Tax credit, RFS drive profits for nation’s largest biodiesel company
Source: Amanda Peterka, E&E reporter • Posted: Friday, May 3, 2013
Renewable Energy Group Inc. announced late yesterday that it sold 39 million gallons of biodiesel in the first part of the year ending March 31, up 14 percent from the first quarter of last year. The Ames, Iowa-based company produced a total of 40 million gallons of the fuel.
“This was the best first quarter for production and gallons sold in the company’s history, which serves as evidence that we are building a profitable, durable and reliable business,” REG President and CEO Daniel Oh said on a call with investors.
The company also posted a $46 million net income in the first three months of the year, up from $14 million in the first quarter of last year. Total revenues increased 80 percent, from $188 million to $339 million. The number takes into account the retroactive tax incentive.
Biodiesel is an advanced biofuel produced from soybean oil, used cooking grease or animal fats. It qualifies for credit under the renewable fuel standard, the federal policy that mandates the country blend 36 billion gallons of biofuel into the nation’s fuel supply by 2022.
The company’s growth was driven by “a number of positive factors” that included U.S. EPA’s biofuel targets for 2013, Oh said. The agency has helped drive demand by requiring that 1.28 billion gallons of biodiesel be blended into the nation’s fuel this year, a 28 percent increase from last year. EPA also allows biodiesel gallons to count for credit under other advanced biofuel categories.
REG also benefited from the reinstatement of the $1-per-gallon biodiesel producers’ tax credit at the beginning of this year, Oh said. The incentive expired at the end of 2011 and was retroactively reinstated in the “fiscal cliff” package that President Obama signed into law in early January.
The expanded use of biodiesel in heating oil, Oh said, is further helping to drive demand in the winter for biodiesel. During the first quarter, REG opened a new terminal in Rochester, N.Y., to provide biodiesel for heating oil.
In the second quarter, the company expects to complete an upgrade at its facility in Albert Lea, Minn., and to begin repair work at a plant in New Boston, Texas, that it purchased last year.
“We are optimistic about the market conditions for biodiesel moving ahead,” Oh said.
REG owns seven biodiesel refineries across the country with a capacity of 212 million gallons per year. Oh said the company operated at 90 percent of that capacity in the first quarter.