Iowa Biodiesel plant powers down

Source:  BY THOMAS J. BARTON, Telegraph Herald, Dubuque Iowa • Posted: Wednesday, March 18, 2015

Dubuque County plant left in limbo awaiting completion of EPA rule

Now, just three months into 2015, the plant already has shut down production after running at half capacity, because of uncertain demand created by federal inaction on the Renewable Fuel Standard and the biodiesel tax credit.

For most of last year, Congress allowed the biodiesel blenders tax credit to expire, renewing it in mid-December. At the same time, the U.S. Environmental Protection Agency went the entire year without establishing how much biodiesel and ethanol to blend with the country’s motor fuel supply, leading to a nationwide industry slow down.

Due to the delay in finishing the 2014 standards, the EPA also has pushed back proposing the 2015 volume requirements.

“All the tanks are full and no one is buying,” General Manager Tom Brooks said. “How do you sell product to a buyer who doesn’t know what he has to blend against? That’s the frustration.”

Across the U.S., biodiesel production fell from a high of 1.8 billion gallons in 2013 to 1.75 billion last year. In Iowa, production fell slightly, but it remains the nation’s leading producer, accounting for 16 percent of biodiesel output in 2014, according to the Iowa Renewable Fuels Association.

Uncertainty sent prices falling nearly 25 percent for all of 2014 and led to a 73 percent decline in industry profitability, Brooks said. The result: Dozens of biodiesel plants have stopped production or laid off workers in recent months.

The Farley plant, which began production in 2007, employs two dozen people, generating an annual payroll of $1.5 million. Indirectly, its shutdown hits trucking companies hard, and brings economic insecurity to other local businesses, Brooks said.

“It creates doubt and uncertainty for investors and lenders, because they don’t know whether the industry is stable. Is the business growing or stagnating?” he said. “And when you’re running the plant at half capacity, your costs increase.”

Western Dubuque Biodiesel loses 25 cents per gallon running at half capacity. Not running costs the company $55,000 to $60,000 per day, Brooks said.

“Then, it creates doubt and confusion in your employees about whether they’ve chosen the right career field,” he said.

Fortunately, state biodiesel tax credits helped soften the blow for Iowa producers, allowing the Farley plant to avoid layoffs and closures seen across the country.

“Due to favorable state policies, Iowa was able to weather the storm better than most states,” association Executive Director Monte Shaw said in a news release. “But the same federal uncertainty hangs over 2015. If the federal government would simply provide policy certainty in the form of a strong and growing RFS and a multi-year biodiesel tax credit extension, I think you’d see the biodiesel industry take a strong step forward.”

The EPA has proposed reducing the biofuel content in gasoline, and a bipartisan group of federal lawmakers have pushed to scale back the mandate. They argue the standard is “unworkable” for refiners and will lead to engine damage and higher fuel and food costs.

Opponents have declared the standard antiquated, as oil imports have fallen with surging domestic production that has eased concerns about foreign supply and national security threats.

They also claim increased natural gas supplies, thanks to fracking, have had more success on reducing greenhouse gases than corn-based ethanol.

Gov. Terry Branstad has said a reduction would be devastating for Iowa’s corn and soybean growers, and repeatedly has called on the Obama administration to support “a robust” standard that provides Iowans lower-cost choices at the pump, supports growth of Iowa’s ethanol industry and reduces U.S. dependence on overseas oil.

Advocates say the mandate is a matter of market access, with ethanol, biodiesel and gasoline competing for a place in cars’ gas tanks. Without it, the oil industry would lock the renewable fuels industry out of the market, they claim.

That would reduce consumer choice, drive up gas prices, increase the country’s reliance on foreign oil, increase carbon emissions that can harm the environment and depress corn prices, said Brooks, vice chairman of the Iowa Biodiesel Board and vice president of the Iowa Renewable Fuels Association board of directors.

Iowa leads the nation in renewable fuels production, with 43 ethanol refineries and 12 biodiesel plants with the combined capacity of producing more than 4 billion gallons per year, according to the renewable fuels association.

The association released a report in January saying the industry supported about 47,000 jobs last year and accounted for nearly $5 billion, or 3.5 percent of Iowa’s gross economic output.

Without the demand for corn and soybeans provided by biofuels — more than half of corn harvested in Iowa in 2014 went to ethanol production — farmers would likely plant fewer acres, lowering investment in rural Iowa, according to the association.

“Lower corn and soybean prices will have a ripple effect on the rural economy,” Brooks said. “Many farmers and ag operators didn’t make money last year. We are already seeing the effects as John Deere has announced various layoffs.”