INSIDE: RECENT DEVELOPMENTS WILL SHAPE FUTURE OF RFS 2017 Fall Edition
MARKET MAKERS A Spotlight on Companies Whose Expertise Builds ConямБdence in Biodiesel Page 14
PLUS Biodiesel Policy in a
Hard Political Culture Page 22
Low Carbon Demand Regears Biodiesel Inputs Page 6
BIOBASED CHEMICALS Worldâ€™s Largest Biomass Event
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CONTENTS 2017 FALL ISSUE VOLUME 14 ISSUE 3
14 The Biodiesel Confidence Builders SPOTLIGHT
Market confidence is everything, so we showcase seven companies whose RIN, regulatory, consulting and production expertise have helped define this industry’s place in a world where uncertainty is the only sure bet
BY RON KOTRBA and the Ever-changing Political 14 22 Biodiesel Landscape POLICY
In a year rife with political change, Biodiesel Magazine brings you the latest information and perspective on RFS, trade and tax credit policy
BY RON KOTRBA
DEPARTMENTS 4 Editor’s Note
Poise Amid Uncertainty BY RON KOTRBA
Advertiser Index 28 2 20 7 & 27 16 15 21 19 9 17 25 18 8 24
2018 Biodiesel Industry Directory 2018 International Biomass Conference & Expo 2018 National Advanced Biofuels Conference & Expo 2018 National Biodiesel Conference Agribusiness Consulting Clean Energy Consultants D3MAX LLC Dallas Group of America, Inc. Frazier, Barnes & Associates, LLC HTH Companies PRIMA RINAlliance RINtrust, LLC Solfuels USA
8 Business Briefs 10 Inside NBB
5 Legal Perspectives
7 Events Calendar
Recent Developments Will Shape Future of RFS BY JOEL BEAUVAIS, JOSHUA BLEDSOE AND STEVEN CROLEY
6 Talking Point
Low Carbon Demand Regears Biodiesel Inputs BY NIAMH BOYLE
ON THE COVER:
Management and executives from Solfuels USA in Helena, Arkansas, stand proudly in front of their newly retooled 40 MMgy plant, which recently began shipping commercial loads of high-quality biodiesel to oil and gas customers. PHOTO: SOLFUELS USA
POISE AMID UNCERTAINTY
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The U.S. biodiesel industry is no stranger to uncertainty. Unfortunately, it has been the norm for the better part of a decade. Trade, the tax credit and RFS, and other important policy issues are the topics of my feature article on page 22, “Biodiesel and the Ever-changing Political Landscape.” These issues are also at the heart of increased uncertainty today. Most notably, U.S. EPA’s Notice of Data Availability, issued Sept. 26 after comments closed on EPA’s already weak proposal, is seeking ways to reduce biodiesel volumes in 2018 and 2019, even though 2018’s volume of 2.1 billion gallons was set by the Obama administration in 2016. At press time, just after I finished writing my policy article, Renewable Energy Group Inc. hosted a press conference at its biodiesel plant in Newton, Iowa, featuring U.S. Sen. Chuck Grassley, R-Iowa. The senator and great biodiesel champion noted once again that this proposal would drastically undermine biodiesel production and that it is contrary to statements made by Republican presidential nominee Trump on the campaign trail and subsequent statements by President Trump, and those he nominated to serve in his cabinet. “A platform is not just to run on,” Grassley said, “it’s also to stand on.” Grassley said during the senate confirmation hearings, it was important for those involved to know how Trump’s nominees from oil-producing states viewed biofuels, whether it was energy secretary nominee Rick Perry from Texas or EPA administrator nominee Scott Pruitt from Oklahoma, and whether they were aware what the president promised to the people of the biofuels industries. Grassley made a senate floor speech the day the NODA was issued, subsequently writing a letter to the president about the matter, he said. “And [on Sept. 29] I had the opportunity to speak with [the president] on the phone, on this very subject,” Grassley said. “It was a three-way call with another, who is very involved in this issue,” intimating this third party was Pruitt. The result led to a meeting that was scheduled to be held Oct. 17 between Midwestern senators and the EPA, including Pruitt. “We’ll see what comes from that, but I hope my message is heard,” Grassley said. “This proposal needs to be dropped.” Earlier this year, in an attempt to show EPA that the National Biodiesel Board is willing to work with the agency, NBB lowered its 2019 biomass-based diesel ask volumes from 2.75 billion gallons to 2.5 billion between the Aug. 1 hearing held on the original 2018-’19 RFS proposal, and Aug. 31 when NBB submitted its official comments. “We’re trying to be professionals,” Doug Whitehead, chief operating officer at NBB, told me. “We know what domestic production capacity is, so the numbers we pitched at the Aug. 1 hearing are accurate and attainable, but we have seen and heard signals in the marketplace, and we want reasonable growth. We’re not coming off our numbers, but we’ll come off our ask to show EPA, ‘We heard you.’” Donnell Rehagen, CEO of NBB, told me, “A one-time shift from a trade standpoint is good, but a shift in our government, which put RFS in place, is more meaningful for us. We are simply waiting for a signal from the government—not once a year it might be this or it might be that. Stakeholders can’t make business decisions that way. To expand this industry, they are looking for a longer-term commitment. That’s what RFS was designed to do. And it has worked effectively to do that. We can’t afford to have starts and stops in the RFS. We experience that with the tax credit and it’s very harmful, but we’ve learned to deal with it. We can’t deal with same situation in the RFS.”
COPYRIGHT © 2017 by BBI International
2017 FALL EDITION
Recent Developments Will Shape Future of RFS BY JOEL BEAUVAIS, JOSHUA BLEDSOE AND STEVEN CROLEY
Three recent developments will shape the future of U.S. EPA’s Renewable Fuel Standard.
In late July, the U.S. Court of Appeals for the D.C. Bledsoe Circuit in Americans for Clean Energy v. EPA invalidated EPA’s use of its “inadequate domestic supply” waiver authority for the 2014-’16 volume requirements. Weeks before, EPA announced in its proposed standards for Croley 2018 and 2019 that it is beginning work on a new rulemaking to “reset” required RFS volumes for years to come. And on Sept. 26, EPA issued a Notice of Data Availability seeking comment on potential bases for further reducing the proposed 2018 advanced biofuel and total renewable fuel volumes, and/or the 2019 biomassbased diesel (BBD) volume. EPA’s 2014-’16 rule was promulgated in December 2015, though the statute requires volumes to be set by November of the year before the compliance year (or two years before, for BBD). EPA retroactively set total renewable fuel, advanced biofuel and cellulosic requirements for 2014-’15 at the levels of actual production—while requiring modest prospective increases for 2016 (and 2017 for BBD). The D.C. Circuit rejected biofuel producers’ challenge to the rule, concluding that EPA “may promulgate late renewable fuel requirements— and even apply those standards retroactively— so long as EPA reasonably considers and mitigates any hardship caused to obligated parties by reason of the lateness.” But the core issue in the case was EPA’s interpretation of its “general waiver” authority to reduce volumes based on “inadequate domestic supply” of renewable fuel. EPA focused on addressing the E10 “blendwall”—shorthand
for limitations on the rate at which ethanol use can be increased once the fuel supply is saturated with E10. EPA first used its cellulosic waiver authority, which authorizes EPA—once it reduces cellulosic volumes based on projected production—to reduce total and advanced biofuel volumes by up to the same amount. EPA then used its general waiver authority to further reduce total renewable fuel, reading “inadequate domestic supply” to include situations like the blendwall. The D.C. Circuit upheld EPA’s use of its cellulosic waiver authority, but not the general waiver. The court held that “the ‘inadequate domestic supply’ provision authorizes EPA to consider supply-side factors affecting the volume of renewable fuel that is available to refiners, blenders, and importers,” but does “not allow EPA to consider the volume of renewable fuel that is available to ultimate consumers or the related demand-side constraints that affect the consumption of renewable fuel by consumers.” Notably, it struck down only the 2016 standard, not the 2014-’15 standards, though all three were based in part on “inadequate domestic supply.” This seems to reflect the court’s view that EPA has authority to reduce requirements for past years without reliance on a specific waiver authority. On July 5, EPA proposed requirements for 2018, and BBD standards for 2019, seeking to maintain volumes at levels comparable to the 2017 standards. As in the 2017 rule, EPA relied exclusively on its cellulosic waiver authority to reduce total and advanced requirements. Thus, neither the 2017 rule nor the 2018 proposal are affected by the court’s narrowing of EPA’s “inadequate domestic supply” waiver authority. This approach seems likely to continue. The difference between cellulosic production (which is increasing slowly) and the statutory levels (which rise more quickly) continues to grow, allowing EPA to rely on the cellulosic waiver alone for greater reductions in volumes. EPA’s September NODA, meanwhile, requests comment on reductions to the proposed 2018 advanced and total renewable fuels
requirements and 2019 BBD requirement. It points to possible price impacts of the expiration of the biodiesel tax credit and pending countervailing duties on imported biodiesel from Argentina and Indonesia. And it seeks comment on several possible authorities to reduce volumes, including the “inadequate domestic supply” provision (read to allow reductions based solely on supply from U.S. producers, not imports), authority to address “severe economic harm,” authority to waive BBD volumes for up to 60 days based on market disruptions (which EPA would apply by reducing annual BBD volumes by the proportion of a year represented by 60 days, or 15 percent), and finally, the statutory factors EPA applies in setting annual BBD volumes. Potentially overshadowing all these developments, EPA has announced its intention to undertake a rulemaking to “reset” annual RFS requirements for future years. EPA’s 2018-’19 proposal highlights its statutory obligation to “reset” volume standards if annual requirements are waived by 20 percent or more for two consecutive years. This requirement has been triggered for cellulosic and advanced biofuels, and the 2018 rule, if finalized as proposed, would trigger it for total renewable fuel. The 2018-’19 proposal states that EPA’s administrator has directed staff to conduct a technical analysis for such a reset. The outcome of that rulemaking, and the litigation that inevitably would follow, will have substantial consequences for the future of the RFS. Authors: Joel Beauvais, Partner Joshua Bledsoe, Counsel Steven Croley, Partner Environment, Land & Resources Department Latham & Watkins LLP email@example.com firstname.lastname@example.org email@example.com
Low Carbon Demand Regears Biodiesel Inputs BY NIAMH BOYLE
Policy changes in the U.S. and Europe are quickly regearing biodiesel demand toward a focus on the carbon emissions cuts which feedstocks can hit, triggering an upsurge in international interest in feedstocks able to deliver low carbon emissions. Demand growth for
low carbon, particularly waste-based feedstocks in North America, is being driven independent of federal policymakers. This has allowed the sector to sidestep some of the gyrations in RFS2 expectations seen under the Trump administration. California’s Low Carbon Fuel Standard carbon cap-and-trade scheme for the road transport fuels sector has pioneered the carbon counting approach now mushrooming across other western states and parts of Canada. California’s greenhouse gas (GHG) saving target will hit 10 percent by 2020. The introduction of a Clean Fuels Program in Oregon targeting similarly aggressive carbon cuts will bolster California’s demand. Oregon plans a 10 percent cut in state transport GHG emissions by 2025 relative to a 2015 baseline by adopting a declining average carbon intensity (CI) for transport fuel suppliers to hit each year. The success of California’s program meanwhile has inspired the Canadian government to consider launching its own transport fuel carbon cap-and-trade program, which will supplement provincial carbon-cutting efforts, including Ontario’s high-GHG threshold for blended biofuels. California’s aggressive carbon-saving mandate and the subsequent rise in state carbon ticket prices have already triggered a boom in low carbon renewable and biodiesel demand. Corn oil, which boasts a relatively low average CI of 36.49g CO2e/MJ under the California LCFS methodology, has seen its consumption as a U.S. biodiesel feedstock soar 25 percent year-over-year (YoY) through 6
the first seven months of 2017 to 842 million pounds, supporting a steady rise in corn oil prices. Prima Markets’ data shows corn oil prices had gained 4 percent since the beginning of 2017 by the middle of September, despite the 6 percent slide in soybean oil prices over the same period. U.S. consumption of other low carbon wastes is also growing. U.S. white grease consumption as a U.S. biodiesel input climbed 8.5 percent YoY through the first half of this year, despite a 1 percent drop in output. U.S. consumption of yellow grease as a biodiesel input jumped 6 percent in the first half of this year.
Overseas Markets Hungry for US Waste
U.S. buyers of waste feedstock are facing mounting competition from international buyers interested in using the low carbon footprints of these grades to feed growth in overseas carbon-counting mandates. The EU will restrict the use of cropbased biofuels in the European road transport fuel sector, while increasing the market share of waste-based advanced biofuels to 6.8 percent by 2030. Europe’s demand for imported waste is already rising. Chinese exports of used cooking oil (UCO) climbed almost 200 percent to more than 176,000 tons in the first eight months of this year, with two-thirds shipped to the EU. A hefty flow of UCO, corn oil and other feedstocks, such as fish and tall oils, has been scheduled to ship to Europe from the U.S. this year. European buyers continue to seek fresh supply from Asia, North Africa and South America. U.S. exports of corn oil to Europe have breached 100,000 tons so far this year, according to shipping data collated by Prima Markets. Strong overseas demand for U.S. yellow grease into waste-dominated biofuels markets such as the U.K. has been constrained by falling U.S. domestic supply, driving U.S. prices higher.
2017 FALL EDITION
While domestic tallow consumption as a biodiesel feedstock in the U.S. has been weaker YoY, California’s insatiable appetite for imported renewable diesel is ironically pulling the strings behind much of the recent export boom. Exports of inedible tallow skyrocketed 38 percent YoY through the first seven months of 2017. Most of this was shipped to feed renewable diesel production in Singapore, before being sent back to the U.S. West Coast.
Big Oil Turns to Small Carbon
Longer term, shifts in corporate strategy look set to continue diversification into low carbon feedstocks, regardless of government policy. Even with the politics of the U.S. RFS2 mandate looking uninspiring, oil majors are increasing their commitment to developing advanced biofuels, aware these investment signals could be critical to long-term prosperity in a low carbon fuel economy. In the distillates world, ExxonMobil has given top billing to its research work into algae as an advanced biofuel feedstock, while French oil firm Total has been busy advertising its global commitment to aviation biofuel. Global renewable diesel leader Neste meanwhile is busy considering where to build its fifth large-scale renewable diesel plant after exhausting its capacity to supply global demand growth from its existing international production footprint. Longer term, low carbon feedstock suppliers are likely to find supplementary demand from the petrochemicals sector as these firms increase their focus on the production of low carbon, biodegradable products such as plastics. Author: Niamh Boyle Senior Research Analyst, Prima Markets +44-207-064-6470 Niamh.firstname.lastname@example.org
EVENTS CALENDAR National Biodiesel Conference & Expo JANUARY 22-25, 2018 Fort Worth, Texas The National Biodiesel Conference & Expo is the biggest biodiesel event of the year and registration is now open for the 2018 Conference in Fort Worth, Texas, Jan. 22-25. Whether you are an industry veteran, or just getting your feet wet in the biodiesel world, the National Biodiesel Conference & Expo has plenty of reasons to attend this year. Speakers will present thought-provoking and engaging sessions, with keynote speeches and roundtable discussions presented by industry experts. The expo hall offers attendees the chance to network with other professionals from around the country, and events like the famous opening reception and Biodiesel Ride & Drive will showcase the latest diesel vehicles and bring plenty of fun and business networking to the week. 800-841--5849 www.biodieselconference.org
International Biomass Conference & Expo APRIL 16-18, 2018 Atlanta, Georgia Organized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop—the world’s premier educational and networking junction for all biomass industries. 866-746-8385 www.biomassconference.com
J a n u a r y
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Wo r t h
Welcome to the big show, the main event, the silver celebration, The 25th Anniversary of Biodiesel
International Fuel Ethanol Workshop & Expo JUNE 11-13, 2018 Omaha, Nebraska From its inception, the mission of this event has remained constant: The FEW delivers timely presentations with a strong focus on commercial-scale ethanol production—from quality control and yield maximization to regulatory compliance and fiscal management. The FEW is also the ethanol industry’s premier forum for unveiling new technologies and research findings. The program extensively covers cellulosic ethanol while remaining committed to optimizing existing grain ethanol operations. 866-746-8385 www.fuelethanolworkshop.com
National Advanced Biofuels Conference & Expo JUNE 11-13, 2018 Omaha, Nebraska With a vertically integrated program and audience, the National Advanced Biofuels Conference & Expo is tailored for industry professionals engaged in producing, developing and deploying advanced biofuels, including cellulosic ethanol, biobased platform chemicals, polymers and other renewable molecules that have the potential to meet or exceed the performance of petroleum-derived products. 866-746-8385 www.advancedbiofuelsconference.com
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PHOTO: MEG CORP.
Sapp Bros., owner of 17 travel plazas and more than 30 wholesale locations across the U.S., celebrated the opening of its new biodiesel blending terminal in Norfolk, Nebraska, Aug. 30. Fuel suppliers can load diesel at the nearby Norfolk NuStar Terminal and then load biodiesel to the desired blend level at the Sapp Bros. terminal just 2.5 miles away. Fuel suppliers will have 24/7 access and loading upon approval. The biodiesel available at the new terminal will be sourced from BQ-9000-certified biodiesel production facilities and made from soybean oil. The Nebraska Soybean Board and MEG Corp. helped Sapp Bros. develop the new blending terminal. Sapp Bros. first began offering biodiesel in 2004 in Peru, Illinois.
People, Products & Partnerships
Cargill announced in September it would build a 60 MMgy biodiesel plant in Wichita, Kansas. The 42,000-square-foot facility is expected to cost $90 million and open in early 2019. Construction will begin in December. The new biodiesel plant will be located next to its oilseed processing plant and will replace an existing oil refinery currently managed by Cargill’s global edible oil business. The biodiesel plant will employ 35 fulltime workers. Cargill currently operates two large-scale biodiesel plants in Kansas City, Missouri, and Iowa Falls, Iowa. It produces ethanol and biodiesel in the U.S. and the EU, ethanol in Brazil, and biodiesel in Argentina.
Sergeant Bluff, Iowa, biodiesel production facility—the nation’s first commercial-scale biodiesel plant, built in 1996. Production capacity at AGP’s Sergeant Bluff biodiesel refinery doubled from 30 to 60 MMgy. The plant expansion was first announced November 2015. The project, coupled with construction of AGP’s new on-site soybean oil refinery that supplies feedstock to the biodiesel plant, was completed this summer. AGP’s Sergeant Bluff complex in Iowa now features integrated soybean processing, soybean oil refining and large-scale biodiesel production. AGP’s total biodiesel production capacity is now 150 MMgy from three Midwestern biodiesel plants.
PHOTO: AG PROCESSING INC.
Ag Processing Inc. (AGP) recently completed a major expansion project at its
Biofuels marketer Targray announced the nationwide launch of its turnkey biodiesel solution for the convenience and fuel retailing segment. Created following a two-
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2017 FALL EDITION
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BUSINESS BRIEFS year pilot program and multiple rounds of customer consultations, Targray’s innovative 24/7 biodiesel solution for the convenience store segment provides a simplified approach to biofuel procurement that emulates purchasing standard diesel. It enables chains and independently owned c-stores and fuel retailers to achieve a positive return on investment from their very first biodiesel order. Typical savings range from 3 to 10 cents per gallon of diesel sold, depending on regional market conditions and federal and state program eligibility. A letter of intent (LOI) was signed in August between North Dakota Soybean Processors LLC and the Jamestown/Stutsman Development Corp. to advance development of a $287 million soybean crush and biodiesel refinery in Spiritwood, North Dakota. NDSP has selected a site on approximately 80 acres in the Spiritwood Energy Industrial Park. According to Minnesota Soybean Processors (MnSP)—the majority investor in and managing member of the NDSP project— the LOI facilitates transfer of land from JSDC to the Spiritwood Energy Park Association LLC and infrastructure improvements such as additional rail capacity. NDSP has completed a feasibility study and a preliminary frontend engineering and de-
sign study for the project that is expected to crush 125,000 bushels of soybeans per day to produce soybean meal, RBD soybean oil and 30 MMgy of biodiesel.
The California Air Resources Board announced it has certified a biodiesel additive that will make B20 blends in California the cleanest proven and tested diesel fuel with the lowest emissions profile available anywhere in the U.S. The additive, branded Vesta 1000, takes already clean-burning biodiesel and ensures it reduces every measurable regulated emission, including NOx, when blended with California’s unique diesel formulation called CARB diesel. The National Biodiesel Board led the initial research and development into the additive to maintain biodiesel’s competitive advantage under the state’s Low Carbon Fuel Standard. The CARB-certified additive ensures compliance with the Jan. 1, 2018,
implementation of the state’s Alternative Diesel Fuel Regulation. California Fueling LLC will produce the formula and Pacific Fuel Resource LLC will deliver the product to market.
PHOTO: RENEWABLE ENERGY GROUP INC.
Renewable Energy Group Inc. completed upgrades at its Emden, Germany, biodiesel plant this summer. REG invested 2.5 million euros for the installation of a new biodiesel distillation column and a thermal oil heater. REG acquired full ownership of the Emden plant in January after its initial majority investment in the former Petrotec AG in December 2014. Emden is one of the company’s two German biodiesel processing facilities, along with 13 biomass-based diesel refineries across the U.S. that have a combined nameplate production capacity of 1.7 million metric tons (502 million gallons) annually.
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Industry in Full Court Press on DC Priorities I’ve spent many winter weekends in gyms around the Midwest coaching youth basketball teams my kids were a part of. With competitive teams playing in Donnell Rehagen, CEO, big-time tournaNational Biodiesel Board ments, we often found ourselves in close games heading into the fourth quarter. Time to turn up the pressure. As we move into the final minutes of 2017, the National Biodiesel Board is doing the same thing on our D.C. efforts—putting on the full court press to get the win. Our big three in D.C. remain the Renewable Fuel Standard, the trade case and the biodiesel tax incentive. All three issues require a comprehensive, multifaceted approach made up of advocacy efforts in Congress, various federal agencies and legal work. And all require significant efforts. With the stakes this high, I have taken an expanded role in day-to-day D.C. operations and NBB Chief Operating Officer Doug Whitehead has taken up residence in the district, working full time from our Washington office to orchestrate our expansive, skilled team of staff and contractor resources. Also in this critical time, we have stepped up coordination of D.C. assets of NBB member companies through weekly meetings and near-daily communication. This allows the industry to laser focus our efforts into the most effective strategies and utilize our combined skills, connections and resources for the greater good of the industry. The 45-day comment period on the RVO proposal closed in September with the final rule due Nov. 30. Our extensive com10
ments, guided by the membership, called for higher volumes of both advanced biofuels and biomass-based diesel in the final rule. Our more than 100 pages of comments and supporting documents highlight that our industry can do much more than the proposed 2.1 billion gallons of biomass-based diesel in 2019 and 4.24 billion gallons of advanced biofuel for 2018. We are extremely concerned with the proposed rule’s unprecedented cut to the advanced biofuel volume and freeze in the biomass-based diesel volume. Both proposals run counter to Congress’ objectives to promote the growth of advanced biofuels like biodiesel. Now that the comment period has closed, our efforts have shifted to discussions directly with the administration, including EPA, USDA, DOE, and directly with the White House. The antidumping and countervailing duty petitions against Argentina and Indonesia continue to progress. In late August, the industry saw a favorable preliminary determination on the countervailing duty case as the U.S. Department of Commerce found those countries’ subsidies to be in violation of international trade rules. The preliminary determination in the companion antidumping investigations is expected in October. Final commerce department determinations will be issued later this year for countervailing duties and in early 2018 for antidumping, with final determinations by the U.S. International Trade Commission soon after. The industry continues to work with the ITC to advance the case, including a standard public hearing set for Nov. 9 in Washington, D.C. These cases are critical to competitiveness of U.S. biodiesel producers and work in concert with our other efforts. And finally, the biodiesel tax incentive, our longest-running federal priority, continues to move forward. There hasn’t been as much public discussion around the tax incentive since May when the ‘‘American Re-
2017 FALL EDITION
newable Fuel and Job Creation Act of 2017’’ was introduced in both the House and Senate, but plenty continues to be done to position ourselves for any possible legislative vehicle for tax policy. In the Senate, S. 944, is led by U.S. Sens. Chuck Grassley, R-Iowa, and Maria Cantwell, D-Washington. The companion legislation H.R. 2383 mirrors the Senate bill and is led by U.S. Reps. Kristi Noem, R-South Dakota, and Bill Pascrell, D-New Jersey. Comprehensive tax reform, budget negotiations, and even a tax extenders package are all viable options to move our incentive forward before the end of the year. I continue to believe that you—the biodiesel industry—are your own best advocates. But you don’t have to do it alone. NBB’s team includes key contracts with seasoned D.C. veterans including the American Soybean Association’s Tom Hance, former Sen. Byron Dorgan, Tim Urban and Donna Flynn of Washington Council Ernst & Young, former Rep. Kenny Hulshof of Kit Bond Strategies, Jim Massie at Alpine Group, the legal teams at Morgan Lewis and Cassidy Levy Kent, and significant new resources just brought on board to bolster our efforts including the Carmen Group and Sextons Creek. By pooling the resources of the biodiesel industry into concentrated efforts lead by NBB, we gain a comprehensive and coordinated advocacy and regulatory effort that gets results. A full court press, on the basketball court and in our Washington, D.C., efforts, is designed to turn up the pressure in crunch time. As the clock ticks down on 2017, I’m confident our increased intensity, effort and focus will yield wins for biodiesel. Donnell Rehagan CEO National Biodiesel Board
NBB Biodiesel Industry Mobilizes to Respond to Proposed RFS Cuts The biodiesel industry mobilized to respond to a notice from U.S. EPA announced Sept. 26 calling for comments on a proposal to further reduce the renewable volume obligations under the 2018 and 2019 Renewable Fuel Standard. The Notice of Data Availability requested comments on the possibility of deeper cuts to the RFS than the levels in its July 21 proposed rule and triggered a new 15-day comment period that closes 15 calendar days after its formal posting in the Federal Register. “The EPA’s proposal earlier this summer was inadequate, underestimating the power of domestic biodiesel production and ignoring the intent of the law,” said Doug Whitehead, chief operating officer of the National Biodiesel Board. “This additional request for comment is even more disappointing. It is critical that our members, champions in Congress and stakeholders again demonstrate to EPA the industry’s proven success record and capacity for continued growth. There will be serious
impacts to the tens of thousands of American biodiesel workers who were promised that this administration had their back.” Along with NBB’s formal comments, stakeholder comments can also be submitted to EPA through NBB’s Fueling Action Center found at www.biodiesel.org. In addition to this coordinated effort to generate comments to EPA, NBB is engaging stakeholders and arming champions in Congress with the data to correct EPA and working directly with the administration. “What’s most frustrating is it appears that EPA has not bothered to look at the facts we’ve put before them in our formal comments on the original proposal for the RFS—facts that support higher volumes of biodiesel and other advanced biofuels,” said Donnell Rehagen, NBB CEO. “This is not the first year the biodiesel industry has been without the tax credit, or the first year there’s been uncertainty in the biodiesel industry. But every year we have pre-
New proposed RFS cuts threaten to stymie American jobs and advanced biofuel growth. PHOTO: JOSEPH L. MURPHY, IOWA SOYBEAN ASSOCIATION
vailed, providing volumes above and beyond the requirements.” The EPA’s Notice of Data Availability requested comments on options for reductions in the 2018 biomass-based diesel, advanced biofuel and total renewable fuel volumes.
Scientific Data the Cornerstone of Biofuels Policies Published research supports the benefits of biodiesel in reducing wastes, supporting domestic jobs and reducing harmful emissions. The National Biodiesel Board has long-touted biodiesel’s benefits by standing behind quantified, scientific analysis and making the biodiesel industry a leader when it comes to bona fide sustainability benefits. Data is the cornerstone of sound policies like the Renewable Fuel Standard and the California Low Carbon Fuel Standard. Previous work by U.S. EPA, the California Air Resources Board, USDA, Argonne National Lab and others consistently show biodiesel lifecycle emissions at least 50 percent better than petroleum. But skeptics wonder about the indirect expansion of global agriculture as U.S. policies have their positive effect on rural farm communities. A new academic paper published in Biotechnology for Biofuels shows biodiesel’s benefits are even better than previous models suggest. More data is available now than ever before, and that data shows farmers are pro-
ducing more on fewer acres. This means that penalties for indirect land use change by EPA and CARB overestimate emissions from creating new farm land. “This latest research verifies biodiesel is an ideal option to support American-made energy,” said Don Scott, NBB director of sustainability. “The more accurate the models become, the more clearly they show biodiesel’s benefits.” Without the controversial indirect effects, biodiesel reduces greenhouse gas (GHG) emissions by 85 percent compared to fossil fuels. Using modeling that includes predicted indirect emissions lowered biodiesel’s advantage to just more than 50 percent cleaner than diesel fuel. That is, according to the modeling done by EPA in 2010 and CARB in 2014. Purdue University’s latest research shows these models underestimated the carbon benefit of biodiesel by 10 percent. “Biodiesel is already recognized as the commercial biofuel with the lowest net GHG emissions,” Scott said. “The power in these new
Data is the cornerstone of sound policies such as the Renewable Fuel Standard and the California Low Carbon Fuel Standard, and a new academic paper shows biodiesel’s benefits are even better than previous models suggest.
findings is that science is improving. The prediction of economic impacts and land use change is becoming more reliable. More data has been analyzed today than has ever been available in the past. As these models look more and more like the real world, biodiesel’s extensive benefits become more clear.”
NBB Annual Report Highlights Industry Success Stories The National Biodiesel Board exists to serve and provide value to its members. Functioning much like a farm coop, members pool their resources, share expenses and gain scale to reach achievements that wouldn’t be possible individually. Members define the direction of the association each year through the annual program plan process that becomes the playbook for staff to execute. The success stories highlighted in NBB’s FY17 Annual Report are a result of highly coordinated efforts among a multitude of program areas working in concert to move the industry forward. “This year, we saw many challenges as a trade association but we also saw significant successes,” said NBB CEO Donnell Rehagen. “All of which would not be a reality without the support of the membership, and our hard-working, dedicated team of experts pulling towards a singular goal.” One of the greatest benefits of NBB membership is the ability of the organization to leverage membership dues dollars with
outside funding sources. Member dues made up only a third of NBB’s total revenue in FY17. For every $1,000 in membership dues paid, NBB members receive the benefit of nearly $3,500 in revenue support through the trade association’s ability to secure outside funding. “Membership in NBB is a tremendous value due to the outside funding NBB is able to secure,” said Brad Shimmens, NBB director of operations and membership. “You would be hard-pressed to find this kind of return on investment anywhere else.” Successes in 2017 include continued NBB’s ability to raise more than $8 million of implementation of the California Low Car- outside funding allows member dues dollars to be bon Fuel Standard and Oregon Clean Fuels used almost exclusively for critical federal and state Program that generated carbon credits for advocacy efforts. the industry in excess of $250 million, the Learn more about the National Biodiesreduction of biodiesel’s indirect land use change penalty used by regulators to craft el Board at www.NBB.org and see this year’s biofuels policy by 37 percent, General Mo- Annual Report at NBB.org/results/projecttors’ announcement of 20 diesel vehicles, all showcase. approved for B20, and much more.
National Education Campaign Supports Critical Policy Efforts The National Biodiesel Board continues to spearhead the only comprehensive national education campaign designed to promote biodiesel. The effort reaches many audiences from national opinion leaders to local fleet managers, but a main component focuses on thought leaders in Washington, D.C. Among NBB’s constant objectives is safeguarding against roadblocks that might impede industry growth. “This year’s national ad campaign encourages thought leaders to explore the promise of more with biodiesel,” said NBB Communications Director Jessica Robinson. “The content focused on the 64,000 jobs the biodiesel industry supports and the tremendous economic
benefits that brings to communities across the country.” The national ad campaign has been cited as influential in offering the positive message support needed to secure key federal policy victories. And survey work conducted by NBB backs that up. “According to NBB’s annual survey, 93 percent of people who recalled seeing the ad had a more favorable impression of biodiesel,” Robinson said. “The more people know about biodiesel, the more favorable their opinions are, which is exactly why this education campaign works so well to increase the perception of biodiesel.”
The campaign wraps up this fall with preliminary data showing millions of impressions, hundreds of thousands of video views, and thousands of clicks through to the campaign homepage, www.AmericasAdvancedBiofuel.com.
Discovery Channel Documentary on Biodiesel This Fall Over the past 18 months, NBB has worked with a documentary film crew working for the Discovery Channel. The 120-minute piece titled Hot Grease will air Nov. 16. It involved some nine days of shooting with NBB staff and members and countless discussions, interviews and materials to help accurately tell the story of the commercial biodiesel industry.
2017 FALL EDITION
State Policy Successes Build Valuable Markets for Industry The National Biodiesel Board works hard to be a coordinating voice for the industry, taking the direction of our members and implementing it in concrete ways to build up the industry. NBB’s state policy program is a key piece in advancing biodiesel markets and relies heavily on coordination with members and regional stakeholders. The biodiesel industry saw a number of state policy milestones achieved in 2017 that will help build valuable market demand for America’s advanced biofuel.
On West Coast, Carbon Reduction is King
Biodiesel plays a key role in West Coast policies focused on carbon reduction. Continued successful implementation of the California Low Carbon Fuel Standard and Oregon Clean Fuels Program increased demand for biodiesel in the two states from 315 million gallons to 455 million gallons collectively in 2017. These volumes generated carbon credits in excess of $250 million in real value that was injected into the biodiesel industry. The California Air Resources Board announced in July its approval of a NOxmitigant additive for biodiesel blends that was developed through an NBB-led effort over the course of more than 18 months. This first-of-its-kind approval by CARB will ensure access to B20 blends throughout California. The additive takes already clean-burning biodiesel and ensures it reduces every measurable regulated emission, including NOx, when blended with California’s unique diesel formulation called CARB diesel. B20 blends are now certified as the lowest emissions liquid fuel available within the state.
but in the heating oil market as well,” said Shelby Neal, NBB director of state governmental affairs. “We commend Gov. Cuomo for signing this important bill that will provide cleaner air for more New Yorkers by improving emissions from heating oil. Increasing the use of Bioheat in the nation’s largest heating oil market also supports local jobs in the clean energy sector.” The bill expands on New York City’s previous commitment to biodiesel, a citywide 2 percent biodiesel requirement implemented in 2012 that increased to 5 percent Oct. 1.
Illinois, Minnesota Extend, Expand Landmark Policies
Biodiesel champions in the Midwest continued to build upon long-running, proven efforts that support biodiesel market growth with continuation and expansion of policies in Illinois and Minnesota. This year, Illinois passed a five-year extension of its diesel fuel sales tax exemption for biodiesel blends over B10. The policy has made Illinois one of the largest biodiesel markets in the country at more than 150 million gallons of annual use. “The biodiesel sales tax incentive in Illinois has been a tremendously successful policy supporting the growing market for American-made advanced biofuels,” Neal said. “It spurs economic activity, supports U.S.-produced fuels, and adds value to the agricultural economy. Illinois is a top-five biodiesel producing and use state, and this policy extension will help maintain the state as an industry leader.” Minnesota, the first state to require a biodiesel blend in 2005, is taking another
Biodiesel’s ability to participate in state policies adds significant value to the industry. The 455 million gallons utilized under the California Low Carbon Fuel Standard and Oregon Clean Fuels Program generated carbon credits valued in excess of $250 million that was injected into the marketplace.
historic step as it announced this summer it is ready to move to B20 on May 1, 2018. Once implemented in May, the requirement will be in effect April through September, reverting to B5 in the winter months. “Minnesota has been a visionary leader on biodiesel policy for 15 years, starting with passage of the nation’s first statewide biodiesel requirement,” said Neal. “This milestone policy couldn’t have been achieved without the hard work of so many of our members and biodiesel stakeholders’ dedicated efforts.”
New York Expands Bioheat For Cleaner Air
On the East Coast, New York state passed legislation this year requiring B5 Bioheat in eight downstate New York counties beginning in 2018. The bill will expand New York City’s biodiesel blending standard to 70 percent of the state’s residents, or nearly 14 million people. “New York has long been a leader in recognizing the environmental, public health and economic benefits of biodiesel, not only in transportation applications www.BiodieselMagazine.com
REVITALIZATION: Solfuels USA recently started shipping commercial loads of high-quality biodiesel from its newly retooled plant in Helena, Arkansas. From left, Matthias Binder, technical director; Henri Bardon, CEO; and Steve Lewis, production manager. PHOTO: SOLFUELS USA
Biodiesel Magazine profiles seven companies integral to boosting biodiesel markets through RIN management, regulatory guidance, consulting, maintenance and production BY RON KOTRBA
Solfuels USA Solfuels USA appeared on the U.S. biodiesel industry radar last December when two Singapore-based companies, Agritrade Resources Ltd. and Solfuels Holdings Pte Ltd., jointly acquired the 40 MMgy Delta American Fuel plant in Helena, Arkansas, which sat idle for years. The plant was built to process virgin soybean oil into biodiesel. “We are convinced that local biodiesel production capacity in the U.S. remains largely underinvested,” Henri Bardon, CEO, said shortly after the acquisition. “The location of this plant 60 miles south of Memphis, with its multimodal logistical capabilities, makes it an ideal location from which to distribute biodiesel.” The plant hired Frazier, Barnes & Associates as engineering partner and Process Systems Inc. as construction contractor to retrofit the plant with its proprietary multifeedstock technology to turn yellow grease, rendered animal fats, inedible corn oil and refined vegetable oil into high-quality fuel. Bardon says the retrofit involved adding an additional transesterification reactor and acid wash. The original 14
design included a single reactor and could process only virgin soybean oil with FFA content up to 0.5 percent. “This gives us the option of producing biodiesel from multiple feedstocks up to 5 percent free fatty acid content,” Bardon says. The retrofit also included installation of an ion exchange system using Lanxess resins to finish the biodiesel. “It’s a regenerative system, so once a quarter we can regenerate our resins with a methanol wash,” Bardon says, adding that the finishing system helps the plant manufacture a superior-quality fuel. “We produce distilled-quality biodiesel without having a distillation column,” he says. In May, Solfuels USA received its approval from U.S. EPA as a registered biodiesel production facility to participate in the Renewable Fuel Standard and generate RINs. In June, the plant began trial production after the retrofit, and by late September it was shipping its first commercial loads of fuel via truck and rail to oil and gas customers. Also in September, Solfuels USA discharged its first barge of soybean oil at the Griffin River Terminal that services the plant. Bardon says he expects the plant to
2017 FALL EDITION
hit max capacity late this year. “We think by mid-October we should reach 60 percent capacity,” he says. Bardon adds that Solfuels USA is being audited by Weaver in October for the third quarter and he expects the plant to be Q-RINcertified by November. And to demonstrate the newly retooled facility’s commitment to quality, Bardon says a full laboratory has been established on-site, and the company is currently engaged in the BQ-9000 certification process. “We should be certified sometime in the first quarter of next year,” Bardon says. The story of Solfuels USA is a good, representative example of the biodiesel sector as a whole. While producing high-quality, earth-friendly fuel is fundamental to the plot of this story, the subtext of the central theme expands far broader. It’s about investment in the future and providing jobs to the rural economy—16 in Arkansas, in one of the most underprivileged regions of the country, and four in Memphis at the commercial sales office. It showcases the global interest in biodiesel development, and the domestic promise biodiesel delivers.
SPOTLIGHT RINtrust RINtrust, one of only a few RIN quality assurance plan (QAP) providers registered with U.S. EPA, was spun out of consulting firm Frazier, Barnes & Associates in 2013. “It was a natural service for us to offer,” says Pete Moss, president of FBA and RINtrust. “We know our clients’ plant capabilities and whether they’re in compliance.” Moss says what makes RINtrust special is its connection to FBA. “We have chemical engineers that understand various process technologies, indepth knowledge of the feedstock, biodiesel and RIN markets, and broad knowledge and expertise in regulations,” he says. According to Moss, RINtrust’s technical, financial and regulatory prowess provide a critical advantage. “We can spot an error or intentional fraud others might miss,” he says,
Clean Energy Consultants Formed in 2017, Clean Energy Consultants is a new company, but its owner, professional engineer Ernie Pollitzer, is anything but new to biodiesel. Pollitzer performed his first RFS engineering review in 2010 and completed nearly 200 more since. “I’ve worked at more than 100 biodiesel, 30 ethanol, more than a dozen biogas and a handful of renewable diesel plants,” Pollitzer says. An engineering review is required for initial registration with U.S. EPA. “This is the most critical, and I work closely and diligently with facility personnel to get this done as soon as possible to maximize RIN credits,” Pollitzer says. Subsequent reviews are required every
adding that most fraud in the biodiesel industry was blatant and large scale. “In one prominent case in Indiana, it took us less than two weeks to determine they were breaking the law,” Moss says. “We were engaged for technical due diligence, but because we understand all aspects of the plant, we figured out quickly they were committing fraud.” When the Q-RIN program was finalized, it more closely resembled the interim B-RIN platform previously in effect, placing primary responsibility for RIN validity on biodiesel plants and obligated parties, not the QAP provider. “However,” Moss says, “QAP providers have the responsibility to ensure generated RINs are valid, so it’s a very good approach. Everyone shares responsibility. Obviously, QAP providers take this seriously.” Moss says RINtrust’s program is simple, straightforward and meets Q-RIN guidelines.
“We look at it from a mass-balance standpoint, requiring documentation to ensure the plant is doing things properly,” he says. Much like the smaller producer-clients it serves, RINtrust is not the biggest QAP provider out Moss there. “We have fewer clients than the others,” Moss says. “But we take a methodical and measured approach. We’ve been in since the beginning helping small- and medium-sized biodiesel producers stay in compliance and make the market more liquid. We’re okay with not being the biggest. We just want to make sure the marketplace has options—and we think we’re a good one. The industry is better with liquidity and choices.”
three years. “The selection of a qualified engineer is critical,” Pollitzer says. Delays could cost more than any engineering review price difference, he says. Clean Energy Consultants also performs California LCFS registration—a complicated process. “While CARB has look-up tables for some pathways, most producers can demonstrate a lower carbon intensity (CI) number for their facility,” Pollitzer says. “Even a couple of points can be huge, especially as credit prices continue to rise.” Pollitzer provides modeling work to demonstrate lower CI numbers and preliminary modeling for economic analysis. Specializing in biodiesel plant optimization, Pollitzer considers himself a partner with the producer. “I tend to work with medium to smaller plants,” he says. “One area where most facilities could improve is on the backend.”
Clean Energy Consultants completes the circle by working with fleet operators, distribution centers and municipalities to incorporate biodiesel into operations. “We set up a B20 fueling system at their facility,” Pollitzer Pollitzer says. “What really gets me jazzed is connecting an end-user with a local biodiesel producer.” With more than 30 years of environmental consulting experience, Pollitzer says he finds biodiesel the most interesting field to work in. “It’s had tremendous growth,” he says, “and yet it’s not even come close to realizing its full potential.”
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SPOTLIGHT Agribusiness Consulting
of knowledge in our shop. What I do is bring these things together and give perspective.” Sacoto, who’s been with Informa for 20 Informa Agribusiness Consulting is part years, says Agribusiness Consulting’s underof an integrated consultancy practice of the standing of the feedstock markets is more Agribusiness Intelligence vertical, integrat- than half the reason people come to the firm ing research and consulting units of several in recent years. “We work with biofuel probrands with a long history in the global food ducers, but historically it’s been on the feedand agriculture supply chain—from seed to stock side,” he says. “The bigger companies market. “Within that, renewable fuels like bio- know the biodiesel market, and they know the diesel is one segment that has become more linchpin is feedstock. The other is RIN pricimportant for us over the years,” says Juan ing and markets. We provide information and Sacoto, senior vice president. “Demand for perspective on these.” Sacoto says projections for clients inservices is heavy in renewable fuels.” The firm has highly specialized teams on the ground in volve a lot of scenario work. “We understand North America, South America and Europe. the good, bad and ugly of forecasting,” he “All three teams coordinate information,” says. “We try to give a sense of direction and proportion.” Sacoto says. Agribusiness Consulting works with With 125 analysts in specific, individualized teams stationed around the world, companies in every stage of the biodiesel Agribusiness Consulting is a powerhouse of chain, including logistics. “One of our many information with a plethora of historical and strengths is that we have an internal logistics forecast reports, databases and relationships. team following rail, truck and barge markets “We know the feedstock markets very well,” very closely,” Sacoto says. The company wants to grow alongside Sacoto says. “We have internal models, historical data, forward views. We have publications, the biodiesel industry. “We would like a larger we do price discovery, and we have that trans- market share of the midsize and smaller comparency and link to the feedstock manufactur- panies in the U.S.” he says. “There is where we ers—whether they are vegetable oil produc- can be of service—provide pricing forecasts ers or renderers. Big, medium or small, our and general strategy on how to position for DJULFRQVXOWLQJSULQWKDOISDJHSGI30 analysts are talking to them. We tap into a lot the next five years. We have enough years in
the business, and we tend to be optimistic or pessimistic based on the individual project. We bring a bit of reality to it.” He says another strength of the company is its impartiality. “We will tell you what we think,” Sacoto says, adding that the investment into biodiesel today is encouraging. “Cargill announced a new plant in Kansas, and others have recently expanded, or will,” Sacoto says. “People are taking the risk and see the future of renewable energy as prosperous. They have a longer view of just what EPA will do this year or next. We see smart capital moving into the sector, and it’s very encouraging.”
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SPOTLIGHT hth companies Founded in 1984 as a mechanical insulation company by owner and CEO Greg Hoberock, hth companies inc. has expanded its services over the years to include industrial cleaning, scaffolding, and even general mechanical work such as pump and valve replacement—not forsaking its original, longstanding service foundation of mechanical insulation. “One thing hth companies prides itself on is our ability to service our customers,” says Mike Freese, president. “We have always focused on being a provider to our customers so they can come to us and expect a solution.” By providing multiple services, hth companies shares resources and provides better coordination to customers. “An example of this is building our own scaffolding around a tank to clean it,” Freese says. “Whether it’s scaffolding, cleaning, insulation or general mechanical services, hth companies wants to provide the customer with options. We have serviced the industrial sector for years in large corn milling plants and in the ethanol industry, and we’ve had success in transferring the skills we’ve obtained from these industries to biodiesel plants.” Although all plants are different, hth companies provides a wide range of maintenance service lines to an eclectic customer
base, including ethanol and biodiesel plants, chemical producers, power plants, public utility treatment facilities, grain processors, hospitals, manufacturing facilities, cement plants and more. It may be easy for a biodiesel producer to overlook or postpone routine tank or heat exchanger hth companies’ equipment is on-site and ready to get the job cleaning, but regularly scheduled done, no matter how big or small. maintenance ultimately minimizes enal safety record—boasting a .59 experience downtime and can avoid costly damage as a modification rate (EMR). result of neglect. “It’s really simple,” Freese “We strive to listen to customers’ needs says. “If machinery or equipment isn’t workand provide value-added solutions through ing at optimal levels, there will be some loss our people, dedication to safety and quality,” of production and likely damage caused to Freese says. “hth companies’ vision is to be their systems. We want to keep clients’ down an organization that creates an environment time minimized so they can continue to prowhere employees are encouraged to develop vide their products to their customers.” In their full potential to provide quality work. addition, Freese says having planned mainWe strive to recruit and retain individuals tenance generally leads to efficient work and that share our values of adaptability, unity, good coordination between plants and condedication, integrity and ingenuity.” To retain tractors. and develop its key asset—its 600 employees Freese says hth companies’ advantage is spanning 13 states—hth companies develthe breadth in services it provides; its ability oped a rotational development program for to listen to customers’ needs and provide sonew managers, and a craft training program lutions; the fact that it is a family-owned busibased on hands-on training and know-how. ness whose leaders are accessible; the quality “We pride ourselves on being involved, of its employees along with the company’s knowing our customers, and making sure the cross-training programs and commitment product we deliver meets both their expectato personnel development; and its phenomtion and ours,” Freese says.
hth companies inc. Services Offered • Scaffold Erection • Mechanical Insulation ial Cleaning • Industrial Mechanical Maintenance • Industrial
800-764-4484 800 764 4484
SPOTLIGHT RINAlliance Fuel marketers that don’t offer biodiesel are leaving money on the table, says Dawn Carlson, president and CEO of RINAlliance, a firm specializing in providing petroleum jobbers and marketers cost-effective solutions to the complicated regulatory burden of tracking, reporting and managing RIN credits. “RINAlliance provides technical regulatory compliance consulting, and assists clients with unique compliance situations on a regular basis,” says Carlson, whose biodiesel roots run deep. She manages her family’s farming operation in Iowa, helped found the Iowa Biodiesel Board, and fuels her truck with biodiesel. “Knowing that my family’s soybeans and animal fat are making their way into the fuel stream in the form of homegrown biofuels, and then back into my Ford F350 fuel tank, is satisfying,” Carlson says. When RFS rules were published nearly a decade ago, Carlson and a former colleague developed a business model and software application to assist blenders with reporting RINs to EPA and performing required attest engagements, or audits, of RIN transactions. “We soon discovered there was a monetary value to the RINs and immediately began trading RIN credits on behalf of the users
of our proprietary software application,” she says. RINAlliance is owned by the nonprofit Petroleum Marketers and Convenience Stores of Iowa, but its presence spans the U.S. “Biodiesel RINs have been a very attractive opportunity for fuel marketers, and that has enabled us to help expand biodiesel marketing nationwide,” Carlson says. “Our clients often come to us looking for sources of biodiesel, so we are very involved in connecting fuel marketers with producers.” RINAlliance clients range from small tank-wagon operations to multistate truck and travel plazas. “Many of the governing board members are clients of RINAlliance,” Carlson says, “and their interests are aligned with the needs of our customers, which means we operate on very low margins to ensure our clients’ success.” With a staff of varied specialists, RINAlliance offers clients full-service support, from registering with EPA as a blender to submitting quarterly reports, performing attestations, vetting RIN producers, and marketing RIN credits to obligated parties. “Our proprietary web-based software application is customized based on client feedback,” Carlson says, “and it provides a historical record of RIN transactions that EPA’s EMTS system does not.” The service also includes a simple calculator for clients to analyze daily whether
it’s better to accept RINs or buy without. “The calculator takes into consideration different state tax incentives on biodiesel and our compliance costs,” she says. One of the most often overlooked compliance areas Carlson sees is when blenders find themselves as importers or exporters. “Helping them through the process of registering, reporting or retiring RINs is a significant matter, and one that should not be done alone,” she says. “We have a great relationship with EPA staff and can help companies navigate these unfamiliar waters.” Carlson says it has been a rewarding adventure developing RINAlliance the past 10 years. “To be in a position to expand biofuels’ footprint by helping companies find profitable niches in selling biodiesel has been gratifying.”
How can a biodiesel producer increase sales? RINAlliance helps petroleum jobbers/marketers blend with biodiesel while staying compliant with the EPA/RFS rules and regulations. Let RINAlliance help grow your customer base!
1-866-433-RINS (7467) firstname.lastname@example.org www.rinalliance.com 18
2017 FALL EDITION
SPOTLIGHT Frazier, Barnes & Associates Engineering and consulting firm Frazier, Barnes & Associates celebrated 20 years of business last year. “I did our first biodiesel feasibility study when the market was 30 MMgy,” says Pete Moss, president, who adds that the company has completed roughly a hundred more since then. “We’ve been at it a long time, and we’ve been very involved in the markets.” FBA offers a wide variety of technical and market services to the biodiesel industry. In addition to feasibility studies, the firm provides technical and regulatory assistance; RFS registration and engineering reviews; process troubleshooting and plant optimization; and independent engineering services, such as construction management, plant drawings, and piping and instrumentation diagrams (P&ID) using the latest software— AutoCAD 3D. “We also do a significant number of feedstock studies,” Moss says. “And we orchestrate training programs for biodiesel facilities, so operators and personnel understand their plants from both technical and market standpoints.”
Moss says FBA is routinely hired for its troubleshooting and process optimization capabilities. “We just finished helping a plant develop way to solve the problem of too much soap,” he says. “Once you begin producing soap, it negatively impacts the process and yields. We have three chemical engineers on Frazier, Barnes & Associates engineers inspect a new piping installation staff, so with our back- at a biodiesel plant. ground knowledge, we PHOTO: FRAZIER, BARNES & ASSOCIATES can go in independently and offer a low-cost and regulatory expertise. After two decades, solution to not only cut out the soaps in this we understand what makes a project work case, but also to reduce energy costs signifi- well—and what to avoid. The pitfall factor cantly. They relied on us to offer outside ex- is important.” Throughout its history, FBA has worked pertise, and we provided a solution with a with small and large biodiesel plants alike. quick payback.” What is different about FBA is “we “The biodiesel industry is so unique,” Moss bring the whole package,” Moss says. “Not says, “as there are all sizes of plants, so many just our technical expertise, but our under- technologies employed and feedstocks used. standing of the feedstock markets as well.” There are many ways to make biodiesel. We Moss comes from a marketing background don’t put boundaries on capacity or technolin the soybean processing industry. “I’ve ogies we work with. We will work with—and been involved in feedstock my entire career, have worked with—every technology and so we bring feedstock, technology, market size plant in the industry today.”
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Biodiesel and the Ever-changing
POLITICAL LANDSCAPE Industry stakeholders and legal experts discuss EPA’s NODA, the RFS court ruling, trade and the tax credit BY RON KOTRBA
When the U.S. EPA issued its Notice of Data Availability on Sept. 26 seeking ways to reduce biomass-based diesel volumes in the 2018 and 2019 Renewable Fuel Standard—the former year’s volume of 2.1 billion gallons having already been finalized in 2016 by the Obama administration—it put the RIN markets in a tailspin and caused those in the biodiesel industry along with its political champions to ask, what is really going on? Accord-
Argentina and Indonesia resulting from the ongoing trade cases. The problem with EPA’s logic is that as of 2010, the biodiesel tax credit has expired five times, but this ultimately did not stop the industry from growing and supplying product. The U.S. produced just slightly more than 300 million gallons in 2010, and nearly 2 billion gallons last year. Given the right policy signals, U.S. producers stand ready to ramp up production from existing assets and, as seen in 2016, invest in expansions, retrofits and new builds. Even with nearly 2 billion gallons of domestic production in 2016, various accounts indicate that one-third of existing domestic productive capacity remained idle. “We need to make sure we are adequately explaining to EPA the difference between domestic production and domestic capacity,” says Donnell Rehagen, CEO of the National Biodiesel Board. “We have plenty of capacity to fill demand in the market, and more.”
ing to the NODA, issued just weeks after the comment period closed on the Trump administration’s disappointing first RFS volume proposal, the agency is seeking comment on possible ways to cut required biodiesel volumes in RFS based on supply concerns resulting from the lack of the $1-per-gallon tax credit and a projected reduction in biodiesel imports from BIODIESEL MAGAZINE 2017 FALL EDITION 22 l
Furthermore, in the ongoing trade cases, only one preliminary determination was issued before the NODA came out. In August, the U.S. Department of Commerce issued preliminary countervailing duties in the antisubsidy case. In October, commerce department will issue its preliminary antidumping determination, and then final antisubsidy and antidumping determinations will proceed late this year into next. “Our expectation in July was the tariffs would be delayed until November,” says Juan Sacoto, senior vice president of Agribusiness Consulting. “By coming this early, in August, there is not much adjustment time. Maybe EPA is acting too quickly. Or, maybe the agency would rather err on the side of caution.” Michael Devine, the New England sales and marketing consultant for biodiesel distributor Amerigreen Energy, says, “The EPA administrator put this out for a reason.” What that reason is, however, as surmised by some biodiesel advocates, is appeasement of Big Oil,
POLICY which has long sought to abolish the RFS by any means necessary. One of biodiesel’s biggest political champions, U.S. Sen. Chuck Grassley, R-Iowa, called the NODA an outrageous bait-and-switch on a Senate floor speech the day it was issued. “This all gives me a strong suspicion that Big Oil and refineries are prevailing, despite assurances to the contrary,” Grassley said. “This seems like a baitand-switch from the EPA’s prior proposal and from assurances from the president himself and cabinet secretaries in my office prior to confirmation for their strong support of renewable fuels.” In the NODA, EPA repeatedly cites comments from oil lobby groups American Fuel and Petrochemical Manufacturers and the American Petroleum Institute, legitimizing concerns that the Trump administration and an EPA led by Scott Pruitt back the oil industry in its quest to dismantle the RFS, despite campaign promises to uphold and defend the standard. “This NODA is another attempt by AFPM and others to kill a program they do not support,” says Doug Whitehead, chief operating officer at NBB. The gravitas the oil industry’s comments carry with EPA is evident, while it is equally evident that the agency discounts submitted comments and historical evidence from the U.S. biodiesel industry demonstrating it has outperformed every RFS increase to date, creates American manufacturing jobs, provides increased energy security and independence, adds much-needed value to rural economies, and is beneficial to the environment. “That’s what’s most frustrating,” Rehagen says. “It appears as if EPA has not bothered looking at the facts that we’ve collected, and the studies, which support higher volumes in this specific RFS. We laid it out in May. It seems they have not read the whole thing, and it appears EPA is worried more about conjecture—the expired tax credit and reduced imports—despite the facts we presented. It’s so disappointing to me. We’ve answered these questions positively. The same thing on the tax credit, it’s not the first year the industry has been without it, nor is it the first year the industry has faced uncertainty.” “There are major concerns about the ultimate legality of this,” Devine says, “and how it will be viewed if implemented. The market obviously reacted very bearishly once it was issued.” Devine notes that RIN markets recovered somewhat in subsequent trading sessions. The NODA has essentially brought together all the policy issues facing the biodiesel industry today: The need to grow RFS volumes
in this hard political culture, a recent court ruling that supposedly narrowed EPA’s discretion on its use of the general waiver authority, the tax credit and trade. Here we will examine each of these in the context of the NODA.
In Americans for Clean Energy v. EPA, the U.S. Circuit Court of Appeals for the District of Columbia issued its much-anticipated ruling in late July. In its NODA, EPA stated that the court ruled “that EPA improperly focused on supply of renewable fuel to consumers, and that the statute instead requires a ‘supply-side’ assessment of the volumes of renewable fuel that can be supplied to refiners, importers and blenders.” In response to the proposed 2018 standards, EPA stated in the NODA it received comments suggesting that the agency should interpret the undefined term “domestic” in “inadequate domestic supply” to account for only volumes of renewable fuel that are produced domestically. It is important to note that EPA footnoted this by stating the comments were from API, AFPM and Valero. The NODA goes on to cite numerous oil lobby comments on suggested interpretations of the word “domestic.” The agency is soliciting comments on whether certain definitions, offered by the oil lobby, would fit within the court’s ruling. “EPA prevailed in the ruling except on the question of its use of its general waiver authority—the extent to which EPA is allowed to consider the demand side of the market when exercising its authority on the basis of inadequate domestic supply,” says Bryan Killian, partner with the law firm Morgan, Lewis & Bockius. “The court rejected that the lack of demand contributes to inadequate domestic supply, embracing that supply and demand aren’t the same thing—economics 101.” Killian says the key takeaway from the court ruling is that demand-side considerations cannot inform EPA’s decision in using the inadequate domestic supply prong of its general waiver authority. Doug Hastings, an associate at Morgan, Lewis & Bockius, says the victory of the case is that it limits the tools EPA can use to reduce volumes. “The general waiver authority authorizes EPA to waive volumes only when there is an inadequate domestic supply of renewable fuels or a severe economic or environmental harm,” Hastings says. “In the future, if EPA wants to waive a volume under the inadequate domestic supply prong of its general waiver authority, it has more circumscribed discretion because it cannot consider demand-side
constraints.” Hastings says this is seen “a little” in the proposed rule for 2018. “EPA did not initially propose to exercise its general waiver authority,” he says. “But it is now seeking comment through its supplemental NODA on whether there are any other ways to use its general waiver authority that are not foreclosed by the D.C. Circuit’s opinion.” Rehagen says, “The court found errors in EPA’s rationale and the way it implemented its volumes, so yes, that is a victory, but if it does not lead to better understanding of how to make the RFS work as intended, then there’s not a lot of value to that victory.” The D.C. Circuit Court formally issued its mandate in the 2014-’16 challenge on Sept. 22. This means the case is returning to EPA to figure out what to do now on the volumes for those years. There’s still a chance the EPA will seek Supreme Court review, but if not, then there will be a new rulemaking in the agency soon on what to do about the D.C. Circuit Court’s decision. Congress’ intent with the RFS was to grow the advanced biofuels pool. “And the way these are nested,” Rehagen says, “you can’t look at growing that without growing the biomass-based diesel pool. With as much as EPA is struggling with setting volumes today, we also see them struggling on how to fix and provide a remedy for what was not done correctly a number of years ago.”
The NBB Fair Trade Coalition filed antidumping and antisubsidy petitions against Argentina and Indonesia this spring “to address a flood of subsidized and dumped imports … resulting in market share losses and depressed prices for domestic producers,” NBB states. “Biodiesel imports from Argentina and Indonesia surged by 464 percent from 2014 to 2016, taking 18.3 percentage points of market share from U.S. manufacturers. Imports of biodiesel from Argentina again jumped 144.5 percent following the filing of the petitions. These surging, low-priced imports prevented producers from earning adequate returns on their substantial investments and caused U.S. producers to pull back on further investments to serve a growing market.” On May 5, the U.S. International Trade Commission made “unanimous affirmative determinations” in its preliminary phase antidumping and countervailing duty investigations concerning biodiesel from Argentina and Indonesia, a first step needed for the commerce department to proceed with its investigation. In May, the USITC stated there “is www.BiodieselMagazine.com
POLICY a reasonable indication that a U.S. industry is materially injured by reason of imports of biodiesel from Argentina and Indonesia that are allegedly subsidized and sold in the United States at less than fair value.” In August, the commerce department issued preliminary countervailing duties in the antisubsidy case. As a result, importers of Argentine and Indonesian biodiesel are required to pay cash deposits on biodiesel imported from those countries ranging from 50.29 to 64.17 percent for biodiesel from Argentina, and 41.06 to 68.28 percent for biodiesel from Indonesia, depending on the foreign producer/exporter involved. Based on commerce department’s finding of “critical circumstances,” the rates for Argentina applied retroactively 90 days from the date of the Federal Register notice. Myles Getlan, a partner at the law firm Cassidy Levy Kent LLP, says the commerce department is scheduled to issue its preliminary determination on dumping in October. “The antidumping and antisubsidy cases are two separate remedies intended to remedy two types of unfair trade practices,” he says. “It’s not uncommon to have companion cases when a petition is filed.”
Getlan says while it’s too early to speak to any dumping results, on the subsidy side, what those rates reflect are massive subsidies those governments provide to biodiesel producers. “In Argentina, the export tax regime has been the focus of attention by the U.S. and other countries for decades,” he says. “The effect of that is to severely depress soybean costs—the sole feedstock for biodiesel producers there— essentially to half of world market prices. That’s what you see in those countervailing duty rates.” Indonesia has a similar export tax regime as related to crude palm oil. “But in Indonesia, they also have a biodiesel subsidy fund—it’s called that—and it is granted hundreds of millions of dollars,” Getlan says, adding that these are straight-forward, direct grants. “When biodiesel producers in Argentina and Indonesia benefit from massive subsidies, it is no surprise they are in a position to flood the U.S. market with biodiesel,” Getlan says. “They have captured nearly 20 percentage points of market share from U.S. producers.” The tax schemes used by Argentina and Indonesia are often referred to as differential export taxes, but Getlan says under U.S. subsidy law, it’s not necessary to consider the differ-
ential between soy and downstream products. “The way the program is analyzed, correctly, is that the government of Argentina sets the export tax at such high level that it has a restraining impact on exports and trade flows, and therefore it causes distortions and distress on the price of soybeans, which has marketdistorting effects.” Any appeals to the rulings would not be considered until final determinations are made. Assuming final determinations and publication of orders, foreign governments and foreign and U.S. companies can appeal to the U.S. Court of International Trade, a federal court in New York, and argue whether the commerce department’s decisions are consistent with antidumping and antisubsidy statutes. If a party wants to appeal the decision of the U.S. Court of International Trade, then they can go to the federal circuit court of appeals in Washington, D.C. “Separately, foreign governments could challenge the results at the World Trade Organization,” Getlan says. “It’s purely a government-to-government process, which doesn’t directly affect U.S. determinations. But it’s an opportunity to challenge not whether the decisions are consistent with U.S. law, but with WTO agreements. It’s way too
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POLICY early to know whether Argentina or Indonesia will challenge the findings with the WTO. So far, we are confident what commerce found is entirely consistent with international law.” Argentina challenged European antidumping tariffs at WTO and won. A WTO appellate body determined the duties were too high, and forced the EU to conform to its decision. The EU voted to significantly lower its duties. Now, as a result, shiploads of Argentine biodiesel are flowing into EU ports once again, causing some biodiesel producers in Europe, such as France’s Saipol, to cut production. While the WTO has yet to rule on Indonesia’s appeal, the EU biodiesel industry is preparing an antisubsidy case against Argentina and Indonesia. “There is always the desire to look and compare the two, but they are very different cases,” Rehagen says, referring to the U.S. and EU trade cases. “I would caution everyone to not read a lot into what’s going on in the EU and impose that into this case. They have different merits.” Pete Moss, president of Frazier, Barnes & Associates, says the EPA’s NODA employs flawed logic. “There is no evidence imports will stop as a result of the trade cases,” he says.
“Just because we put tariffs in place—and we don’t even know if these are final—this doesn’t mean imports can’t or won’t come in from other areas.” Devine says people tend to confuse Argentine and Indonesian imports with all imports. “We’ll likely see a recalibration of the distribution chain,” Devine says. “In the EU, we may see a tolling of assets to bring more biodiesel into the U.S.’s East Coast from Europe.” Moss adds that the NODA is baseless and unacceptable. “On the grounds of inadequate domestic supply, EPA can’t make cuts based on something there’s no proof of, based on the assumption that imports will stop and the tax credit won’t come back,” he says.
In the context of what’s going on in Washington, D.C., the biodiesel tax credit is a complicated narrative, says Tim Urban, a member of the Washington Council Ernst & Young and leader of the firm’s Renewable Energy and Climate Change practice. Three likely vehicles to pass a biodiesel tax credit this session or early next are comprehensive tax reform, a tax extenders package, or a disaster relief bill. “In the past month, the
atmosphere has become rife with momentum for tax reform,” Urban says. “There is a decent chance a major tax reform bill will be enacted, either this year or early next.” Donna Steel Flynn, also with WCEY, says there is a place for the biodiesel tax credit in a tax reform bill. “The blueprint acknowledges a transition from the current to a new tax system,” she says, “which would recognize certain provisions that exist in the code would get an extension, or get phased down over time.” In early October, the House of Representatives and Senate took preliminary steps toward enacting comprehensive tax reform by pushing their respective budget resolutions forward. The House, on Oct. 5, considered the FY18 Budget Resolution, H. Con. Res. 71, which includes reconciliation instructions. Congressional leaders decided a budget resolution must pass to allow for the possibility of tax reform. “This all takes time,” Flynn says. “They will not even start marking up the bill in the ways and means committee until the end of October. With all the other things stacked up that have to be done by the end of the year, there may not be enough legislative days for them to finish this session, so it may go into
POLICY the first quarter of next year. But there is tre- identify public benefits to people who are promendous pressure to finish this and get a bill ducing what is being incentivized. If you look to the president’s desk. The survival of some at the state of biodiesel before the tax credit members of Congress depends on it.” was passed in 2004, it was an obscure niche. In lieu of tax reform, a second possibility The federal government putting a price tag on for extending the biodiesel tax credit is some the public benefits really put biodiesel on the kind of catch-all bill that would include must- map.” While some, such as the oil lobby and do action items, making it more difficult to put market purists, as Grassley says, oppose the off. “Those maneuver in a way that an extend- biodiesel tax credit, Urban says it is essentially ers package could be inserted and signed into very new. “The credit is in its infancy and neclaw,” Urban says. “That’s a second possibility if essary,” he says. tax reform doesn’t go through this year. But as tax reform moves, there is less interest on the Other Issues The RFS reset process, point of obligaHill to talk about anything other than reform because there would be no need for a stop-gap tion issue, and agriculture policy are all admeasure. The odds of the two are interre- ditional important issues facing the biodiesel lated.” Flynn says disaster relief is another tax industry. “If EPA waives volumes by at least 20 vehicle by which a biodiesel tax credit could be taken up. “Whenever a tax vehicle moves, percent in two consecutive years, it can trigger interested parties try to get provisions into it,” a reset,” Killian says. “Here, the reset provision would potentially be triggered by the waiver of she says. In an exclusive interview with Biodiesel volumes for 2017 and 2018. EPA could wait Magazine, Sen. Grassley says inserting a bio- to see what happens with the 2017 litigation, diesel tax credit into a disaster relief package but EPA could also presumably start the reset will not be possible until every other opportu- process soon.” On the point of obligation issue, some nity fails. “We haven’t had tax reform in more than 30 years,” he says. “I’ve seen more move- obligated parties like Valero petitioned EPA to ment on tax reform and simplification in the change this, asking the agency to take responsibility off refiners and move it downstream. past few months than I have since 1986.” Grassley says given the way Congress “EPA had proposed to deny that petition, but works, the tax credit won’t even be talked about it has not yet issued a final denial,” Killian says. until the midnight hour of putting together a “The point of obligation issue is dead in the bill before laying down the chairman’s marks. same way that vampires are dead. The only “A lot of things come together at the midnight thing that would surprise me is if no one chalhour, and this will be one of them,” he says. lenges it when EPA formally denies it.” Ag and RFS policies are inextricably inThe senator notes his, NBB’s and domestic producers’ desire to change the incentive from tertwined. The farm bill will be up for cona blenders credit to a domestic producers cred- sideration next year, as it expires in 2018, and it. “We hope to do that at the same time,” he committees have begun work on that. “When says. “This was done in the Senate two years you look at ag programs in the farm bill, you ago, but they didn’t do the same thing in the can’t look at that without looking at renewHouse, so we will make that attempt again. We able fuels,” Rehagen says. “There are supports hope to deal with the issue of not subsidizing built into the farm bill that also see supports imported biodiesel from Argentina. It’s stupid in the RFS and higher volumes of renewable to have U.S. taxpayers pay a dollar a gallon im- fuel. It’ll be interesting moving forward with porting biodiesel from Argentina. It’s a waste the RFS and how it impacts higher volumes, as this will send a clear signal about the value of $750 million.” Grassley says he believes the biodiesel tax this administration puts on what farmers do. credit will ultimately be reinstated retroactively, As a farm bill has provided less support to “because it always has been,” he says. “Wher- farm economics, it becomes more and more ever you are, let your Congressmen and Sena- reliant on support included through renewable tors know about it. You can’t take anything for fuels—biodiesel, ethanol and renewable diesel. If EPA looks at reducing out-year demand for granted today.” Urban explains that the tax code struggles renewable fuels, they would be harming farmto put a value on certain benefits, for certain in- ers and the economics they work in.” Henri Bardon, CEO of Solfuels USA, a dustry sectors. “Biodiesel provides public benefits for everyone walking down the street in 40 MMgy biodiesel plant in Helena, Arkanterms of less pollution,” he says. “The whole sas, says people underestimate the fact that idea of an incentive like this is to capture and RFS is not just about emissions reductions, BIODIESEL MAGAZINE 2017 FALL EDITION 26 l
energy security and independence, but it’s also a farm support program. “It has significantly reduced government farm subsidies,” he says. He adds that the oil and gas industry, which is clearly behind the NODA, should embrace rather than seek to reduce biofuels worldwide, since biofuels can help shelter petroleum from an emissions crusade in the context of growing international interest to eliminate internal combustion engines. When asked if federal policy in general is moving in the right direction, Whitehead says, “With this ever-changing landscape we live in, I wish I had a definitive answer. When you look at how Trump campaigned, and how the cabinet nominees testified in their confirmation hearings, this industry would have a sense of optimism. But in this hard political culture, we have to turn up the volume. We can’t hope for them to understand our story—rather we have to tell it to the people who can make a difference for us. We remain optimistic that the promises made in the past by this administration will be kept.” The NODA appears to offer a self-fulfilling prophecy. EPA’s unwarranted fear of supply may ultimately cause the agency to reduce demand via reducing the RFS volumes, thereby ensuring supply constrictions. Rather than preemptively presupposing supply issues based on an unfinished trade case and the lack of a tax credit, perhaps EPA should let the market determine how supply will be secured. If, next year, or the year after, the biodiesel industry misses its mark, then certainly the government has the prerogative to consider adjusting the mandate—and demand as generated by RFS—down. But to shackle an industry based on presuppositions when the facts clearly show U.S. biodiesel producers have come back from the brink of extinction time and time again to break production and supply records mere months later is a discount of the highest, most egregious degree. “What is frustrating for me is that it seems that there is not a clear line of information and fact-finding in EPA,” Rehagen says. “Our job now is to find out how we can do a better job getting information to the people who are expressing these concerns. The AFPM and others are definitely at play here. The question is, is anybody paying attention?”
Author: Ron Kotrba Editor, Biodiesel Magazine 218-745-8347 email@example.com
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Published on Oct 13, 2017