Indiana biodiesel producer falls victim to US policy uncertainty

By Ron Kotrba | November 14, 2019

In a time when U.S. economic growth is reported to be roaring full-steam ahead with record-low unemployment rates, record-high stock markets and a resurgence in American manufacturing, another biodiesel production facility is shutting down. Integrity Biofuels in Morristown, Indiana, is the latest victim of congressional inaction and an administration whose EPA is undermining the rule of law.

Since this summer, several biodiesel manufacturing facilities have ceased production or closed, citing poor economic conditions in the industry due to the expiration of the biodiesel tax credit on Dec. 31, 2017, and the EPA’s copious small refinery exemptions (SREs) granted to oil companies required to blend certain volumes of biofuels under the Renewable Fuel Standard—a law in place for more than a decade.

Biodiesel plants that have publicly announced closures since this summer include Renewable Energy Group’s 15 MMgy facility in New Boston, Texas; W2Fuel’s 10 MMgy plant in Crawfordsville, Iowa, and its 15 MMgy site in Adrian, Michigan; the Flint Hills Resources and Benefuel joint venture Duonix, a 50 MMgy facility in Beatrice, Nebraska; and three World Energy plants, including its 45 MMgy facility in Camp Hill, Pennsylvania, 72 MMgy plant in Natchez, Mississippi, and 18 MMgy facility in Rome, Georgia. Others, such as American GreenFuels, have announced cuts in output.

In October, Guy Herrell, plant manager for Integrity Biofuels, told Biodiesel Magazine that the plant’s most recent testing puts production capacity of Integrity Biofuels at more than 6.4 MMgy. The facility, which is touted as Indiana’s first biodiesel plant opening in August 2006, employs 14 people and has begun the layoff process.  

“It’s very unfortunate that government policy, or lack thereof, can have such an impact on an industry,” said John Whittington, co-owner of Integrity Biofuels. “Since 2005, the biodiesel tax credit incentive, which was put in place to encourage the development of the renewable fuels industry, has been treated like a yo-yo, providing no stability to the biodiesel markets. The dysfunctional happenings inside the beltway of Washington, D.C., have distracted our elected officials and they have turned their backs on the industry that they once encouraged to grow. Without a long-term policy in place, even if that means a slow phaseout of the biodiesel tax credit, our industry continues to have unstable markets. No one knows for sure if the credit will come back, or if it will be retroactive if it is reinstated. This suppresses the market and only allows those who are willing to take a risk at the government’s roulette table and those who have the cash capabilities to wait for a possible reinstatement or retroactive tax credit. This is a ridiculous way to treat an industry and terrible management of our tax dollars by the government.” 

In August, after EPA had steadily been increasing its granting of SREs since the Trump administration had taken office, the agency approved dozens more, which outraged biofuel producers and farmers. The backlash from President Trump’s base was so great that he set out to negotiate a deal between biofuel producers and their farmer supporters and Big Oil, bringing in key legislators and cabinet members to round out the discussions. Once the deal was struck, EPA announced on Oct. 4 that the agency would begin to account for SRE projections in future RFS volume requirements using a three-year average of SREs granted. When the agency announced the release of its supplemental proposal Oct. 15 to codify the agreement, however, farmers, biofuel producers and their association leaders suggested the move was a bait-and-switch, as the proposal sought to use a three-year average of U.S. DOE recommendations rather than actual gallons waived. Once again, biofuel and agriculture groups, along with key senators, are urging President Trump to uphold the deal he negotiated and force EPA to do the same.

Meanwhile, pressure is mounting on Congress to act on a tax extenders package. Several key tax provisions, such as the biodiesel tax credit, expired at the end of 2017 while more expired at the end of 2018. Even more yet are set to expire at the end of this year, affecting a wide variety of industries. Earlier this month, 40 House Democrats sent a letter to House leaders urging them to reinstate the biodiesel tax credit. On Nov. 11, a diverse group of 66 associations, representing a wide array of industries, sent a letter to House and Senate leaders asking them to act on a tax extenders package before the end of the year. On Nov. 12, the National Biodiesel Board released a new report written by John Urbanchuk of ABF Economics on how important the tax credit is for the biodiesel industry, including job creation, retention and economic growth.

“The U.S. Congress allowed the biodiesel tax credit to expire at the end of 2009, 2011, 2013, 2016 and 2017, which meant that the credit was not initially in place for 2010, 2012, 2014, 2015, 2017, 2018 and 2019,” Integrity Biofuels stated. “In each of these previous years, the tax credit was eventually reinstated retroactively through various pieces of legislation near the end of December or early the following year. The industry has now been without the credit since Dec. 31, 2017, over 23 months. With the history of it being expired and then reinstated [so] many times confuses the marketplace.”

 

 
 
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