EPA Rule Could Wreck Biofuel Competition

May 13, 2009 07:00 PM

Jeanne Bernick, Top Producer Crops & Issues Editor
The biofuels industry has had a lot to say about the Environmental Protection Agency (EPA) lately, and not much of it is nice. The industry is dismayed that the EPA has decided to include indirect land use provisions in its rulemaking to expand the Renewable Fuel Standard (RFS-2).
Indirect land use change (ILUC) is a controversial theory that suggests corn used for ethanol displaces other crops, like soybeans -- this in turn causes farmers in other countries, such as Brazil, to cut down rainforests to grow soybeans to fill demand. To date there is no consensus among scientists regarding the validity of this theory.
However, the EPA has included ILUC in its proposed rule, thereby creating a carbon "penalty” for expansion of biofuels compared to gasoline.
"The approach EPA has used in its proposed rule on RFS-2 implementation is significantly flawed,” American Soybean Association president Johnny Dodson, a soybean producer from Halls, Tenn., said at a recent House Agriculture Subcommittee hearing.
Dodson believes the approach will do unnecessary and irreversible harm to the competitive position of the U.S. soy biodiesel industry worldwide. The potential carbon "penalty” for biofuels also makes it difficult for investors to be encouraged to fund new generation biofuels.
"It is unfair to penalize American biofuels producers for land use decisions in other countries that they have no control over,” says Growth Energy's Tom Buis, CEO of ethanol producer group Growth Energy. "The fact is land use decisions are enormously complicated and involve many factors that have nothing to do with renewable fuels, including changes in currency, monetary policy, export needs, productivity gains and weather, just to name a few.”
Meanwhile, the EPA has failed to examine the indirect effects of petroleum, thereby giving gasoline "an unfair advantage,” adds Buis.
This unfair advantage comes as the biofuels industry is facing severe economic hardship, says Manning Feraci, National Biodiesel Board Vice President of Federal Affairs. "Volatility in commodity markets, reduced demand and inability to compete in the European marketplace are making it difficult for producers to sell fuel,” says Feraci. "Uncertainty relating to federal policy that is vital to the industry's survival is sending inconsistent signals to the marketplace and undermining investor confidence.”
Nearly all members of a recent House Agriculture Subcommittee Hearing on ILUC were highly skeptical of EPA's decision to move forward with the indirect land use change component. House Agriculture Subcommittee Chairman Tim Holden and Ranking Member Bob Goodlatte have indicated they will send a letter to the EPA asking for a 120-day extension of the existing 60-day comment period.

You can email Jeanne Bernick at jbernick@farmjournal.com.

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