Las Vegas (Platts)--5Feb2013/600 pm EST/2300 GMT

The National Biodiesel Board predicted Tuesday that US biodiesel producers would make 1.5 billion gallons or more this year, easily exceeding the US Environmental Protection Agency's blending mandate of 1.28 billion gallons.

Joe Jobe, the trade group's CEO, told reporters that a number of factors would help the industry rebound after 2012's unchanged output, including the restoration of a $1/gal tax credit and EPA's regulatory fix for renewable fuel credit fraud.

The biodiesel group has urged EPA not to lower its 2013 blending mandate for advanced biofuels, a broader category under the Renewable Fuel Standard.

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"We really believe that we're very well positioned," Jobe told the NBB's annual conference in Las Vegas. "We've got the capacity. We've got the feedstock supply. We've got people ready to go. We've got sufficient infrastructure."

On January 31, EPA proposed requiring refiners blend 2.75 billion ethanol-equivalent gallons of advanced biofuels under this year's RFS, up from 2 billion gallons in 2012.

But the agency asked for comments on whether it should lower that mandate, given possible shortages in cellulosic fuel, concerns about Brazil flooding the US market with imported sugarcane ethanol and other production uncertainties.

EPA said that if it keeps the proposed volume, refiners would have to find 816 million ethanol-equivalent gallons of advanced fuels on top of the required 1.28 billion gallons of biomass-based diesel and 11 million gallons of cellulosic biofuel.

The agency said those additional advanced gallons could easily come from excess biodiesel production, domestic production sources -- grain sorghum-based fuel, renewable diesel and biogas -- or from Brazilian sugarcane ethanol imports.

Jobe said biodiesel has the edge in that bunch, because of the reinstated tax credit and because EPA assigns each gallon 1.5 Renewable Identification Numbers (RINs), compared with one RIN for each gallon of alcohol-based fuel like sugarcane ethanol.

"We are the most economically favorable for that, so we will be filling some of that market with domestic biodiesel," he said.

EPA said Brazilian imports would need to reach 666 million gallons under the proposed target if the US biodiesel industry does not outstrip its goal and if domestic production of other advanced fuels is about 150 million gallons.

"We believe that such volumes can be reasonably expected from Brazil despite some uncertainty in production and export potential," the agency said.

But EPA acknowledged that the projection contained plenty of uncertainties. A study from the US Department of Agriculture, for instance, estimates Brazil's total ethanol exports to all countries might only reach 500 million gallons in 2013.

"As a result, it is possible that there could be a shortfall of the total advanced biofuel requirement in 2013 under these circumstances," EPA said.

The agency said it wanted to resist lowering the advanced biofuel requirement given the policy's objective of reducing greenhouse gas emissions from the transportation sector. "We do not believe it is appropriate to forgo such benefits when they are physically achievable," EPA said.

Nevertheless, the agency said a paragraph later that there might be enough uncertainty to warrant a more cautious approach to advanced biofuels in 2013 and offered the example of cutting the proposal by 200 million gallons. Industry has 45 days to make its case for keeping or lowering the 2.75-billion-gallon target.

The law gives the agency discretion to cut the total advanced biofuels requirement by as much as it slashes the cellulosic requirement -- 986 million gallons in the case of the 2013 volumes.

EPA asked for comments on whether it should also reduce the 2014 advanced biofuel requirement, set by statute to reach 3.75 billion gallons.

--Meghan Gordon, meghan_gordon@platts.com
--Edited by Keiron Greenhalgh, keiron_greenhalgh@platts.com

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