Biodiesel's great story is told in Phoenix

By Ron Kotrba | February 08, 2011

The National Biodiesel Board’s new chair, Gary Haer, kicked off the second general session at the National Biodiesel Conference & Expo in Phoenix, and he discussed the long, rough paths he and the industry have taken over the past 12-plus years to get to where it is today. “Twelve years ago the pitch was getting people to listen to what biodiesel had to offer, handing them a five-gallon bucket of biodiesel,” he said. “I’m glad we don’t have to do that any longer. The day we sold our first railcar of 25,000 gallons, that was a great day, I was so proud, so jubilant, and it couldn’t get any better than that.”

As America’s first commercially available advanced biofuel, the industry has certainly come a long way since that five gallon pail, he said.

“The past two years have put stress on our businesses, finances and families,” he said. “There are fewer chairs here,” but even so, biodiesel is now poised for one of biggest years on record. It will play a new role in the nation’s energy complex. And even with the successes, we must look ahead to new challenges, Haer said. The renewable fuel standard began as a floor but now it’s the market driver. Existing industry capacity is well over 2 billion gallons, and producers and stakeholders should partner with the petroleum industry to further the biodiesel cause, he said. “In this environment there’s no substitute for smart businesses and innovative thinking,” Haer said. “We need to encourage strict enforcement of RIN compliance and integrity, and we must renew our commitment to produce the highest quality fuel in for the marketplace.” He said the NBB recognized the critical importance of quality early on. He mentioned the three Es: Education, encouragement and enforcement.

The BQ-9000 quality assurance program continues to grow, Haer said, and 70 percent of biodiesel capacity is represented by BQ-9000 accredited companies.  

Another challenge Haer mentioned is availability of affordable feedstock to responsibly grow the biomass-based diesel requirement. Past chairman Ed Hegland has appointed a taskforce to study feedstock supply that will investigate the market and economic data for feedstock availability.

“Here’s what we already know,” Haer said. “We have ample feeds supplies to meet the 1 billion gallon obligation, and even better, we have enough feedstock to meet the industry’s vision to supply 5 percent of distillate demand with biodiesel by 2015,” which is about 2 billion gallons. “These are realistic goals for our industry.”

Haer said the tax incentive has been one of most success pieces of energy legislation in the history of America. “It’s done what we said it would do,” he said. “It’s built brick and mortar refining capacity, but people in the industry [maybe] took the credit for granted and after the last year, now we all recognize how difficult it could be to navigate the legislative process even with bipartisan policy.”

The soy farmers were thanked, and Haer said, “I understand the difficulties and complexities of this business, and I intend to bring that knowledge in my new role as chairman. We can always improve, listen more and encourage more involvement by our members. This is a critical year. Let’s stick together. We can only accomplish what we need to through a unified voice. We cannot afford to split into factions, and we must avoid the temptation to move anywhere but straight ahead. We’ve faced our darkest years and we can keep together through anything. It’s not easy but it’s worthwhile. [Biodiesel] is not only how you make your living, but it’s also how you earn your legacy.”

Director of state policy efforts at NBB, Shelby Neal, moderated a panel in the session on the importance of state mandates and low carbon fuel standards.

On the panel was Steven Levy with Sprague Energy, who said, “Strange bedfellows unite” in reference to New York City’s embrace of biodiesel. “It’s not often legislators, industry and environmentalists all have the same cause,” but that’s what happened in New York City. The city passed a Bioheat mandate to take effect in 2012. It’s a B2 mandate but Levy said that will likely be bumped up to B5 before the mandate even goes into effect. Not only will the mandate, as is, create a 20 million gallon market annually, but it opens the door to a 7 billion gallon a year market in the heating oil world.

“When you bring the infrastructure to New York for Bioheat, you also bring the infrastructure throughout the region,” he said. “It doesn’t take place overnight, and we need heroes—there are many in this room.”

Eric Bowen, also on the panel, gave an update on California’s low carbon fuel standard (LCFS). He said California will rely on the power of the marketplace to produce the most efficient cost-effective carbon reduction, and unlike in RFS2, biodiesel will have to compete on its merits.

But biodiesel from waste has achieved the lowest carbon score of any fuel California has measured to date. “The opportunity is huge, but success is not guaranteed,” Bowen said.

He mentioned three things to maximize opportunities. One is infrastructure. “There’s no rack blended biodiesel available in California today,” he said. Two is the issue with underground storage tanks, which is being worked on by Underwriters Laboratories right now, albeit moving at a slower pace than anyone would like. The California Biodiesel Alliance and NBB worked to create a three-year grace period though, but a longer-term UST solution is needed. “We need to work with U.S. EPA and tank manufacturers to get this done,” he said. Three, the state is now working on its own definition of biodiesel, and “it’s important we get that definition right,” Bowen said. There’s a billion gallon a year opportunity in California for biodiesel if these issues can be worked out in Sacramento.

Ed Hegland talked on the panel about the Minnesota mandate, which blazed the trail for others to follow. Problems with cold flow after it went into effect ultimately resulted in a better ASTM specification (with the Cold Soak Filtration Test) for the entire industry, he said. Hegland spoke of the mandate ramping up to 20 percent by 2015. Other states have modeled their policies after what Minnesota has done, he said, and “even though the leading edge is often the bleeding edge, we survived.”

Rebecca Richardson, senior consultant to the NBB, discussed Illinois’ two-tiered incentive that offers a 20 percent discount on sales tax for B10 blends and lower, and total sales tax forgiveness on blends higher than B10. “It has spearheaded interest in industry growth in the state, just as we hoped and dreamed it would work,” she told the general session audience. It’s made diesel fuel cost competitive with fuel to the east and west of Illinois, and actually increased diesel fuel sales in the state, she said. “No one is driving through Illinois to fuel up,” like truckers were threatening to do in Iowa as that state last year contemplated a mandate. “RFS2 obligations will be focused on Illinois, [the incentive has] built the business, and there’s robust interest to grow in that part of the country,” Richardson said.

“The most important component is good public policy,” said Ben Wootton, head of Keystone Biofuels and the Pennsylvania Biodiesel Producers Group. “Our story starts in 2007, we needed money but relying on government subsidies is not good a business plan. We pushed two bills, one for an incentive, asking for a dollar per gallon for five years—we settled for three years and 75 cents, and we would have settled for 50 cents, but three years was critical. We needed time to work with stakeholders.” The result was, in 2010 the B2 mandate rolled out. It’s an on-road mandate, and Wootton said he is pushing for incorporating off-road and home heating oil to be included in the mandate. “We saw a tenfold increase, instate production went from 4 million gallons a year to 40 million gallons a year,” he said. In addition, there’s the trickle effect of job creation and spending revolving around the biodiesel industry in Pennsylvania. “The state spent $5 million in 2010 but generated $200 million for the economy.”

If Pennsylvania can do it, any state can do it, he said. “One voice can make a difference.”

Levy said, “Our task is directly related to work being done in California. If we can have simple definitions of biodiesel and LCFS, it makes our jobs easier—and quicker. The Northeast follows California quite frequently.” For predictions, Levy said New York City will go to B5 by 2015 for Bioheat, and there will be an LCFS in 11 states in the next couple of years. “It’s coming, it’s happening not just in the Northeast,” Levy said.

“This industry is not for the faint of heart,” said Manning Feraci, NBB vice president of federal affairs. Last year, “as Congress continued to twist itself in partisan knots, people said we should throw in the towel, but (quoting Vince Lombardi) winners never quit, and quitters never win. We have come through the dark night; the framework is in place for biodiesel to do good things. It’s no accident we’ve arrived at this point. … Reports of the U.S. biodiesel industry’s demise have been greatly exaggerated. This is not the time for complacency though, now more than ever it is imperative that we stick together as an industry. We cannot bury our children in mountains of debt, and don’t take my word for it. Elected officials are looking in every nook and cranny to find savings, that’s why we must remain vigilant and put forward a united front. We have a great story to tell, but in this political environment, we can’t take anything for granted. Most things in life don’t come easy.” He said NBB, specifically his efforts, will be focused on pushing for a longer term credit and one that is a producer payment rather than for an incentive for blenders. He also said NBB is working to protect the integrity of the RFS2 program. 


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