The U.S. biodiesel industry will suffer from new trade barriers that threaten to end its lucrative export business to Europe, and in Texas the measure could be devastating.
As the largest U.S. producer of the alternative fuel, Texas has a number of companies that relied heavily on selling biodiesel in Europe and now face gaping holes in their businesses that may prove difficult to fill.
In addition, the Port of Houston has been a major hub for storing, handling and shipping biodiesel overseas, and companies in those businesses also stand to lose.
“The impact on Texas is going to be pretty great,” said Dan du Plessis, marketing and supply chain manager for GreenHunter Biofuels, which operates a 105 million gallon per year biodiesel plant at the Houston Ship Channel that had been exporting more than 90 percent of its product to Europe.
Last week, the European Commission said U.S. biodiesel exporters will now have to pay additional anti-dumping tariffs of up to 29 percent, and anti-subsidy duties of up to 41 percent. The tariffs are temporary for the next six months, but the commission will decide by this summer whether to extend them for five years.
The tariffs came after complaints last year that U.S. biodiesel producers were collecting both U.S. and European subsidies and then selling huge quantities of fuel in Europe at prices that undercut domestic producers.
European officials estimated that 80 percent of U.S. biodiesel production was exported in 2008.
But the U.S. biodiesel industry says the commission doesn’t have adequate proof that its domestic industry has been harmed by U.S. competition and, therefore, cannot extend the tariffs.
Until the overall picture improves for U.S. biodiesel producers, however, some firms could be in trouble, Eurasia Group biofuels analyst Divya Reddy said in a report last week.
“Ultimately, low-cost producers will survive current market conditions in the U.S.,” she said, “while smaller, higher cost producers could find themselves driven out of business more quickly.”
Mostly made from vegetable oils in the U.S., biodiesel has been touted as a homegrown way to help reduce dependence on oil, cut tailpipe emissions and aid American farmers. To stoke demand, the U.S. government offers a $1-per-gallon tax credit to companies that blend biodiesel with petroleum diesel.
But ethanol, a gasoline additive made mostly from corn in the U.S. and also subsidized, has made deeper inroads in this nation.
Energy legislation in 2007 was supposed to require blending of 500 million gallons of biodiesel in 2009, doubling to 1 billion by 2012. But the Environmental Protection Agency still hasn’t approved the rules to put the law into practice. That delay and the new tariffs have left many domestic producers without customers here or abroad.
In 2008, U.S. plants produced just 700 million gallons, and most of that was exported.
Texas has 30 biodiesel plants with a total production capacity of 691 million gallons per year, said Jess Hewitt, president of the Biodiesel Coalition of Texas. Forty percent of that capacity is idle, including several plants in the Houston and Galveston area, he said.
“If the plant was participating in exports to the EU, then their business has declined,” he said.