Obstacles ahead

Recipes for growth or stagnancy of biodiesel industry linger in 2019.

BY KATIE JOHNSON

The biodiesel industry sits at a precipice, awaiting progress on several longtime policy obstacles impeding growth in industry production.

“We’re on a teeter-totter,” says Grant Kimberley, executive director of the Iowa Biodiesel Board. “It could go either way this year.”

Nearly 30 years ago, biodiesel entered the market that has evolved into a 2 billion-gallons-per-year industry. The National Biodiesel Board reports that Iowa produced a nationleading 285 million gallons in 2017. Estimates for 2018 show that amount has grown to more than 350 million gallons.

The U.S. Department of Agriculture projects growth will continue, with 7.8 billion pounds of soybean oil to be used for biodiesel in 2019 – 13 percent

more than 2018 — making it the second largest use of soybean oil behind food. Despite the industry’s booming growth, biodiesel production continues to face several roadblocks that repressed further production in 2018. They include the blenders tax credit, Renewable Fuels Standard (RFS) and small refinery waivers.

“Uncertainty lies ahead with the on-and-off-again nature of the biodiesel tax credit,” Kimberley says.

“Since 2005, the blenders tax credit has been a foundation of the biodiesel industry and is necessary for continued stability and growth opportunities.”

He emphasized that biodiesel plants are stagnant in growth without longterm market assurance.

“There is no way to plan long term without knowing whether the tax credit will be in place,” Kimberley says.

Facilities can operate for a while, but they need money to continue and improve, he says. If the tax credit gets reinstated, especially for several years, plants can make investment decisions to become more efficient and improve logistics and infrastructure to be stronger down the road.

Western Iowa Energy, located in Wall Lake, chose to diversify their plant, in part, through kosher certification.

Employees at Western Iowa Energy in Wall Lake examine data from biodiesel samples. The blenders tax credit has been an important foundation of the biodiesel industry for years.

Joseph L. Murphy/Iowa Soybean Association

Brad Wilson, Western Iowa Energy president and general manager, says certifying their facility as kosher improved demand, value and their bottom line. The facility can produce 45 million gallons of biodiesel per year since focusing on soybean oil as a primary ingredient in their biodiesel. Despite the added diversification,

Wilson says policy obstacles still stand in the way.

“Biodiesel has really grown. There is strong demand for it,” says Wilson. “But we see programs, such as small refinery waivers take away from potential growth.”

Wilson says the biggest hurdles in 2019 will come from the volume obligations outlined in the RFS, the extension of the tax credit and the waivers granted to small refineries, allowing them to waive their obligation to blend biofuels under the RFS.

“When they hand out those waivers, it tells those refineries they don’t have to comply with the standards outlined in the RFS, he says. If they must do the waivers, it has to be in a way that doesn’t affect volume obligations and limit our chance for growth.”

Growth has been key when it comes to the success of the industry. Programs such as the Low Carbon Fuel Standard (LCFS) in California incentivize the production of biodiesel and other renewable fuels and contribute to an increase in the number of processing plants. Western Iowa Energy recognized the opportunity in California and acted on it.

“The LCFS is the reason Western Iowa Energy purchased a plant in California. The demand for an environmentally friendly fuel is huge,” says Wilson. “I believe we’ll see more states implementing similar programs.”

An increased incentive for biodiesel production is a win-win for farmers and consumers.

Broadening demand for soybean oil significantly improves farmers’ bottom lines. Just an 11-cent increase in a pound of soy oil equates to an additional 63 cents per bushel for soy growers across the country. Additionally, the industry has created almost 4,000 jobs in the state of Iowa, according to a study by ABF Economics.

Kaleb Little, director of communications at the National Biodiesel Board, says biodiesel is the ultimate success story of the soybean farmer and the soybean checkoff.

“Farmers should be proud of this product and proud to create this market, which has added so much to their bottom line,” says Little, commenting on the extraordinary growth the industry has seen. “For many farmers, it feels as though biodiesel has been around for a long time, but our 30-year history pales in comparison to the 100-year head start of the petroleum industry.”

Little echoes the policy concerns the biodiesel industry shares across the nation.

“We will have our eye on D.C., but the biodiesel industry continues to work on all fronts. We are addressing and improving this product from an environmental, sustainable and technological standpoint.”

Policy issues aside, Little says the product must work for consumers if the industry wants to grow.

He emphasizes the use for biodiesel at a consumer level. Biodiesel is one of the only alternative fuels available for the trucking industry. When companies want to reduce emissions or use more American-made fuels, there are not a lot of options outside of petroleum.

“At the end of the day, the consumer must be able to use it,” Little adds.

Greg Morrow of Cobb Oil Company in Brighton fills a tank with biodiesel on a farm near Washington.

Joseph L. Murphy/Iowa Soybean Association

Kimberley, Wilson and Little share the same message to Iowa soy growers and beyond: farmers need to be vocal about biodiesel.

“Any time our farmers get the chance to talk to politicians, don’t forget to say we need support for renewable fuels,” Little says. “Ask your fuel suppliers to offer biodiesel and encourage friends and family to use it.”

Contact Katie Johnson at kjohnson@iasoybeans.com.