U.S. approves Canada crops for biodiesel use

WINNIPEG, Manitoba (Reuters) - The U.S. Environmental Protection Agency approved the use of Canadian crops such as canola and corn in U.S. biofuels on Thursday, a move that lifted Canadian canola prices and may help the U.S. meet its ambitious targets for biofuels.

The EPA's designation of Canadian crops as a renewable biomass will allow U.S. biofuel makers to collect tax credits for using them, said Canola Council of Canada president JoAnne Buth.

"I suspect we will see more canola moving into the U.S. now," Buth said in an interview.

ICE Canada canola futures closed up 1.9 percent exceeding gains in other related markets.

Canada becomes the first country outside the United States to receive approval under the EPA's land use test on an aggregate basis, said Ben Evans, spokesman for the U.S.-based National Biodiesel Board.

That means Canada has provided assurances that overall it is not bringing more net farm land into production, so farmers don't have to individually prove the same thing to qualify under the U.S. biodiesel mandate.

The U.S. Congress has set a goal of blending 36 billion gallons of renewable fuel into transportation fuel by 2022 and that target is large enough that there's little risk of Canadian crops displacing U.S. feedstocks like soybeans from the biodiesel mix, Evans said.

"I don't think you'll see a huge flood, but a gradual increase" of canola entering the U.S. biodiesel industry, Evans said in an interview. "It's a positive development."

In 2010, soybean oil made up half of the feedstock used in production of U.S. biodiesel, followed by animal fats, Evans said.

The U.S. Canola Association also supports the decision, said Dale Thorenson, the association's assistant director.

Last year, the EPA placed canola oil on an equal footing with soyoil, ruling that it emits low enough greenhouse gas levels to qualify for the U.S. mandate to increase renewable fuel production.

That decision allowed biodiesel makers to get credits for using U.S. canola, but Canadian crops did not qualify.

Canada is the world's top exporter of canola, a rapeseed variant that is used mostly for vegetable oil and livestock feed. Top Canadian canola crushers include Cargill Inc, Viterra Inc, Bunge Ltd, Richardson International Limited, Louis Dreyfus and Archer Daniels Midland.

Canada is normally a net importer of corn.

LINK to EPA decision:http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm

(Reporting by Rod Nickel; Editing by David Gregorio and Sofina Mirza-Reid)