This year is poised to be a great year for the biodiesel industry. The EPA upheld the Renewable Volume Obligation (RVO) for this year and along with the return of the tax credit, the industry is busy getting back online and producing quality fuel.
However, despite the RVO, there are still some challenges that need to be addressed to ensure success and during USDA Ag Secretary Tom Vilsack and EPA Administrator Lisa Jackson’s visit to REG’s biodiesel facility in Newton, Iowa, these challenges were discussed along with solutions.
I sat down with REG President and COO, Daniel Oh, to learn more about what it will take from the biodiesel industry, the obligated parties and agencies such as EPA to ensure the country’s goals are met.
Listen to my full interview with Daniel Oh: REG's Daniel Oh Talks RVOs
“Well its early days in the year. As we look at national biodiesel data we don’t yet see the volume being purchased that if you extrapolate that, would cause the obligation that the obligated parties have to buy biodiesel to be fully completed by the end of the year,” said Oh. “Now this doesn’t concern us in that we see volumes increasing every month. However, the obligated parties have different positions and in good faith I think they’re all trying to comply but some of them have the distribution base to buy biodiesel others don’t. Some are figuring out how to sell. Some are even trying to figure out how to even purchase and handle biodiesel.”
Oh continued, “So what we really need moving ahead is to get to a point over the next two-to-three years where we have a new market equilibrium. Where those plants that deserve to be around and our highly competitive, produce great fuel, are running at high utilization and the obligated parties are being served in low cost efficient way. In this year, what we really need to see is greater buying sooner so that the right plants can get up and running and provide the RINS (Renewable Identification Numbers) that are necessary for the full year obligation.”
Oh noted that the obligated parties are their customers and they are delighted to serve them. He said that what REG is doing all day is providing them with not only a compliance opportunity but also the opportunity for energy security, cleaner air and lower carbon emissions.
“That said, the unintended outcome might be that because obligated parties are trying to figure out the right time and the right manner in which to purchase biodiesel, they don’t create enough demand early enough in the year to bring plants online,” said Oh. “Clearly there are more than enough plants in the country to produce biodiesel, but it takes some time to get up and running. So we really want to see the obligated parties buy biodiesel sooner, get the plants up that need to be up and running so it’s much simpler to meet the volume.”
At the EPA level, Oh said that if they simply reaffirm that the RVO is a serious obligation and that they care, that is probably all that necessary.
REG plans to continue to work closely with the EPA and USDA to ensure that with all parties working together, the opportunity is there for the obligated parties to meet their RVOs and the country to meet is renewable fuels goals.
Click here to see photos from the USDA/EPA REG biodiesel plant briefing and tour.