Amid the oil industry’s all-out blitz to kill a government mandate for corn-based ethanol, biodiesel producers say they have a solution that could help everyone involved.
It goes like this: Buy more biodiesel.
That proposal may not be so far-fetched.
Federal mandates require fuel producers to buy and blend specific amounts of ethanol and other biofuels. But those mandates have increased to levels that the oil industry says are nearly impossible for it to meet and have driven up prices.
Refiners say that they can’t blend more than 10 percent ethanol into their gasoline for safe operation in many vehicles, but government mandates currently require them to surpass that total.
Biodiesel makers, however, say that if refiners buy more biodiesel they can satisfy their requirements for more corn-based ethanol under current rules from the U.S. Environmental Protection Agency.
Biodiesel, made from used cooking oils, discarded animal fats and other items, qualifies as an advanced biofuel under EPA rules, as opposed to corn-based ethanol, which is considered a conventional biofuel.
“Advanced biofuels can qualify to meet the conventional obligation, but not vice versa,” said Joe Jobe, CEO of the National Biodiesel Board.
While oil companies say a frenzy to buy ethanol credits has driven up prices, they could instead be purchasing credits that represent gallons of biodiesel, Jobe said.
The American Petroleum Institute, the oil industry’s main lobbying group, did not immediately respond to a request for comment. Neither did the EPA.
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Bill Day, a spokesman for Valero, the nation’s largest refiner, said the biodiesel solution to the ethanol price crunch would not be able to solve the problem. Refiners currently purchase biodiesel credits, or Renewable Identification Numbers, to meet their obligations.
“While it is possible to use biodiesel RINs to help meet the Renewable Fuel Standard ethanol obligation, there is nowhere near enough biodiesel RINs available to help the blendwall situation, not even close,” Day said, referring to a limit on the amount of ethanol that producers say they can blend into gasoline. “Valero will purchase some biodiesel RINs, but as the country’s largest gasoline producer, our obligation is far higher than what is available.”
San Antonio-based Valero, along with other oil companies, is urging the government to do away with the Renewable Fuel Standard. The company has simultaneously become a major producer of ethanol and other biofuels, which it sees as permanent parts of America’s fuel mix, just not with a government mandate.
“If you need a federal law mandating the use of your product in order to be economic, then there’s something wrong with your product,” Day said.
Jobe, of the National Biodiesel Board, argued that the Renewable Fuel Standard has helped to support the diversification of the American fuel supply, which would not have been possible otherwise.
The mandate has led biodiesel producers to generate more than 1 billion gallons of fuel for each for the last two years, a figure that is expected to leap above 1.5 billion this year, Jobe said.
“From our perspective the program is a tremendous success,” Jobe said.
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Biodiesel and other biofuels can help moderate fuel prices by ensuring that they are tied less to oil, he said. Despite efforts to make the United States oil-independent, that alone will not lead to more affordable fuel prices, Jobe said.
“Canada is now what we say we want to be in 10 years,” he said. “Canada is completely energy independent they’re a net exporter of petroleum, yet Canadian consumers pay a similar price for gasoline that we do.”
Jobe said the power generation sector could be a model for the American fuels market, with its diverse sources of energy from coal, natural gas, water and renewable sources.
“It’s highly diversified and so what do you see in the power generation sector? You see that prices have remained stable and low and very affordable,” Jobe said. “And if you look at the same period of time in petroleum, prices are… highly unstable.”