Industry blames policy uncertainty for drop in biodiesel production 

Source: Amanda Peterka, E&E reporter • Posted: Friday, January 16, 2015

Biodiesel production dropped slightly last year, signaling that the expiration of the industry’s tax credit and the lack of a final annual volume mandate from U.S. EPA took a toll on the industry.

The industry produced 1.75 billion gallons last year, down from the nearly 1.8 billion gallons produced in 2013, according to new figures released today by EPA. This is the first time year-over-year biodiesel production has slumped since EPA implemented the 2007 renewable fuel standard.

For the first time last year, EPA failed to set final mandates under the RFS, decreasing refiner demand for advanced biofuels products.

Under the levels that Congress wrote into the RFS, refiners were required to use at least 1 billion gallons of biodiesel a year beginning in 2012. But EPA has the authority to increase that amount and proposed to require 1.28 billion gallons last year. Biodiesel producers strongly objected to the proposal, pointing to their record production in 2013, and ultimately, EPA decided to not finalize its proposal.

The biodiesel industry also operated most of last year without its $1-a-gallon tax credit, which Congress allowed to expire at the end of 2013 and did not reinstate until the final weeks of December.

According to the National Biodiesel Board, many plants idled operations or reduced production last year in response to the policy uncertainty.

“This is an industry that should be growing, and that has proven it can expand with smart policies in place,” Joe Jobe, CEO of the board, said in a statement. “Yet we have this paralysis in Washington. Biodiesel companies simply can’t plan for growth or hire new people with the kind of uncertainty we have now.”

In contrast, conventional ethanol producers generated renewable credits for 14.34 billion gallons last year, nearly at the 14.4-billion-gallon level called for by Congress in the RFS. In its failed proposal, EPA proposed to require refiners to blend 13.01 billion gallons of conventional ethanol.

The Renewable Fuels Association, which represents ethanol producers, said the data underscored the need for EPA to “get the program back on track” and issue volume targets consistent with RFS levels.

Cellulosic biofuel producers, or makers of biofuels from non-food plant materials, topped 30 million gallons last year, according to the EPA data. Although production was far higher than the 2013 production of 422,740 gallons, the figure includes new forms of biofuel that were not part of the RFS program in 2013, including compressed and liquefied natural gas produced from certain sources of biogas.

EPA in November announced it would seek to set refiners’ volume targets for 2014, 2015 and 2016 in a single rulemaking this year.