The owner of an oil refinery in Prince George says it can’t compete with subsidized biodiesel from the U.S. and has filed a countervailing and anti-dumping duty complaint with the Canada Border Services Agency (CBSA).
The company, Tidewater Renewables (TSX:LCFS), is also lobbying the provincial government to address “the looming economic crisis being driven by large volumes of subsidized US renewable diesel imports into the Canadian market,” according to the Office of the Registrar of Lobbyists.
Tidewater Renewables was created by Tidewater Midstream (TSX:TWM) after it bought a refinery in Prince George from Husky Energy in 2019 for $215 million. In 2021, Tidewater Renewables was created to develop a biofuel co-processing complex to produce biodiesel.
A market for biofuels had been created through B.C.’s low carbon fuel standard, which requires fuels like gasoline and diesel in B.C. to be blended with some form of renewable fuel to lower their emissions intensity.
In 2023, Tidewater Renewables began producing renewable diesel at its new renewable fuel complex, which has a production capacity of 3,000 barrels per day (bpd).
The refinery sources light oil produced in northeastern B.C.’s Montney formation, where Tidewater Midstream has oil and gas assets, and its refinery produces about 12,000 bpd of gasoline and diesel.
By producing biodiesel, Tidewater is eligible to sell emission credits under the B.C. government’s low carbon fuel standard (LCFS).
But that market for low carbon fuel credits has collapsed, thanks to a recent flood of cheaper biofuels from the U.S., which are subsidized under the U.S. Inflation Reduction Act’s new Clean Fuel Production Credit.
According to recent financial filings, Tidewater was not able to sell any credits in the second quarter of this year and blames a flood of cheaper subsidized American biodiesel.
“Towards the end of the second quarter of 2024 the corporation was unable to secure new forward sales agreements for the BC LCFS emission credits expected to be generated during the third and fourth quarter of 2024,” the company states.
“Management attributes the inability to contract near-term BC LCFS emission credit sales to a substantial increase in the volume of subsidized U.S. renewable diesel physically moving out of the oversupplied U.S. renewable fuel market and into the higher value BC market.”
The company warns that it has “insufficient cash to fund its operations for the next 12 months” if it can’t generate revenue through emissions credits.
“Should the corporation be unable to generate sufficient cash flow from financing and operating activities, such circumstances may adversely affect the corporation’s ability to operate its facility profitably,” it states in its third quarter financials.
Earlier this month, the company announced it was filing a complaint with CBSA in which it is seeking countervailing and anti-dumping duties to be applied to imports of American biofuels.
If the company is successful, it estimates duties valued at $0.50 to $0.80 per litre could be imposed at the border on American biodiesel imports.
“This reflects the corporation's estimates that U.S. renewable diesel imports benefit from an average amount of subsidization and dumping of between 40 per cent to 60 per cent,” the company said in a news release.
“Tidewater Renewables believes these measures are essential to remedy and offset the significant impact of U.S. subsidies...which enable U.S. producers to export renewable diesel to Canada at artificially low prices.”
Tidewater is using an argument long used by the American lumber lobby against Canadian softwood lumber – i.e. that when the cost of a commodity is artificially lowered through government subsidies it creates an unfair trade advantage.
Both California and B.C. have low carbon fuel standards that require refiners to add biofuels or renewable fuels to gasoline and diesel to reduce their carbon intensity.
But whereas Canada also now has a national standard (the Canadian Clean Fuel Regulations), the U.S. doesn’t. And whereas there are federal biofuel production subsidies in the U.S., there are no federal biofuel production subsidies in Canada, noted Adrian Dix, B.C. minister of Energy and Climate Solutions.
“We had been making significant progress with the federal government to support Canadian biofuel producers, but the proroguing of parliament has paused that work,” Dix said in a statement to BIV.
“We are currently looking at options to support B.C. biofuel producers, like Tidewater Renewables, and ensure fair treatment for domestic producers and will continue to advocate for a national biofuel program.”
Citing Carbon Acumen, Reuters reported in November that American producers exported more than 500 million litres of renewable diesel to Canada in the first six months of 2024 – up from 151 million litres in the same period last year. As a result, B.C.’s low carbon fuel credits have fallen in value from about $450, to as low as $207 in July, 2024.
American producers are eligible for the production credits, even when they produce biofuels for export, noted Werner Antweiler, associate professor at the University of B.C.’s Sauder School of Business.
And whereas American biofuel producers have access to the Canadian market, Canadian producers don’t have the same access to the American market, and don’t qualify for the American subsidies, Antweiler said.
“The lack of cross-border integration is hurting them,” he said. “Without reciprocal access, countervailing duties should restore competitiveness as a suitable remedy.
Without a level playing field, Antweiler said American subsidies “could destroy our Canadian producers.”
