NBB: SREs are harming demand for biodiesel, renewable diesel

By Erin Voegele | June 25, 2019

The National Biodiesel Board sent a letter to U.S. EPA Administrator Andrew Wheeler June 21 highlighting the economic damage that Renewable Fuel Standard small refinery exemptions (SREs) are causing the biodiesel and renewable diesel industries.

The letter cites a recent statement made by Wheeler expressing his hope “that by increasing…E15 to year-round, it will help make up the difference for any [SREs] going forward.”

In the letter, Kurt Kovarik, vice president of federal affairs at the NBB, stresses that the E15 waiver will not provide market growth for biodiesel and renewable diesel. SREs, however, have had a detrimental impact on demand for those fuels, he said. “EPA is required to repair the damaged destruction for biodiesel and renewable diesel resulting from your agency’s flood of unwarranted, retroactive small refinery exemptions,” Kovarik wrote.

He goes on to explain the positive impact the biodiesel industry has on the farm economy and notes SREs are adding to the agricultural economy’s economic hardship.

“Independent analysis substantiates the demand destruction for biodiesel and renewable diesel resulting from small refinery exemptions,” Kovarik continued. “Professor Scott Irwin, Laurence J. Norton Chair of Agricultural Marketing at the University of Illinois, asserts that because the RFS is binding for biomass-based diesel, the retroactive exemptions directly reduce biodiesel use. He estimates that demand for biomass-based diesel will be reduced by nearly a billion gallons from 2018 exemptions, if EPA continues to grant small refinery exemptions indiscriminately. Professor Irwin further estimates that the economic losses for the industry exceed $2 billion each year and could reach $7.7 billion by next year for the 2017 to 2019 period.”

Citing data from the EPA’s SRE dashboard, Kovarik said the NBB had calculated more than 360 million gallons of biomass-based diesel were exempted for 2015-2017 in just the advanced biofuel category. The demand destruction could have grown to 739 million gallons alone in 2017 when the potential impact of the conventional biofuel obligation is also considered. “That is an enormous among of demand loss for an industry that your agency projects will produce 2.8 billion gallons of fuel this year,” Kovarik continued.

“EPA’s dashboard data confirms that these exemptions are destroying demand for biomass-based diesel,” Kovarik wrote. “The data clearly show that exempted refiners continue to roll forward millions of RINs to meet 2017 and 2018 obligations, thereby destroying demand for biodiesel and renewable diesel to comply with obligations this year.”

“As you know, EPA has many options to prevent additional damage to the biodiesel and renewable diesel industry,” he continued. “When setting the forthcoming annual standards, your agency can acknowledge that it intends to grant additional small refinery exemptions and include a good faith estimate of the exempted gallons in the RVO formula. Additionally, your agency can ensure that future small refinery exemptions are not granted retroactively. At a minimum, EPA must set the 2021 biomass-based diesel volumes at a level that supports our industry’s demonstrated ability to produce fuel, and ensure that those volumes are upheld and met.”

A full copy of the letter can be downloaded from the NBB’s website