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06/15/2013
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Regulatory Oversight Threatens Sugarcane Ethanol Supplies to U.S.

Brazilian sugarcane ethanol has become an important component of America’s advanced biofuels supply. But language tucked away in a proposed Environmental Protection Agency (EPA) rulemaking could effectively end U.S. access to this clean renewable fuel.

Sugarcane ethanol producers are concerned the regulatory process is being used to impose onerous, anti-competitive requirements on foreign ethanol. So today, we submitted comments on EPA’s proposed “Regulation of Fuels and Fuel Additives: RFS Pathways II and Technical Amendments to the RFS2 Standards.” Our comments highlighted what’s at stake for advanced biofuels in the U.S. and underline the threat posed to reducing greenhouse gas emissions from transportation. While official comments close today – despite our request for an extension – EPA still wants to hear from you.

First, a little background. Under the Renewable Fuel Standard (RFS), sugarcane ethanol has become an important part of meeting America’s desire to use more advanced biofuels. Brazilian exports provided nearly one-quarter of the entire U.S. advanced biofuel supply in 2012, are projected to supply nearly 700 million gallons of fuel required to meet 2013’s targets, and could supply up to one billion additional gallons in 2014 – all with at least 61% fewer emissions than gasoline, according to the EPA.

Economic and Environmental Causes for Concern

However, EPA’s proposal as currently written would cause three principal problems that could halt the steady supply of this clean fuel.

1 – Cost-prohibitive requirements – If approved, every sugarcane ethanol producer exporting to America would be subject to a host of burdensome new requirements, like physically segregating the ethanol they export from the production plant all the way to port arrival in the U.S. and spending considerable sums on expensive third-party auditors and bonds. By our estimates, producers would have to post a compliance bond of roughly $1 million for every 5 million gallons exported to meet EPA’s proposed rules. In addition, every gallon of sugarcane ethanol would have to be segregated from the moment of production across each of Brazil’s 400 mills, and could no longer be combined for shipment to domestic or other international markets if even one drop was destined for America.

These new requirements will drive up production costs to the point where sending this advanced biofuel to the U.S. may no longer make economic sense. Biofuels thrive on the global market, and since half of Brazil’s sugarcane ethanol exports already go to other countries, new costly mandates could force exports away from America.

2 – Increased emissions – Segregated supplies would also boost associated transportation emissions of shipping sugarcane ethanol. Producers could no longer use pipelines or bulk storage facilities, rail shipments would have to be separated for exports, and ocean vessels might have to be shipped at less than capacity. More ships and trains mean more emissions – a change that seems incongruent to President Obama’s climate goals.

3 – Impossible requirements – Perhaps most concerning, proposed rules would force all Brazilian sugarcane ethanol producers to demonstrate compliance by January 1, 2013 – a deadline that passed more than seven months ago! By our calculations, $40 million in bond payments would be retroactively due on the 200 million gallons of sugarcane ethanol imported into the U.S. so far this year.

An Unnecessary Change

EPA’s intentions are laudable, and we support the agency’s goal of ensuring the regulatory system that tracks U.S. biofuel consumption (known as Renewable Identification Numbers or RINs) is accurate. But the current system monitoring foreign producers isn’t broken.

Significant protections already guard against RIN concerns, and the Brazilian sugarcane industry worked proactively with EPA to ensure Brazilian producers maintain records to comply with reasonable expectations. Plus, there has never been an instance of RIN fraud linked to Brazil.

These proposed changes appear to be a solution in search of a problem that will have (what we trust are) unintended consequences – namely threatening American access to one of the few advanced biofuels on the market today. We hope EPA will take our comments into consideration, and keep our reliable supply of clean and renewable sugarcane ethanol flowing into U.S. vehicles.

Increasing the cost of low carbon sugarcane biofuels by 20 cents per gallon all the while increasing transport emissions doesn’t seem like the right way to implement the RFS. If you agree with us, make sure the EPA hears your concerns.

Leticia Phillips

Leticia Phillips is UNICA’s Representative for North America. Ms. Phillips is an expert on Brazil-US relations and leads the Brazilian sugarcane industry’s advocacy efforts before the main stakeholders in the region, including the US Congress, Federal agencies, State legislators and business and civil society.