Biodiesel Uncertainty Driving Cheaper Feedstocks

John Davis

Biodiesel Pump in Galva IowaThe uncertainty of the U.S. biodiesel market, caused by the double-whammy of the recent expiration of the $1-a-gallon federal biodiesel tax credit and the Environmental Protection Agency’s (EPA) proposal to effectively cut the amount of biodiesel required to be blended into the Nation’s fuel supply, could be a big driver for cheaper feedstocks. This article from Biodiesel Magazine breaks down how the combination of these factors is pushing producers even more than in the past to find cheaper feedstocks for the green fuel.

When EPA’s draft proposal was leaked prior to its official publication, Steve Bond with Blue Sun Biodiesel told Biodiesel Magazine, “One of the things we look at as the industry matures is, the more efficient plants are going to be able to stay near or at near capacity of 80 to 90 percent. So the impact will hit some plants that have been simply hanging on for the past few years, those that are either single feedstock or just less efficient—most of the impact will be felt by these plants,” he said. “In our Blue Sun Biodiesel plant in St. Joseph, Mo., we’ve invested a lot to make it efficient. But, it’s still a concerning issue. It’s clear the biodiesel industry can do more.”

The largest U.S. biodiesel producer, Renewable Energy Group Inc., announced in mid-December it was acquiring renewable diesel technology firm Syntroleum Corp. along with its 101 patents and 50 percent stake in the 75 MMgy Dynamic Fuels plant in Geismar, La. When the official RVO proposal came out, REG President and CEO Daniel J. Oh said, “REG’s lower-cost multifeedstock business model, network of biorefineries and terminals, and strong position within the industry should allow us to continue to succeed as the markets inevitably adjust to reach a new equilibrium.” Benavides says while large, public biodiesel companies like REG’s stock may fluctuate with the uncertainty, they will “be OK.”

The article goes on to point out how the low-cost production and low-cost feedstocks, which can represent 80-plus percent of production expenses, is driving new technologies to turn low-grade, high free fatty acid (FFA) materials into quality biodiesel. The story also breaks down some of the up-and-comers and their technologies as the industry moves into this area.