(Source: Wikimedia Commons)
Biofuel Board says biodiesel is being "unfairly dragged" down by ethanol criticism

The National Biodiesel Board is looking to distance itself from the ethanol lobby, which includes the Renewable Fuel Association (RFA) and other pro-corn ethanol lobbyist organizations.  

I. Corn Ethanol in the Crosshairs

In Washington D.C. cash talks and the ethanol lobby has spent substantially to score itself tax breaks, blending quotas, and subsidies.  However, the oil industry has pushed back with lobbying of its own.  Following the repeal of billion dollar yearly subsidies to corn growers and ethanol plant operators, now even the blending quotas that create artificial demand for the corn ethanol industry's food for fuel scheme are in jeopardy.

leaked draft document from the U.S. Environmental Protection Agency (EPA) revealed that the EPA is eyeing large cuts to both the biodiesel and corn ethanol blending quotas.  Blending quotas are a way by which the federal government manipulates the market to produce artificial demand to promote fuel products it feel should be forced on consumers.  By mandating that refineries must blend in a certain amount of biofuels or face fines, the federal government creates artificial demand at the refinery level.

Biodiesel claims it's being damaged by the big corn versus big oil fight. [Image Source: Digital Trends]

A big question is exactly what would happen to demand if the blending quotas are scaled back -- or eliminated altogether.  Lobbyists for the biodiesel and corn ethanol industries suggest that such actions would create a market collapse.  In other words, it appears there's very little natural demand for these fuels and these industries could dry up were the U.S. to operate as a free market.

On the other hand the picture is slightly muddled by the fact that the federal government also manipulates the market to benefit the oil industry, which it gives certain land grants, tax breaks, and other handouts.  Thus it's hard to tell exactly what a free U.S. fuel market would look like, given the scale of market manipulation both with fossil fuels and alternative fuels that the U.S. government has engaged.
Congress Buillding wide
The Republican controlled House of Representatives has discussed a potential repeal of the EISA/RFS.
[Image Source: U.S. Congress]

The leaked EPA proposal suggests cutting the corn ethanol target to 13.0 billion gallons, down substantially from the 13.8 billion gallons mandated in 2013 and the 14.4 billion gallons that The Energy Independence and Security Act of 2007 (EISA) [PDF] originally mandates for 2014.  The 13.0 billion gallon mark is considered an important concessions as it would place ethanol production below the so-called "blending wall" (13.3 billion gallons) -- the level at which refiners would have to start selling some fuel at higher than E10 blends, such as the controversial E15.

The leaked document suggests cutting blending requirements for other forms of biofuel from 3.75 billion gallons to 2.21 billion gallons.  While in some cases the cuts are inarguable -- for example in the case of cellulosic ethanol, which has basically failed to attain any sort of commercial scale production -- the cuts have biodiesel producers fuming mad.  The leaked document suggests cutting biodiesel targets from 1.7 billion gallons to 1.28 billion gallons -- nearly a 25 percent cut.  While that may not sound like much, given the lower volume, it's a much larger cut -- percentage wise -- than the corn ethanol reduction, which saw a cut of less than 6 percent.

II. What is Biodiesel, and What Are They Saying About the Cuts?

Biodiesel is a hodge-podge sort of fuel produced from a mixture of "agricultural oils, recycled cooking oil [,] and animal fats", according to the national biodiesel board.  While a bit outdated, a 2010 edition of BioCycle gives a somewhat more specific breakdown, saying that about 77 percent of U.S. biodiesel comes from so-called "virgin" oil sources (from oilseeds), another 17 percent comes from waste animal fat, and 6 percent comes from yellow grease -- a solidified byproduct of the oil that burger chains and Chinese restaurants U.S. to fry America's much beloved fast foods in.

Canola field
A growing canola crop [Matt Lavin/Image Source: Montana State Univ.]

While seed oils -- most commonly canola (a rapeseed derived crop) and soybeans -- are food crops, they have their own unique advantages and disadvantages versus corn ethanol.  An acre of corn can produce 400-600 gallons of ethanol [source], an acre of soybeans can produce 40-70 gallons of biodiesel, and an acre of canola can produce 70-140 gallons [source].

When it comes to food for fuel, one way that soybean/canola-derived biodiesel is slightly more desirable than corn ethanol is that it can be produced on lower quality land.  A recent Illinois survey suggests that corn requires four times as much fertilizer and also requires expensive drying [source].

Biodiesel also comes from food crops, roughly three-quarters of the time. [Image Source: Wikimedia Commons]

The National Biodiesel Board has penned a letter to the EPA griping about the cut in blending quota.  In the letter -- which we were unable to find online but is quoted by Politico Pro, a subscription-only news program -- the board writes that biodiesel is being "unfairly dragged" into the big corn versus big oil fight.  They write that the cuts would result in the loss of 8,000 American jobs and the potential closure of several plants.  Many biodiesel firms went under when tax cuts for production were recently rolled back by Congress.

The Obama administration's new EPA chief administrator Gina McCarthy, who replaces the departing Lisa Jackson, has not commented on the letter or the larger biodiesel cut directly.  As for the leak she said that at this point it's not a finalized document but "only... a draft proposal" and that "no final decision" on the Renewable Fuel Standard (RFS) blending quotas has been made for 2014.

The EPA drew criticism from corn growers when it extended the deadline that oil producers had to blend in the volume for 2013 by several months, effectively cutting the 2013 target.  However, that concession was not termed a "cut" in RFS targets by the EPA.  By contrast, if the new draft is indeed adopted, it would be the first actual cut to the EISA's RFS targets since President George W. Bush (R) signed the EISA into law in 2007.

Sources: Politico Pro [subscription only], via Green Car Reports, Feedstuffs [leaked draft]

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