domestic producers. These proposed amendments, if adopted and applied, would discriminate against Brazilian ethanol, be more restrictive of the ethanol trade than is necessary, and act as quantitative restrictions against Brazilian ethanol. It would be difficult for the United States to defend these provision based on environmental objectives, as these provisions would apply to arbitrarily Brazilian ethanol imports, despite the environmental benefits that accrue from using Brazilian ethanol instead of non-renewable fuels.
Brazilian sugarcane ethanol has become an important component of America’s advanced biofuels supply. But language tucked away in a proposed Environmental Protection Agency (EPA) rulemaking could effectively end U.S. access to this clean renewable fuel.
Sugarcane ethanol producers are concerned the regulatory process is being used to impose onerous, anti-competitive requirements on foreign ethanol. So today, we submitted comments on EPA’s proposed “Regulation of Fuels and Fuel Additives: RFS Pathways II and Technical Amendments to the RFS2 Standards.” Our comments highlighted what’s at stake for advanced biofuels in the U.S. and underline the threat posed to reducing greenhouse gas emissions from transportation. While official comments close today – despite our request for an extension – EPA still wants to hear from you.
First, a little background. Under the Renewable Fuel Standard (RFS), sugarcane ethanol has become an important part of meeting America’s desire to use more advanced biofuels. Brazilian exports provided nearly one-quarter of the entire U.S. advanced biofuel supply in 2012, are projected to supply nearly 700 million gallons of fuel required to meet 2013’s targets, and could supply up to one billion additional gallons in 2014 – all with at least 61% fewer emissions than gasoline, according to the EPA.
Economic and Environmental Causes for Concern
However, EPA’s proposal as currently written would cause three principal problems that could halt the steady supply of this clean fuel.
- Cost-prohibitive requirements – If approved, every sugarcane ethanol producer exporting to America would be subject to a host of burdensome new requirements, like physically segregating the ethanol they export from the production plant all the way to port arrival in the U.S. and spending considerable sums on expensive third-party auditors and bonds. By our estimates, producers would have to post a compliance bond of roughly $1 million for every 5 million gallons exported to meet EPA’s proposed rules. In addition, every gallon of sugarcane ethanol would have to be segregated from the moment of production across each of Brazil’s 400 mills, and could no longer be combined for shipment to domestic or other international markets if even one drop was destined for America.
These new requirements will drive up production costs to the point where sending this advanced biofuel to the U.S. may no longer make economic sense. Biofuels thrive on the global market, and since half of Brazil’s sugarcane ethanol exports already go to other countries, new costly mandates could force exports away from America.
- Increased emissions – Segregated supplies would also boost associated transportation emissions of shipping sugarcane ethanol. Producers could no longer use pipelines or bulk storage facilities, rail shipments would have to be separated for exports, and ocean vessels might have to be shipped at less than capacity. More ships and trains mean more emissions – a change that seems incongruent to President Obama’s climate goals.
- Impossible requirements – Perhaps most concerning, proposed rules would force all Brazilian sugarcane ethanol producers to demonstrate compliance by January 1, 2013 – a deadline that passed more than seven months ago! By our calculations, $40 million in bond payments would be retroactively due on the 200 million gallons of sugarcane ethanol imported into the U.S. so far this year.
An Unnecessary Change
EPA’s intentions are laudable, and we support the agency’s goal of ensuring the regulatory system that tracks U.S. biofuel consumption (known as Renewable Identification Numbers or RINs) is accurate. But the current system monitoring foreign producers isn’t broken.
Significant protections already guard against RIN concerns, and the Brazilian sugarcane industry worked proactively with EPA to ensure Brazilian producers maintain records to comply with reasonable expectations. Plus, there has never been an instance of RIN fraud linked to Brazil.
These proposed changes appear to be a solution in search of a problem that will have (what we trust are) unintended consequences – namely threatening American access to one of the few advanced biofuels on the market today. We hope EPA will take our comments into consideration, and keep our reliable supply of clean and renewable sugarcane ethanol flowing into U.S. vehicles.
Increasing the cost of low carbon sugarcane biofuels by 20 cents per gallon all the while increasing transport emissions doesn’t seem like the right way to implement the RFS. If you agree with us, make sure the EPA hears your concerns.