EPA Signals Retreat on Greenhouse Gases by Minimizing Contributions from Foreign Producers of Advanced Biofuels
In response to the Environmental Protection Agency (EPA) unveiling a proposal that could cut next year’s Renewable Fuel Standard (RFS) target for advanced biofuels by 20 percent, Leticia Phillips, the Brazilian Sugarcane Industry Association’s (known by the acronym “UNICA”) North American Representative issued the following statement.
Slashing the 2014 target for advanced biofuels would be a huge step backwards from the Obama administration’s goal of decreasing greenhouse gases and improving energy security. Advanced biofuels, including Brazilian sugarcane ethanol, reduce carbon dioxide emissions by at least 50 percent compared to gasoline, and EPA has traditionally promoted these clean renewable fuels. That is why we are surprised and disappointed that EPA’s proposal minimizes the 650-800 million gallons of sugarcane ethanol Brazil is poised to supply to the United States in 2014.
Since the beginning of the RFS program, EPA has been a strong supporter of the modest but important role Brazilian sugarcane ethanol plays supplying Americans with sustainable fuel, certifying that it cuts carbon dioxide emissions by more than 60 percent and designating it an advanced renewable fuel. This federal proposal also dramatically impacts states like California, which considers Brazilian sugarcane ethanol the low-carbon fuel with the best performance today and the only fuel available at commercial scale to contribute to its low-carbon fuel standard.
Our association looks forward to commenting on this inadequate proposal and will continue to play an active role in the RFS rulemaking process, serving as a source of credible information about the efficiency and sustainability of sugarcane ethanol. Likewise, Brazil will continue to be a strong, dependable partner helping America meet its clean energy goals.
# # #
The Brazilian Sugarcane Industry Association is the leading trade association for the sugarcane industry in Brazil, representing 60 percent of the country’s sugarcane production and processing. More information on sugarcane ethanol and its role as an advanced biofuel is available at www.sugarcane.org/rfs.
The 40-year anniversary of 1973’s OPEC oil embargo is an important milestone in the world’s transition toward renewable sources of fuel. Many media outlets and respected energy leaders have been looking back over the past four decades, searching for lessons learned. Among the best retrospectives I’ve read is a feature story in E&E News’ ClimateWire – a respected policy-insider publication headquartered here in Washington – that recounts how price spikes and fuel shortages prompted a renewable fuels revolution in Brazil and helped create “the most successful biofuel industry in the world.”
This “Brazilian experience” with renewable energy and sugarcane ethanol reads like a primer on how stable policy and investment in new technologies can fuel a green economy while cutting emissions and dependence on foreign oil. Today, sugarcane ethanol has replaced almost 40% of Brazil’s gasoline demand while cutting nearly 200 million tons of carbon dioxide emissions.
The full ClimateWire article is an excellent read, and a few key excerpts jump off the page to underscore the power of clean and renewable fuels:
- Stable government policy was necessary at first – Brazil initially relied on government mandates to start the transition away from gasoline. By mandating ethanol blending in gasoline, requiring installation of pumps dispensing pure ethanol, funding research and development, and encouraging carmakers to build vehicles that could run on ethanol, sugarcane ethanol became a reality virtually overnight.
“By 1977, gasoline-ethanol blends had arrived at the pump. The sugarcane industry invested in new fields. New ethanol mills dotted the landscape. The World Bank and national financial institutions structured a financing system to support the investment.”
- Sudden policy changes threatened growth – When Brazil transitioned to a democracy and the price of oil dropped in the 1980s, the national government considered dropping ethanol support, threatening a fast-growing industry even though consumer demand was clear.
“The government could not shut it down in one step because so many people had ethanol cars…there was a lot of tension between fiscal pressure and the number of cars in the street.”
- But stable technology investments saved the day – Even though Brazil’s cut funding, automakers maintained investments in new ethanol vehicle technologies. By the time oil prices rose again in the early 2000s, flex-fuel vehicles were ready to meet market demand.
“The decision on which fuel people would use was transferred from the government to consumer…Flex-fuel vehicles rapidly became the best-selling cars in Brazil.”
- Brazilian consumers have real options at the pump – The combination of technological investments, environmental and economic benefits, and steady government policy helped create a booming domestic biofuels economy and holds lessons for America’s policymakers.
“’We need to focus on being as smart as the Brazilians,’ R. James Woolsey, former director of the CIA and chairman of the Foundation for Defense of Democracies, said in a discussion on energy security and independence.”
“Because the United States had not widely encouraged the development of flex-fuel vehicles, the country now faces the possibility of a blend wall: too much ethanol and not enough gas tanks to take it…The goal for the United States shouldn’t be to completely displace oil, experts said, but to encourage a greater mix of fuel sources.”
Indeed, as debate over the future of advanced biofuels policy intensifies, it’s important to remember that a stable Renewable Fuels Standard (RFS) has encouraged advanced biofuels use in the U.S. while driving innovations in renewable fuels that boost American economic growth and energy security while cutting emissions.
Brazil will continue to be a strong, dependable partner helping America meet its clean energy goals. And Brazilian sugarcane producers will continue to play an active role in the RFS rulemaking process serving as a source for credible information and analysis about the efficiency and sustainability of sugarcane ethanol.
The late U.S. Senator Daniel Patrick Moynihan is often credited for quipping that everyone is entitled to their own opinions, but not to their own facts.
Fresh export data from Brazil reminded me of that saying because it will come as an unwelcome reality check for naysayers of sugarcane ethanol. Let’s turn to the facts to debunk two leading myths circulating around Washington, D.C. about Brazilian sugarcane ethanol.
Myth #1: Brazil can’t supply sufficient sugarcane ethanol to meet America’s needs.
Reality: Brazilian sugarcane ethanol is on track to not only meet, but could exceed the amount regulators projected necessary to comply with the Renewable Fuels Standard (RFS) 2013 targets for advanced biofuels.
The U.S. Environmental Protection Agency (EPA) has forecast that the U.S. will need almost 600 million gallons of sugarcane ethanol to meet RFS requirements this year. As of August 31, Brazil’s sugarcane ethanol producers have shipped about 330 million gallons to U.S. markets, compared to 267 million gallons during the same period in 2012. (For those keeping track of the imports and RINs after reading Sunday’s New York Times, just look at EPA’s data online to see that over 250 million gallons worth of RINs have been generated from imported advanced biofuels like sugarcane ethanol.)
Some simple arithmetic shows Brazil’s exports year-to-date are only slightly more than half what’s needed for the year. Bad news, right? With eight months down and just four to go, rumors are circulating that sugarcane ethanol imports won’t supply the necessary gallons.
But those naysayers forget Brazil’s sugarcane harvest starts in April, meaning ethanol exports tend to start slow in the first half of each year before hitting high gear in the second half. In fact, American imports of sugarcane ethanol during the second half of each year have historically been three to five times higher than imports in the first half of each year.
Compare the first half of 2013 with other historical data[i] and it’s clear that Brazil is easily on target to meet EPA’s expectations:
But don’t just take my word for it. In the agency’s final 2013 RFS rule, EPA notes that sugarcane ethanol imports this year have increased by 110% to 147% compared to 2012. EPA then observes: “[t]his increase, combined with the fact that the majority of Brazilian ethanol exports to the United States have historically occurred in the second half of the calendar year, suggests that Brazilian ethanol exports to the U.S. are on a trajectory that would readily enable Brazil to supply 580 million gallons to the U.S. in 2013.”
Of course, the real driver of imports is U.S. demand. And here we have to again tell the RFS naysayers to check their facts. Despite the doom and gloom of some special interests, the biofuels industry has delivered the gallons. Not just conventional biofuels, like corn ethanol, but also the advanced biofuels, from biodiesel to sugarcane ethanol. In fact, thanks to robust growth in advanced biofuel production in the past few months, the U.S. may not demand the level of imports that EPA expected earlier this year. That’s more proof that the RFS is working.
Myth #2: The “ethanol shuffle” that sends corn ethanol to Brazil and sugarcane ethanol to the U.S. doesn’t help the economy or environment of either country.
Reality: The 2011 shuffle was a one-time event, and Brazil is a net-exporter of biofuels.
Brazil is committed to helping America meet its renewable fuels goals, and production has expanded over time to meet rising U.S. demand. Ethanol production so far in 2013 is up 7 percent compared to first-half August 2012, and 8 percent compared to second-half August 2012.
Growing sugarcane ethanol production and export levels also put to rest any fears of another “ethanol shuffle” between Brazil and the U.S. This term refers to the one-year anomaly experienced in 2011 when America exported a comparable amount of corn ethanol to Brazil as the volume of sugarcane ethanol imported from Brazil.
As of the end of August, Brazil had only imported 31 million gallons of corn ethanol from America – which is less than 10% of the sugarcane ethanol Brazil has exported to the U.S. during the comparable period. Unfortunately for some critics, the music’s stopped on the ethanol shuffle, and the phenomenon is clearly not happening again in 2013.
Reality: A Committed Partnership On Renewable Fuels
Add it all up, and Brazil is far and away a net exporter of ethanol to the U.S. – a role that’s helping encourage innovation and expanding advanced biofuels use among American drivers.
Brazil’s sugarcane producers look forward to working with EPA to find the right advanced biofuels requirements under the RFS for 2014 and beyond, and stand ready to help America meet its growing goals for low-emission transportation options.
I think that even by Senator Moynihan’s high standards, we might all agree these observations are facts worth keeping in mind the next time an unfounded opinion gets in the way of reality.
[i] All data courtesy of the Brazilian Ministry of Trade & Development’s Secretary of Foreign Trade online database.
With Labor Day behind us, Washington D.C. has officially ended summer vacation and gotten back to work. Brazil’s sugarcane ethanol producers are no exception, and we’ve renewed our efforts making the case for advanced biofuels.
To kick things off this week, Joel Velasco – senior vice president of California-based renewable fuels company Amyris and board advisor to the Brazilian Sugarcane Industry Association (UNICA) – sat down for an interview on E&ETV, an influential webcast on Capitol Hill featuring energy and environmental policy leaders.
Joel offers unique insights into the advanced biofuels industry because (besides his advisory role with UNICA) he is also senior vice president of California-based renewable fuels company Amyris and a board member of the Advanced Biofuels Association. Joel shared his perspective on several key topics:
- The state of play for renewable fuels in the U.S. The Environmental Protection Agency (EPA) may have officially lowered the 2013 target for cellulosic ethanol and announced it will probably reduce volumes for other advanced biofuels starting in 2014, but that doesn’t mean an end to sugarcane ethanol’s modest but important role supplying America with clean renewable fuel. According to Velasco:
“What EPA did during the summer break was to basically finalize the rule they had already proposed earlier this year that said, we don’t have the cellulosic fuels but we do have other advanced fuels – let’s continue going on that path.”
“We're really talking about an increase from 2013 to 2014, as the law was written, of about a billion gallons. Most of that was going to be cellulosic biofuels – those we know are probably not going to be available for 2014. The big question is how much of that cellulosic they’re (EPA) going to waive into the other advanced pools, and how much of that cellulosic is just going to disappear or is not going to be required.”
- Congress’ next steps on the Renewable Fuel Standard (RFS). While EPA sets the annual targets and administers the program, Congress has also been working on the future of renewable fuels policy, starting with the House Energy and Commerce Committee’s white paper process. Joel opined:
“The committee should be commended for having this white paper process…I really think this was a unique way to get stakeholder input. It allowed everybody who had a stake in the game to actually provide input on a number of issues. I think the committee now has all the views that they need to look at.”
Obviously, if they get into this, we’re getting into a situation of then opening the Clean Air Act and making amendments to it…Once you start messing with the Clean Air Act all kinds of folks are going to get involved, and I just don’t think the legislative calendar will allow for some sort of (legislative) reform.“
- Expanding Brazil-U.S. biofuels trade. Global ethanol trade is creating economic and environmental benefits for both Brazil and the U.S. That growing relationship is anchored by fair trade and the RFS, and may expand during the first-ever biofuels trade mission coming up between the two countries. Velasco explained:
“Brazil and the United States are the world’s two largest producers of biofuel…And I think both countries, whether it’s President Obama here or President Rousseff in Brazil are committed to pursuing that deep relationship. We have a lot to celebrate – neither country has barriers for their biofuels, the ethanol tariff is gone here, Brazil has maintained a zero tariff there, and the subsidies are pretty much ended. So now it’s time to talk about what markets can we build beyond our two countries, and how do we strengthen the relationship?”
“The Advanced Biofuel Association, Renewable Fuel Association, and Unica are going to bring together companies in Brazil (for American biofuels companies)…And we will see what are the other options we have not just in Brazil or the U.S., but around the world. I think this is a great step in the right direction, and it’s proof that the RFS is working because these industries are being formed and we’re looking at how we can actually deepen the integration between these two economies.”
Joel’s interview comes at an important time for the advanced biofuels industry, both here and abroad. Sugarcane ethanol is a key component to America’s renewable fuel goals and Brazil is committed to continue growing as a trusted trade partner with the U.S. As debate over the future of the RFS continues, we’ll continue to highlight the importance of maintaining access to clean renewable biofuels.
No American city enjoys its August vacations more than Washington. With Congress away on recess, most Washingtonians skip town for at least a week to rest and prepare for renewed policymaking in the fall. I’ll certainly confess to enjoying the sand between my toes last month!
But editorial writers did not take a similar holiday, and a trio of leading newspapers each opined in recent weeks that it is time for the federal Renewable Fuels Standard (RFS) to go. These editorials in The Washington Post, USA Today and The Wall Street Journal (subscription required) focused primarily on concerns with corn ethanol, and the difficulty blending more than 10 percent ethanol into gasoline – the so-called “blend wall.” The editorial boards at each paper largely ignored how the RFS has spurred innovation and encouraged production of cleaner alternatives to both gasoline and conventional biofuels.
With Labor Day behind us, sugarcane ethanol producers will renew our conversations with lawmakers, reporters and opinion leaders, reminding them that:
- The RFS has successfully encouraged more advanced biofuel use in the United States. Yes, cellulosic biofuels have been slower to develop than Congress anticipated. Fortunately, other advanced renewable fuels like sugarcane ethanol and biodiesel are taking up the slack. Last year, Americans consumed 1.8 billion gallons of advanced biofuels, and the Environmental Protection Agency (EPA) expects consumption will rise to 2.75 billion gallons of ethanol equivalent in 2013 – the precise volumes called for by the RFS.
- Advanced biofuels are cleaner and better for the environment than gasoline. EPA determines which fuels qualify as advanced biofuels, and a key condition for this designation is reducing lifecycle greenhouse gas emissions by at least 50 percent compared to fossil fuels. EPA named Brazilian sugarcane ethanol an advanced biofuel in 2010 after determining it reduces greenhouse gases by 61 percent.
- Sugarcane ethanol plays a modest but important role supplying the U.S. with advanced biofuels. Last year, it comprised only 3 percent of all renewable fuel consumed by Americans, but sugarcane ethanol provided nearly one-quarter of the U.S. supply of advanced biofuels in 2012.
- The RFS is fostering innovation, and more advanced biofuels are on the way. A new report from Environmental Entrepreneurs (E2), a project of the Natural Resources Defense Council, finds steady improvements in technology and production capacity. It estimates a sufficient supply of advanced biofuels will be available to meet current RFS requirements through 2016. That’s the case for sugarcane ethanol. Brazilian sugarcane producers are making investments to expand production, and Americans can depend on more advanced biofuel from sugarcane.
These vital facts about the contributions of Brazilian sugarcane biofuels can get lost in the debate over renewable fuels in Washington, but we think they’re important as our two countries work together to make transportation more sustainable. So vacation is over, and it’s time to get back to work.
Sugarcane Ethanol Producers Applaud EPA’s 2013 RFS Standards, Urge Reasonable Adjustments to 2014 Requirements
Sugarcane ethanol producers applaud the Environmental Protection Agency (EPA) announcement on 2013 annual percentage standards for the Renewable Fuels Standard (RFS), which maintained the advanced biofuel volume at 2.75 billion gallons.
We also support EPA extending the time for obligated parties to demonstrate compliance with 2013 standards to June 30, 2014 – a common sense approach that will allow ethanol producers to take anticipated 2014 RIN obligations into consideration as they determine 2013 compliance actions.
Sugarcane ethanol producers also look forward to working with the EPA to find the right requirements for 2014 and the years ahead. We urge regulators to support reasonable proposed adjustments as the EPA considers 2014 requirements – especially the cellulosic and advanced biofuels volumes.
Brazilian exports provided nearly one-quarter of the entire U.S. advanced biofuel supply in 2012, are projected to supply nearly 700 million gallons in 2013, and could supply up to one billion additional gallons in 2014 – all with at least 61% fewer emissions than gasoline, according to the EPA.
Sugarcane biofuels are an important component of a diversified strategy to meet America’s RFS targets, and Brazilian producers stand ready to help America meet its goals for low-emission transportation by keeping clean renewable advanced biofuels flowing into U.S. vehicles.
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.