Biodiesel Claims RFS Victory

Industry Holds Hope for Tax Credit

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The final rule sets the 2014 biodiesel volume at 1.63 billion gallons or effectively the actual volume blended. That number rises to 1.73 billion for 2015. (Photo courtesy of Renewable Energy Group)

OMAHA (DTN) -- Biodiesel industry officials hope the final Renewable Fuel Standard volumes announced Monday are the beginning of a new federal-policy era for the industry.

Officials with the National Biodiesel Board said during a news conference Tuesday the final RFS is one step in the right direction toward providing policy certainty to the industry.

Consistent federal policy support is something biodiesel has sought for the past decade, seeking to stop the industry's rise-and-fall cycle tied to renewal and expiration of the $1 blender's tax credit and lack of a strong market signal in the RFS.

The industry still holds hope Congress will make changes to the blender's tax credit to prevent foreign producers from flooding the North American market.

"We are generally positive about this rule," said Joe Jobe, chief executive officer of the National Biodiesel Board. "A couple of things -- it shows steady, sustainable growth in biomass-based diesel for five years. The doubling of our industry -- that is a demonstrable success. In spite of the fact that cellulosic ethanol has not come on as fast as expected, biodiesel has over-performed.

"Our industry's goal is to double again from 2017 to 2022. We believe that is a sustainable goal." The final rule sets the 2014 biodiesel volume at 1.63 billion gallons or effectively the actual volume blended. That number rises to 1.73 billion for 2015, 1.9 billion gallons in 2016 and 2 billion gallons in 2017. The only adjustment EPA made from its proposal was increasing the 2015 number by 300 million gallons.

According to the statute, the biomass-based diesel, or biodiesel, volumes were set at a minimum of 1 billion gallons starting in 2012.

By statute the U.S. Environmental Protection Agency is required to finalize the 2018 biomass-based diesel RFS volumes by Nov. 1, 2016. This means the agency would need to release a proposal by May or June of 2016.

Ben Evans, communications director for the NBB, said he believes EPA will stay on track and issue the new volumes on time next year.

"The point of the rule is to get back on track and that's what this rule does," he said.

INDUSTRY SETBACKS

Early last year the U.S. biodiesel industry suffered a series of setbacks that led to the shuttering of many plants.

First, the blender's tax credit expired in December 2014 and has yet to be renewed. Second, EPA opted to relax sustainability standards for biodiesel that opened the import market for Argentine producers.

Anti-dumping duties imposed on Argentina by the European Union in recent years effectively closed off Argentine biodiesel to the EU. That means Argentine biodiesel has been working its way into the United States market.

NBB officials said those policy setbacks were compounded by a lack of a supportive RFS.

The United States biodiesel industry produced about 1.75 billion gallons in 2014 leading up to the expiration of the blender's tax credit.

Jobe said the industry needs both policies to grow.

"I would say these are two completely separate programs," he said. "We're working on getting the blender's credit back in place for 2015-2016. They are complementary policies. We want to make the tax credit more cost-effective and not to support an influx of foreign product."

Jobe said NBB will continue to work with EPA to put in place another five-year RFS that the industry hopes would lead to another doubling of production to 4 billion gallons by 2022 and make biodiesel about 10% of the overall diesel fuel pool.

In addition, Jobe said the industry supports an amendment put forward by Sens. Charles Grassley, R-Iowa, and Maria Cantwell, D-Wash., to convert the credit from a mixture credit to a production credit.

The amendment would extend the blender's credit retroactively for 2015 and 2016. The credit includes a $1-per-gallon biodiesel mixture credit, the $1-per-gallon biodiesel-mixture excise tax credit, and the $1-per-gallon biodiesel credit for fuel not in a mixture.

The amendment would convert the biodiesel credit to a $1-per-gallon production credit beginning Jan. 1, 2016, for fuel produced by the taxpayer in the United States.

In addition, biodiesel would be converted to a taxable fuel in 2016 with the excise tax paid by the taxpayer eligible to elect the credit.

"They're both important to us," Jobe said about the RFS and the tax credit. "They're both priorities to us. Both are needed in this nascent stage of our industry. Both have proven to be highly effective."

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

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Todd Neeley