Calif. biodiesel conference addresses state LCFS, bad RIN issues

By Erin Voegele | January 17, 2012

Leaders of the California biodiesel industry met Jan. 16 in San Francisco to partake in the inaugural California Biodiesel & Renewable Diesel Conference. More than 180 industry stakeholders attended event, which was presented by the California Biodiesel Alliance and Biodiesel Magazine.

Eric Bowen, chairman of the California Biodiesel Alliance and executive director of corporate business development and legal affairs at the Renewable Energy Group Inc., was on hand to deliver the keynote address. During his presentation Bowen not only spoke of mistakes the industry has made in the past and now must work to overcome, but he also offered his personal opinion on the issues surrounding the status of California’s low carbon fuel standard and the temporary injunction the program now faces. 

Regarding California’s LCFS, Bowen stressed that his own personal opinion of the issue in no way should be construed as that of either the California Biodiesel Alliance or REG. “I personally believe that [the California Air Resources Board] is going to win this battle,” he said. “CARB has a long history of winning these types of battles, and I really view this injunction…as a bump in the road.”

Assuming his prediction is right Bowen said there are a couple of ways the issue could play out. “In a couple of months there is going to be a hearing to have a stay of the injunction that has been put in place,” he said, noting that he is unsure what the result will be. If the injunction is removed, the program should move ahead as planned, albeit with a slight delay, and will continue until a final court decision is handed down. If the injunction remains in place, Bowen said it is likely CARB will consider actions that can be taken to address the complaints of the district court while still allowing the program to move forward. “My personal opinion is the district court’s rationale around why the low carbon fuel standard violates the commerce clause is weak,” he continued. “The carbon intensity regulations account for geography simply because of the carbon of moving fuel, and otherwise are geography-neutral. Ultimately, I think that is what the courts will rule.”

Aside from the LCFS, Bowen noted that the biodiesel industry must work to overcome negative perception issues caused in the past by low-quality fuel and fraudulent RINs. According to him, the biodiesel industry sustained some public perception damage during the boom years. At one point, he said, there were nearly 300 biodiesel plants either in operation, under construction or planned in the U.S., with a combined annual production capacity of approximately 3 billion gallons a year. Some of the plants that were constructed during that boom period were built in poor locations, using ineffective technology, or built for the wrong feedstock. Some faced all three challenges, he said. Those plants put some bad fuel in the market causing quality issues that still haunt the industry today. While fuel quality issues have largely been solved, Bowen noted that it is still necessary for the industry to remain diligent. “If we don’t self-police, and if we don’t self-regulate, we’re not going to be able to realize our potential,” he added. That said, Bowen also noted that the local California biodiesel market didn’t really experience the “boom” period that other regions of the U.S. did. He attributes that primarily to the fact that permitting issues and delays in California largely prevented overbuilding.

Bowen also addressed the issue of fraudulent RINs. “To the best of my knowledge, we don’t actually have a RIN fraud problem here in California,” he said. He noted, however, that local producers are still plagued by invalid RINs that were produced by companies in other regions of the country, generally by smaller producers who built inefficient, impractical plants during the boom. Bowen estimates tens of millions of dollars of fraudulent RINs have been put into the market by these few companies. The bad news for many small producers around the nation that do produce high-quality fuel is that large obligated parties have been electing to reduce their risk by buying RINs exclusively from larger producers. That comes at an incredibly high cost to small producers who have done nothing wrong, Bowen said.

Regarding the future of the biodiesel industry in California, Bowen noted it looks bright. He said that local biodiesel use seems to be going up, and that local producers are expected to operate at capacity for the foreseeable future. While drop-in diesel biofuels are also likely to begin to enter the California market, Bowen said those fuels will be complementary to biodiesel use, not competitive.

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