US Biodiesel Industry Eyes Recovery

ORLANDO, Fla. (DTN) -- While 2025 will be remembered by the biomass-based diesel and renewable diesel production industries as a tough ride that saw production shut down across the country, the leader of Clean Fuels Alliance America said Tuesday that things are lining up for production to come back in full force.

As biofuels industries wait for official guidance from the Trump administration on the 45Z Clean Fuels Production tax credit early in 2026, the biodiesel industry was hit particularly hard by the expiration of the blenders tax credit.

Because the industry had plans to replace the blenders credit with 45Z and 45Z didn't completely materialize, many biodiesel and renewable diesel plants shut down production.

Clean Fuels CEO Donnell Rehagen outlined the struggles during a speech at the group's conference in Orlando, Florida. He told the audience of farmers and biofuels producers their willingness to stick with it during difficult times was laudable.

"I always speak of our industry's resilience; but resilience is not just the act of enduring, it is adapting, bending but not breaking, using difficulty as a building block rather than a crushing weight," he said.

"I wish resilience wasn't a requirement to be part of this industry. It would be nice if you didn't have to be so resilient. You deserve a long runway of certainty so your businesses can thrive and deliver on the promises we make to America."

At last year's Clean Fuels conference, Rehagen spoke about all the successes the industry was having including solid profit margins in 2024.

The tone changed abruptly for the industry, he said, calling 2025 "brutal" for biofuels producers.

"Deep uncertainty over 45Z tax credits made it virtually impossible to plan and run a biodiesel business," Rehagen said.

"Questions about the Renewable Volume Obligation from EPA -- including the timing and whether they'd eventually undermine the strongest proposed RVO (renewable volume obligations) we've ever had by granting the backlog of small-refinery exemptions -- created paralysis for the market."

Rehagen said the industry saw "significantly slower" production across biodiesel, renewable diesel and sustainable aviation fuel.

"These aren't abstractions, they're real wounds and they're deep," he said. "You should be commended for sticking out a harsh year."

The list of blows to the industry is long, Rehagen said, pointing to uncertainty as the driver. Despite a rough year, he said the industry has seen many policy wins that could set the tone going forward.

Though the latest final Renewable Fuel Standard volumes are late, the proposal from the U.S. Environmental Protection Agency released last year would set biomass-based diesel volumes at around 5.6 billion gallons for 2026 -- about 2 billion gallons higher than 2025 volumes.

Rehagen said that was "by far" the largest single year jump in program history. "That's the scale of ambition we've fought for," he said. "It creates room for growth, for planning, for investment."

Also, starting in 2026, the U.S. Treasury will exclude indirect land-use change from lifecycle greenhouse gas calculations for the 45Z tax credit.

Rehagen said that decision "levels the playing field" for domestic, crop-based biofuels and lowers one of the "major headwinds" the industry has confronted for many years. In addition, the 45Z credit was extended through 2029.

In December, the state of California ended the Alternative Diesel Fuel regulation, opening the door for higher biodiesel blends to be sold in the state.

"So, in 2026 we could see twice as much biodiesel in California as we did in 2025," Rehagen said.

Clean fuels regulations in New Mexico and Washington, he said, are positive for the industry.

In New Mexico, the Clean Transportation Fuel Standard is being finalized and could rely on more biodiesel and renewable diesel in decarbonized efforts.

In Washington, legislation passed in 2025 that increased the Clean Fuel Standard carbon reduction target from 20% by 2038 to 45% by 2038 and potentially up to 55%. The new legislation has the potential to increase demand for biodiesel and renewable diesel from 150 million gallons to 337 million gallons, and up to 550 million gallons.

In addition, John Deere announced approval of the use of B30 biodiesel blends in all Tier 4 Power Systems engines.

"This landmark decision by one of the world's leading agriculture and construction equipment manufacturers represents a major step forward for farmers and fleets seeking to reduce their carbon footprint," Rehagen said.

Also last year, travel center company Pilot opened three B99 biodiesel pumps for commercial fleet use in Illinois, Texas and Iowa.

"These aren't marginal gains, these are structural shifts," Rehagen said.

"They acknowledge the increasing role our fuels are playing in the country. And that's because of you. Because of you and your persistence. These gains will change how our industry plans, invests and competes."

Though recent victories have put the industry in a favorable position, Rehagen said experience points to the likelihood that the roller coaster will continue.

The clean fuels industry today is "very different" from the clean fuels industry of just five years ago, he said.

"We have biodiesel producers and renewable diesel producers and sustainable aviation fuel producers," Rehagen said.

"We have feedstock growers and feedstock processors and traders. We have large operations and small ones. We have traditional ag partners and newer petroleum refining partners who've invested in renewables. Many of these parties have different interests from the clean fuels industry. But last year showed us what happens when we set aside some differences and work together."

In particular, the biofuels industry teamed with oil and gas refiners in calling for an RFS volume of 5.25 billion gallons for biomass-based diesel, and the Trump administration responded by setting the number higher.

Rehagen said when all those interests came together, it resulted in something "powerful" emerging.

"That unity between ag and energy gave us leverage we've never had before," he said.

"Unity can be very fragile. Things can shift from good to difficult in a heartbeat. Policies change. Administrations change. Market conditions change. When that happens, our instinct can be to protect our own piece rather than the whole. So, I'm asking each of you: stay with us. Stay engaged. When policy debates get contentious, when market pressures create competition between different pathways, when it seems to be easier to go at it alone, remember, we need every segment of our industry. We need everybody in this room."

Todd Neeley can be reached at todd.neeley@dtn.com

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