Feeling the Effects

In his editor’s note from the Fall 2019 print edition of Biodiesel Magazine, Ron Kotrba discusses the tough market and policy conditions that materialized this past summer, how it is impacting biodiesel producers, and the resiliency of this industry.
By Ron Kotrba | October 11, 2019

July and August were without question some of the toughest months for the U.S. biodiesel industry in years, perhaps ever.  Biodiesel producers have seen their fair share of adversity. In my 15 years covering this industry, I have learned what resilience truly means. Here are just a few obstacles you have overcome in the past decade and a-half.

Fighting for and getting the all-important biodiesel tax credit in 2004-’05. Being shut out of the European market in the late 2000s. Seeing the great possibilities of market expansion through passage of the second Renewable Fuel Standard, only to have its implementation seriously delayed and overlapping with the first tax credit lapse in 2010. Subsequent expirations of the tax credit followed by retroactive reinstatements, destroying its utility as an instrument of investment. Devastating RIN fraud. Constant pushback from Big Oil. The RFS program going off-track in 2014 and 2015 with no final RVOs for two years. Changing administrations and Congress. Arduous reeducation of lawmakers and agencies. The administering agency of RFS—the U.S. EPA—becoming an unofficial tool of Big Oil. Hyper-partisan politics causing gridlock and divisiveness. A president who promises big things for farmers and biofuels but whose actions have, so far, shown little support for those same constituents. 

In early July, the biodiesel industry was thrown for a loop when the commerce department announced its preliminary determination from the “changed circumstances review” of countervailing duties (CVDs) put on Argentine biodiesel imports a year and a-half prior. The determination was to significantly reduce CVDs while leaving in place the antidumping tariffs. How this will play out and whether the latter is enough to keep imports from flooding the U.S. market like in 2016 is anyone’s guess.

Two days later, EPA released its 2020-’21 proposal for RFS volumes, in which it planned to keep 2021 biomass-based diesel volumes at 2020 levels—without cause. Furthermore, with the administration’s increasing number of granted small refinery exemptions to RFS over the past two years—and 38 pending SREs at the time—the situation was getting dire.

Then, on Aug. 9, 31 of those 38 petitions were granted, wiping out more than a billion gallons of biofuel demand in the blink of an eye. The outrage from farmers and biofuel constituents was palpable. Perhaps in hindsight this will be viewed as a good thing, considering it has forced the Trump administration to address SREs when all previous attempts had failed. A Trump deal to appease his base was pending at press time. Meanwhile, the tax credit has remained lapsed for the longest period—more than 20 months—since its inception. Any one of these issues would be devastating, but to have all of them converge simultaneously is too much for any industry to take.

Following these affairs that unfolded over this summer, I talked with more than a dozen people—lawmakers, producers, plant employees, representatives of soybean and biodiesel associations, trade specialists—and documented their perspectives on the events and the effects being felt, particularly on producers and plant employees, in “Cruel Summer” on page 12.

One thing is certain—they are absolutely feeling the effects. However, depending on the deal struck by Trump and whether Congress can come together in bipartisan support of an extenders package that includes the biodiesel tax credit, it may not be too late to turn these obstacles into means of progress. As the constant underdog, this industry has repeatedly beaten the odds in Rocky-like fashion to overcome seemingly insurmountable challenges. And I have no doubt it will do so again. 

Author: Ron Kotrba
Biodiesel Magazine
[email protected]

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