More than a year ago, when the U.S. EPA announced it would combine the 2009 and 2010 biomass-based diesel mandates under RFS2, bringing the obligated parties' required blend volume to 1.15 billion gallons, the future for biodiesel seemed very bright. This was before the agency determined that soy biodiesel achieved advanced biofuel status by virtue of producing 57 percent fewer greenhouse gas (GHG) emissions over its life cycle compared to that of petroleum diesel.

Then, early this year when that milestone announcement was made, the industry had even more to look forward to, despite the fact that the important federal blender tax credit for biodiesel had expired. It was early in the year, and everyone figured Congress would get its priorities together and pass the biodiesel tax credit, right? EPA set July 1 as the implementation date for RFS2. Weeks passed and hopes rose in the biodiesel industry as the House of Representatives continued to pass bills that included a retroactive tax credit extension. But those hopes were shattered as the Senate, time after time, stripped the credit away before passing these respective packages.

More and more plants began to idle, and even though July 1 came and went, obligated parties were gobbling up renewable identification number (RIN) credits from as far back as 2008, keeping actual production at a small fraction of installed capacity. Despite these mitigating circumstances, people continue to ask about the future of biodiesel-specifically, the biomass-based diesel mandate-given the situation with the lapsed tax credit. This was the topic of a recent F.A.M.E. Forum blog post of mine, initiated by a reader who sent me the following email:

"I keep reading articles about the RFS mandates on the use of biodiesel but also about the government not passing the tax credit, so very few companies are producing biodiesel. An article tying the two together would be interesting since it seems this is going to come to a head in the future when the supply can't meet the demand. Then what happens?"

The gist of my response argued that the mandate was passed irrespective of the tax credit, so the absence of one should not affect the other. Yes, oil lobbies can argue that without it, biodiesel is cost-prohibitive, but let's not forget RIN credit prices, which for 2010 biodiesel credits, are more than 50 cents a credit. Add the fact that one gallon of biodiesel carries 1.5 ethanol equivalent RINs, this would mean a biodiesel RIN credit price surpassing 75 cents.

Joe Jobe, the National Biodiesel Board's CEO, left an extensive comment on this posting, adding very good perspective and some positive situations to watch for in 2011. "It is worthwhile to note that the uncertainty in the marketplace caused by the 18-month delay in implementing the RFS2 program, together with the unprecedented use of allowing biodiesel RINs generated in 2008 to be used for compliance with the RFS2 program in 2010, created a dramatically reduced volume requirement for biodiesel in 2010 (only 345 million gallons)." For 2011, however, there is an 800 million gallon biomass-based diesel mandate, and even with the 20 percent carry over allowance of RINs from 2009, at a minimum this equates to a doubling of production in 2011 versus this year-with or without the tax credit in place. Thanks Joe for the great comment on my blog, and let us, the industry producing America's first advanced biofuel, not lose sight of these positives.