2018 Fall Biodiesel Magazine

Page 1

IN S I DE: T HE R OAD T O FE E DS T O C K FL E X I B I L I T Y 2018 Fall Edition

G R OW T H

STRATEGIES Producers Expand, Diversify in Trying Times Page 16

Plus The Complex

Dynamics of Coprocessing

Page 20

And

Driving Decarbonization Page 5

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CONTENTS 2018 FALL ISSUE VOLUME 15 ISSUE 4

FEATURES

16 Consultative Expansion SPOTLIGHT

Biodiesel Magazine spotlights a producer turned feedstock provider, a consulting firm that assists manufacturers, and one of today’s fastest-growing biodiesel refiners

BY RON KOTRBA

20 The Complex Dynamics of Coprocessing MARKET

A direct partnership between Big Oil and agriculture to coprocess renewable diesel could have detrimental effects on biodiesel, the green economy and the RFS

16

BY RON KOTRBA

DEPARTMENTS 5 Editor’s Note

Issues of the Day BY RON KOTRBA

6 Talking Point

9 Events Calendar 10 Business Briefs 12 Inside NBB

The Road to Feedstock Flexibility BY CHRIS ABRAMS

8 Legal Perspectives

20

Driving Decarbonization BY GRAHAM NOYES

Advertiser Index 3 18 24 17 19 23 7 9, 28 25 22 2

2019 International Fuel Ethanol Workshop & Expo Clean Energy Consultants Dallas Group of America, Inc. Green Energy Biofuel, LLC HERO BX HTH Companies IMERYS National Biodiesel Board Oil-Dri Corporation of America RINAlliance United Color Tech

ON THE COVER:

Hero BX celebrated 10 years of successful operation at its Erie, Pennsylvania, biodiesel plant late last year. Since then, the company has acquired two additional plants, penned a tolling agreement with another, and opened an R&D lab. PHOTO: HERO BX

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BIODIESEL MAGAZINE

2018 FALL EDITION


EDITOR'S NOTE

ISSUES OF THE DAY

www.BiodieselMagazine.com

Ron Kotrba

E D I T O R I A L Tom Bryan President & Editor in Chief tbryan@bbiinternational.com

Editor Biodiesel Magazine rkotrba@bbiinternational.com

Ron Kotrba Editor rkotrba@bbiinternational.com Jan Tellmann Copy Editor jtellmann@bbiinternational.com

As we worked to put this issue of the magazine together this fall, Capitol Hill was besieged with protestors contesting the nomination of Brett Kavanaugh to the Supreme Court. The divisiveness of the process to install a Justice who can swing the highest court in the land from the left to the right for the first time in half a century was not unlike a train wreck: You didn’t want to watch, but you couldn’t look away. Certain key phrases hammered over and over again by talking heads—“corroborating evidence” and “supplemental background investigation” to name just a few—will ring inside my ears long after the dust has settled and the 24-hour news cycle moves onto its next circus sideshow. I cannot guarantee a civil response if I hear one more person mispronounce “corroborate.” It is a hard “R,” people. Since when has two “Rs” made a “W” sound, anyway? In any event, it was the finest display of partisan politics we’ve seen in some time. While the Senate was engaged in this epic, partisan battle, a bipartisan congressional group sent a letter to House leaders calling for a multiyear reinstatement of the biodiesel tax credit. Earlier this year, after several years of disagreement between trade associations, the National Biodiesel Board dropped its pursuit of reforming the tax credit from a blenders credit to a domestic producers incentive and once again unified its voice with the Advanced Biofuels Association calling on Congress to renew the blenders tax credit as-is. This, of course, came about after the NBB’s trade cases against Argentine and Indonesian biodiesel were concluded and hefty tariffs were put in place. Nevertheless, having a unified voice on this front is encouraging. Although we may have witnessed enough polarizing events this fall to last a lifetime, another conflict-ridden concern specific to our industry has been mounting for some time. The talk of oil companies coprocessing renewable feedstock at petroleum refineries has its roots in a biodiesel era of a different time. The biodiesel industry’s concerns over this are real, and I try to lay these out on page 20 in “The Complex Dynamics of Coprocessing.” At the risk of oversimplifying the case, the argument encompasses feedstock availability and demand, a battle over undifferentiated advanced biofuel volumes in RFS, questions of regulatory equity and commitment to renewables, investments (or lack thereof), technical issues, and adding gallons to the energy mix vs. reducing them. I would also like to bring your attention to our Spotlight feature, “Consultative Expansion,” on page 16. We highlight the expansions of two very different industry players—Hero BX and Green Energy Biofuel—while tying the section together with a profile of consulting firm Clean Energy Consultants and founder Ernie Pollitzer, who has more than 30 years of experience in environmental compliance. I would be remiss not to point out the compelling columns in this issue as well: “The Road to Feedstock Flexibility” by Chris Abrams of Imerys on page 6, and “Driving Decarbonization” by Graham Noyes of the Low Carbon Fuels Coalition on page 8. Finally, I would like to offer a special thank you to our advertisers for supporting this quarterly print magazine that supports the biodiesel industry, and for entrusting us to deliver your message to our audience.

P U B L I S H I N G Joe Bryan John Nelson Howard Brockhouse

&

S A L E S

CEO jbryan@bbiinternational.com Marketing & Sales Director jnelson@bbiinternational.com Business Development Director hbrockhouse@bbiinternational.com

Chip Shereck

Senior Account Manager cshereck@bbiinternational.com

Jessica Tiller

Circulation Manager jtiller@bbiinternational.com

Marla DeFoe

Marketing & Advertising Manager mdefoe@bbiinternational.com

Dayna Bastian

Social Media & Marketing Coordinator dbastian@bbiinternational.com

Jaci Satterlund

A R T Art Director jsatterlund@bbiinternational.com

Raquel Boushee

Graphic Designer rboushee@bbiinternational.com

Subscriptions Subscriptions to Biodiesel Magazine are free of charge to everyone with the exception of a shipping and handling charge for any country outside the United States. To subscribe, visit www. biodieselmagazine.com or you can send your mailing address and payment (checks made out to BBI International) to: Biodiesel Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Reprints and Back Issues Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 701-746-8385 or service@bbiinternational.com. Advertising Biodiesel Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and highquality print production. To find out more about Biodiesel Magazine advertising opportunities, please contact us at 701-746-8385 or service@ bbiinternational.com. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number. Letters may be edited for clarity and/or space. Send to Biodiesel Magazine Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email rkotrba@bbiinternational.com.

Please recycle this magazine and remove inserts or samples before recycling

TM

COPYRIGHT © 2018 by BBI International

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TALKING POINT

The Road to Feedstock Flexibility BY CHRIS ABRAMS

This has been a banner year for the biodiesel market, and it looks like 2018 will make a strong close as we enter the fourth quarter. Pro-

ducers are reporting operating at maximum rates for most of the year. Industry experts estimate that the market will be robust for some time to come. When I talk to biodiesel plant and operations employees, the biggest initiatives and concerns they mention are expanding plant capacity, the potential tightening of fuel quality standards, and incorporating new, lower-quality feedstocks into their processes. All of these are exciting developments for producers and for our industry. At Imerys we spend a lot of time studying the biodiesel and oleo-fuel markets, and the direction they are going. This is to help ensure we can meet the market’s needs today, and more importantly to meet its future needs. We at Imerys have spent most of 2018 talking about the last point—new and diverse feedstocks—and how to assist biodiesel manufacturers in incorporating them into their existing processes. We call this initiative “feedstock flexibility.” Some call it “feedstock neutrality.” Whatever you want to call it, we all need to plan now so we are prepared for changes the biodiesel industry will soon undergo as markets for renewable fuels change and expand. What do we expect to see in the near future, and how will it affect biodiesel operations? One big change related to feedstocks is that availability and supply will continue to tighten. What is causing this tightening? The primary reason is the previously mentioned strong biodiesel market in which producers are growing by expansion and acquisition. On the horizon, we see growing demand for lower-grade feedstocks due to the emergence of renewable diesel. We have already seen biodiesel producers, such as REG and World Energy, making

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moves to build and acquire renewable diesel facilities. There are standalone players, like Neste, and others throughout the world expanding production and making key strategic purchases in the same space. For instance, Neste just made a key strategic move to acquire Netherlands-based animal fats trader IH Demeter B.V. The big shift will come once major petroleum refiners ramp up redesigned, existing assets with renewable fuels production units. Only time will tell when that will be. Throughout the summer, financial news agencies continuously reported on joint ventures and investments by most of the major oil producers in this space. Their demand will put massive pressure on the feedstock supply chain. What I am saying is not new, nor earthshattering, but it is necessary to clarify how we as an industry prepare and harden our resources to meet the market in the near future. First, we need to ask whether we care what feedstocks are used. Not necessarily. Biodiesel can be made, to some degree, from any triacylglycerol source. Feedstocks can affect biodiesel attributes such as cetane number, lubricity, cloud point and carbon intensity. Carbon intensity will continue to become a bigger piece of the equation as governments and end users start pushing for these requirements. For most at the plant level, the question is how a diversified feedstock supply will affect my operations and profits. The biodiesel industry wants to achieve predictable and consistent supply and pricing, biodiesel fuel that meets requirements for the markets you service or desire to service (cold flow properties, carbon intensity, etc.), and predictable production operations and finished product quality. With those broad goals defined, how do you approach a feedstock-flexibility program to allow expansion of your current mixed-feedstock

2018 FALL EDITION

program? It has to start with pretreatment. Preparing feedstock for conversion is essential to downstream processes. Eliminating key contaminants improves conversion and separation, and limits production variations. Pretreatment is often performed using a suitable separation process, typically either a mixture of acid/base washing (“wet wash”) or via an adsorbent “dry wash.” While both processes are functional for current feedstocks, lower-quality feedstocks are placing higher loadings on these processes. In addition, refiners are now becoming more conscious of their water-consumption footprint. Water is becoming a scarcer commodity, and post-usage water treatment costlier. Imerys is now being approached by producers wanting to optimize their wet and dry wash for just these reasons. The market desires to reduce total consumables and everyone wants to become better stewards of the environment. The challenges faced with lower-quality feedstocks can be addressed by using higher adsorbent application rates and chemicals dosing, but this typically has a cost—not just in opex, but more importantly in reduced capacity and yields at a time when the market is looking to increase capacity. This is the challenge on which Imerys has been working the past two years—improved adsorbent functionality to allow more feedstock flexibility, but without the negative impact on capacity or consumption. We aim to build a tool kit for end users to be able to flexibly source and convert the best available feedstock for their production. Author: Chris Abrams Commercial Development Manager, Imerys Filtration 502-416-6998 chris.abrams@imerys.com


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LEGAL PERSPECTIVE

Driving Decarbonization BY GRAHAM NOYES

The innovative concept that underlies California’s Low Carbon Fuel Standard is the use of a market-based crediting system to reduce the carbon intensity (CI) of transportation fuel. Between 2011 and 2017, California’s LCFS reduced the greenhouse gas (GHG) emissions that would have been emitted by conventional gasoline and diesel fuel by 35 million metric tons (MMT). In California’s diesel

pool last year alone, 375 million gasoline gallon equivalent (MGGE) of renewable diesel provided 3 MMT of GHG reduction, 187 MGGE of biodiesel provided 1.4 MMT of reductions, and 124 MGGE of biomethane provided 0.7 MMT in reductions. At the Sept. 27 governing board hearing, California Air Resources Board extended California’s LCFS with a CI reduction schedule that ratchets down an additional 1.25 percent each year until 2030. Credits today are trading at $190/MT. Other states and provinces in North America and jurisdictions around the world are increasingly seeing the value the LCFS delivers and are viewing the program as a flexible tool they can use to achieve their own policy objectives. Several attributes of the LCFS make it attractive from a policydesign perspective. Because the LCFS establishes a market-based crediting system with a decade-long compliance schedule, the program does not require an annual appropriation. The program uses a technologyneutral, performance-based, scientific metric. And the review and recognition of novel pathways developed by industry enables the science of GHG modeling to evolve over time rather than being fixed by statute. The mission of the Low Carbon Fuels Coalition is the support and expansion of

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low carbon fuel policy structures worldwide. Along with cohosts Biotechnology Innovation Organization and below50, the LCFC recently hosted the “Driving Decarbonization” event at the Global Climate Action Summit. At the event, former California State Sen. Fran Pavley provided an overview of how LCFS programs fit within an overall climate policy structure. CARB Transportation Branch Chief Sam Wade explained the mechanics and GHG benefits of these policy structures. Oregon Clean Fuels Program lead Cory-Ann Wind described how Oregon developed its streamlined program. From a public health perspective, Will Barrett, clean air advocacy director for the American Lung Association, spoke about the benefits to individual and community health that these programs deliver. And State Rep. Joe Fitzgibbon discussed his work to establish a Clean Fuel Standard for the state of Washington. The earliest adopters of LCFS programs were California, Oregon and British Columbia, all members of the Pacific Coast Collaborative. The vision of the PCC is to dramatically reduce GHG emissions and to create a vibrant, low-carbon regional economy. Both the Oregon Clean Fuels Program and the BC Renewable and Low Carbon Fuel Requirements Regulation are generally consistent with the California LCFS. However, the Oregon program is considerably simpler and easier to administer than California’s program, and the BC program does not include an indirect land use change (ILUC) GHG modeling component. Beyond the PCC, Canada has become a leader in the adoption of similar programs in other Canadian provinces and on a federal level. A national CFS is under development, with 2022 projected as an enforcement date for the liquid fuel component. Biofuels, particularly in the diesel pool, are widely expected to deliver a significant portion of the re-

2018 FALL EDITION

ductions. Development of the standard will continue into 2020; gaseous and solid fuels are also to be regulated under the CFS, coming into force in 2023. BC is also assessing new 2030 targets for its LCFS, and several provinces now have CI recognition in their renewable fuel standards. The LCFC is serving as a resource to its affiliate organization, Advanced Biofuels Canada, to support the growth of these programs. Brazil is the second largest biofuelproducing country in the world and has long taken a leadership role in biofuels policy. Brazil is currently developing the RenovaBio program that is anticipated to utilize a CI standard and include a market-based trading program. The LCFC is looking forward to working cooperatively with the Brazilian Sugarcane Industry Association (UNICA) and other Brazilian stakeholders on low carbon fuel policy design issues. In other international jurisdictions, the LCFC is working with BIO and the World Business Council for Sustainable Development’s below50 program to further expand comparable policies. below50 is active in Australia, Brazil, Europe and the U.S., and it is seeking to promote LCFS-type policies at both the federal and the state or provincial level. For example, below50 strongly endorsed Brazil’s Renovabio policy and is working to see it implemented in a way that generates a strong market signal for lowcarbon fuels. Author: Graham Noyes Executive Director, Low Carbon Fuels Coalition Managing Attorney, Noyes Law Corp. 530-264-7157 graham@noyeslawcorp.com


EVENTS CALENDAR JANUARY 21 24 SAN DIEGO

National Biodiesel Conference & Expo JANUARY 21-24, 2019 San Diego, CA Marriott Marquis San Diego Marina The National Biodiesel Conference & Expo is the biggest biodiesel event of the year. Whether you are an industry veteran, or just getting your feet wet in the biodiesel world, the National Biodiesel Conference & Expo has plenty for all. Speakers will present thought-provoking and engaging sessions, with keynote speeches and roundtable discussions presented by industry experts. Find new opportunities to network with other professionals from around the country and get business done. Registration will be live this fall at www.biodieselconference.org.

International Biomass Conference & Expo MARCH 18-20, 2019 Savannah, Georgia Now in its 12th year, the International Biomass Conference & Expo is expected to bring together more than 800 attendees, 100 exhibitors and 100 speakers from more than 40 countries. It is the largest gathering of biomass professionals and academics in the world. The conference provides relevant content and unparalleled networking opportunities in a dynamic business-to-business environment. In addition to abundant networking opportunities, the largest biomass conference in the world is renowned for its outstanding programming—powered by Biomass Magazine–that maintains a strong focus on commercial-scale biomass production, new technology, and near-term research and development. Join us at the International Biomass Conference & Expo as we enter this new and exciting era in biomass energy. 866-746-8385 http://www.biomassconference.com

International Fuel Ethanol Workshop & Expo JUNE 10-12, 2019 Indianapolis, Indiana 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

The National Biodiesel Conference & Expo is more than a conference—it’s the biggest biodiesel business meeting of the year. Engage with us in San Diego. Register now at

BiodieselConference.org

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BusinessBriefs

People, Products & Partnerships

ing oil exporter Rexon Energy. The acquisition comes less than two months after purchasing an idle biodiesel facility in Amsterdam. The acquisition of Rexon Energy will help provide raw materials for its three biodiesel manufacturing operations in Immingham and Teeside on the east coast of England, along with its new Amsterdambased facility, scheduled to begin operating next year. In July, Greenergy reached an agreement with tank terminal operator Oiltanking Amsterdam B.V. to purchase an idle biodiesel manufacturing facility in Amsterdam. The plant was built in 2010 to process vegetable oils but was never commissioned. Greenergy plans to retrofit the facility to process waste oils and expand production capacity. Oiltanking will provide Greenergy with storage facilities for feedstock and biodiesel, in addition to other support services per a long-term agreement between the two entities.

Kuleana Sunscreen PHOTO: PACIFIC BIODIESEL

Locally grown sunflowers

market changes. In 2016, BDI officially delisted from the Frankfurt Stock Exchange. Subsequently, BDI Holding and daughter companies BDI-BioEnergy International, BDI-BioLife Science and BDI-Betriebs were formed. The former daughter company UIC, a supplier of highvacuum distillation units, was sold in July. BDI Holding also holds shares in VTU Holding, VTU Beteiligungen and Ecomotion Spain. Delisting from the Frankfurt stock exchange was a consequence of increasingly burdensome legal constraints and obligations regarding reporting and public information concerning BDI’s business activities. According to Goessler, restructuring has allowed for simplification of the organization of BDI’s group of companies, particularly in the administrative areas.

PHOTO: PACIFIC BIODIESEL

Maiden Hawaii Naturals LLC, a wholly owned subsidiary of Pacific Biodiesel, has introduced Kuleana Sunscreen, a natural, reef-safe product. Made from plant-based oils, minerals and other natural ingredients—including the company’s locally made macadamia and sunflower oils—the sunscreen contains no ecologically harmful chemicals such as oxybenzone and octinoxate, which were recently banned by Hawaii’s new sunscreen law. Kuleana Sunscreen will support Hawaii-based environmental organizations through its membership in the global organization, 1% for the Planet.

Breaking ground on the Center for Soy Innovation PHOTO: MISSOURI SOYBEAN ASSOCIATION

BDI Headquarters PHOTO: BDI HOLDING GMBH

Goessler

PHOTO: GREENERGY

U.K. biodiesel producer Greenergy has acquired Singapore-based used cook-

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Austria-based biodiesel technology pioneer BDI-BioEnergy International has recently completed organizational restructuring. Helmut Goessler, founder, CEO and major shareholder, said as a result of the changes the firm is better equipped for the future and to react more quickly to

2018 FALL EDITION

Missouri’s soybean farmers broke ground on a new building in western Jefferson City in late July, kicking off an 18-month project to develop the Center for Soy Innovation. The center will bring together the many organizations working with and on behalf of Missouri’s soybean growers in one location, and serve as a hub for business development and incubation, as well as value-added agriculture. From the Missouri Soybean Association and Merchandising Council to the Biodiesel Coalition of Missouri and Foundation for Soy Innovation to the administrative functions for farmerowned biodiesel plants, Missouri Farmers Care and the Ag Education on the Move programs, it will be a one-stop shop. The building will also feature soy-based building materials and demonstrate new


BUSINESS BRIEFS uses for soybeans, from soy-based countertops, flooring and insulation to turf, asphalt sealant and biodiesel/BioHeat.

USEK President Professor Georges Hobeika, left, and IPTEC President Toni Issa PHOTO: IPTEC

The Holy Spirit University of Kaslik (USEK) in Lebanon and IPT Energy Center signed a memorandum of understanding (MOU) this summer to install a pilot-scale biodiesel production unit on campus to be fed by used cooking oil (UCO). The goal is to encourage and promote sustainable biodiesel production by collecting household UCO in storage tanks available at select IPT fueling stations and at the USEK university campus in Kaslik, and using the pilot plant to convert the waste oils into fuel at USEK. The biodiesel produced will be shared between USEK and IPTEC, with USEK’s share to be consumed in university generators. Certain IPT fueling stations will be selling IPTEC’s share of biodiesel from the project for commercial use. The project will be supported by awareness campaigns and incentives to encourage participation and will be assessed for its replicability at the national level in coordination with and support from the United Nations Development Programme. The parties intend to lobby for and support mainstream use of biodiesel in Lebanon.

Robinson

Jessica Robinson, longtime communications director for the National Biodiesel Board, has left the organization and joined Osborn Barr|Paramore as a group director. Rob-

inson said in her new role she works with a team of dynamic communications professionals to support key agriculture clients. “My specific role focuses on organizational support and media relations,” she told Biodiesel Magazine. “Among our clients is the United Soybean Board. USB supports biodiesel by funding outreach and education work through the NBB, so I am working with many of the same farmers and ag leaders as my previous role. These are many of the folks who first invested and believed in biodiesel. What I love about biodiesel and this new role are the passion people bring to work. I believe in the importance of the rural spirit as much as I believe in biodiesel. Working to tell worthy stories, like these, has always been my passion. I am grateful I have also been able to do it for a career. And I’m still driving my biodiesel rig. The biggest challenge is that it doesn’t fit in the garage at the new office.” Two new co-chairs have been selected to lead the Next Generation Scientists for Biodiesel—Shyam Paudel, a chemical engineering Ph.D. candidate at Missouri University of Paudel Science and Technology; and William Gray, a chemical engineering undergraduate student at Rowan University in Glassboro, New Jersey. Paudel’s interest in energy comes from his childhood, growing up in the mountains of Western Gray Nepal, where children commonly studied by the light of kerosene lamps. After his father bought solar panels for the house, Paudel’s desire to end energy poverty was born. Gray’s journey with biodiesel began in the summer of 2017, with a research project that involved developing a feasible lipid extraction process for microalgae. Paudel and Gray join one other sitting co-chair of the organization—Jennifer Greenstein, North Carolina State University, studying plant and microbial biology. A

fourth co-chair, James Brizendine, recently graduated from Missouri University of Science and Technology with a degree in environmental engineering.

PHOTO: WORLD ENERGY

World Energy Paramount PHOTO: WORLD ENERGY

Biodiesel and biojet fuel producer World Energy supplied a United Airlines Boeing 787 flight from San Francisco International Airport to Zurich Airport on Sept. 14 with a 30/70 blend of biojet fuel made at the recently acquired AltAir Paramount LLC facility in Paramount, California. World Energy sourced the petroleum jet fuel blend for the flight from Chevron, the largest provider of jet fuel at SFO. Chevron also arranged the supply logistics to move the blended product to United at SFO. The Sept. 14 flight includes feedstock from Agrisoma. The flight is part of an ongoing commitment to addressing climate change and follows on the heels of Gov. Jerry Brown’s executive order for California to be net-zero carbon by 2045. The aircraft used 16,000 gallons of biofuel on Flight 44 from its hub in San Francisco to Zurich, which represented the longest transatlantic flight to date—and the longest flight by a U.S. airline to date—powered by a biofuel volume of this size.

www.BiodieselMagazine.com

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Fueling Growth in the Biodiesel Industry As we near the end of 2018, the biodiesel industry has seen some significant progress as we work towards sustainable industry growth. Today, biodiesel is creating an impact and presence in the current marketplace and is showing up as a leading player in the fuels industry. The National Biodiesel Fair Trade Coalition’s trade petitions, filed in 2017, against Argentina and Indonesia have, in fact, leveled the playing field as we set Donnell Rehagen, CEO, out to do. With agreement from the InNational Biodiesel Board ternational Trade Commission and the U.S. Department of Commerce that these countries were involved in subsidizing and dumping biodiesel into the U.S., the duties applied to those products have made their entry into the U.S. nearly disappear. The result is a domestic market that, in 2018, has seen growth in demand and improved margins. Today, biodiesel is the No. 1 alternative fuel choice for fleets, according to the National Work Truck Association and American Transportation Research Institute 2018 Survey. With between 2.6 and 2.9 billion gallons of biodiesel consumed each of the past two years, biodiesel accounts for nearly 5 percent of the on-road diesel volumes. We also continue to see higher blends, B20 and above, gain greater market acceptance around the country. Our nation’s attention to fossil fuels and their carbon emissions continues to grow as well. A recent life cycle analysis (LCA) published by Argonne National Laboratory, the USDA and others note that biodiesel could achieve up to a 72 percent reduction in greenhouse gas (GHG) emissions. With this in mind, states and regions of the country are enacting policies to reduce their carbon and GHG emissions and renewable fuels are looked to for these policy objectives to be reached. Whether it is the Low Carbon

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2018 FALL EDITION

Fuel Standard in California or the targets New York City has put into place, policymakers across the country are increasingly taking the bull by the horns and providing clear strategies for these emissions reductions goals. I would expect to see these types of policies continue to grow and multiply across the country over the coming years. Along with significant increases in on-road use, the industry is also seeing expansion in the Bioheat market. Biodiesel in the home heating oil sector, which is a 5 billion-gallon market, has seen substantial growth over the past several years and has the potential for additional strong growth over the coming years. Our partnership with the heating oil industry has not only improved the perception of its product but has also increased consumer and policymaker awareness of biodiesel in the Northeast. This increased awareness has helped in our federal policy efforts by allowing us to build supporters on Capitol Hill from congressional districts that just a few years ago would have been ambivalent to biodiesel. With each year, NBB is proud to be the U.S. trade association representing the entire biodiesel value chain, including producers, feedstock suppliers and fuel distributors, as well as the U.S. renewable diesel industry. Our industry has so many great stories and is doing so many great things to impact people’s lives: Improving emissions, creating value for biodiesel feedstocks and coproducts, and supporting more than 64,000 jobs in the U.S. are just a few. Working alongside you, NBB will continue to lead the fight for even better days in this industry. We must all continue to roll up our sleeves and keep educating consumers and policymakers on why more biodiesel is the right thing to do for this nation.

Donnell Rehagan CEO National Biodiesel Board


inside

NBB NBB Rallies Industry for a Stronger, More Accountable RFS Congress designed the Renewable Fuel Standard program to reduce greenhouse gas emissions and expand the country’s renewable fuels sector, especially advanced biofuels such as biodiesel. The National Biodiesel Board is working tirelessly to promote a stronger RFS program and increase annual volumes to fully support the industry’s proven growth. The Biodiesel Industry Can Do More In June, NBB expressed appreciation that the U.S. EPA proposed increases in the 2020 biomass-based diesel and 2019 advanced biofuel categories under the RFS. While the proposed increases sent a positive signal to the industry, EPA’s granting of dozens of retroactive small refinery exemptions undercut prior year volumes and could still have a negative impact on future year standards. “We welcome the administration’s proposal to grow the biodiesel volumes, following two flatlined years,” said Kurt Kovarik, vice president of federal affairs at NBB. “This is a positive signal for our industry and we’re pleased the EPA has acknowledged our ability to produce higher volumes. We’ve consistently demonstrated that we can do much more. The fact remains, though, instability in the RFS program caused by the EPA has done significant damage that can only be rectified for biodiesel through consistent and predictable growth in volumes.” Kovarik pointed to decisions by the EPA administrator to provide numerous waivers to petroleum refiners that release them from their obligations under the RFS, effectively reducing the overall volumes under the program in 2016 and 2017. Those exemptions have effectively destroyed current demand for biodiesel by 300 million gallons. “As a candidate on the campaign trail, Donald Trump pledged he would support biofuels and protect the RFS,” Kovarik added. “While this is just a proposal, we hope the administration is serious about growing biodiesel volumes and will fulfill the president’s promise to support and grow the RFS.” The EPA proposed to raise the renewable volume obligations (RVO) for the biomass-based diesel category from 2.1 billion gallons in 2019 to 2.43 billion gallons in 2020. The agency also proposed to slightly increase the advanced biofuel category, for which biodiesel also qualifies, from 4.29 billion gallons in 2018 to 4.88 billion gallons in 2019. The RFS requires the EPA to grow the volume of advanced biofuels like biodiesel delivered to U.S. consumers. Since taking office, Trump’s EPA has recommended zero growth for the biomass-based diesel category. NBB Thanks Senators for RFS Support This summer, 39 U.S. senators sent a letter to EPA Acting Administrator Andrew Wheeler urging him to increase biomass-based diesel and advanced volumes and accurately account for small refinery hardship exemptions in the annual RFS volumes. NBB specifically thanked Sens. Patty Murray, D-Washington; Roy Blunt, R-Missouri; Heidi Heitkamp, D-North Dakota; and Chuck Grassley, R-Iowa, for leading the letter.

USDA Secretary Sonny Perdue and the NBB board

Noting that EPA proposes to set the 2020 biomass-based diesel volume at 2.43 billion gallons, the senators wrote, “While these proposed increases are encouraging, these volumes continue to underestimate the existing potential of the biodiesel and renewable diesel industries in our states. We believe the biodiesel industry can do more and that EPA should demonstrate more confidence in the RFS program’s ability to drive growth.” Comments from the senators and NBB demonstrate that the increased biomass-based diesel volume is achievable with available feedstocks. Calling on EPA to accurately account for small refinery hardship exemptions, the senators added, “It is critical that EPA appropriately account for any small refiner economic hardship exemptions that it reasonably expects to grant during the 2019 compliance year in the final rule, or EPA will not be able to fulfill its duty to ensure RVOs are met.” Kovarik stated, “We join the senators in calling on EPA to raise biomass-based diesel volumes to an appropriate level that will drive additional growth. Biodiesel production has consistently exceeded the annual volume obligations set by EPA. The industry continues to operate below capacity, which limits job creation and economic growth. Moreover, EPA must fully and accurately account for small refiner hardship exemptions under the RFS. NBB estimates that the exemptions granted by EPA for 2016 and 2017 reduced demand for biodiesel and renewable diesel by about 300 million gallons. That lost demand is equal to or greater than the annual production of some of the nation’s top biodiesel-producing states, including Washington, Missouri, North Dakota and Iowa. The volumes that EPA sets are meaningless if the agency does not ensure they are met at the end of the year.” Next Steps for RFS NBB and its members continue working to move the needle for higher volumes, meeting with the administration, working with biodiesel champions on the Hill, and collaborating with key industry stakeholders. The EPA is set to finalize volumes before Nov. 30. www.BiodieselMagazine.com

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insideNBB

National Association Celebrates 10 Years in Green Building The National Biodiesel Board celebrated 10 years in its Jefferson City, Missouri, headquarters office in September. NBB commemorated the decade of growth and milestones with a formal ribbon-cutting ceremony. “The National Biodiesel Board was started here in Jefferson City 25 years ago,” said CEO Donnell Rehagen during the community event. “This building has served NBB for the past 10 years, allowing us to grow our industry across the nation.” In 2008, NBB moved into its home in Jefferson City after remodeling a previously vacant building on the east side of town. The office itself was designed with sustainability in mind, including energy-efficient indoor lighting, recycled carpet and solar-powered outdoor lights. NBB wanted to follow biodiesel’s lead with clean, green energy. Since moving into the celebrated space, the biodiesel industry has made significant strides and continues to see progress each year. “NBB has come a long way since our humble beginnings, but NBB also celebrated its 25th anniversary as an organization this year. These two milestone events highlight the growth and lon- you can still find us here in the heart of Missouri,” Rehagen addgevity of the biodiesel industry. What started as a study at the Uni- ed. “The staff within these walls continue to strive for excellence, versity of Missouri has turned into a nearly 3 billion-gallon industry growth and promotion of a quality, sustainable fuel.” that supports more than 64,000 jobs.

BioFry 2018 Draws Hundreds for French Fries, Biodiesel Facts Hundreds of congressional staff members enjoyed a complimentary French fry snack while learning about the important role biodiesel is playing in diversifying our nation’s fuel supply by reducing carbon emissions and creating jobs. The National Biodiesel Board hosted its annual Capitol Hill BioFry Sept. 25 to educate congressional staff about biodiesel, renewable diesel and the U.S. companies that produce them. “NBB was pleased to host the annual BioFry event and educate an important audience about biodiesel’s success,” explained Paul Winters, NBB’s director of public affairs. “This unique venue provides a relaxed atmosphere for our NBB team to mingle with congressional staff and explain how biodiesel is improving the environment, creating jobs and reducing the use of petroleum.” NBB serves French fries to highlight one of the numerous feedstocks used to make biodiesel—recycled cooking oil. Many of the attendees were surprised to learn that more than 10 percent of America’s biodiesel fuel is made from recycled cooking oil, such as that used in fryers. Recycling used cooking oil into biodiesel keeps waste out of our nation’s landfills and sewers, protects the environment with cleaner air, and helps to keep America healthier. Biodiesel made from recycled cooking oil has even been featured in the Discovery channel documentary Hot Grease, which is now available on iTunes 14

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2018 FALL EDITION

and Discovery. The NBB team also reinforced the importance of strong federal policies to support continued industry growth, including increased volumes in the Renewable Fuel Standard and a renewal of the biodiesel and renewable diesel tax incentive. Staff members were interested to learn that biodiesel is produced in nearly every state in the country and supports more than 60,000 jobs all while reducing carbon emissions by up to 86 percent compared to petroleum diesel. “The 2018 BioFry drew hundreds of Capitol Hill staff, allowing the NBB team to engage in informative conversation in a relaxed setting over a cup of delicious fries,” Winters added. “We look forward to continuing this annual event.”


insideNBB

NBB National Ad Campaign Shows Strong ROI The National Biodiesel Board’s annual advertising campaign hit airwaves this summer with biodiesel education aimed to influence key decision makers on the many benefits of biodiesel. “Funded by the United Soybean Board and nearly a dozen qualified state soybean boards, this educational campaign allows NBB to reach an audience unfamiliar with agriculture and the biodiesel industry, as a major component includes targeted advertising in the mid-Atlantic and Washington, D.C., areas,” said Kaleb Little, NBB director of communications. “This reach is mutually beneficial for NBB, members and production agriculturalists as the ads strive to increase consumer acceptance and growth of our product.” This year print ads were found in The Washington Post, The Hill, Politico and Roll Call,

with digital ads on more than two dozen news and information sites, as well as Facebook. “Early results show a strong return on investment for the campaign,” Little said. “The campaign ran in June, July and heavy in September. The print campaign earned approximately 686,200 impressions, digital reached more than 9 million impressions, and we gained more than 500,000 impressions on air through the radio component.” This reach greatly helps share the positive message of clean-burning biodiesel. NBB plans to continue to promote the biodiesel industry and its mission through these ad campaigns, and greatly appreciates any assistance in sharing the narrative.

Engage at the National Biodiesel Conference & Expo The National Biodiesel Conference & Expo is the place to see and be seen in the world of biodiesel. Now is your chance to claim your spot at the 2019 conference in San Diego—where all the key players will come together for a week of learning, networking and discovery. “We were overwhelmed with the exposure and positive light our company received as a main stage sponsor at last year’s conference,” said Tim Keaveney, executive vice president of business development for biodiesel producer Hero BX. “We’ve been a long-time sponsor and participant of the biodiesel conference and last year’s conference was without a doubt the best we’ve had.” The sponsorship and branding options this year raise the bar, offering new, eye-catching visibility and preferred placement. From elevator door decals to illuminated floor signage, the sponsorship placements will dazzle and engage conference goers. “The biodiesel conference gave our company a great platform to share the advancements we’ve

made enabling fleets to deploy B100 and capture the 80 percent carbon reduction from using biodiesel,” said Colin Huwyler, CEO of Optimus Technologies. “We look forward to the 2019 conference.” Whether you are an industry veteran or just getting your feet wet in the biodiesel world, the National Biodiesel Conference & Expo has plenty for all. Speakers will present thought-provoking and engaging sessions, with keynote speeches and roundtable discussions presented by industry experts. Attendees will find new opportunities to network with other professionals around the country and get business done. For more information about the 2019 National Biodiesel Conference & Expo visit https:// www.biodieselconference.org/. For sponsorship inquiries, contact Brad Shimmens with NBB at 800-841-5849 or bshimmens@biodiesel.org.

www.BiodieselMagazine.com

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BIODIESEL MAGAZINE'S

SPOTLIGHT CONSULTATIVE EXPANSION

Biodiesel Magazine spotlights a biodiesel producer whose recent acquisition fulfills increased demand for feedstock, a consulting firm that assists manufacturers in market entry and optimizing production efficiencies, and the impressive expansion of one of today’s fastest-growing biodiesel refiners BY RON KOTRBA

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2018 FALL EDITION


SPOTLIGHT Green Energy Biofuel BioJoe Renwick, founder and co-owner of Winnsboro, South Carolina-based Green Energy Biofuel, is preparing to open the plant of his dreams—a 40 MMgy biofuel feedstock production facility recently acquired and retooled in Warrenville, South Carolina. Formerly known as Midlands Biofuels, GEB has been steadily expanding since opening its small-scale biodiesel refinery in Winnsboro 10 years ago. Now the company’s expansion is taking off exponentially, and Renwick needs employees to keep up with the growth. The Warrenville plant is named “GEB3” since it’s the company’s third plant—its second is a feedstock collection and purification site in Knoxville, Tennessee. GEB3 will serve as both a feedstock processing facility and clearinghouse to provide biodiesel producers along the East Coast with quality material. Over the past decade, GEB has secured more than 1,000 accounts for collection of used cooking oil across the Southeast, and current negotiations may double this. Renwick says markets will determine whether GEB3 will focus on feedstock purification or biodiesel production at any given time. “Fortunately, through

ingenuity, we have always been able to adapt to the changing market,” he says. “We have been practicing on small-scale production for 10 years, and now we are ready for large scale.” One of Renwick’s biggest focuses today is hiring enough quality people to ensure GEB3 runs to its full potential. In 2008, just two employees were on the payroll. “Currently, we have 26, and we are still growing,” Renwick says. “We haven’t even started to staff the new plant and expect another 42 employees there over the next five years. We’re extremely fortunate and proud to be able to provide not just jobs but careers to exceptional employees and family.” Drivers make up more than half of the current GEB staff. “In the next 12 months, we plan to add seven to 10 new tractors and tankers to keep product moving to and from our new plant,” Renwick says. “We have been blessed with an amazing staff that supports us in all of our trials and errors. Without their dedication and hard work, we wouldn’t be where we are today.” GEB co-owner and medical doctor Beth Renwick—BioJoe’s wife—recently won the Columbia Business Report’s 2018 South Carolina Women of Influence Award. “Nothing is as important as your health,” she says. “Take time

From left, Kyle Nelson, assistant operator; Matt Osteen, COO; Will Smith, Springhouse Consulting; Matt Rosen, production manager; BioJoe Renwick, founder PHOTO: GREEN ENERGY BIOFUEL

every day to feed your spirit, train your body and focus your mind. When your cup is full, you will have enough to share with others. It’s only a man’s world if you let it be. Women can do anything.” The company is accepting resumes to facilitate its growth and Renwick says he looks forward to interviewing candidates for a variety of jobs, including centrifuge and boiler operators, lab technicians, and shop vac operator positions now available in Warrenville. To learn more, or to get in touch with BioJoe or Beth about current job opportunities, visit gebiofuel.com. “We really don’t know what the future holds for us,” Renwick says, “but it will be big!”

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SPOTLIGHT Clean Energy Consultants With the lapsed U.S. tax credit and depressed RIN values, federal biodiesel incentives are at an all-time low. “RIN values are less than half of what they were a year ago,” says Ernie Pollitzer, owner of Clean Energy Consultants. “EPA’s small refinery exemptions definitely had an effect.” Since RIN prices tanked, California’s LCFS market has become particularly hot. “LCFS is the economic driver, more so than RINs,” Pollitzer says. “Biodiesel producers thousands of miles away are finding value shipping to California, where people are clamoring for biodiesel.” He adds that states interested in encouraging renewable fuels should heed California’s LCFS model. The industry is reacting to fluctuating markets and competition from renewable diesel expansion, Pollitzer says, demonstrated by consolidation, ongoing process optimizations, and product diversification. As a result, producers are actively seeking lower-cost feedstock, additional carbon markets and direct sales accounts. He encourages clients to expand beyond typical field jobbers in their area. “Direct client markets are a way to offset lower RIN values and no tax credit,” he says. “In the past, some didn’t want to look for other accounts to

stay alive. But now they’re looking at it more closely.” Pollitzer is passionate about helping biodiesel producers improve operations. “They need to look at handling different kinds of feedstocks,” he says. “I can help producers move to enzymatic production. Enzymes are tailor-made for feedstocks like brown grease. The key is locking down large quantities of high-FFA feedstock first.” In a broader sense, Pollitzer enjoys helping producers become more efficient to stay afloat in turbulent times. “A lot of plants have developed their own way of doing things,” he says. “But times are changing. They need to consider other ways to be more efficient. It helps having an outside person observe their operations and incorporate different ideas.” Pollitzer’s environmental compliance work spans more than 30 years. His expertise includes air and storm water permitting, plus SPCC (spill) plans. Eight years ago, he added renewable fuels to his repertoire. “I tell people that when RFS2 was born, so was my renewable fuels career,” he says. His first RFS Engineering Review was performed in 2010. “Since then, I’ve done hundreds of engineering reviews or three-year updates,” Pollitzer says. “I’ve also done hundreds of Q-RIN audit site visits.” CEC is a one-stop-shop for federal RFS

Pollitzer fuels his 2014 BMW on blends of 30 to 50 percent biodiesel. PHOTO: CLEAN ENERGY CONSULTANTS

requirements and California LCFS regulations. The consulting firm individualizes proposals to best match client requirements. “I don’t use cookie-cutter proposals,” Pollitzer says. “I work to understand what the client’s needs are, craft a plan, and work with them hand-in-hand through the process.” Pollitzer recently was a moderator at a regional EPA alternative fuel workshop in Charleston, South Carolina. “I was there on behalf of biodiesel,” he says. “We need to continue promoting the value of biodiesel. It’s amazing how little, even in 2018, people know about biodiesel.”

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SPOTLIGHT Hero BX Hero BX is arguably the fastest-growing biodiesel refiner in the U.S. Since 2007, the company has steadily operated its flagship biodiesel manufacturing facility in Erie, Pennsylvania, the success from which has helped fuel a recent era of unprecedented expansion during unstable times. While some producers have succumbed to uncertainty, Hero BX is moving full-steam ahead. Owner Samuel P. “Pat” Black III is bullish on biodiesel and has tasked senior management to actively seek growth opportunities. In 2015, Hero BX acquired an idle facility in Alabama. After retooling and expanding, the 20 MMgy multifeedstock biodiesel plant opened in 2016. That same year, Hero BX opened a Bioheat blending terminal in New Hampshire. This April, the company solidified a tolling agreement with Iowa Renewable Energy in Washington, Iowa. In May, it opened a research lab at Penn State Behrand. Just a few months later, Hero BX completed two plant acquisitions in South Roxana, Illinois, and Clinton, Iowa. “We look at this as a marathon,” says Tim Keaveney, executive vice president of business development. “We’ve all lived with market uncertainties, but these also create opportu-

nities.” Hero BX’s marathon approach is evidenced by Black’s decade-long investments in production assets, the best people, and stateof-the-art technology. “That’s why we’re able to prosper through the ups and downs,” Keaveney says. “That, and Mr. Black’s commitment to the industry, and keeping adequate capital available to survive the downswings.” Black says Hero BX’s strategy is simple. “Produce the highest-quality product and make it easy for the consumer to get it,” he says. “We now have a larger footprint to accomplish just that.” Setting goals and achieving important milestones while “tuning out the noise of short-term distractions like uncertainty” is how Black says Hero BX executes its long-term growth strategy. Management credits Hero BX’s success to teamwork and strong core values. “This is a people business,” says President Chris Peterson. “Hire good people, give them the tools to do the job properly, and reward them for doing so—and they perform. We’ve executed that model in Pennsylvania and Alabama, and we’re doing so in Illinois and Iowa. Having a plant and the best equipment is great, but if you don’t know how to run it, it’s all for naught.” Black says production facilities alone are just tanks, pipes and valves. “The people make the plants run and succeed,” he says.

Hero BX celebrated 10 years of production in late 2017. PHOTO: HERO BX

“The men and women of Hero BX work tirelessly in support of our efforts with unwavering dedication.” Most of Hero BX’s business is repeat, so solid relationships and trust are critical to the company. “We need and love our customers and suppliers,” Keaveney says. “They’ve been with us through thick and thin and have gone through many of the same challenges as we have in this industry.” Hero BX’s growth is far from complete. “We will continue to execute our growth strategy and evaluate the potential for continued acquisition, new construction and vertical integration across the biodiesel marketplace,” Black says. “We have to diversify to survive and produce our own catalyst for change.”


MARKET

THE COMPLEX DYNAMICS OF

COPROCESSING

While oil refiners adding a small percentage of renewable feedstock to their operations sounds simple, the political, economic, technical, societal and market consequences are anything but BY RON KOTRBA

In 2007, at the height of the biodiesel boom, ConocoPhillips and Tyson Foods announced a partnership to coprocess animal fats with petroleum crude oil at a number of U.S. oil refineries. Such partnerships between Big Oil

and agriculture stand to threaten years of investment, feedstock, public policy and market developments by biodiesel producers. The future was uncertain, particularly since at the time, coprocessed renewable diesel produced from recycled feedstock such as pork fat qualified for the blenders tax credit at the reduced rate of 50 cents per gallon, just like biodiesel made from those same feedstocks at a standalone plant. In 2008, the National Biodiesel Board under the leadership of its former CEO Joe Jobe was successful in lobbying Congress to not only extend the tax credit for another year, but also in getting recycled feedstock to qualify for the full dollar. More importantly, Congress also closed the splash-and-dash loophole that was fleecing taxpayers, and it excluded coprocessed renewable diesel from qualifying for the blenders tax credit. Just months later, in 2009, the partnership between ConocoPhillips and Tyson was put on hold. Much has changed in the past decade. Regulations for RFS2 were established and the program was implemented, helping grow produc20

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tion and use of biodiesel and renewable diesel in the U.S. to billions, rather than millions, of gallons. The compliance mechanism of RINs provided an economic stimulus to producers. State markets blossomed—most notably, California’s lucrative LCFS market, which is driven by increased demand for low-carbon fuels. And Big Oil stepped up its campaign to discredit and undermine the RFS through any means necessary. Of late, small refinery exemptions granted by the Trump administration’s EPA to large, profitable oil refiners that are obligated under law to blend renewable fuels have weakened demand for biofuels and caused RIN values to nosedive. One notable development that has taken root over the past decade, since the emergence and dissolution of the ConocoPhillips and Tyson partnership, has been oil companies’ investment in renewable diesel. Finland-based Neste Corp. has become a major worldwide player, exporting hundreds of millions of gallons to the U.S. alone each year. Valero and Darling Ingredients developed a large, greenfield, standalone renewable diesel plant in Louisiana, which is expanding. Less-profitable oil refineries, such as those in France, Italy and the U.S., have undergone or are undergoing complete conversion from processing crude oil to lipids. And, once again, oil companies have begun, or have announced plans to coprocess fats, oils and greases. These include BP, Chevron, Andeavor (re-

2018 FALL EDITION

cently acquired by Marathon Petroleum Corp.), Sinclair and others. Important Distinctions Before articulating the complex issues surrounding the potential proliferation and consequences of coprocessed renewable diesel, there must be clear definitions of what’s at play. Biodiesel is a diesel fuel substitute consisting of mono alkyl esters that is similar to but different than petroleum diesel fuel. Renewable diesel is a hydroprocessed fuel that is chemically indistinguishable from and fungible with petroleum diesel fuel. Both can be made from the same pool of renewable feedstocks of fats, oils and greases, and both are considered by the EPA to be biomass-based diesel for purposes of administering the RFS. As a result, both can generate D4 RINs in the biomass-based diesel category of RFS. Greenfield or standalone biodiesel and renewable diesel production facilities are distinguished from oil refineries that are converted to process renewable diesel, whether in whole or in part, and from oil refineries that coprocess renewable diesel. While some oil refineries have converted their entire site operations to process renewable diesel, others may co-locate renewable diesel production on-site, which is also different than coprocessing.


MARKET

“The first important thing is how we define what coprocessing is,” says Scott Fenwick, NBB’s technical director. Fenwick says there are a couple of different ways an oil refiner could coprocess renewable diesel. One route, he says, is to blend a small percentage of renewable feedstock such as soybean oil with crude petroleum oil and move it through the entire refining process. “This is the least likely choice,” Fenwick says, as pushing renewable feedstock through the distillation process followed by a fluid catalytic cracker (FCC) or hydrocracker could cause catalyst fouling, increased product loss and other technical issues. A more likely route is blending a small percentage of renewable feedstock into middle distillate cuts after distillation and cracking, prior to the diesel hydrotreater. “That’s the least severe option,” Fenwick says. “That’s what a refinery would put diesel through to remove sulfur. With renewable feedstock, hydrotreating would convert the oxygen and glycerin into water and propane, and make everything else into a hydrocarbon while maintaining the length of the molecule.” Sinclair’s oil refinery in Casper, Wyoming, is moving forward with a renewable diesel project, but details are unclear and the oil company declined speaking with Biodiesel Magazine about the endeavor. This year in Blaine, Washington, BP’s Cherry Point refinery “launched a renewable diesel unit that can coprocess bio-

mass-based feedstock alongside conventional feedstocks to produce ultra-low-sulfur diesel,” according to the refinery’s website. Representatives from BP were unable to speak about the project before press time. Last year, another oil company with a renewable diesel project, Tesoro, changed its name to Andeavor. This fall Andeavor was acquired by Marathon Petroleum Corp., which owns a 70 MMgy biodiesel plant in Ohio called Cincinnati Renewable Fuels. In Dickinson, North Dakota, the company’s 20,000-barrelper-day (bpd) oil refinery is entering the second phase of its renewable diesel project. Phase 1, coprocessing of vegetable oils with crude oil, was announced last year and began this summer, according to Ron Day, government and public affairs director for the Dickinson refinery. “Actual coprocessing began in June,” Day tells Biodiesel Magazine. He says modifications were made to offload vegetable oils into the facility, “including piping and connections to make that happen.” Day says the investments made in Phase 1 were a precursor to Phase 2, which is full conversion of the refinery to solely process biomass feedstock into renewable diesel. “It helped demonstrate that this was doable,” Day says of Phase 1. Construction work on the full conversion project in Dickinson began this fall, according to Day, and it is expected to be complete in late 2020. Day says the refin-

ery will continue to coprocess renewable feedstock with petroleum crude oil until conversion is complete. The converted oil refinery will utilize an existing hydrotreater and hydrogen plant as part of the process, Day says. “But we will also be adding another diesel hydrotreater process that is larger than the existing one, and a larger hydrogen plant,” he says. “Those are the two biggest pieces of the project. Everything else is in place—the tankage, truck offloading and the ability to get the product to the rail terminals.” The coprocessed renewable diesel produced while the conversion project is underway is staying in North Dakota, Day says, but once the site is producing renewable diesel exclusively, all of the 12,000 bpd of product will be railed to California to take advantage of the state’s LCFS credits. Today, those credits are trading at nearly $200 a ton. The Issues The strain of added feedstock demand from oil refiners is one of the biggest concerns the biodiesel industry has of coprocessing, but it certainly isn’t the only, or necessarily the most important, one. Fenwick says if PADD 5 (West Coast) oil refiners were to coprocess just 1 percent vegetable oil, this would create an additional annual feedstock demand of 482 million gallons. “That’s a huge volume,” Fenwww.BiodieselMagazine.com

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MARKET wick says. “It’s certainly not going to happen overnight, but it would create a significant demand of renewable feedstock.” According to Jobe, who left NBB in 2016 to start his own consulting firm called Rock House Advisors, there is approximately 314 billion gallons of annual petroleum refining capacity in the U.S. and Canada today. “If just half of that capacity were to coprocess just 2 percent vegetable oil, that would create an additional demand of 6.28 billion gallons of lipids,” Jobe tells Biodiesel Magazine. “We don’t have that much.” Even though agricultural productivity and new feedstock developments continue to increase, the entrance of oil refiners into the finite market of renewable feedstock does pose a threat, says Donnell Rehagen, CEO of NBB. “There’s a limited pool of feedstock used in production of biodiesel and renewable diesel, and they all rely on that same pool, which is only so big,” Rehagen says. “Our industry has built itself out with that in mind. We have not wanted to overbuild capacity. The scale of these oil refineries is exponentially larger than biodiesel plants, so if they step in and economically, easily and quickly begin coprocessing renewable feedstock, it would soak up a large amount—and that can be devastating to our industry.” Rehagen says the EPA and the petroleum industry define small refineries as those that process 3 million gallons of fuel a

day. “That’s a billion gallons of fuel a year,” he says. “Converting just one ‘small refinery’ can have a huge impact on demand in the renewable feedstock pool.” Gene Gebolys, founder, president and CEO of World Energy, has chaired the NBB’s RFS working group for a number of years. “There are indeed ample supplies of lipid feedstock for robust growth in the D4 and D5 categories,” Gebolys says. “Over its 10-year life, the RFS has driven biomass-based diesel production from about half a billion gallons to approaching 3 billion gallons, or 5 percent of the distillate supply. The U.S. has become the leading biomass-based diesel producer in the world, yet feedstock prices are as low as they’ve been since RFS implementation 10 years ago. And with a bumper crop of oilseeds being harvested as we speak, availability of feedstock has never been stronger.” For Gebolys, the issue with coprocessing is less about which process will outcompete the other for feedstock and more about which process will outcompete the other to fill D5 volumes—the undifferentiated advanced biofuel volumes above specified biomass-based diesel (D4) and cellulosic biofuel (D3, D7) volumes in annual RFS quotas. Coprocessed renewable diesel cannot generate D4 biomass-based diesel RINs, but it can produce D5s. “Biomass-based diesel and coprocessed renewable diesel will be

competing to fill the volumes of the D5 or undifferentiated advanced category of the RFS, which is the category that the EPA has historically shown a preference for in terms of leading most of the growth in advanced biofuel,” Gebolys says. “The renewable volume obligations (RVOs) in the D5 category will determine how many gallons of fuel will be generated by biomass-based diesel and coprocessed renewable diesel and, therefore, how many gallons of lipid feedstocks will be used to fill those RVOs. In other words, the determining factor for the amount of fats and oils feedstock that will be used to make biomass-based diesel and coprocessed renewable diesel will be the D5 RVOs, and not which process will prevail in the competition to generate those D5s.” Gebolys adds that coprocessed renewable diesel will soon be able to generate LCFS credits in California. Another real concern is Big Oil’s perceived lack of commitment to renewable fuels. Rehagen says NBB will invite anyone into its organization provided they see biodiesel and renewable diesel as viable well into the future. Even though some oil companies have invested in standalone biodiesel and renewable diesel capacity while others are looking into coprocessing, the vast majority of current oil refiners naturally produce petroleum-based fuels. “We need committed companies, individuals and organizations in the NBB,” Rehagen says. “If

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MARKET they want to demonstrate their commitment to the future of our industry, the renewables industry, we welcome that conversation.” The problem, however, is that even though some oil companies are investing in renewables, many of those same firms—and certainly the associations representing them, including the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers—want to dismantle the RFS and thereby destroy demand for renewable fuels. “The biggest proponents of coprocessed renewable diesel are on record as strongly opposing the RFS,” Gebolys says. “They are also advocating significantly lighter compliance requirements for coprocessed renewable diesel than is currently required for biomass-based diesel, which, if accepted by regulators, would greatly advantage coprocessed renewable diesel.” Biomass-based diesel is one of the most heavily regulated set of fuels. “It is regulated by robust compliance measures to meet precise specifications of the finished fuel and must be tracked through the supply chain to make sure it is not exported or used in nonqualifying applications,” Gebolys says. “Biodiesel gets no credit for its byproducts such as glycerin, only credit for the finished product. Coprocessed renewable diesel advocates are trying to persuade regulators that when they blend off

small percentages of lipids into their crude oil feedstock, that they be allowed to use a massbalance approach. In other words, they want to be able to get credit for a full gallon of finished fuel for every gallon of lipid they blend into the frontend of their process. They don’t want the finished fuel to be tracked through the supply chain, which would allow it to end up in exports and nonqualifying applications. They also don’t want to have their finished product tested for renewable content or to meet a renewable fuel specification.” Lipids are 11 percent oxygen and 10 percent glycerin. Through coprocessing, those compounds end up as what Gebolys calls “nonqualifying, nontransportation fuel byproducts” including propane, water and other chemicals. “Yet they want to receive full credit for their finished fuel based on the amount of feedstock in rather than the finished fuel out,” Gebolys says. “I think the biodiesel industry is happy to compete on a level playing field,” Fenwick says, “but what we want to see is how these regulating agencies—California Air Resources Board and EPA—are going to allow these credits to be generated. The argument for those who want to coprocess is that it’s difficult to determine what actual renewable content is in the fuel when leaving the gate—so difficult that it should be able to generate credits up front on

the volume of feedstock.” One option, however, would be to subtract out the average losses. “But that wouldn’t be fair,” Fenwick says, “since no two refineries are the same.” He adds that NBB has commissioned a study of the ASTM D6866 test method for radio carbon dating, which can identify the biogenic content of fuel. “The method was originally written for the USDA’s BioPreferred Program,” Fenwick says. “We’re wrapping up our study and will be presenting it soon to CARB for its Oct. 19 webinar.” Items the study addresses include how low a level of detection the technique can measure, and how repeatable, reproducible and accurate it is. Furthermore, Gebolys says while biomass-based diesel plants are heavily regulated by EPA for various steps in the process for purposes of RFS registration and permitting compliance, coprocessed renewable diesel advocates wish to avoid detailed evaluation of the carbon intensity of their processes, which vary from refinery to refinery. “And if coprocessed renewable diesel is treated in a way that it is given an unfair compliance advantage— amounting to significantly higher levels of public policy support—while providing significantly lower levels of public policy benefits, we should all be concerned,” Gebolys says. Lower societal and public policy benefits associated with coprocessed renewable diesel

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MARKET are significant sticking points for the biomassbased diesel industry. These encompass a wide range of important considerations, such as whether coprocessed renewable diesel creates jobs, investment in rural and green economies, and added gallons to the marketplace. Gebolys says not only can coprocessed renewable diesel and its D5 RINs unfairly squeeze out biomassbased diesel from fulfilling those volumes, but “refiners could begin these projects with little investment in their existing refineries and no long-term commitment to renewables,” he says. “This translates to little economic or publicpolicy benefit.” Henri-Jean Bardon, a director and investor in Solfuels USA, a 40 MMgy biodiesel plant in Helena, Arkansas, says dissemination of coprocessed renewable diesel can cause markets to go haywire. “It could double the price of soybean oil in the marketplace,” thereby squeezing biodiesel producers out of the market, he says. “Then, oil companies could just drop coprocessing. It’s a crazy situation, to be honest. It doesn’t add jobs, and my personal point of view is I think we are walking away from the tailpipe emissions benefits of biodiesel that started this whole renewables movement in the first place. It gets lost in the overall politics of it all. To me, on both sides of the Atlantic, they’ve been trying to kill traditional biodiesel for the past few years. That seems to be the trend, and I don’t understand why. Maybe it’s coming from the fossil fuel industry, I don’t know. To me, it doesn’t seem logical. If there is a threat to the fossil fuel industry, it’s definitely the electric car—not biodiesel and ethanol. Ethanol and biodiesel are assisting the fossil fuel industry with continuing to sell its gasoline and diesel products. So I don’t get it.”

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Rehagen says, “First and foremost, part of the interest Americans had in renewable fuels was rejuvenation in rural economies and investment in jobs by new facilities. So for existing refineries to retool their plant to process different input products than crude oil, there’s no new jobs created by that. It’s a significant difference.” Furthermore, neither the conversion of oil refineries to produce renewable diesel nor coprocessing of renewable feedstock with crude oil provide additional gallons to the marketplace. “They’re simply not making a gallon of what they were before and are now making a gallon of this,” Rehagen says. “That’s where we’ve viewed biodiesel plants as adding to the energy infrastructure, creating jobs, energy security and independence.” In some instances, like the Dickinson refinery, the oil refinery could process 20,000 bpd. In 2020, once its conversion project is complete, the site will be able to produce 12,000 bpd—a reduction of 8,000 bpd. “Those are better gallons than what was produced before,” Rehagen says, “but investments are not lost to these large refiners who are able to retool and take off from there, compared to our investments, which are from the ground up. A brand new biodiesel plant or renewable diesel plant is going to be a huge economic injection in the community and region. In the case of retooling an existing refinery, we’re unlikely to see new jobs come out of that. It may have a short-term impact on the local economy, but long-term there would not be a significant economic impact compared to what it had before. That’s where the models of building additional plants to increase biodiesel and renewable diesel production is preferable to us. And it’s consistent with our promise to lawmakers to increase fuel availability in the marketplace. New plants

2018 FALL EDITION

add gallons. Retooled refineries do not.” Not only would coprocessing not add additional gallons, but some say it could actually negate the entire volume of vegetable oil put into the process. “My opinion is, if they are putting 2 percent vegetable oil into coprocessing, they can end up losing most of that in the refining process,” Bardon says. “Essentially the vegetable oil can become a pure loss. As long as vegetable oil prices are low, maybe that’s a calculation some refiners will make.” Gebolys agrees, saying oil refineries are optimized to produce petroleum fuels while biofuels production facilities are optimized in processing renewable feedstock. “In a coprocessed renewable diesel project, it is possible that an injection of 1 percent lipids into a refinery stream could result in a 1 percent reduction in refinery efficiency,” Gebolys says. “This would have a net result in producing nothing. This could be one reason why coprocessed renewable diesel advocates are resisting receiving the kind of process examination that biomass-based diesel producers receive, beyond just having the incentive of a reduced compliance burden.” Related to losses, technical considerations exist as well. Renewable feedstock can offer new challenges that were not considered when oil refineries were originally built. “Issues like corrosion,” Fenwick says. “They’ll need to take into account the metallurgy, as the oxygen molecules in renewable feedstock are converted into water, which can be corrosive. And there are significant losses depending on the process technology.” A biodiesel producer cleaves the glycerin backbone of triglycerides and coproduces crude glycerin. A refiner turns that into C3, or propane, so whether they have the ability to capture it or send it straight to the flare as a


MARKET loss, or recover it for heat and power in cogeneration, has to be taken into account. For these reasons, Fenwick says, some refiners may not want to jump into coprocessing with both feet. Beyond actual volume output of renewable fuel content from coprocessing, the carbon and emissions benefits, if any, are less than clear. “People are not talking about emissions benefits of coprocessing,” Bardon says. “Do you get the same benefits through coprocessing as through blending?” Fenwick says, “We have a wealth of data on the quantifiable health, emissions and performance benefits of biodiesel and renewable diesel that a truly coprocessed fuel may not have yet.” Numerous studies have looked at emissions from RD100 or B100. “Even coprocessed fuels can achieve better emissions,” Fenwick says, “but I haven’t seen any results to validate that.” Biodiesel is one of the most tested fuels on the planet, with nearly two dozen iterations of its ASTM D6751 quality standard, allowance of up to 5 percent biodiesel in the diesel fuel spec (ASTM D975), a separate ASTM D7467 standard for B6 to B20 blends, allowance of blends up to 20 percent in the heating oil spec (ASTM D396), and much more. “It is accepted by almost all OEMs in blends up to B20 and in higher blends by some,” Gebolys says. “Biodiesel in blends of B5 to B20 offer

a range of premium characteristics that are superior to ULSD, including performance, with high lubricity and cetane; safety, with high conductivity that reduces static discharge and high flashpoint; and emissions, with low sulfur and aromatics, and overall reduction in virtually all regulated emissions.” Furthermore, biodiesel is less expensive to make and usually has a higher blend margin than renewable diesel, Gebolys adds. Biodiesel advocates say there is room in the market for both renewable diesel and biodiesel, and perhaps a harmonious blend is some concoction of the two in which biodiesel can add much needed lubricity to renewable diesel. “Biodiesel, we know, is very suitable for blending with renewable diesel from a technical standpoint, so a blend of biodiesel and renewable diesel can be even better than straight renewable diesel,” Rehagen says. “There are lots of opportunities to sort through all of this. Where we find ourselves now is, demand is high and growing fast.” Gebolys reiterates what many biodiesel advocates argue—investments made in biodiesel plants are critical. “Imagine partnerships between traditional refiners and agriculture,” he says. “Is that symbiotic? Absolutely not. What I mean is that some agricultural producers of biodiesel feedstocks—farmers, ranchers, renderers—might be tempted to support

more coprocessed renewable diesel projects by traditional refiners under the misconception that it will just lead to more demand for their products. This is not the case. The amount of agricultural lipids used to make biofuels will be determined by the RVOs set in the D4 and D5 categories, and not by how many different biofuel technologies are competing to meet those volumes. So agricultural stakeholders who cheer on coprocessed renewable diesel projects by traditional refiners are doing so at the expense of standalone biomass-based diesel companies that have invested billions to build up their plants and their industry. They are committed to the long-term health and growth of this industry. Traditional refiners advocating favorable coprocessed renewable diesel treatment are making little to no investment, have little skin in the game, and mostly oppose the RFS. Conversely, standalone biomass-based diesel producers inject $11 billion annually into the economy and support more than 64,000 jobs. Coprocessed renewable diesel adds almost nothing to the economy and supports nearly zero new jobs.” Author: Ron Kotrba Editor, Biodiesel Magazine 218-745-8347 rkotrba@bbiinternational.com

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JANUARY 21 24 SAN DIEGO

THE BIGGEST EVENT IN BIODIESEL The 2019 National Biodiesel Conference & Expo is heading back to our most popular location—sunny San Diego. Join us for networking with biodiesel decision makers from around the world and get an insider’s look at what biodiesel has in store for 2019. This is a can’t-miss event for anyone involved with the biodiesel industry. Register now at BiodieselConference.org