EU tariffs would be a setback for U.S. biodiesel

Seattle-based Imperium Renewables and other American biodiesel producers are expected to face new tariffs on U.S. fuel that is imported into the European Union, a setback for an industry already hard-hit by the downturn in world oil-prices markets.

The tariffs would be temporary but could be made permanent once the European Commission finishes an investigation of surging U.S. imports, according to Dow Jones Newswires, which obtained a copy of the proposal.

The duties would apply to "B99," a blend that is 99 percent biodiesel and 1 percent diesel from fossil fuels. This "blended" fuel qualifies for a $1-a-gallon tax credit from the U.S. government, and exports from the U.S. to Europe increased about 40 percent in 2008 compared to 2007.

European biodiesel producers claim the U.S. tax credit is an unfair subsidy

John Plaza, founder and CEO of Imperium, said that the new tariffs were expected, and will certainly increase the price of biodiesel imports to the European Union. But he said the greater threat remains the volatile price of crude oil.

"It is hard for any current or next-generation renewable fuel to compete with today's low price of a barrel of oil," he said in an e-mail.

The U.S. biodiesel industry boomed in recent years amid government incentives to produce cleaner-burning fuels that would reduce dependence on crude oil. U.S. biodiesel production jumped from just 25 gallons a year in 2004 to 700 million gallons in 2008, according to the National Biodiesel Board, a U.S. industry group.

Imperium was part of the boom, opening a plant in August of 2007 in Grays Harbor County that is capable of producing 100 million gallons of biodiesel annually.

But the company early in 2008 abandoned a public stock offering and was stung by rising prices for the agricultural commodities that can be converted into biodiesel. Then, in the second half of 2008, world oil prices imploded as the global economy took a nose dive.

In an interview last year with The Seattle Times, Plaza said one strategy for riding out the financial crisis was to export most of Imperium's biodiesel.

The European Commission, in the report obtained by Dow Jones Newswires, concluded that U.S. imports had caused the financial condition of the European biodiesel industry to deteriorate drastically.

One U.S. practice last year that triggered the ire of European producers was called "splash and dash," according to Pavel Molchanov, a vice president at Raymond James & Associates who follows the biodiesel industry.

The tactic involved companies that imported into the U.S. biodiesel produced in another country, added 1 percent diesel to gain the U.S. tax credit, and then exported it to Europe.

The commission proposes a two-part tariff that would be assigned at different rates to different U.S. biodiesel producers, and begin to be imposed in March.

The duties are calculated in euros per kilogram of fuel. For Imperium Renewables, the total amount would exceed $1 a gallon.

Manning Feraci, a vice president of the National Biodiesel Board, said it has submitted data to the European Commission to demonstrate U.S. competition is not causing harm to the industry there.

Seattle Times reporter Justin Mayo contributed to this story