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Precedent set for continued biodiesel growth

EPA has committed to increasing biodiesel volumes in its final RFS ruling while getting the program timelines back on track, meaning the 2018 proposal for biomass-based diesel is just months away
By Ron Kotrba | December 02, 2015

Everyone I’ve talked with in the biodiesel space since the EPA’s final RFS rule was issued has been happy about the renewable volume obligations (RVOs) for biomass-based diesel. The proposal issued last spring provided a modest trajectory of growth needed to stabilize this industry and get it back on its feet. The final rule issued two days ago not only provides an even greater increase in biodiesel volumes year-over-year to attract investment and get plants running again, but perhaps even more importantly it establishes a precedent of continued growth in biomass-based diesel RVOs.

Steady, sustainable and meaningful growth is what this industry needs, and as the National Biodiesel Board’s CEO, Joe Jobe, said yesterday during a press call, this rule provides just that. “We’re going to see a doubling of our industry that is on track to happen in a five-year period,” Jobe said, referring to 2012 to 2017. “That is demonstrable success.”

Jobe said the NBB’s goal is to push for doubling the RVOs again in the next five-year period, from 2017 to 2022. “This is a very achievable and sustainable goal our industry will work to achieve,” he said.

And according to what EPA wrote in its final rulemaking, the agency agrees that continued growth is what’s needed for biomass-based diesel.

“Although the biomass-based diesel industry has performed well in 2013 and in subsequent years, we believe that continued appropriate increases in the biomass-based diesel volume requirement will help provide stability to the biomass-based industry and encourage continued growth,” EPA stated. “This industry is currently the single largest contributor to the advanced biofuel pool, one that to date has been largely responsible for providing the growth in advanced biofuels envisioned by Congress. Nevertheless, there has been variability in the number of biodiesel facilities in production over the last few years, as well as the percent utilization of individual facilities, both of which contribute uncertainty in the rate of production in the near future, and which can be mitigated to some degree with an increase in the biomass-based diesel applicable volume. Increasing the biomass-based diesel volume requirement should help to provide market conditions that allow these biomass-based diesel production facilities to operate with greater certainty. This result is consistent with the goals of the Act to increase the production and use of advanced biofuels.”

Jobe said another aspect of this final rule that’s positive is it shows commitment on the part of the EPA and the administration to utilize this existing law and this program as a primary tool to achieve GHG reductions in the heavy-duty transportation sector.

The final rule also represents a commitment from EPA to get the RFS program back on track, Jobe said, to meet the statutory deadlines going forward—this is extremely important to the stability of this industry and its ability to attract investment. “This has been one of the biggest flaws in the program in the past few years,” he said. “It comes out strongly as a commitment to get on track and move forward.”

Having the RFS program back on track means that the 2018 RVO for biomass-based diesel must be out 14 months in advance of the program year—or by Nov. 1, 2016. Ben Evans, director of federal communications for the NBB, said the organization fully expects EPA to meet its deadlines moving forward. So with the final rule for 2018 to be published by Nov. 1, 2016, this means that the proposal for 2018 is literally just months away, perhaps June. So while the industry celebrates its victory in a final rule that establishes a growth trajectory through 2017 that is greater than the proposal offered, the work is far from over.

What volume will NBB urge EPA to propose for 2018? “I think it’s too early for us to say that,” Evans told me. “We have an RVO task force that carefully analyzes the markets each year and makes recommendations, so we will conduct that process again and develop proposals accordingly.”

In the meantime, NBB is still hard at work pushing for renewal of the tax credit while producers make moves to ramp up production and get this industry back on solid ground.