Biodiesel faces a mixed forecast as the industry gathers in San Diego
As a new presidential administration comes into power, ambiguity reigns for the biodiesel industry.
But at the same time, the California market appears to be growing solidly for the fuel derived from a diversity of products including soybeans, canola oil and animal fats.
“We have learned to thrive on uncertainty,” said Jennifer Case, president of New Leaf Biofuel, based in San Diego. “We are a scrappy industry.”
Case is one of about 800 attendees at the industry’s biggest annual get-together, the National Biodeisel Conference and Expo, running through Thursday at the San Diego Convention Center.
“We’re heading up,” said Donnell Rehagen, chief executive of the National Biodiesel Board. “We’re in a growth pattern.”
But the pattern may be disrupted.
A $1-per-gallon tax credit for biofuels expired Dec. 31. Although the credit has always been retroactively extended in the past, there are indications that Donald Trump’s administration may take a harder line on renewable energy mandates.
“They should absolutely be nervous,” said Robert Rapier, chief energy analyst for Investing Daily.
Trump went on the record on the campaign trail saying he supported the Renewable Fuel Standard, the federal program that has been the lifeblood not only of biodiesel but other biofuels such as biodiesel’s controversial cousin, ethanol.
But the RFS is administered by the Environmental Protection Agency and Trump’s appointee to head the EPA is Oklahoma Atty. Gen. Scott Pruitt, who has criticized the fuel standard.
Billionaire investor Carl Icahn, who has been advising Trump, has called the EPA’s system of credits accompanying the RFS “catastrophic” and in need of elimination.
Icahn owns CVR Refining — and oil refiners have long opposed the costs of complying with the fuel standard.
“I don’t think they have the support to get rid of [the RFS] because you’ve got a lot of bipartisan senators and representatives from farm states who support the renewable fuel standard,” Rapier said. “But the EPA has a lot of discretion where they can set that target.”
Pruitt’s confirmation hearings started Wednesday in the U.S. Senate, where he promised to carry out the RFS mandate.
Should Pruitt get confirmed, Rapier said, “he may say, ‘All right, I can’t get rid of [the RFS] but I can certainly set the mandate lower.’ ”
The National Biodiesel Board is being noncommittal about the Pruitt EPA nomination.
“We leave that up to each of the administrations,” Rehagen said. “They need to have the people on board to carry forth those policies but with that said, we’ll be paying very close attention to policies as they develop.”
The story is much different in California.
The state has created the Low Carbon Fuel Standard to help meet California’s aggressive climate targets, such as reducing greenhouse gas emissions by 40% below 1990 levels by 2030.
“The policy demands more and more emissions reductions at an increasing rate,” said Ryan Lamberg, executive director of the California Biodiesel Initiative.
That opens the door for biodiesel, which is cleaner than standard diesel fuel.
Biodiesel consumption in California is expected to reach 350 million gallons this year, up from 14 million gallons five years ago, said Shelby Neal, director of state governmental affairs for the National Biodiesel Board.
“It is completely because of the Low Carbon Fuel Standard,” said Neal, who spends part of his time lobbying for the industry in Sacramento. “Biodiesel has the lowest carbon score of any of the liquid fuels. So basically that makes it the cheapest compliance option.”
That’s good news for producers like Case, whose 31-employee company recycles cooking oil from restaurants across San Diego County. Last year, the company produced 5 million gallons of fuel from the oil.
“We have policies in the state of California that are supporting us right now,” Case said. “We have to double down on this. Federal has to catch up with California.”
Biofuels have long faced criticism beyond that of refiners who don’t like being mandated to blend ethanol into the nation’s gasoline supply. Free-market economists say tax credit regimes end up shifting costs — usually onto taxpayers.
“Biodiesel doesn’t have as high a profile but the oil companies still don’t like it,” Rapier said. “They don’t like being told you have to blend a competing product. They might do it anyway if the price was right, but they don’t like being told regardless of the price, you gotta put this into the fuel system.”
In November, the EPA announced that the amount of corn-based ethanol blended into the nation’s fuel supply must increase from 14.5 billion gallons to 15 billion gallons while advanced biofuels such as biodiesel and cellulosic ethanol must rise from 3.6 billion gallons to 4.3 billion.
Biodiesel’s backers received good news Tuesday.
General Motors announced that it is expanding its portfolio of biodiesel vehicles to include cars and crossovers. Chevrolet will roll out diesel-powered editions of the Cruze and Equinox, with the Cruze expected to get more than 50 miles per gallon on B20 fuel — blends of up to 20% biodiesel and 80% petroleum diesel.
“A big part of the pull came from the customer side, saying we should look at this,” said John Schwegman, director of commercial product and medium duty for GM Fleet.
rob.nikolewski@sduniontribune.com
