2019 Fall Biodiesel Magazine by BBI International

2019 Fall Edition

CR UE L

SUMMER Pressure Mounts on Trump, Congress as SREs, Lapsed Tax Credit Take Toll on Biodiesel Producers Page 12

Plus Industry

Know-how Page 18

And

Algae Biodiesel Analysis

Page 24

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CONTENTS 2019 FALL ISSUE VOLUME 16 ISSUE 4

FEATURES

12 Cruel Summer POLICY

Producers languish as biodiesel and soybean leaders exert significant pressure on the Trump administration and Congress over SREs and the RFS, tax and trade policies

BY RON KOTRBA

18 Industry Know-how SPOTLIGHT

Two organizations with unique solutions to different fuel industry problems, and one special report by three biodiesel veterans, are highlighted in this special section

BY RON KOTRBA

CONTRIBUTION

24 Algae Oil to Biodiesel: A Practical Application RESEARCH

An international process technology provider discusses its analysis of algae oil and approach to biodiesel conversion under the European Commission’s FP7 program

BY ROBERT RAUDNER

DEPARTMENTS 4 Editor’s Note

Feeling the Effects

BY RON KOTRBA 5 Events Calendar

Advertiser Index

6 Business Briefs 8 Inside NBB

ON THE COVER:

World Energy’s 72 MMgy biodiesel plant in Natchez, Mississippi, was one of three plants the second-largest biodiesel producer in North America closed in August after the U.S. EPA announced it had granted 31 new small refinery exemptions to the Renewable Fuel Standard. This photo was taken after operations had ceased.

23 22 17 2 7 26 19 28 5, 27 20 6

2020 Biodiesel Magazine's Biodiesel Plant Map Avalara BDI - BioEnergy International GmbH Biodiesel Production Technology Summit Deep South Commodities, LLC Evonik Oil Addities USA, Inc. Global Fuel Recovery IMERYS National Biodiesel Board Rock House Advisors and Playmaker Strategies SWANA Solid Waste Association of North America

PHOTO: WORLD ENERGY LLC

www.BiodieselMagazine.com

EDITOR'S NOTE

FEELING THE EFFECTS Ron Kotrba

Editor Biodiesel Magazine rkotrba@bbiinternational.com

July and August were without question some of the toughest months for the U.S. biodiesel industry in years, perhaps ever. Bio-

diesel producers have seen their fair share of adversity. In my 15 years covering this industry, I have learned what resilience truly means. Here are just a few obstacles you have overcome in the past decade and a-half. Fighting for and getting the all-important biodiesel tax credit in 2004-’05. Being shut out of the European market in the late 2000s. Seeing the great possibilities of market expansion through passage of the second Renewable Fuel Standard, only to have its implementation seriously delayed and overlapping with the first tax credit lapse in 2010. Subsequent expirations of the tax credit followed by retroactive reinstatements, destroying its utility as an instrument of investment. Devastating RIN fraud. Constant pushback from Big Oil. The RFS program going off-track in 2014 and 2015 with no final RVOs for two years. Changing administrations and Congress. Arduous reeducation of lawmakers and agencies. The administering agency of RFS—the U.S. EPA—becoming an unofficial tool of Big Oil. Hyper-partisan politics causing gridlock and divisiveness. A president who promises big things for farmers and biofuels but whose actions have, so far, shown little support for those same constituents. In early July, the biodiesel industry was thrown for a loop when the commerce department announced its preliminary determination from the “changed circumstances review” of countervailing duties (CVDs) put on Argentine biodiesel imports a year and a-half prior. The determination was to significantly reduce CVDs while leaving in place the antidumping tariffs. How this will play out and whether the latter is enough to keep imports from flooding the U.S. market like in 2016 is anyone’s guess. Two days later, EPA released its 2020-’21 proposal for RFS volumes, in which it planned to keep 2021 biomass-based diesel volumes at 2020 levels—without cause. Furthermore, with the administration’s increasing number of granted small refinery exemptions to RFS over the past two years—and 38 pending SREs at the time—the situation was getting dire. Then, on Aug. 9, 31 of those 38 petitions were granted, wiping out more than a billion gallons of biofuel demand in the blink of an eye. The outrage from farmers and biofuel constituents was palpable. Perhaps in hindsight this will be viewed as a good thing, considering it has forced the Trump administration to address SREs when all previous attempts had failed. A Trump deal to appease his base was pending at press time. Meanwhile, the tax credit has remained lapsed for the longest period—more than 20 months—since its inception. Any one of these issues would be devastating, but to have all of them converge simultaneously is too much for any industry to take. Following these affairs that unfolded over this summer, I talked with more than a dozen people—lawmakers, producers, plant employees, representatives of soybean and biodiesel associations, trade specialists—and documented their perspectives on the events and the effects being felt, particularly on producers and plant employees, in “Cruel Summer” on page 12. One thing is certain—they are absolutely feeling the effects. However, depending on the deal struck by Trump and whether Congress can come together in bipartisan support of an extenders package that includes the biodiesel tax credit, it may not be too late to turn these obstacles into means of progress. As the constant underdog, this industry has repeatedly beaten the odds in Rocky-like fashion to overcome seemingly insurmountable challenges. And I have no doubt it will do so again.

www.BiodieselMagazine.com E D I T O R I A L Ron Kotrba Editor rkotrba@bbiinternational.com Jan Tellmann Copy Editor jtellmann@bbiinternational.com P U B L I S H I N G

Tom Bryan

President tbryan@bbiinternational.com

John Nelson Howard Brockhouse

Vice President of Marketing & Sales jnelson@bbiinternational.com Business Development Director hbrockhouse@bbiinternational.com

Chip Shereck

Senior Account Manager cshereck@bbiinternational.com

Jessica Tiller

Circulation Manager jtiller@bbiinternational.com

Marla DeFoe

Marketing & Advertising Manager mdefoe@bbiinternational.com

Dayna Bastian

Social Media & Marketing Coordinator dbastian@bbiinternational.com

Jaci Satterlund

A R T Art Director jsatterlund@bbiinternational.com

Raquel Boushee

Graphic Designer rboushee@bbiinternational.com

Subscriptions Subscriptions to Biodiesel Magazine are free of charge to everyone with the exception of a shipping and handling charge for any country outside the United States. To subscribe, visit www. biodieselmagazine.com or you can send your mailing address and payment (checks made out to BBI International) to: Biodiesel Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Reprints and Back Issues Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 701-746-8385 or service@bbiinternational.com. Advertising Biodiesel Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and highquality print production. To find out more about Biodiesel Magazine advertising opportunities, please contact us at 701-746-8385 or service@ bbiinternational.com. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number. Letters may be edited for clarity and/or space. Send to Biodiesel Magazine Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email rkotrba@bbiinternational.com.

Please recycle this magazine and remove inserts or samples before recycling

BIODIESEL MAGAZINE

2019 FALL EDITION

S A L E S

CEO jbryan@bbiinternational.com

Joe Bryan

EVENTS CALENDAR National Biodiesel Conference & Expo JANUARY 20-23, 2020 Tampa, Florida This premier event offers an impressive schedule filled with opportunities for networking, learning and discovery. Conference-goers and exhibitors will be able to engage with decisionmakers and get an insider’s look at what the industry has in store for 2020. 573-635-3893 www.biodieselconference.org

International Biomass Conference & Expo

JANUARY 20 23

TAMPA

FEBRUARY 3-5, 2020 Gaylord Opryland Resort & Convention Center Nashville, Tennessee Organized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop— the world’s premier educational and networking junction for all biomass industries. 866-746-8385 www.biomassconference.com

Biodiesel Production Technology Summit JUNE 15-17, 2020 Minneapolis Convention Center Minneapolis, Minnesota The Biodiesel Production Technology Summit is a new forum designed for biodiesel and renewable diesel producers to learn about cutting-edge process technologies, new techniques and equipment to optimize existing production, and efficiencies to save money while increasing throughput and fuel quality. Produced by Biodiesel Magazine, this world-class event features premium content with one purpose—to further the biomass-based diesel sector beyond its current limitations.

Join us at the National Biodiesel Conference & Expo in Tampa as the industry lays out its VISION for a pivotal 2020.

866-746-8385 www.biodieseltechnologysummit.com

International Fuel Ethanol Workshop & Expo JUNE 15-17, 2020 Minneapolis Convention Center Minneapolis, Minnesota From its inception, the mission of this event has remained constant: The FEW delivers timely presentations with a strong focus on commercial-scale ethanol production—from quality control and yield maximization to regulatory compliance and fiscal management. The FEW is the ethanol industry’s premier forum for unveiling new technologies and research findings. The program is primarily focused on optimizing grain ethanol operations while also covering cellulosic and advanced ethanol technologies. 866-746-8385 www.biomassconference.com

BiodieselConference.org NATIONAL

Learn More About the Biodiesel Industry

BOARD

View Biodiesel Magazine's Webinar Series' upcoming and OnDemand webinars. 866-746-8385 | www.biodieselmagazine.com/pages/webinar

www.BiodieselMagazine.com

BusinessBriefs

Davison, third from left

People, Products & Partnerships

PHOTO: JUST BIODIESEL PTY LTD.

PHOTO: BUSINESS WIRE

The former Australian Renewable Fuels plant in Barnawatha, Victoria, a 13.2 MMgy biodiesel manufacturing facility, has restarted operations under the new ownership of Just Biodiesel Pty Ltd. Formation of Just Biodiesel was finalized in December following the purchase of the mothballed plant from the receiver, KordaMentha, in May 2018. ARF filed bankruptcy and shut down operations more than three years ago. Just Biodiesel began shipping biodiesel in June and will supply the Australian market in partnership with distribution companies Refuelling Solutions and Viva Energy Australia. It will also ship tallow and used cooking oil biodiesel to customers in California and the EU.

Renewable Energy Group Inc. celebrated the grand opening of its first diesel fueling station July 17 in Seneca, Illinois. Construction on the fully automated station began earlier this year. Diesel customers from trucking fleets to local diesel vehicle owners will be able to fill up with biodiesel-blended fuel to conveniently reduce harmful greenhouse gas emissions. REG Seneca, a 60 MMgy biorefinery located adjacent to the fueling station, will provide the low-carbon biodiesel used in the diesel blends of B11 and higher. More than 17,000 trucks go through REG Seneca each year, according to Gary Haer, vice president of sales and marketing for REG.

PHOTO: U.S. EPA

Andrew Davison, founder and owner of Sandwich, Massachusetts-based Cape Cod Biofuels, was presented an environmental merit award by the U.S. EPA Sept. 10 for his unique biodiesel business model. Cape Cod Biofuels works with farmers to supply 400 restaurants with vegetable oil. It then collects that used oil back, plus oil from hundreds of other restaurants, and converts it into biodiesel at its community-scale plant. Cape Cod Biofuels supplies regional fleets and 3,000 heating oil customers with B20 and B50 blends while running four company trucks on its own biodiesel. The National Biodiesel Board nominated Davison for the award.

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BUSINESS BRIEFS

Global food company JBS announced it will build a new biodiesel plant in Santa Catarina, Brazil. The company is investing approximately $48 million through Seara Alimentos to build and operate the factory in the city of Mafra. JBS Biodiesel, a JBS Novos Negócios division, will operate the plant, which will use raw material from the Seara production chain, including pork and poultry fat. JBS will also work with the soybean complex to supplement its feedstock. The plant will produce 900 tons of fuel per day and will more than double its biodiesel production capacity to 158.5 MMgy. JBS has two other biodiesel plants in the Brazilian states of São Paulo and Mato Grosso.

PHOTO: VICTORY RENEWABLES

PHOTO: CROWN IRON WORKS

An open house was held June 25 in Garden City, Kansas, to celebrate Victory Renewables’ new biodiesel blending facility. The site stores both diesel and biodiesel fuels, allowing suppliers to load biodiesel in concentrations of 5 to 100 percent. The biodiesel offered at the new blending facility is sourced from BQ9000-certified producers. With inline blending capabilities, the facility can accommodate inbound and outbound product movements by both rail and truck. The Kansas Soybean Checkoff provided infrastructure grants to help make biodiesel blends available in the west-southwest part of the state. Victory Renewables is a subsidiary of Conestoga Energy Holdings.

Crown Iron Works, a division of CPM Holdings Inc., has opened its new Global Headquarters and Innovation Center in Blaine, Minnesota. The 68,000 square-foot, $12 million facility will serve as a resource to leading global manufacturers within the oilseed and specialty processing industries. The center includes a 15,000 square-foot pilot plant with a computerized control room for process monitoring and data collection of all plant areas including preparation, extraction, refining, biodiesel, renewable diesel and oleochemical processing. The center features multiple training locations including classrooms of varying size and numerous hands-on capabilities.

Renewable Commodities Traders & Brokers l Logistics & Transport I O. 407.204.1000 • M. 407.222.7038 • F. 407.386.7550 919 Orange Avenue, Suite 202, Winter Park, FL 32789

Consulting Services

DeepSouthCommodities.com www.BiodieselMagazine.com

NATIONAL

BOARD

Biodiesel Producers Want Fairness Earlier this summer, oil refiners threatened to sue the U.S. EPA for failing to retroactively issue 2018 small refinery waivers in a timely manner. The group claims that the uncertainty “tied up” small refineries’ working capital and prevented them from investing in their refineries to make efficiency improvements to remain competitive and profitable. This assertion is ironic, since those are the exact harms that retroactive small refinery waivers have been causing to biodiesel and renewable diesel producers Donnell Rehagen, CEO, National Biodiesel Board for the past several years. The U.S. adopted the Renewable Fuel Standard, signed by President George W. Bush in 2007, to encourage investment in advanced biofuels such as biodiesel, renewable diesel and renewable jet fuel. Biodiesel producers responded by investing billions of private dollars and building an industry that produces more than 2 billion gallons of transportation fuel each year. These great fuels are better for engines and cleaner for the environment while providing a vital market for surplus and recycled animal fats, agricultural oils and used restaurant greases—all products that are considered waste or coproducts of food production. The RFS was designed to increase the volume of advanced biofuels being introduced into the marketplace year after year. For biodiesel and renewable diesel, the annual increase is established directly by the EPA after fact finding and data collection. This volume-setting exercise then gives the U.S. industry the clear signals it needs to increase its investment, buy more feedstock and hire more people to produce an increased volume. The fact is that biodiesel and renewable diesel growth has consistently exceeded EPA’s estimates of what can be achieved. Year after year, the two fuels fill more than 90 percent of the RFS volumes reserved for advanced biofuels. The EPA complains that advanced biofuels have not materialized quickly enough to meet the goals of the RFS. But the agency itself is holding its thumb on the industry and blocking growth. These blocking actions are specifically counter to the intent of Congress when the law was passed. And many of the lawmakers who were intimately involved in drafting the RFS have told the EPA so. These small refinery waivers act as an “after-the-fact” reduction in the annual volume the EPA has previously set and codified. The annual volume commitment the EPA made, many times nearly a year before, is reduced by hundreds of millions of gallons in order to provide “relief ” to some of the largest and most profitable companies in the entire world. This comes at the expense of the small companies around the country that originally invested in the biodiesel and renewable diesel in8

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2019 FALL EDITION

dustry when the government sent out its “call to action” by passing the RFS in the first place. The EPA has made clear that it will stand in the way of future growth for biodiesel and renewable diesel under the RFS. In proposing its 2021 volume for biodiesel and renewable diesel, EPA simply repeated the exact same numbers from its 2020 volume, without any analysis of the biodiesel industry’s ability to continue sustainable growth. How is this consistent with congressional intent to grow advanced biofuels? According to University of Illinois economist Scott Irwin, virtually all of the demand destruction from small refinery waivers is falling on the biodiesel industry. This summer, EPA granted 31 more of these petitions. The damage to the U.S. biodiesel and renewable diesel industry will soon reach $7.7 billion or 2.54 billion gallons, according to Irwin. Consider that the annual volume of our industry is approximately 3 billion gallons. Consider as well that a “small” oil refinery, one that is eligible for an RFS hardship waiver—one that can make up to 3 million gallons a day or more than 1 billion gallons a year—would have an RFS obligation to use just 20 million gallons of biodiesel or renewable diesel in a year. Dozens of U.S. biodiesel plants produce less than 20 million gallons a year—just one small refinery exemption would eliminate their entire market. In response to the unfairness in Washington, D.C., Davie Stephens, American Soybean Association president, and I requested a meeting with President Donald Trump to discuss small refinery exemptions and the RFS. Our request emphasized the need to include biodiesel-specific measures in any proposed resolution. Biodiesel producers have suffered the greatest impact from the administration’s small refinery exemptions. We are seeing biodiesel producers across the country—from Pennsylvania to Iowa to Georgia and Texas—shutting their doors and laying off workers as a result of demand destruction. The RFS was designed to support the growth of advanced biofuels, but the small refinery exemptions have turned the program upside down. Biodiesel and renewable diesel producers have been playing by the rules the EPA established in 2007. It appears a couple of years ago the rules were changed, and refinery waivers became extremely easy to acquire—you simply just have to ask. This is all at the expense of those small companies that answered the original call to action and have now invested billions of dollars to grow a renewable fuels industry in the U.S. It’s hard to find the fairness in that. Donnell Rehagen CEO National Biodiesel Board

inside

NBB Congress Leaves Biodiesel Producers Waiting for Tax Incentive The biodiesel industry has now waited 20 months for Congress to renew the biodiesel tax incentive. For some companies, the delay has become a crisis. Several producers stopped purchasing feedstocks, shut down plants and furloughed workers over the summer. NBB and its members continue to call Congress’ attention to the situation. Unfortunately, Congress has not set a firm timeline for renewing the tax policy. In June, Rep. Mike Thompson, D-California, introduced the Taxpayer Certainty and Disaster Tax Relief Act of 2019. Among other things, the bill would extend the biodiesel tax incentive for 2018 through 2020. NBB encouraged members of the House ways and means committee to mark up and approve the legislation. The committee’s approval means the legislation can be voted on by the full House of Representatives at any time. The full House, however, did not vote on the legislation. Congress also missed an opportunity to attach the biodiesel tax incentive renewal to a late July budget agreement, even as NBB and its members advocated for them to do so. Both the House and the Senate left Washington, D.C., for the summer without further action to renew the tax incentive. In early July, Flint Hills Resources announced the closure of the Duonix Beatrice biodiesel plant in Nebraska, citing uncertainty over the tax credit as one of the primary reasons. Other large producers also announced plant closures or production cuts across the country, including REG in late July, World Energy in mid-August, and American GreenFuels in late August. More than 200 million gallons of production is impacted by the publicly announced closures, and more than 200 employees at the plants have been idled. Overall, the production loss impacts thousands of jobs throughout the industry. NBB member companies met and worked with congressional champions throughout the summer to highlight the crisis facing the industry. Producers hosted roundtable meetings and plant tours with several of the lead sponsors of the Biodiesel Tax Credit Extension Act of 2019. That legislation, introduced by freshman legislator Rep. Abby Finkenauer, D-Iowa, now has 59 co-sponsors— including 35 Democrats and 24 Republicans. With such strong bipartisan support for the policy, it’s difficult to understand why Congress has allowed the biodiesel tax incentive to remain lapsed for more than a year and a half. The credit is highly

NBB board members have been pressing lawmakers to reinstate the biodiesel tax credit.

effective; the biodiesel industry has proven its ability to grow with support from the incentive. NBB and its members continue to meet with and ask representatives and senators to make renewing the biodiesel tax incentive an urgent priority. NBB organized members to fly to Washington during the third week of September, soon after Congress returns from the summer break. NBB is emphasizing that rapid renewal is necessary to prevent additional plants from closing and long-term certainty can bring those that have closed back online.

www.BiodieselMagazine.com

insideNBB

Biodiesel Secures Big Win in California with B20 in Underground Storage California has cleared the way for storing biodiesel blends of up to 20 percent (B20) in underground storage tanks (UST), removing the last major barrier to satisfying the state’s thirst for biodiesel. Through an effort lasting more than 10 years, the National Biodiesel Board, several member companies and the California Advanced Biofuels Alliance provided the state water board with data necessary to demonstrate B20 compatibility in underground storage tanks. “This is a major victory toward biodiesel’s mainstream integration into the California fuel supply,” said Donnell Rehagen, NBB CEO. “We recognize the huge potential for biodiesel to supply California with a better and cleaner fuel and applaud state regulators for working closely with us to clear this final hurdle that will allow for more low-carbon biodiesel to make its way to the consumers and fleets all across the state.” The vast majority of diesel fuel is stored in underground storage tanks, particularly at retail fueling locations. Although biodiesel biodegrades in water as fast as sugar, regulators had concerns that any degradation of UST materials could allow diesel fuel to compromise the water supply. The California State Water Resources Control Board amended California’s UST regulations Aug. 6. The new language reverses the

previous wording of the regulation, which in effect required tank owners to prove that every component of the tank was compatible. The regulation will go into effect Jan. 1. “This change in regulations represents a huge milestone for consumers in California, who will now have increased access to B20 in a state where protecting the environment is greatly valued,” said Tyson Keever of SeQuential and Crimson Renewable Energy, who also chairs CABA. “Our company is driven to make a positive impact on reducing carbon emissions, stimulate local economies and reduce dependence on fossil fuels, and this new regulation will amplify our ability to do all three.”

National Biodiesel Board Premieres on Rural America Live Biodiesel was the featured topic of an hour-long segment on RFD-TV’s flagship series Rural America Live in August. Steve Howell, the senior technical advisor for the National Biodiesel Board, and Greg Anderson, an NBB governing board member and farmer leader, were guests on the program that was viewed by thousands across rural America. “This unique opportunity gave the biodiesel industry one hour of earned media, in prime time across the United States,” Anderson said. “We told the story of biodiesel, from its inception to how far the industry has come today and were able to give the biodiesel story national exposure. Knowing RFD-TV reaches approximately 52 million homes, I know our influence was broad and deep.” During the segment, viewers were able to learn more about the benefits of using biodiesel fuel in the agricultural industry and on the road. “I think what connected with the farmer and rancher viewers was the value that biodiesel brings to agriculture,” Anderson said. “We were able to go in-depth on what biodiesel brings to soybean farmers’ bottom line, as well as the livestock industry.”

BIODIESEL MAGAZINE

2019 FALL EDITION

NBB shared its history and success stories of those who use America’s first advanced biofuel. Viewers were able to call in with questions and comments about the use of biodiesel fuel. “During our segment, we covered a lot of ground,” Anderson explained. “Steve and I spoke about how the biodiesel industry has created 64,000 jobs, generated 2.5 billion dollars in wages paid, and has an overall impact of $11 billion to our economy.” The full RFD-TV segment can be found at the NBB YouTube channel.

insideNBB

Biodiesel Websites Get Major Upgrade The National Biodiesel Board is excited to unveil an update to NBB’s digital presence that has been more than a year in the making. NBB recently launched full redesigns of www.biodiesel.org, www.nbb.org, and www. mybioheat.com. The three websites offer abundant information in a clean, modern style, enhanced with mobile optimization allowing quick and easy website access from any phone or tablet while on the go—making biodiesel information more accessible than ever. NBB’s websites are often the introduction to biodiesel for fleet managers, government officials, reporters, key influencers, the general public and so many others. Keeping this platform clean, up-to-date and user-friendly is critical to NBB’s mission of educating key audiences on the various aspects of our fuel and industry. NBB’s family of websites continues to be the premier destination for finding biodiesel material on the internet. While the flagship websites, biodiesel.org and nbb.org, generate more than 1.2 million page views annually, NBB manages an additional dozen websites that form the NBB family of websites.

The trio of redesigned websites offers a fresh new face to deliver the same great biodiesel content NBB has maintained for years. NBB is dedicated to ensuring content and delivery mechanisms are top-of-the-line in order to continue providing helpful information to millions more in the future.

NBB Membership Testimonials Tom Brooks Western Dubuque Biodiesel

Danielle Brannan New Leaf Biofuel

Farley, Iowa

San Diego, California

Western Dubuque Biodiesel became a member out of necessity in 2007 due to the health effects study and BQ-9000 program. Since joining, we have found that NBB has offered us a team of highly competent and professional experts that greatly assist our company. Our partnership has allowed us to Brooks become successful as a quality producer and profitable as a company due to the excellent D.C. team that hits well above its weight class on key legislative successes for our industry and plant. I’m proud to not only be an NBB member, but to have the privilege to serve on the governing board while helping to continue the success and advancement of biodiesel.

Biodiesel’s impact throughout California is incredibly important to New Leaf Biofuel. Through the ongoing energy fight on the West Coast, the work that the National Biodiesel Board has done has been invaluable to our company. We depend on the investments NBB Brannan has made to ensure biodiesel’s place in the California fuel supply, which have helped make California the nation’s largest market for biodiesel. I’m proud to be a member of NBB, and I look forward to driving growth even further for this great industry.

How to Be a Member

Whether you want to be a producer of biodiesel or are a company that supports the biodiesel industry through provision of goods or services, or simply an individual that supports biodiesel, the NBB has a lot to offer. If you’re interested, please contact Brad Shimmens, director of operations and membership, at bshimmens@biodiesel.org or at 573-635-3893. www.BiodieselMagazine.com

POLICY

Prior to August, truck traffic in and out of World Energy’s 72 MMgy biodiesel plant in Natchez, Mississippi, would be causing a whirl of activity. But in mid-August, following the EPA's announcement of 31 new small refinery exemptions, the company announced the closing of this and two other plants. PHOTO: WORLD ENERGY LLC

Democratic Congresswoman Abby Finkenauer was at her parents’ house in Sherrill, Iowa—a small town north of Dubuque that “has more cows than people,” she says—when she got news that the U.S. EPA had just granted another 31 small refinery exemptions (SREs) to the Renewable Fuel Standard. It was Aug. 9 and Congress

cares about biofuels. He’s the only one who understands anything about the industry. It’s fair to say he doesn’t understand all the details—he leaves that to the EPA—but EPA is not enforcing the law. That’s the worst thing—when you Finkenauer have someone in the White House who is supportive but those in his administration are not carrying out the president’s direction.” As that fateful August decision was announced, U.S. biodiesel producers entered the 20th month without the blenders tax credit— the longest lapse since the important incentive first went into effect in 2005. For five years, the tax credit was successful in helping grow the biodiesel industry before RFS2, the second installment of the RFS passed in 2007 that included advanced biofuels and biomass-based diesel whose implementation finally began July 1, 2010. Unfortunately for biodiesel producers, the tax credit expired for the first time on Jan. 1, 2010, in what was to become the first of many expirations, with each lapse getting longer, and with each renewal becoming harder to secure. Retroactive repayments replaced forward-looking instruments to spur investment. It’s hard to say how many billions of gallons of domestic capacity this sector might have achieved, and how many greenhouse gas (GHG) emissions averted, if these two policies alone—the RFS and the blenders tax credit—were consistently applied together and implemented as the law intended. The closest, most recent example of

was on summer recess. “I was outside looking at neighboring farms when I saw the tweet,” she tells Biodiesel Magazine. “It broke my heart. It shouldn’t be happening this way. I don’t understand why the process is working the way it is. It sounds like it isn’t a process at all. I know firsthand this is taking a large toll on the livelihood of my neighbors, farmers, and it’s affecting the future of my state. I will continue to uplift their voices through all of this—the SREs, the lack of a biodiesel tax credit extension, the ongoing trade war. I will make sure they’re heard.” The volume of SREs granted has exploded during the Trump administration, with 85 SREs approved to date for compliance years 2016-’18, equating to approximately 4.04 billion renewable identification numbers (RINs). In comparison, the EPA under President Obama approved only 23 SREs for compliance years 2013-’15, accounting for a combined 690 million RINs. Trump’s EPA approved 35 percent more SREs in one day—Aug. 9—than all the SREs approved by Obama’s agency. This from a president whose political base is rural America and who campaigned on upholding the RFS. “You need to understand,” Sen. Chuck Grassley, R-Iowa, tells Biodiesel Magazine, “Trump’s the only one in the White House who BIODIESEL MAGAZINE 2019 FALL EDITION 12 l

this positive dynamic was 2016. In late 2015, the tax credit was reinstated retroactively to Jan. 1, 2015, and forward through Dec. 31, 2016. On Nov. 30, 2015, after two years without RVOs in place when the RFS Grassley program fell seriously off-track, the EPA released its final 2014-’17 RVOs for biomassbased diesel and its final 2014-’16 RVOs for the overall advanced biofuel category, and both were higher than the proposal released the previous May. The agency also vowed to continue increasing biomass-based diesel RVOs in years to come. The final RVOs for biomass-based diesel were 1.63 billion gallons for 2014, 1.73 billion gallons for 2015, 1.9 billion gallons for 2016, and 2 billion gallons for 2017. The advanced biofuels RVOs also increased slightly for 2015 and 2016. With these positive signals of a forward-looking tax credit and steadily increasing RVOs, the U.S. market for biomass-based diesel mushroomed, growing more than 800 million gallons in a year. While 2016 was a good year, domestic producers were unable to fully realize this as imports from Indonesia and Argentina flooded the U.S., seizing approximately one-third of the market. In addition, renewable diesel imports from Singapore soared. As a result, the National Biodiesel Board Fair Trade Coalition initiated a long review process with the U.S. Department of Commerce and the U.S. International Trade Commission that it eventually won, establishing stiff countervailing duties (CVDs) against both nations in the antisubsidy trade case and equally

CRUEL

SUMMER

A series of unfortunate events this summer―all caused by U.S. government action or inaction―has led to a precarious situation in the biodiesel sector, but there may be a silver lining

BY RON KOTRBA severe antidumping duties in 2018. The measures halted imports of what the trade coalition effectively argued was unfairly traded biodiesel. The trade measures, while technically sound, were a Gebolys political no-brainer for the then-newly elected U.S. president, Donald Trump, who campaigned on a platform of “Make America Great Again” by rebalancing unfair trade relationships, incentivizing domestic manufacturing, upholding the RFS, and elevating farmers and rural America—his political base. When the commerce department announced this July that it had reached a preliminary determination to significantly reduce the CVDs against Argentina after an unprecedented “changed circumstances review” (CCR) so shortly after the tariffs went into effect, it left U.S. biodiesel stakeholders scratching their heads in utter wonder. This was only the beginning, however, as just two days later, the EPA released its 2021 RVO proposal for biomass-based diesel. Amidst significant demand destruction that the agency had caused under the Trump administration’s relatively short tenure, the EPA proposed to stall the 2021 biomass-based diesel RVO at 2.43 billion gallons, the same as the RVO for 2020 set in late 2018. Under this scenario of rampant SREs being granted, a stalled RVO would be, in effect, a severe cut to the standard considering EPA has yet to account for its voluminous SREs granted hitherto. The U.S. ethanol and biodiesel industries

had already been dealing with an inordinate number of SREs granted under the Trump administration, which were the subject of numerous lawsuits, complaints, calls for investigations and legislative action for quite some time. The questionable process in which the SREs are granted, the lack of estimations of SREs to be granted in RVO proposals, and the agency’s thumbing its proverbial nose at the idea of reallocating waived gallonage had all been taking its toll on biofuel producers. When it seemed like things couldn’t get any worse, and as soybean farmers endured a long and market-destroying trade war with China that eroded the U.S. soybean complex’s No. 1 relationship, on Aug. 9, the EPA approved its largest and most destructive set of SREs—31 in one fell swoop. A week after the Aug. 9 SRE announcement, World Energy—one of the largest biodiesel producers in North America—announced it was halting production at three of its biodiesel plants in Georgia, Mississippi and Pennsylvania. “If anyone was still living with the delusion that this administration supported us, then this round of SREs was an unignorable wake-up call,” Gene Gebolys, founder and CEO of World Energy, tells Biodiesel Magazine. “The president made promises to uphold the RFS and then he made that decision to eviscerate it. We’ll get through this, but I am not sure the administration’s credibility will.” Tax Credit In November 2018, U.S. voters elected around 90 new members to the House of Representatives—the “freshman class”—installing in January the most diverse body in the history of the chamber. As a result, Democrats regained control of the House, solidifying a more youthful, progressive contingent to the

party whose No. 1 goal, ostensibly, is to act on climate change. A month after being sworn in, Rep. Alexandria Ocasio-Cortez, D-New York, introduced “The Green New Deal,” a framework to slash carbon emissions and avert what many Democrats label an “existential crisis.” The proposal has been characterized as ambitious and bold, and it could revolutionize the U.S. economy while upending the status quo in major sectors of power generation, transportation, construction and more. Republicans, who control the Senate, are not biting. With the progressive, often urban Democrats in a political stalemate with the more rural, conservative Republicans, there should be overwhelming bipartisan support for the blenders tax credit. Yet it has remained lapsed for 20-plus months, despite both the House and Senate having introduced virtually identical legislation to reinstate the incentive. “It expired on the Trump administration’s watch when we had a Republican House and Senate,” says Finkenauer, one of the freshmen class that makes up more than a fifth of the House. “I’ve made it my mission to reinstate it, and I’m working across the aisle for bipartisan and bicameral support.” In April, Finkenauer introduced “The Biodiesel Tax Credit Extension Act,” a two-year extension retroactive to Jan. 1, 2018, through Dec. 31, 2019. “Grassley has a matching bill in the Senate,” she says. “It doesn’t matter what the party affiliation is, all should be supportive of this and I’m working really hard on getting this done.” She says the House ways and means committee is paying attention too, as they marked up a package that includes a three-year extension of the credit. “The time to act is now,” she says. “The uncertainty has a direct impact on the folks and communities in my district. Rural Iowa is being www.BiodieselMagazine.com

POLICY hit hard from the ongoing trade war with China and the SREs. With the low demand [for farm products] from the trade war, we need to get this done now.” Congress grew accustomed to the normal process of Kovarik dealing with tax extenders after the fact, according to Kurt Kovarik, NBB vice president of federal affairs. “That became the norm,” he tells Biodiesel Magazine. “It became something that didn’t have to be done on time and could be done retroactively, unfortunately. That, coupled with the new Congress after the majority in the House flipped, and with so many new members, it has become a very long process to educate them on what extenders are, why Congress always acted on them, and what the tax credit means for our industry in terms of growth, certainty and the ability to produce renewable fuels from byproducts. Those situations have led to where we are today, plus heighted partisanship around tax policy in general, following the tax legislation the Republican Congress passed in late 2017. The way this was handled left a bad taste in the mouths of Democrats, particularly for the new ones, who felt it was an unjust process and tax bill. We’ve been wading through all this for months. Now, with a three-year extension marked up in ways and means, we’re close, but it’s been longer than we’d hoped for.” It’s still unclear why, in a House controlled by Democrats strongly in favor of curbing climate change, a policy such as the blenders tax credit, which is proven to incentivize increased production and use of biodiesel—a fuel that reduces GHG emissions by up to nearly 90 percent compared to petroleum diesel—remains in limbo. “We entirely agree,” Kovarik says. “We’ve been trying to convey that. There are enormous aspirations to do big things, and while they’re trying to accomplish those, they are unfortunately harming one existing policy whose goals get them where they’re trying to go. It’s a process of educating them. Many don’t know what biodiesel is. We are trying to convince them that there are achievable policies in the near-term they can act on to move the needle in the direction they want to go. The tax credit is very low-hanging fruit that’s right in front of them.” On the other side of the aisle, Republicans who serve more rural, agriculture-oriented constituents should be rushing to reinstate the credit to provide relief to soybean farmers suf14

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fering from market destruction as the U.S. and China play tit for tat in a power struggle to shape the future of global trade. “I’ve been to Washington, D.C., seven times this year,” Rob Shaffer, chairman of the American SoyShaffer bean Association’s transportation and infrastructure committee, tells Biodiesel Magazine. Shaffer is a farmer from El Paso, Illinois. “I would have been there eight times, but I was planting soybeans and burning B20 while putting my crop in. The expired tax credit is hurting a lot of folks. Between the trade war with China and no tax credit, the uncertainty is killing the industry.” In 2017, China was the top market for U.S. soybeans, accounting for $14 billion in sales, 61 percent of total exports and nearly one-third of total U.S. soybean production. “Now we’re sitting on 900 million bushels of soybeans,” Shaffer says. “It took 25 years to build this relationship, and it could take less than two years to destroy it.” NBB CEO Donnell Rehagen says it’s not just biodiesel producers that benefit directly from the tax credit. “Downstream blenders and distributors get a piece of it,” he tells Biodiesel Magazine. “And because it’s been in place for such a long time, everyone expects it to come back. For nearly two years, biodiesel producers have been selling at prices that assumed the dollar in the equation. This is why we’re seeing plants closing and scaling back production—there’s not enough cash to keep that activity going. From the standpoint of fairness to our industry, Congress needs to act. Producers are at the end of cash reserves to make those transactions keep happening. We can talk about how to make the policy better in the long run to be sensitive to investments the government is making, but we need to get this done—and soon.” Gebolys says, “Many market participants are simply reaching their saturation point for the blenders tax credit risk. The biodiesel tax credit market is less a reflection of what people think will happen and more a function of the fact that most folks with an appetite for the tax credit have already eaten their fill.” A week after World Energy announced it was closing three plants, Kolmar Americas Inc. announced it was cutting production by half at its recently expanded 40 MMgy American GreenFuels plant in New Haven, Connecticut, starting in the fourth quarter. “The importance of the biodiesel tax credit is critical,” Raf

2019 FALL EDITION

Aviner, president of Kolmar Americas, tells Biodiesel Magazine. “In the past, it helped expand our production capacity and business development, investments in technology and projects that would further enhance the Rehagen industry. But since Scott Pruitt”—the former EPA administrator who was replaced with Andrew Wheeler—“began handing out SREs like Smarties at Halloween, the market has been plummeting and cash needs to be returned to this industry through a retroactive tax credit extension. None of us went into business thinking we would be dependent on the tax credit. But it’s become this because the SRE situation has essentially put production in such negative territory, the tax credit is the only way for us to recoup the money we laid out. It’s not that we can’t live without the tax credit—it was not a lifeline originally—it has just become that. Once EPA administers the RFS in such a way that is consistent with Congress’ intent and returns to normal interpretation that we’ve enjoyed for years prior to this administration, I think the biodiesel tax credit will be once again be used to enhance plants, technologies and infrastructure, which it was created for.” Although progressive Democrats on the Hill are pushing for climate change policies, Republicans are reticent to move in this direction, particularly when the tone setter is a president who says climate change is a hoax propagated by the Chinese. But Robert Morton, an NBB director and chairman of Newport Biodiesel, says public sentiment is reaching a tipping point on climate change and GHG emissions. “You see this when you get away from Washington, D.C.,” he tells Biodiesel Magazine. “In Rhode Island, it’s huge, and likewise elsewhere all around the country and the world—except in D.C. And even they will get there eventually, but it’ll take time. If we don’t face it now, it’ll be too late. Biodiesel is a great opportunity to create fuel to help that problem. It’s very frustrating to see road blocks to what’s an obvious solution that is available now to help combat climate change.” “The world is waking up to the need for a lower-carbon future and we are an important part of the transition to that,” Gebolys says. “We need to do a better job of controlling what we can control and pushing forward to building a better industry doing more to contribute to a better world.”

One would think passing the biodiesel tax credit in Congress would be “a layup,” Shaffer says. “But it’s not. D.C. politics don’t favor the Midwest. We’re trying to tell our story and get movement on it. This Morton is a hell of a good industry. Sixty-five cents of every bushel of soybeans is derived from biodiesel.” Grassley says he thinks the tax credit extension will be renewed, but it needs to be put on a must-pass appropriations or end-ofsession omnibus bill to get it done. “If that’s possible, then when Pelosi and McConnell and Schumer and McCarthy put out a package, I expect the biodiesel tax credit to be in it,” he says. “I will push for the biodiesel tax credit. But there’s also the short line railroad tax credit (45G) and 25 others that expired at the same time, plus five others that are going to expire at the end of this year. Some of these tax credits ought to be permanent law, and the biodiesel tax credit should be an example of that.” Trade The U.S. commerce department’s November 2018 decision to initiate a CCR of tariffs on Argentine biodiesel led to a preliminary determination announced this July to significantly reduce CVDs while leaving the dumping tariffs in place. One of the main reasons the duties were imposed on Argentine biodiesel was because of the price-distorting effect on global markets from the nation’s differential export tax (DET) scheme, which the Argentine government employs to incentivize domestic soybean processing. The DETs placed higher export taxes on whole beans and much lower taxes on soy biodiesel. Argentina’s government requested the CCR after it made four legislative decrees that narrow the export tax differential between biodiesel and soybeans. Myles Getlan of Cassidy Levy Kent says it’s worth noting that, over the years, Argentina has routinely made changes to its export tax regime. “Even in the commerce department’s underlying investigation, they cited a dozen different export tax decrees just related to soybeans and biodiesel over the years,” Getlan tells Biodiesel Magazine. “One point we made to the department is, why make changes to the duties based on a few new measures when Argentina routinely changes its export taxes?” Moreover, Getlan says if the preliminary determination to reduce CVDs becomes

final, there’s nothing to stop Argentina from changing the taxes back to further broaden the differential. “With political developments in Argentina and the prospect of a new administration soon, one could expect furGetlan ther updates to the tax regime,” he says. Argentina President Mauricio Macri, a longtime friend of Trump, is likely to face defeat this fall to Alberto Fernandez, who is described as a leftist populist. Some suggest the U.S. government initiated the CVD review as a favor from Trump to Macri, to help him win reelection and stay in office. Others suggest much more lucrative, personal reasons, such as helping the Trump Organization with real estate deals in Buenos Aires. Trump’s own words taken from a U.S. Embassy Argentina press release from Nov. 30, 2018, shed light on their relationship. The speech was given before the G20 summit in Argentina. “I want to just say that I’ve been friends with Mauricio for a long time, many years,” Trump said. “People wouldn’t know that. He was a very young man, very handsome man. And we knew each other very well. And I actually did business with his family, with his father. Great father. He was a friend a mine … Little did I know that his son would become a president … And little did you realize that I was going to become president. So we’ve known each other a long while. We’re going to be talking about lots of good things for Argentina, for the United States, including trade, including military purchases, and other things. But we have a lot to talk about—a little bit of old times; about 95 percent business, I would say. But this is a great honor to be with you. You’re my friend, long time. Great family. And you’re doing a fantastic job, and I want to congratulate you.” On that same day, the U.S. Department of the Treasury issued a release on an energy cooperation framework signed between the two countries. Among other elements, the agreement was to expand opportunities in energy trade, including accelerating Argentina’s renewable energy sector. Two days prior, on Nov. 28, the U.S. government’s development finance institution, the Overseas Private Investment Corporation, agreed to provide $813 million to support Argentina’s economic growth in sectors ranging from infrastructure to energy and logistics.

“This administration is trying to help Macri to get reelected,” Grassley tells Biodiesel Magazine. “He did so poorly in the primary, and it looks like he will be defeated.” Grassley says he’s not sure why the Trump adTrump ministration would want to help the new leftist president and “a bunch of socialists running that country.” He says the CVDs were reviewed and reduced “to help the administration and president of Argentina,” and when they lose power “we ought to back down.” “If they agree with me on that point, and I sense they would, as soon as Argentina’s election is over in October, then maybe our government ought to see [that we were trying to help a guy who lost] the election,” Grassley says. “It’s obvious [the Trump administration] wouldn’t want to help a leftwing government.” Gebolys says, “All indications are that the Argentines are almost certainly poised to vote back into power the more leftist populist block. To the extent that the U.S. was trying to be supportive of Macri’s centrist reform-minded efforts, it appears unlikely that this motivation will be on the table going forward.” It’s entirely possible that the CCR and preliminary reduction of CVDs were politically motivated, Getlan says. “It is certainly realistic that political considerations were part of this decision,” he says. “All we ask for is that the commerce department make decisions based on facts, the law, and the framework in which it just recently found that Argentina was providing robust subsidies through its tax regime. To the extent that political considerations were made with this decision, the fact that there could be a new administration in Argentina soon suggests the commerce department should reassess its position.” The rollback lacks merit entirely, Aviner says. “We’re hopeful that the commerce department will reconsider the preliminary decision and leave the CVDs in place,” he says. “It’s important to provide a level playing field. Favors [given to] Argentina undermines us and what Trump ran on—making America great again and supporting domestic manufacturing.” The Human Element Leading up to EPA’s 31 new SREs, the 50 MMgy Duonix biodiesel plant in Beatrice, Nebraska, a joint venture between Flint Hills Resources and Benefuel, announced it would be closing its doors. “The biodiesel tax credit www.BiodieselMagazine.com

POLICY realize they must look out for themselves. I say call and send letters to your congresspeople, get as many people involved as possible. It’s very important to us.”

American GreenFuels employees, many of whom are young military veterans, are worried about the future of their jobs and this industry. PHOTO: KOLMAR AMERICAS INC.

has not been reinstated since its expiration at the end of 2017, and this creates additional uncertainty in the market and causes irrational pricing behavior,” Rob Tripp, CEO of Benefuel, tells Biodiesel Magazine. “Among other factors, this has affected the margin environment substantially and has caused many plants to idle in the recent months. The market would trade more rationally and with less risk if the tax credit was reinstated over a longer period of time, or if it was canceled altogether—with RINs picking up the value.” In late July, Renewable Energy Group Inc. announced it was closing its 15 MMgy plant in New Boston, Texas, and offered to relocate its employees. “This closure comes as a result of the poor economics over the past 18 months resulting in large part from the uncertainty surrounding the biodiesel tax credit,” says Cynthia J. Warner, REG president and CEO. “Despite significant bipartisan support, Congress’ inaction on this value-added incentive has led to unsustainable market conditions.” When World Energy announced three plant closures, it noted that more than 100 workers will be directly impacted, plus countless farmers, suppliers, distributors and others indirectly. “We do everything in our power to be a force for good for the people who work with us, their families, and in the communities where we operate,” Gebolys says. “When markets prevent us from doing that effectively, it’s very difficult. No business is more powerful than the market. When the market speaks, we have to hear it and act decisively for the benefit of all our people, even those most affected by these moves.” Aviner says American GreenFuels’ cutback in production is not resulting in layoffs “for now,” he says, “but we’ll see what happens.” The plant directly employs 50 people and has frozen new hires. “We create and sus16

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tain more than 250 indirect jobs through our plant in New Haven,” Aviner says. Several employees are military veterans, which make “excellent employees, leaders and coaching staff ” due to their unique background. They are trained from the bottom up, with significant investment by the company to become worldclass chemical plant operators and technicians. “We’re very proud of where we came from in 2013 to where we are today,” he says. “We— they—live with the constant worry that this industry they’ve come into and we’ve invested in is on the chopping block due to congressional inaction. We don’t have an endless pool of operators. If our workers leave because of this, it’ll be hard to replace them.” Ken Strickland, a supervisor at American GreenFuels, says he worries about his job. “Without the tax credit, my job can disappear entirely,” he says. “It’s hard to believe after all we’ve built here, Congress can turn its back on this industry. It’s been a long year and a-half worrying about the future.” Strickland says during the 2016 presidential election, Trump “sounded like he was protective of American manufacturing jobs, but the past two years have been the worst of my career. It’s a shame. American GreenFuels is operating better than ever after our extensive expansion only for our elected officials to let us down.” The plant’s general manager, Mikulas Gasparik, says it’s difficult for some young people to find another job like what they have at American GreenFuels. “They make a good living, and it’s difficult for me to answer them when they ask about the future of their jobs,” he says. “Some of our young vets, this is the first job they know out of the service. They like their jobs and we want them to stay with us, but Washington is pulling the rug out from underneath them so I—they—don’t know what to do. I ask them to be patient with us, but I

2019 FALL EDITION

A Solution? The August SREs led to significant backlash from the ethanol, biodiesel and agricultural industries, and Trump was forced to act or risk further disaffecting his base as the 2020 presidential election cycle ramps up. After a series of meetings with biofuel and oil interests, a negotiated deal was pending announcement at press time. NBB is pushing for 2020 advanced biofuels volumes of 5.54 billion gallons vs. the current proposal of 5.04 billion gallons. For the 2021 biomass-based diesel RVO, NBB is arguing for 2.76 billion gallons vs. the current proposal of 2.43 billion gallons. “The numbers we’re asking for are solely to provide growth, not making up for the SREs,” says Paul Winters, NBB’s federal communications director. “We cannot sit back anymore,” Kovarik says. “EPA must follow the law and estimate waived gallons in the rule pending now. If it doesn’t, then none of the volumes matter. This is not what Congress intended. All we are asking for is integrity in implementation of the RFS.” The NBB is not asking EPA to go back and reallocate all the waived gallons throughout the history of the program or even this administration. “This rule under consideration now is not final until November, so the gallons EPA just decided to waive in August, we are asking that it reinstates those in this rule that’s open right now,” Rehagen says. “We’re only asking EPA to fix this now and going forward.” “We’ve got one priority,” Kovarik says. “Without achieving that one policy objective— without accounting for SREs going forward— then none of the other policies offered mean anything.” Rehagen says, “EPA can’t keep doing this. If it wants to grant SREs, that’s fine— but the volumes have to go back in. Otherwise there’s no process, no predictability and no certainty for us.” Grassley told the White House that waived gallonage ought to be reinstated to make up for past mistakes. “But most important,” he says, “we need to be guaranteed the law will be followed. EPA cannot ignore what Congress implied.” In a statement provided to Biodiesel Magazine by Sen. Amy Klobuchar, D-Minnesota, she says she, like others in Congress, has “fought to stop the misguided overuse of the small refinery waivers by the EPA, which … have resulted in the recent closure of … production facilities and the idling of others, directly affecting thousands of jobs. At a time when farmers and rural

communities are struggling with low prices and ongoing trade disputes, the EPA should not be taking regulatory actions that reduce demand.” While the industry awaits the pending deal from the Trump administration, many in Congress are acting to push for oversight or introduce legislation to prevent situations like the Aug. 9 SRE announcement from happening again. Finkenauer and others are asking for the Government Accountability Office to investigate EPA’s misuse of SREs. Legislation (H.R. 4385) introduced Sept. 18 by Rep. Rodney Davis, R-Illinois, would require EPA to account for SREs when formulating annual RVOs. Meanwhile, biodiesel stakeholders have become frustrated with soybeans and biodiesel being marginalized in high-level discussions that revolve around corn and ethanol, despite the disproportionate impacts SREs have on the smaller biodiesel sector. The administration seems to think allowing year-round sales of E15 somehow makes up for billions of gallons of demand destruction in the biodiesel industry. “This a bit mind-boggling to me,” Gebolys says. “We’ve allowed others to define us as ethanol, to suit their purposes. We need to get better at getting our own story out. It’s a good and compelling one.” The biofuels and agricultural industries are simply asking that the Trump administra-

Amy Klobuchar, a Democratic presidential candidate and U.S. senator from Minnesota, pumps B20 into a diesel truck. Like others in Congress, she is fighting misuse of SREs by the EPA. PHOTO: MINNESOTA SOYBEAN GROWERS ASSOCIATION

tion uphold his campaign promises and, more importantly, the RFS, which has been law for more than a decade. Big Oil, on the other hand, is trying to subvert the RFS and by extension break the law. Although Grassley believes Trump is on the side of farmers, he says “Big Oil has a big influence in EPA.” Time will tell whether the deal Trump strikes will benefit farmers and biofuel producers. “I believe in redemption,” Gebolys says. “We’d certainly welcome meaningful, decisive action now. At this point though, any further

promises, delays or feel-good announcements need to be seen exactly for what they are.” Aviner says, “Better late than never. Anything less than full reallocation of gallons waived from SREs and truly market-driven RVOs would be insufficient to rectify the damage done. I’ll take Trump at his word that he will do something, but I’ll believe it when I see it.” Author: Ron Kotrba Editor, Biodiesel Magazine 218-745-8347 rkotrba@bbiinternational.com

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INDUSTRY KNOW-HOW From a company whose user-friendly software facilitates small feedstock generators landing national contracts to a comprehensive policy and market report on biomass-based diesel, and a tax specialist with traditional as well as new solutions, the industry knowledge in this spotlight edition runs deep BY RON KOTRBA

BIODIESEL MAGAZINE

2019 FALL EDITION

SPOTLIGHT Global Fuel Recovery

Come January, International Maritime Organization regulations require oceangoing vessels to use bunker fuel with 86 percent less sulfur, moving from 3.5 to 0.5 percent. The new IMO 2020 requirement is expected to increase diesel demand by 1.2 million barrels per day, says Michael Smith, co-founder of Global Fuel Recovery. It will also push used motor oil prices down, forcing many reclaimers to raise their prices. Smith has been in the reclamation business for more than 20 years and, fortunately for generators and buyers, his threeyear-old startup is ready and well-positioned for this market shift. With strategic partner Modern Fuels, GFR is managing feedstock for a 17 MMgy used oil refinery in Houston to rerefine used motor and high-sulfur bunker oils into IMO 2020 fuel by mid-next year. Through its cloud-based, outward-facing software developed by business partner and co-founder Barry Lile, GFR is an asset-light company giving small- and medium-sized collection companies the ability to link together and obtain national contracts for used motor oil, yellow grease, off-spec biodiesel, crude glycerin and more. “Most software that companies use faces them, but ours faces the customer and their needs,” Smith says. “It covers

everything—billing, transportation, regulatory compliance, how much oil is taken out and where, and how much is paid. It tracks the transaction the whole way.” GFR is bringing technology to bear on an old problem. “The way many collection companies are doing things is super antiquated,” Smith says. “Our customers go into our software, set up their account, and we match them with the right aggregator. Everything’s right there. It’s all automated.” GFR’s software eliminates selling, general and administrative (SG&A) costs. “On the biodiesel side,” Smith says, “we can schedule trucks based on contracts months out and reshuffle as markets change, giving plants the ability to see what the supply line will look like.” GFR’s software will be fully accessible on Android and Apple smartphones in December. “It’s very customer-friendly and easy to get service,” Smith says, whether for the aggregator or buyer. GFR is more than a reclamation broker with unique software. “We’re a facilitator,” Smith says. “If a company has yellow grease and wants to sell to biodiesel producers and then buy biodiesel back from them to run in their trucks and close the loop, we can do that. We bring these types of creative solutions to the market. We’re able to cut out a lot of fat and bring really high values to people generat-

ing yellow grease, while giving smalland medium-sized collection companies software and new customers.” Fe e d s t o ck quality analysis is one of GFR’s new endeavors. “Soon we can Smith identify, whether for a biodiesel or re-refining plant, what feedstocks work best for them based on price, recovered material and recovery rate,” Smith says. “The price they’re currently paying for material can be way off, depending on the amount of recovery they get out of it. We can help make these important decisions.” Modes of commerce have shifted and GFR, which Smith expects to grow 10-fold in five years, is a catalyst for efficiency and change. “The same old sales channels aren’t efficient anymore,” he says. “Our software drives efficiencies and looks for excess capacities. We bring liquidity to the fuel markets. We help our customers make a profit—and a difference. If they can’t make a profit, then they can’t make a difference.”

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832-699-0045 www.BiodieselMagazine.com

SPOTLIGHT Special Report

In August, three industry veterans—Joe Jobe, former CEO of the National Biodiesel Board and founder of Rock House Advisors; Manning Feraci, former NBB vice president of federal affairs and founder of Playmaker Strategies; and Larry Schafer, former NBB consultant and principal at Playmaker Strategies—released their comprehensive policy and market report, “Biodiesel and Renewable Diesel Policy, Regulatory and Market Perspectives.” The report is the result of the trio’s 60 years of combined experience in the field, much of which was earned as a team helping steer and develop legislation and regulations that, more than a decade later, remain the industry’s cornerstone policies. “The report is comprehensive by design,” Feraci says. “It serves as a detailed, one-stop shop to gain a good grasp and perspective on policies that make or break projects.” Jobe points out growing corporate interest in sustainability. “Today, almost every Fortune 500 company has a chief sustainability officer,” he says. High concentrations of carbon emissions come from transportation, and political will for electrification is growing. But electrifying the heavyduty sector will not come quickly. “Biomassbased diesel is the anchor solution,” Jobe says. Demand for information in this report comes from Wall Street investors, hedge fund

BIODIESEL MAGAZINE

interest and private equity funds, but also from those already invested in the space—biodiesel firms that are growing or have new board members lacking industry knowledge. “If you’re in this industry, then it’s important to understand all the interactions of the different products and policies,” Jobe says. Biofuels investments span from Wall Street to Main Street and include companies looking to buy assets or create new ones. “Companies making investment decisions need to understand the policy, analyze risk and evaluate the market today and five to 10 years out,” Schafer says. “This is an important step in determining whether there is good investment opportunity. Our report helps people get up to speed to determine whether they should enter this space.” In biodiesel’s early days, plants made biodiesel and glycerin. Today, “products” such as D4 RINs, LCFS credits, Illinois sales tax credits and the federal tax credit, to name a few, must be managed and marketed independently. “The interplay between all those things matters a lot,” Jobe says. “There’s tremendous complexity that is difficult to grasp, so when you try to put together how biodiesel, renewable diesel and coprocessed renewable diesel compete with one

2019 FALL EDITION

another inside the policy framework, it is quite the spiderweb.” The report was created as a candid, informational piece—not an instrument of advocacy. “We approached it from the perspective of, if we were an investment group, what would we like to know?” Jobe says. “This includes key strengths, weaknesses, red flags and pitfalls to be aware of for those who intend to deploy their or their strategic partners’ resources.” The document provides in-depth analysis on federal policies, including RFS legislation and implementation, RINs, court decisions and their impacts, the reset provision, the blenders tax credit and other incentives, trade, and more; state policies and incentives; and markets dynamics, the competitive environment, and economics. For more information on obtaining the report, visit rockhouse.us/doc.

Avalara

Federal excise taxes on fuels may not change very often, but in more than 12,000 state, county, city and local special jurisdictions, excise taxes are in constant flux. Beaty For a company to operate as a fuel wholesaler or distributor across multiple jurisdictions without a tax partner such as Avalara by its side could cost precious time, resources and money. How does Avalara stay on top of all the changes in excise taxes across so many jurisdictions? “We have an army of people,” says John Beaty, general manager for Avalara’s excise business unit. This army of tax specialists is deployed throughout North America. “We added Mexico this year,” Beaty says. Beaty has worked in oil and gas for the better part of 25 years and saw the need for good tax solutions. With biofuels such as ethanol and biodiesel playing a much bigger role in the fuels market over the past decade, this need has become even greater. “The rules to determine which taxes apply and the complexity in calculating them accurately deviate a great deal,” Beaty says. “The rules can be different based on the state, and the excise taxes can apply either above, at or below the rack. So, when you add in blending, there could be a third party involved, which adds to the complexity. Standard sales and use taxes are rather straightforward. The rate is based on physical location, typically at the point of sale. This is not hard to calculate, and most don’t need help with this. But excise tax is based on the volumetric ratio of the product, and the blend of biofuel could be a very different calculation, as sometimes biofuel is taxed at a different rate than petroleum fuel. On top of that, they may have an environmental fee, which we lump in as a tax, but there’s still a loading fee that must be calculated in as well.” To grasp just how complex all this can be, Beaty says for every rule, there’s an exception, and for every exception, there’s another rule. “Having a consistent, accurate solution to calculate and maintain the content of these rules and rates takes the burden off organizations so they don’t have to constantly monitor websites and rule changes,” he says.

Avalara’s traditional core products are Avalara AvaTax Excise, which is the company’s “calculator engine” that determines excise tax; and Avalara Returns Excise, which generates signature-ready returns. Both are designed for energy suppliers, distributors, retailers and traders. But a new product Beaty is excited about is Avalara’s general ledger reconciliation. “We look at reconciliation like trying to find a needle in a stack of needles,” Beaty says. “With our new solution, we highlight where the needles are.” The purpose of Avalara’s new product is to reconcile what a client reported to the state with what they posted in their general ledger, which Beaty says is an incredible efficiency tool and cost savings for companies. “In every company, the tax manager is inundated with day-to-day work,” he says. “Between troubleshooting, research and special projects, there’s no time to reconcile what’s been reported vs. what’s been posted. It’s a very labor-intensive process. You want to make sure what you reported is what’s posted in the accounting system. The traditional way to do this is to run a report, take the listings, and pick and look through them all with a ruler. By the end of the day, you want to go mad.” Beaty says a transaction may be posted as one financial amount in one volume on the company’s accounting ledger, but on the report submitted to the state it may be broken out in four different ways. “You want to reconcile this because the state will audit, and if what’s posted in the ledger is different than what’s been reported to the state,

then you can get a penalty and interest finding,” he says. “We’ve created a function to electronically generate a report to highlight what’s been posted in the general ledger. We’re super excited about it, and all our clients are as well.” Beaty says Avalara’s general ledger reconciliation solution is currently in beta testing and it plans to roll the product out by the end of the year. The generic perception around tax is that it is an unavoidable cost of doing business. A few simple calculations—how hard can it be? “In reality it’s not standard calculations across the board,” Beaty says. “Rules can greatly differentiate outcomes. If you take a more proactive or strategic approach, you can optimize your margins by getting taxes correct. There’s a great business value proposition case to be made.” Beaty says companies can do their own taxes and, maybe—just maybe—they’ll get them right. “Or, if they underpay, then they face penalties and interest findings,” he says. “If they overpay—and the overpayment is actually identified—then it can take six to nine months to recoup that money. There’s a weighted cost to capital when it goes out the door, particularly when it didn’t have to go out in the first place.” He says partnering with Avalara is a strategic business decision to optimize tax determination, preparation and reconciliation. “In the fuels business, pennies on the gallon mean everything,” he says. “Any efficiency can direct bottom line improvements to the general ledger.”

www.BiodieselMagazine.com

Excise tax compliance doesn’t have to be so hard The biodiesel market’s complex rules and requirements make tax compliance complicated. Avalara’s experts understand these challenges, and our excise tax solutions are built to solve them. • SaaS-based tax calculation • Signature ready form preparation • License, registration, and exemption management Ready to streamline tax management and reduce your audit risk? Visit https://avlr.co/2YQKJDW or call (877) 803-9818.

2020

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RESEARCH

Marlene Kreinz conducts R&D for BDI-BioEnergy International and investigates algae oil properties along with the effectiveness of conversion to biodiesel with BDI’s RepCat process. PHOTO: BDI-BIOENERGY INTERNATIONAL GMBH

Algae Oil to BIODIESEL: A Practical Application Under FP7’s All-Gas Project, BDI-BioEnergy International demonstrates algae oil extraction, characterization and conversion to biodiesel using its RepCat process BY ROBERT RAUDNER

CONTRIBUTION: The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s). 24

BIODIESEL MAGAZINE

2019 FALL EDITION

RESEARCH The usage of algae oil as a feedstock for renewable fuel is present in the literature, but less information is available when it comes to practical application.

Raudner

In course of the “7th Framework Programme for Research and Technological Development” (FP7), the European Commission supports the research and demonstration of sustainable biofuel production from algae. The All-Gas Project demonstrates the sustainable large-scale production of biofuels based on low-cost microalgae cultures using municipal wastewater. Beside the upstream cultivation testing, two different ways for using algae as feedstock for fuels were investigated within the downstream part of the project. One way was to use algae directly in an anaerobic digester. After different cleaning procedures, the biogas was then used in a vehicle fleet test. The other way of using algae as fuel is the production of biodiesel. Austria-based technology company BDI-BioEnergy International took over responsibility for this part. Algae oil was first extracted from the biomass and thereby a new, patent-pending process was invented for lipid extraction out of wet algae biomass. Concerning biodiesel production, algae lipids turned out to behave completely differently compared to fresh vegetable oil or waste oil and fats due to the extremely high content of impurities. In particular, the high content of phospholipids hinders phase separations within conventional biodiesel processes. It was therefore obvious to apply BDI’s benchmark RepCat process. RepCat avoids phase separation and, as a result, is the first choice for difficult types of feedstock. Both esterification and transesterification happen in a two-stage reactor system operated at elevated temperature and pressure by means of a heterogeneous, recyclable catalyst. Methyl ester is then finally purified by distillation to achieve EN 14214 requirements. In detail, it was possible to reduce the initial 995 parts per million (ppm) phosphorus in the algae oil to below 1 ppm. In the case

Algae biomass and the resulting biodiesel PHOTO: BDI-BIOENERGY INTERNATIONAL GMBH

of magnesium, which was also extracted as it is part of the co-extracted chlorophyll, the final concentration in the algae biodiesel was below the detection limit. The sulfur content was reduced by more than 92 percent. Nevertheless, since its initial content in the algae oil was at 1,320 ppm, the EN 14214 limit of 10 ppm could not be achieved; further sulfur reduction steps are necessary and available with BDI technology. In the algae oil, fatty acids (either bound or free) were found to be between 40 and 50 percent mass/mass (m/m). Only this part of the algae oil can be converted into fatty acid methyl ester and is therefore influencing the EN 14214 parameter ester content. However, with the RepCat process, the ester content of the algae biodiesel was 97.1 percent (m/m), which is above the 96.5 percent (m/m) limit in the standard. Special attention was also paid to the fatty acid profile, since there are limits in the EN 14214 on the content of linolenic acid methyl ester (C18:3) and polyunsaturated methyl esters with more than three double bonds. The content of C18:3 was below the limit of 12 percent (m/m). An interesting topic is the content of polyunsaturated fatty acids (PUFA). These PUFAs are responsible for improper fuel stability as they rapidly polymerize. Surprisingly, the unusual fatty acid C16:4 was found in the algae biodiesel with a very high content of 3.4 percent (m/m). However, the oxidation stability after the addition of 1,000 ppm butylated hydroxytoluene (BHT) resulted in 8.2 hours, above the limits of ASTM D6751 and EN 14214. The algae biodiesel was mixed with a conventional fossil diesel—EN 590 quality with a

The RepCat test reactor PHOTO: BDI-BIOENERGY INTERNATIONAL GMBH

cold filter plugging point (CFPP) of minus 31 degrees Celsius—particularly to investigate its influence on cold flow properties of the blend. The neat algae biodiesel had a CFPP of 1 degree C, which is comparable to biodiesel derived from used cooking oil. The cold weather properties of a B7 blend were not significantly influenced, and the resulting CFPP was minus 29 degrees C. Summing up, it was shown by BDI that, despite the very unconventional composition of the algae oil, it is possible to produce algae biodiesel by using the BDI RepCat technology. However, it must be noted that the term algae oil represents a high variation of different lipids and that its composition depends on the type of algae and its cultivation process. Therefore, a comprehensive analysis of the oil and transesterification trials are necessary to evaluate its suitability for biodiesel production. Author: Robert Raudner Technical Expert R&D Biofuels BDI-BioEnergy International GmbH +43 316 4009 100 robert.raudner@bdi-bioenergy.com

www.BiodieselMagazine.com

JANUARY 20 23

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The Biggest Event in Biodiesel The National Biodiesel Conference & Expo is the annual must-attend event for the biodiesel industry and the ideal place to showcase your company to biodiesel stakeholders worldwide. Make sure your company is represented as the biodiesel industry lays out its VISION for 2020 and beyond! To register for the conference or explore sponsorship opportunities, visit BiodieselConference.org.

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