Trump Era Biodiesel? What’s Going to Happen?

For most, it’s hard to guess what is going to happen for biodiesel under the Trump administration.   On the one hand, President Trump appears to be in favor of conventional petroleum for fuel and against the wasteful spending on pet renewables like Solyndra.   On the other hand he is pro-business and wants to reduce government regulation, which biodiesel has seen more than its fair share of in the last 8 years.

The biodiesel tax credit expired 12/31/2016.  There are two new bills pending for its renewal, one in the house (H.R. 5240) and one in the senate (S. 3188).  The tandem bills would extend the incentive through 2019 and reform the tax incentive to a producer’s credit aimed at domestic production.  This would seem to be in favor of Trump’s “America First” agenda, as it would create domestic jobs, domestic revenue, and prevent American tax dollars from subsidizing foreign imported biodiesel.

We encourage all biodiesel stakeholders to contact their elected officials in Congress and press for Congress to extend the biodiesel tax incentive.  This needs to happen sooner than later.  Waiting until 2018 to renew it retroactively WILL KILL more small and medium sized biodiesel plants, just as it has already in North Carolina and other states.  In 2010, there were 6 biodiesel plants in North Carolina.  In 2017, there are only three left, and none of them have shown any significant revenue or production growth to brag about.

To reach your senators’ offices, call the Senate switchboard at 202- 224-3121 or visit the Senate website here. Unless you already have a contact at the office, ask to speak to the staffer who handles energy or tax issues.

To contact your U.S. Representative call the House switchboard at 202-225-3121 or visit the House website here.

Congress has used tax incentives to stimulate domestic energy production for more than 100 years. Since being implemented in 2005, the biodiesel tax incentive has played a key role in stimulating growth in the U.S. biodiesel industry, helping it become the first EPA-designated Advanced Biofuel to reach commercial-scale production nationwide. By helping biodiesel compete on a more level playing field with petroleum, the $1-per-gallon tax credit creates jobs, strengthens U.S. energy security, reduces harmful and costly emissions, diversifies the fuels market, and ultimately lowers costs to the consumer. There is a clear correlation between the tax incentive and increased biodiesel production, which has grown from about 100 million gallons in 2005, when the tax incentive was first implemented, to almost 1.8 billion gallons in 2014.

However, unlike billions of dollars in petroleum tax incentives written permanently into the tax code, the biodiesel tax incentive faces tremendous uncertainty as Congress has passed short-term extensions and allowed it to temporarily expire repeatedly in recent years, including for most of 2015. This has created significant disruptions in the industry. The annual threat of losing the tax incentive has stunted growth, limiting biodiesel producers’ access to capital and investment while restricting their ability to expand and hire new employees. With less than a decade of commercial-scale production, biodiesel remains a young and maturing industry that needs stable, long-term tax policy to continue meaningful growth.

Glycerin Raindrops

People often ask us about how biodiesel is made and the glycerin separation phase. Here is a great example that we see every day. Once the reactor has stopped, we allow for a brief separation period where the heavy phase glycerin literally “falls out” to the bottom of the tank. We then pull this off and continue the reaction if necessary, or push to the next step in the process.

 

Motor Fuels Tax Rate Increase

Effective January 1, 2017 the NC motor fuels tax rate will increase from 34 cents per gallon to 34.3 cents per gallon.  This rate will be effective for the entire 2017 calendar year.

 

Biodiesel Blends for Heating Oil in your Boiler and Furnace and Cut Costs!

Biodiesel blended with off-road diesel fuel makes an excellent winter heating oil blend that not only reduces sulfur and particulate emissions but also increases cetane AND reduces your costs!    Simply blending biodiesel at a 50/50 ratio with diesel fuel can reduce costs by over 20 cents per gallon!

Today’s current Heating Oil Price  = $1.67
Today’s Biodiesel Price                   =  $1.25
B50 Biodiesel Blend Price              =  $1.46

 

Burning a biodiesel blend in your boiler or furnace can help you meet EPA emissions requirements and save you money at the same time!  Call us today to learn more or to order.

 

 

Status of the Biodiesel Tax Credit

As most everyone knows the Biodiesel Tax Credit (BTC) expires at the end of this year once again, and so far has not been renewed by congress.  This is typical, and shouldn’t be troubling, but yet cannot help but continue to contribute to the instability that is the renewable fuels industry.   Congress has had 11 months to renew the tax credit for 2017 and beyond, yet it, as well as other tax extenders, have remained in jeopardy of expiring and will likely not be renewed until next year.

Contrary to what most laymen think, the BTC has traditionally enjoyed bi-partisan support and has been readily supported by both President Obama and President Bush, who was president when it was created in 2004.  Early insights into President-elect Trump also see support for domestic energy and renewable energy, and particularly biodiesel.

As usual, most people think it’s highly unlikely that the tax credit WON’T be renewed, it’s just a question of when.  If the renewal happens quickly after the first of the year (and Trump’s inauguration), it could offer very little disruption to the industry.  If however they wait until near the end of the year as has happened before in the past, it could indeed crush more of the smaller plants with less operating capital than their bigger competitors.

This time is supposedly different however, as more traction than ever has appeared in favor of a Producer’s Credit instead of a Blender’s Credit, which would only offer the BTC to Biodiesel refiners, instead of blenders like petroleum companies that don’t actually make biodiesel, but just blend it with diesel fuel.  Ultimately this solves a very critical problem, imported biodiesel coming into the country that is blended by petroleum companies and claiming the tax credit.  This essentially allows a foreign company to “double dip”, claiming tax benefits from their own country and also ours, using OUR tax dollars to enrich a foreign company.  Sadly, this has been going on for years and the the Producer’s Credit BTC bill that was proposed in 2015 was changed back to the Blender’s credit before being passed for the 2016/2017 years.    Now once again it’s being proposed as a Producer’s credit, except it sounds like for at least the first quarter of 2017 it STILL might be Blender’s credit in order to reduce the impact on the heating oil industry that’s already purchased or hedged their positions against the BTC with heating oil.  This solution would be acceptable to most in the long run, as it reduces the impact on the existing market while providing a long term resolution to American tax dollars funding foreign interests that compete in our own market.

Irritated your tax dollars are being used to fund foreign companies that directly compete with US companies?   You should be.

Want to help? Call or write your congressman. Tell them you want them to support the Biodiesel Tax Credit.  To find your members of Congress and their contact information, visit the Senate website and the House website.  Additionally, Sens. Chuck Grassley, R-Iowa, and Maria Cantwell, D-Washington, are the sponsors of Senate Tax Bill S.3188 and Reps. Kristi Noem, R-South Dakota, and Bill Pascrell D-New Jersey, are the sponsors of House Tax Bill HR 5240 that have been previously introduced to extend the biodiesel tax incentive through 2019 and reform it as a domestic production credit.

US biodiesel leaders remain optimistic after Trump victory

From Ron Kotrba on Biodiesel Magazine:

After a stunning landslide victory for Donald J. Trump and his campaign in what easily could be described as the most contentious presidential election in recent U.S. history, the domestic biodiesel industry remains optimistic that a new Trump administration will work to further biodiesel’s role in growing the U.S. economy.

Although last month Larry Schafer, co-founder of Playmaker Strategies LLC and a senior advisor to the National Biodiesel Board, said during Christianson & Associates’ Biofuels Financial Conference that Hillary Clinton’s positions on renewable fuels policies would be easier to predict than Trump’s, it is clear the president-elect’s support of the U.S. biodiesel industry would be consistent with his campaign promises to bring back American manufacturing jobs and—as Trump’s website states on energy policy—“make America energy-independent … and protect clean air and clean water.”

The biodiesel industry currently supports 48,000 American jobs and its reduction of tailpipe and greenhouse gas emissions is well-established by government agencies and private institutions alike. Furthermore, unlike petroleum, biodiesel’s nontoxic chemistry poses no threat to the nation’s water resources.

In addition, Trump has made it very clear his intention to cut U.S. dollars being sent overseas to aid in foreign manufacturing at the expense of U.S. jobs. This position would be consistent with reforming the $1-per-gallon biodiesel blenders tax incentive to a domestic producers incentive, which would stop U.S. tax dollars from subsidizing foreign biodiesel production through a growing volume of biodiesel and renewable diesel imports—670 million gallons last year and potentially more than 800 million gallons this year.

The National Biodiesel Board congratulated Trump and other newly elected and returning leaders, and stated it looks forward to working them to promote local jobs, energy security and clean air through a growing biodiesel market.

“Biodiesel has long been a bipartisan issue and we are confident our new Congress will continue to support a smart solution that works for America on so many levels,” said Donnell Rehagen, the newly appointed CEO of the NBB. “President-elect Trump has expressed strong support for biofuels and support for the renewable fuel standard (RFS), so we are hopeful his administration will further strengthen opportunities for America’s advanced biofuel. By the time he takes office, we hope that the EPA will have announced biodiesel volumes that more closely reflect fuel availability and current production and that the critical biodiesel tax incentive will be extended and reformed to a production credit to ensure that American jobs are not put at risk yet again due to Congress’ inaction.”

“Biodiesel is a critical piece of our nation’s ambitions for energy security, greenhouse gas reduction and economic development,” said Grant Kimberley, the executive director of the Iowa Biodiesel Board. “We welcome the opportunity to work with a new administration in the White House, and appreciate the positive statements about biodiesel that President-elect Donald Trump made on the campaign trail. We are optimistic that he will support policies imperative to the growth of biodiesel, including the federal RFS, one of the most effective policies in history to diversify America’s fuel supply. The federal tax incentive for biodiesel is also critical to help us compete against petroleum, which had more than a hundred-year start on biodiesel.”

Kimberley added that the IBB’s immediate priority is the extension and restructuring of the biodiesel tax credit. “This is vital because the current structure allows foreign biodiesel producers to take advantage of the credit if their fuel is blended in the U.S.—not the original intent of Congress,” he said. “We look forward to the time ahead as we work to secure biodiesel’s future.”

From energy menu, America should order – ‘all of the above’

From an OpEd article published in the Raleigh News and Observer on October 27, 2016:

 

When gas prices rise, we routinely hear about the added costs rippling through the economy, hitting consumers and companies alike with the equivalent of a “gas tax.” By that logic, shouldn’t lower gas prices mean more expendable income and higher profits, creating a generally improved economic climate and bullish markets?

Yet throughout the year we’ve seen just the opposite, with counter-intuitive headlines like, “Oil Prices Slump, Markets Follow.” Now, as those same oil prices have begun to rise, the Dow Jones Industrial Average has flirted with record-setting territory.

Is this the new normal?

Probably not. Some analysts believe that when oil prices recover, the markets will eventually decouple themselves from their attachment to “black gold.” Yet the market fluctuations do illustrate the destructive power oil price instability has on the American economy.

And the issue of volatile oil prices is unlikely to subside anytime soon.

In the utilities industry, no one energy source makes up more than a third of the electricity generated. Last year, about a third of our electricity came from coal, another third from natural gas, 20 percent from nuclear and another 13 percent or so from hydro and other renewable sources. For consumers, that means fluctuations in the costs of one fuel can be more easily offset by the diversity of sources employed by utilities.

On the other hand, the transportation sector illustrates how a lack of diversity in fuels spikes what Americans pay for their daily commute. Gasoline and diesel produced from petroleum dominate, making up a whopping 86 percent of the market; the rest comes from renewables, Compressed Natural Gas, electric vehicles, etc.

The petroleum industry doesn’t want the public, or policy makers, to focus on diversifying the market. Instead, they promise domestic drillers will simply unearth almost unlimited supplies of oil under our own soil. And, they say, awash in new oil, America’s petroleum industry will drive down the cost of gasoline.

But recent history tells us this can’t possibly be true. The past 20 months have clearly demonstrated that only OPEC has the means to shift the price of oil – higher or lower, depending on its motives.

In the fall of 2014, OPEC, led by Saudi Arabia, made the decision to flood the market with oil. Domestic drillers tried to keep up, but the price of oil – traded on international markets – dropped precipitously, causing the U.S. petroleum industry to lose hundreds of millions of dollars and shed thousands upon thousands of jobs.

The fact is that within our borders we only control less than 1 percent of the world’s proven oil reserves. The Middle East controls almost half. To make matters worse, it can cost 10 times as much to reach those U.S. reserves as compared to countries in the Middle East.

What America needs is an “all of the above” strategy when it comes to its transportation fuels. Yes to biofuels. Yes to electric vehicles. Yes to new technologies that have the promise of providing diversity to our portfolio of fuels.

Yet the powerful oil and gas lobby vehemently opposes any attempt to boost alternatives and voluntarily lessen its monopoly of the market. Ironically, they argue free-market principles should carry the day. The transportation fuels market should be unfettered, they exclaim.

There are two obvious issues with this position: First, there’s nothing “free” about their position in the transportation fuels market. According to Congress’ Joint Committee on Taxation, the U.S. oil and gas industry alone enjoys more than $4 billion in subsidies. Globally, it’s even worse.

The second issue is the suggestion that the transportation fuels market is unfettered. OPEC operates as an international cartel, making decisions as a group of nations to set production targets that influence the price of oil on global markets. Frankly, as a leader of a U.S. trade organization, if I suggested our group operate in a similar manner, I could go to jail.

The markets may sometimes react illogically to the conditions they’re presented, but policy makers don’t have to do the same. We need to change the headlines. I’d take one that reads, “Consumers and Economy Helped by Fuel Diversity.”

Zack Hamm is President of Triangle Biofuels, based in Wilson.

Read more here: http://www.newsobserver.com/opinion/op-ed/article110922477.html#storylink=cpy

NC Biodiesel Highway Tax Drops to .34

Effective July 1st, 2016, the NC motor fuels tax rate will drop to .34 per gallon from .35.   The current .34/gallon tax rate will remain valid until December 31, 2016.

http://www.dornc.com/taxes/motor/alternative_fuel_licensees.pdf

 

Saudi Arabia has declared an end to its oil war with the US

“Two years after quietly declaring war on upstart US shale, Saudi Arabia says the need for the fighting is over. In remarks to journalists while on a US visit, Saudi Arabian energy minister Khalid Al-Falih said that the worldwide oil glut has vanished, signaling an end to Saudi Arabia’s strategy of flooding the global market with oil to try to put American drillers out of business.”

The implication was that Saudi Arabia owned the victory. But a three-week-long resurgence of US oil drilling after 21 months of decline suggests that Saudi and the US fought to a draw.

Falih noted that a record volume of oil remains in storage in the US and around the world (paywall), built up during the glut, but once much of that is sold off, the kingdom can resume its traditional role managing supply and demand.

“We are out of it,” Falih told the Houston Chronicle. “The oversupply has disappeared. We just have to carry the overhang of inventory for a while until the system works it out.”

Source:

Saudi Arabia has declared an end to its oil war with the US

Production Increases, Upgrades Coming

2014 and 2015 were tough years for biodiesel.  The lack of an established tax credit and delayed policy implementation for the EPA RFS program created uncertainty in the biodiesel  market, and many smaller plants suffered for it.   Even for 2016 the tax credit took over a month and a half to be established where plants could send in the forms to claim credits.   That old saying about the 9 most terrifying words:  “I’m from the government and I’m here to help”, sure seems to fit.

InProcess Biodiesel after reacting and settling.

In-Process Biodiesel After Reacting and Settling.

But things are picking up, and demand for biodiesel is increasing for the second quarter of this year.   We have several upgrades underway to improve our production efficiency and throughput.  We will be making some improvements to our boiler, adding another resin column, installing additional heat exchangers to scavenge heat and improve process temperatures, and improving our wash process to reduce the bottleneck we have there.  We should have these improvements completed in the next few weeks, expecting an almost instant realization of efficiency savings and improved production capacity (assuming Murphy doesn’t step in and rear his ugly head).

On the longer term, we are revisiting our original master site plan for consideration of a major expansion at the facility.  We have been looking at two different production paths for this upgrade, using the enzymatic biodiesel production process, or supercritical.  They both have their advantages and disadvantages, and both will be expensive to convert the plant to.  We are still in the evaluation stages but intend to move forward with one of them in the future, hopefully realizing an increase in our nameplate capacity while also reducing our cost per gallon production costs.

The fuel industry is on its heels right now, and while most are probably thinking of getting out of the business, it feels more like it’s time to double down while things are cheap.   It wouldn’t take much for the oil industry to spike above $50/barrel again, or even $100.  A war in the middle east, Iran and Russia, or our own US production going bankrupt because of the recent oil glut.  There is no quick fix for oil, we don’t have any readily available replacement for it so it’s going to be with us for a while, always in demand; and biodiesel will be right there beside it.