Boosted by strong federal policy aimed at diversifying the transportation fuels market, the U.S. biodiesel industry reached a new production record for the first half of the year and is on pace for its best year ever, according to new figures from U.S. EPA.

Biodiesel refiners across the country have produced more than 636 million gallons through the end of June, the EPA reported July 25. That puts the industry on pace to break the previous annual biodiesel production record of just under 1.1 billion gallons and to significantly exceed this year's volume requirement under the renewable fuel standard (RFS).

“This is further proof that policies like the RFS are delivering,” said Anne Steckel, vice president of federal affairs at the National Biodiesel Board, the U.S. biodiesel trade association. “This growth means good-paying jobs, fewer harmful emissions and a diversified fuel market that is helping consumers.”

“Just this week, gas prices were the third highest on record, even as we're drilling more and more oil here at home,” Steckel added. “It just shows that we need alternatives if we're going to escape this cycle of price spikes in the oil markets. The American people understand that we need to diversify and adopt an all-of-the-above energy approach, and we need strong domestic energy policy to do that.”

Biodiesel, made from a diverse mix of resources including soybean oil, recycled cooking oil and animal fats, is the only EPA-designated advanced biofuel with commercial-scale production nationwide, and the first to reach 1 billion gallons of annual production. In 2011, production reached nearly 1.1 billion gallons. It remained flat at that level in 2012 after Congress allowed the $1 per gallon biodiesel tax incentive to expire.

But this year, after Congress restored the tax incentive and the EPA finalized a volume increase under the RFS, the industry is poised to shatter previous records.

“We've been steadily increasing volume and are planning to run at maximum capacity for the rest of the year,” said Karl Radune, president of BioDiesel One Ltd., a small producer in Southington, Conn., that makes biodiesel from recycled cooking oil. “It's allowed us to build inventories, reach out to new customers, and recapture some of the customers we lost when the tax incentive lapsed last year.”

Radune said he also is hoping to boost staffing but remains concerned that Congress might allow the tax incentive to expire again at the end of the year, as it did in 2010 and 2012.

“The uncertainty around the tax incentive makes it very difficult to plan for growth,” he said.

Biodiesel is a renewable, clean-burning diesel replacement that can be used in existing diesel engines. It is the first and only commercial-scale fuel produced across the U.S. to meet the EPA's definition as an advanced biofuel under the RFS—meaning the EPA has determined that it reduces greenhouse gas emissions by more than 50 percent when compared with petroleum diesel. It is produced in nearly every state in the country and last year supported some 50,000 jobs nationwide.

Biodiesel volumes are reported under the biomass-based diesel category under the RFS, which also includes renewable diesel, a similar diesel alternative. Together, biodiesel and renewable diesel producers have reported a total of more than 700 million gallons under the biomass-based diesel category, significantly ahead of the annual volume requirement of 1.28 billion gallons.