On August 24, 2016, Brazil's government announced that it would not be extending a tax break on ethanol sales that is due to expire in December 2016. During the 2015 Paris Climate Accord, Brazil pledged to increase cane-based ethanol and biodiesel to nearly 18 percent of its total energy mix by 2030, requiring an increase in annual ethanol production from 30 billion liters in 2015/2016 to 50 billion liters in 2030. The loss of the ethanol tax break prevents biofuel from being cost competitive with gasoline, and will severely impede the ability of ethanol and biodiesel to make up a larger percentage of Brazil's energy mix. Elizabeth Farina, head of the cane industry association Unica, stated that this change will push cane mills to switch from biofuel to sugar production. Two days after the announcement that Brazil would not be renewing the ethanol tax break, Brokers INTL FCStone predicted that the top cane growing region of Brazil would produce 4.7 percent less ethanol in the 2016/2017 crop than it did in 2015/2016.
On May 18, 2016, the U.S. Environmental Protection Agency (EPA) announced a proposed increase of the renewable fuel volume requirements under the Renewable Fuel Standard (RFS) program for all biofuels in 2017 and biomass-based diesel in 2018. While both the renewable fuel volume requirements and the proposed percentage standards are increases from previous years, the volume requirements for cellulosic biofuel, advance biofuel, and renewable fuel still fall short of the volumes proposed for 2017 under Section 211 of the Clean Air Act. The proposed volume requirements are:
- Cellulosic biofuel, from 230 million gallons in 2016 to 312 million gallons in 2017;
- Advanced biofuel, from 3.61 billion gallons in 2016 to 4 billion gallons in 2017;
- Renewable fuel, from 18.11 billion gallons in 2016 to 18.8 billion gallons in 2017; and
- Biomass-based diesel, from 2 billion gallons in 2017 to 2.1 billion gallons in 2018.
These volumes would change the percentage standards to 0.173 percent for cellulosic biofuel, 2.22 percent for advanced biofuel, 10.44 percent for renewable fuel, and 1.67 percent for biomass-based diesel. A timely passage of the RFS volumes is of great importance to the biofuel industry, as any delays can create uncertainty for investors and harm industry progress. The rule is open for comment through July 11, 2016, and EPA intends to issue the final rule by November 30, 2016. Comments may be submitted at www.regulations.gov via Docket ID No. EPA-HQ-OAR-2016-0004.
On March 23, 2016, Bloomberg BNA Daily Environment Report announced that EPA signed a final rule exempting manufacturers of six biodiesel chemicals from reporting processing and use information under the Chemical Data Reporting (CDR) rule under Section 8(a) of the Toxic Substances Control Act (TSCA). In 2014, BRAG filed a regulatory petition to exempt the chemicals, requesting the same exemption that EPA currently provides to manufactures of petroleum-based versions of the chemicals. The rule was originally issued as a direct final rule in February 2015 before being withdrawn due to a single comment. This final rule is consistent with the original proposed rule that was issued on July 22, 2015, and applies to manufacturers of:
- Fatty acids, C14-18 and C16-18 unsaturated, methyl esters (Chemical Abstracts Service (CAS) No. 67762-26-9);
- Fatty acids, C16-18 and C-18 unsaturated, methyl esters (CAS No. 67762-38-3);
- Fatty acids, canola oil, methyl esters (CAS No.129828-16-6);
- Fatty acids, corn oil, methyl esters (CAS No. 515152-40-6);
- Fatty acids, tallow, methyl esters (CAS No. 61788-61-2); and
- Soybean oil, methyl esters (CAS No. 67784-80-9).
As with all the chemicals currently afforded partial exemption status, the biodiesel chemicals would no longer be eligible for the partial reporting exemption if they were to become the subject of a TSCA Sections 4, 5(a)(2), 5(b)(4), or 6 rule (proposed or final), an enforceable consent agreement, a Section 5(e) order, or relief granted under a civil action under Section 5 or 7. BRAG is pleased that EPA was able to complete the rulemaking process in time for the CDR reporting cycle starting in June 2016. The partial CDR exemption will save manufacturers about two weeks of time that would typically be spent preparing processing and use data for Form U.
On February 16, 2016, Agriculture Secretary Tom Vilsack responded to two recent reports on ethanol and renewable fuels. The first report was published by USDA and is on "2015 Energy Balance for the Corn-Ethanol Industry," and the second report comes from the University of Missouri Food and Agricultural Policy Research Institute (FAPRI) and is a "Literature Review of Estimated Market Effects of U.S. Corn Starch Ethanol." Both studies demonstrate the growth of the United States' renewable energy industry with improved ethanol and biodiesel production resulting in doubled renewable energy production and a reduction in foreign oil imports. The energy used to produce corn has fallen as well, which has made the production of ethanol more efficient so that "more energy is being produced from ethanol than is used to produce it, by factors of 2 to 1 nationally and by factors of 4 to 1 in the Midwest." Both studies point towards a solid future of growth and innovation for the U.S. renewable energy industry.
On January 26, 2016, Biobased and Renewable Products Advocacy Group (BRAG®) member Neste Oil announced that Tamoil has begun selling arctic diesel containing renewable diesel produced by Neste in the northern Italian Alps region. The fuel, Gasolio Artico Tamoil - New Generation Diesel, will contain at least 20 percent renewable diesel and will reduce emissions while providing excellent performance in cold conditions. Neste's renewable diesel does not contain conventional fatty acid methyl esters (FAME) biodiesel, allowing the fuel to be stored for a long period of time without losing the ability to be used at any point. This year's Marcialonga cross-country ski race will use Gasolio Artico Tamoil - New Generation Diesel fuel to power snow tractors, service trucks, and other vehicles.
On October 4, 2015, California Governor Jerry Brown signed Assembly Bill No. 1032, an act to amend Sections 60501 and 60505.5 of the Revenue and Taxation code, relating to taxation, into law. The bill adds biodiesel to the list of fuels that are eligible for tax refunds when they are used for nontaxable purposes. Starting on January 1, 2016, the State Board of Equalization will provide refunds on the portion of nontaxable biodiesel removed from the terminal to those that can show that they have already paid the tax on the fuel.
On August 18, 2015, the Internal Revenue Service (IRS) released a notice containing tax code information for 2014 biodiesel tax credits. The focus of the notice is the treatment of credits under Internal Revenue Code Section 6426(c) and (d) that allow a biodiesel blender to claim a credit against tax liability. Generally, the tax liability is in the form of excise taxes imposed by Sections 4041 and 4081 and is reported on Form 720, Quarterly Federal Excise Tax Return, and the Section 6426 credits are claimed on Schedule C (Form 720), Claims. The IRS notice informs claimants about the federal income tax treatment of these credits and illustrates the application of the income tax treatment for claimants.
On June 17, 2015, the Australian government made a bipartisan agreement to tax Australian-produced biodiesel and ethanol. Cleaner fuel grants for renewable and biobased diesel fuels will end by July 1, 2015, as will the Ethanol production grant. An excise rate on biodiesel will be phased in starting in 2015-2016 at zero percent, and will increase annually, eventually reaching 50 percent of the diesel excise rate in 2030-2031. The Biofuels Association of Australia approved of the agreement, saying it will "allow the industry to focus on the longer term and provides a sustainable footing for the biofuels industry to grow and delivers on the government objective of moving biofuels into the excise framework."
On March 30, 2015, the U.S. Environmental Protection Agency (EPA) withdrew
a Direct Final Rule for Partial Exemption of Certain Chemical Substances from
Reporting Additional Chemical Data. The direct final rule, issued
in January 2015, would have exempted manufacturers of six biobased diesel
chemicals from reporting processing and use information for the compounds under
the Chemical Data Reporting (CDR) rule. It resulted from a regulatory petition
filed by the Biobased and Renewable Advocacy Group (BRAG®). The EPA
decision to withdraw the rule was in response to a single comment posted during
the short comment period.
Kathleen Roberts, BRAG's Executive Director, stated: "Albeit
disappointing, the response is not unexpected given the strict procedures
associated with direct final rules. EPA has stated it plans to proceed with a
proposed rulemaking to list the chemicals soon and we will urge them to move as
quickly as possible. Our hope is EPA can complete the rulemaking process in
time for the next reporting CDR cycle, which starts in June 2016."
Until the new rule is completed, manufacturers of the six affected
biobased diesel chemicals should be prepared to submit processing and use
information under the CDR in 2016.
On January 27, 2015, the U.S.
Environmental Protection Agency (EPA) approved the importation of biodiesel
made from soybeans from Argentinian biofuel producers as qualifying for U.S.
biofuel credits under the federal Renewable Fuel Standard (RFS).
Argentina's Biofuels Chamber's (CARBIO) request for an "Alternative
Renewable Biomass Tracking Requirement" was approved, which allows foreign
manufacturers to be part of the RFS if they follow certain environmental
standards. The U.S. biodiesel industry has criticized this pathway approval for
Argentinian biodiesel because it is believed to be less rigorous than other
certification standards used previously. Before this pathway was approved,
individual Argentinian biofuel producers could still qualify for the RFS
program on their own, but the new method through CARBIO will allow all
interested companies to be tracked as a consortium. EPA does not expect the
approval to result in competition with domestic biofuel producers. This claim
is strongly disputed by U.S. agricultural and biofuel groups. The Argentinian
biodiesel industry has a production capacity of well over 1 billion gallons,
which could displace a large percentage of the RFS volume requirement of 1.28
billion gallons, which to date has been made up primarily of U.S. product.
The National Biodiesel Board and others have sought the views of
the EPA Administrator and have asked EPA to revisit this pathway decision. If
EPA does not change its position, the organizations may consider legal options.
In addition, there is currently a group of about 30 U.S. Senators who have
called for EPA to reverse the rule.