Photo from: http://www.lee-enterprises.com/
The owner of nationally recognized biodiesel consulting firm, Lee Enterprises, is passionate and outspoken about the industry. This week he shared his thoughts on the industry.
“I am bullish on the industry” says biodiesel consultant, Wayne Lee. “If not for a gridlocked Congress, the industry would be flourishing now”. The new Renewable Fuels Standard (RFS2) was implemented on July 1st. It requires diesel importers and refiners to use 1.15 billion gallons of biodiesel in 2010. And, Lee says that the EPA is apparently “sticking to its guns” and has already released 2011 requirements.
“The thing giving the industry heartburn right now is the $1 tax credit” says Lee. “This tax credit is for 2010, the year is half over, and we don’t have an answer. I place the blame squarely on Congress” Lee says. “The credit appears to have overwhelming bipartisan support, but they keep attaching it to controversial legislation. That is inexcusable”.
Lee sees the real tragedy as those producers who trusted the government to do as it promised and pass the credit. “Only about 15% of the plants had that trust and remained open after the first of the year” Lee said, “and many of them have been rewarded with bankruptcy and foreclosure – and Washington wonders why there is an anti-incumbent sentiment”.
While price is always the key factor, Lee notes how little the price of biodiesel impacts the overall cost of a blended gallon of diesel fuel. “In a common 2% blend, a $3.00 per gallon diesel blended with $3.50 per gallon of biodiesel, produces a $3.01 per gallon blended product” says Lee. “That does not even consider that each gallon of biodiesel also carries 1.5 RINs, valued at about $.75 in today’s market” Lee noted. “If I owned an oil company, I would be buying lots of biodiesel right now” he says, “because big oil is going to need them by year’s end”. Lee stresses that the sole factor limiting the industry is the tax credit uncertainty. “It keeps everyone unable to agree on price”.
“I believe that big oil is keeping this issue convoluted” says Lee. “I expect them to come in at year’s end and say that they could not comply with RFS2 because they couldn’t find biodiesel to buy. My hope is that the EPA will stand fast. The product is out there for people that want it – it is simply a matter of agreeing on price”.
The major automakers have all accepted biodiesel blends for use in autos and Lee sees the future of biodiesel as very promising. “Unlike other alternative fuels, there aren’t as many options with diesel” he says. “You can’t run a cruise ship, airplane or tractor trailer rig on batteries”. Lee maintains that biodiesel is not simply an environmental issue, however. “When oil hits $125 per barrel, OPEC is going to control one half the world’s wealth” Lee says. “That should scare everyone. Additionally, we are in a tough economy right now and if we replaced even a fourth of our imported oil with alternative fuels, the economy would turn around quickly” he said. “These are national security and economic issues” Lee says. “I think voters are really beginning to see this and demanding results” he said. ”We are in a tough situation in America right now. If our elected officials cannot deliver, we will elect some that can”.
Photo from: http://1800recycling.com/2010/02/converting-biodiesel/
HOUSTON (ICIS news)--Despite new renewable fuel standards (RFS2) going into effect this month, biodiesel refiners are finding it easier to sell paper than bio-based fuel, sources said on Monday. The US Environmental Protection Agency (EPA) regulation calling for 1.15bn gal of biodiesel to be blended into the nation’s fuel supply in 2010 officially started in July. But so far, much of the market’s interest has been in the renewable fuel identification numbers (RINs), the 38-character number attached to each batch of biodiesel made, sources said. Blenders submit their RINs to the EPA as evidence they are meeting the mandate. The EPA allowed blenders to use RINs from 2009 and 2010 to meet 2010 requirements. Now blenders who bought enough biodiesel in the past two years to exceed government requirements are selling their surplus RINs to other blenders, who can then use the RINs as credits without having to buy the physical fuel, refiners and brokers said. “The bottom line, there isn’t a 1.15bn market waiting in 2010” for the physical fuel, said Ron Marr, marketer for the biodiesel-producing Minneosota Soybean Processors. “The wet barrel demand for 2010 is looking more like 200 [m]-600m gal.” It all comes down to economics, sources said. With the credit in place, biodiesel fuel prices averaged $839/tonne for the first seven months of 2009. After the $1/gal blending subsidy for biodiesel expired in December 2009, the fuel price rose to an average $948/tonne (€749/tonne) between January and July 2010. That was too expensive for many blenders, who suspended purchasing in expectation that Congress would reinstate the subsidy this year, something that has not yet happened. US biodiesel production fell to about 10% of total capacity as the only consistent buying came from a few states with renewable fuel usage mandates. Now blenders short of the required gallons are more apt to purchase RINs from other blenders who may have built a surplus in 2009. Biodiesel RIN prices have grown to about 50 cents/RIN in July from about 23 cents/RIN in March. “Even with RFS2, no one is transacting in wet gallons,” a renewable fuel trader working in the Gulf Coast region said. “RINs have to get to sixty cents or higher before people start producing biodiesel.” John Urbanchuk, technical director of Entrix, a consulting firm in Pennsylvania, said the next test will be whether blenders look to domestic biodiesel or imports when the number of available RINs diminishes. “The lapse of the tax credit last December has really put producers in a bind,” Urbanhuck said. “We’ve seen a drop in biodiesel production. Having said that, we still have the RFS2 requirements. If the production is not there, you’ll see increased interest in RINs to meet that.” ($1 = €0.79)
I only include this story because it shows the dark underbelly of EPA regulations and how they can be contorted to fit the need. The politics of biodiesel are discussed here. Please discuss in the forum if you would like.
NBB Members convene in Washington to discuss RFS2, the biodiesel tax incentive and new opportunities for biodiesel at their annual June membership meeting.
The federal renewable fuel standard (RFS2) is about to move the “M” to a “B”—annual biodiesel production has measured in the millions for the past 10 years, but starting in 2012, those numbers are expected to swap “million” for “billion.” RFS2 requires obligated parties to use 1.15 billion gallons of biodiesel domestically by the end of 2010 to account for 2009 and 2010 use. In 2012, requirements hit the 1 billion gallon mark. While RFS2 was carefully designed to create a predictable and easily attainable safety net for biofuel use, there are market considerations and long-term targets to consider that will help ensure a smooth transition to higher volumes. The National Biodiesel Board appointed an RFS2 Volume Working Group to guide the industry through the RFS2 implementation process and accompanying potentially higher volume demands. The task force will draw on economic indicators, feedstock availability forecasts, and historic trends and data. Task force members include: Gene Gebolys, World Energy Alternatives LLC , Charlestown, Mass. Kris Kappenman, Archer Daniels Midland Co., Decatur, Ill. Greg Anderson, Nebraska Soybean Board, Lincoln, Neb. Martin Beirne III, Green Earth Fuels LLC, Houston Beth Calabotta, Monsanto, St. Louis Leif Forer, Piedmont Biofuels Industrial LLC, Pittsboro, N.C. Ryan Pederson, U.S. Canola Association, Washington Mike Noble, Lake Erie Biofuels, doing business as HERO BX, Erie, Pa. Jim Conway, Griffin Industries, Cold Spring, Ky. Bobby Heiser, Nittany BioDiesel LLC, Boalsburg, Pa. The Task Force will also develop recommendations for the U.S. EPA as it considers volumes for 2013 and beyond.
Since the $1 per gallon biodiesel tax credit expired, U.S. biodiesel production has plummeted by more than 80 percent. At the same time, motorists are changing buying habits as the price of biodiesel surpasses other fuels. The $1 per gallon blender tax credit makes biodiesel cost competitive with conventional diesel fuel.
ALEXANDRIA, Va. — NATSO, the national association representing truck stops and travel plazas, along with industry partners, urged congressional leaders to support Sen. Charles Grassley’s amendment to the Small Business Lending Act of 2010 and extend the biodiesel tax credit through Dec. 31.
In a letter addressed to members of the Senate, NATSO, along with the National Association of Convenience Stores, the Petroleum Marketers Association of America and the Society of Independent Gasoline Marketers of America, said the blender tax credit is critically important to the survival of the nation’s biodiesel producers and fuel blenders.
If I remember correctly, we covered a story about a letter signed by NATSO and others that also urged the federal government to reinstate the biodiesel blenders’ tax credit of a dollar per gallon.