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CONTENTS

JULY/AUGUST 2013 VOLUME 10 ISSUE 4

20

26

INFRASTRUCTURE

REGULATION

Blend, Baby, Blend!

Traversing the RIN QAP Proposal

BY RON KOTRBA

BY RON KOTRBA

New blending operations help bring biodiesel to the masses

Exploring comments from affected parties in the RIN chain

CONTRIBUTION DISTRIBUTION

30 Advertiser Index 8 2013 Algae Biomass Summit 36 2013 National Advanced Biofuels Conference & Expo 28 American Agri-Diesel 12 BBI Consulting Services 35 Biodiesel Industry Directory 29 Crown Iron Works Company 25 EcoEngineers 11 First Environment Inc. 2 Genscape, Inc. 19 Gorman-Rupp Pumps 32 ICM, Inc. 13 Iowa Central Fuel Testing Lab 5 Liquid Controls 9 Louis Dreyfus 18 MaxFlo Advanced Filtration 22 Methes Energies 24 & 33 National Biodiesel Board 23 Oil-Dri Corporation of America 31 Webster Fuel Pumps & Valves

Expanding Distribution Channels by Thinking Outside the Box Tricks of the trade from an industry leader

BY GAVIN CARPENTER

DEPARTMENTS 4 Editor’s Note

IMPORTS, US PRODUCTION UP

BY RON KOTRBA 6 Legal Perspectives

EU Slaps Penalties on Argentine, Indonesian Biodiesel

BY RICHARD WEINER 7 Talking Point

Can Argentina’s Biodiesel Industry Grow Despite the Politics?

BY SCOTT FENWICK 9 Biodiesel Events 10 FrontEnd

Biodiesel News & Trends

14 Inside NBB 18 Business Briefs

Companies, Organizations & People in the News

Biodiesel Magazine: (USPS No. 023-975) July/August 2013, Vol. 10, Issue 4. Biodiesel Magazine is published bi-monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Biodiesel Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

34 Marketplace JULY | AUGUST 2013

BIODIESEL MAGAZINE

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EDITOR'S NOTE

IMPORTS, US PRODUCTION UP Ron Kotrba

www.BiodieselMagazine.com

Editor Biodiesel Magazine rkotrba@bbiinternational.com

E D I T O R I A L Tom Bryan President & Editor in Chief tbryan@bbiinternational.com Tim Portz Vice President of Content & Executive Editor tportz@bbiinternational.com Ron Kotrba Editor rkotrba@bbiinternational.com Jan Tellmann Copy Editor jtellmann@bbiinternational.com P U B L I S H I N G Mike Bryan Joe Bryan Matthew Spoor Howard Brockhouse

&

S A L E S

Chairman mbryan@bbiinternational.com CEO jbryan@bbiinternational.com Vice President, Sales & Marketing mspoor@bbiinternational.com Business Development Director hbrockhouse@bbiinternational.com

Tami Pearson

Account Manager tpearson@bbiinternational.com

Jessica Beaudry

Circulation Manager jbeaudry@bbiinternational.com

Marla DeFoe

Advertising Coordinator mdefoe@bbiinternational.com

John Nelson

Senior Marketing Manager jnelson@bbiinternational.com

Jaci Satterlund Elizabeth Burslie

A R T Art Director jsatterlund@bbiinternational.com Graphic Designer bburslie@bbiinternational.com

Subscriptions Subscriptions to Biodiesel Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. 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 701-7465367. 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 high-quality print production. To find out more about Biodiesel Magazine advertising opportunities, please contact us at 701-7468385 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 to rkotrba@ bbiinternational.com.

Please recycle this magazine and remove inserts or samples before recycling TM

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This has been quite the interesting year when it comes to global movement of biodiesel. At press time, Brazilian firm BSBios announced exportation of its, and Brazil’s, first volumes of biodiesel. In late June, the company said the fuel was headed for the Port of Rotterdam, the major EU hub port in The Netherlands. This, of course, came after the EU put provisional antidumping tariffs on biodiesel from Argentina and Indonesia (see Legal Perspectives on page 6). The EU had been a major export market for biodiesel from those two countries. This led to reports of Argentina pursuing registration with U.S. EPA under the renewable fuel standard to generate RINs so producers could find a new, major outlet for their biodiesel (see Talking Point on page 7). Interestingly, EIA data released at the end of May showed U.S. imports of biodiesel were up more than eight-fold over February (see page 10), and sources indicate the summer months will see even more imports. Those March figures included the first shipments of biodiesel from Argentina in years. Much of the imported biodiesel hitting American shores thus far has been RIN-less, so the thought has been high RIN-less imports coupled with unimpressive first-quarter domestic production would likely mean an increase in RIN prices, which would be a good thing for producers. Then Australian Renewable Fuels announced it was shipping 3 million gallons of biodiesel to the U.S. and, according to the EPA’s expansive excel file of registered fuel producers, obligated parties and importers, the company is registered to generate D4 RINs. This would equate to 4.5 million D4 biomass-based diesel RINs headed to U.S. shores from ARFuels alone. Then EPA released domestic production volumes for May, which showed an 18.5 percent increase in U.S. production over April—also a good thing for the industry. This means U.S. producers are ramping up production to meet its largest federal mandate yet. Through May, domestic production exceeded 500 million gallons. How will all of these events affect RIN prices? Time will tell.

COPYRIGHT © 2013 by BBI International


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LEGAL PERSPECTIVE

EU Slaps Penalties on Argentine, Indonesian Biodiesel BY RICHARD WEINER

The big news in the world of international biodiesel today is that the European Union has slapped biodiesel imported from Argentina and Indonesia with a penalty, which effectively makes biodiesel from these countries more expensive to purchase in the EU. Since biodiesel from

Argentina and Indonesia accounts for 90 percent of the biodiesel imported into the EU, this significantly shifts the economic paradigm of biodiesel sales in Europe in favor of biodiesel produced within the EU itself. The penalty, known as antidumping duties, was imposed by the European Commission in Brussels after the European Biodiesel Board filed a complaint on behalf of European producers that account for more than 60 percent of EU production, claiming that the biodiesel imported from Argentina and Indonesia was being sold in the EU at artificially depressed prices— prices with which European producers simply could not compete. The EC is the regulatory body in the EU that is responsible for investigating allegations of non-EU manufacturers dumping their products into the EU at artificially depressed prices. As a result of its investigation of the EBB’s complaint, the EC last month imposed antidumping duties of between 6.8 and 10.6 percent on biodiesel imported from Argentina and between 1 and 9.6 percent on biodiesel imported from Indonesia, concluding that EU biodiesel producers had been harmed by the imports and needed the duties in order to regain the European market share that they had lost to Argentine and Indonesian biodiesel companies. In arriving at its conclusion, the EC conducted the following analysis: 1. A company is dumping its products into the EU if it is exporting its products to the EU at prices lower than the normal value of the products in its own domestic market. The EC determined that Argentine and Indonesian biodiesel companies were selling their products in the EU below the cost at which these companies actually produced the biodiesel in an attempt to gain

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JULY | AUGUST 2013

EU market share. The EC concluded that as a result of dumping their biodiesel into the EU, the Argentine and Indonesian companies had increased their share of the EU biodiesel market from 9.1 to 18.8 percent in a period of three years. 2. The EC noted that both Argentina and Indonesia had imposed an export tariff on the exportation of raw materials such as palm oil and soybean oil, but not finished products such as biodiesel, thereby making it more expensive for European companies to produce biodiesel from these raw materials. The lack of these raw materials in the EU from which to produce biodiesel, coupled with inexpensive biodiesel imported from Argentina and Indonesia, the EC concluded, caused material economic injury to the European biodiesel industry. As support for its conclusion, the EC indicated that during the period in which the market share for Argentine and Indonesian biodiesel had increased from 9.1 to 18.8 percent, the market share for European biodiesel had decreased by 5.5 percent. 3. The EC concluded that in order to relieve the material economic injury suffered by European biodiesel companies as a result of the biodiesel dumped into the EU from Argentina and Indonesia, it would impose provisional antidumping duties on biodiesel imported from these countries, beginning May 28, and continuing for a period of six months. The governments of the 27 countries that make up the EU must now decide before the end of November whether to turn these provisional duties into definitive duties against biodiesel imported from Argentina and Indonesia, which would typically be imposed for a period of five years. The biodiesel trade war between the EU and Argentina and Indonesia is just starting to heat up. Argentina has threatened to fight back against the antidumping sanctions by filing a complaint against the EU with the World Trade Organization. Stay tuned for more fireworks in the months to come. Author: Richard Weiner Vice President, Fredrikson & Byron 612-492-7009 rweiner@fredlaw.com


TALKING POINT

Can Argentina’s Biodiesel Industry Grow Despite the Politics? BY SCOTT FENWICK

It may be winter in South America, but Argentina believes its “growing season” is still going strong. Over the past six years, the biodiesel industry in Argentina has been growing at an unprecedented pace. Not only has the country become the fourth largest producer of biodiesel globally, it has also become the world’s largest exporter of biodiesel, looking for as many import markets as it can find. The country currently mandates 7 percent biodiesel usage and is considering raising it to 10 percent. Further, the rate of growth in Argentina has exceeded the amount of biodiesel it has been able to consume within the country. Despite this impressive progress, political barriers the country faces on an international scale may hinder growth expectations. Late in May of 2013, one of Argentina’s largest export markets, the European Union, slapped the country with antidumping duties in order to protect the domestic market within Europe from cheaper imports. To the EU, Argentina is just another country that will become irrelevant within the European biodiesel market. To Argentina, this means looking at other export markets for ways to take up the slack. The U.S. market seems to be an obvious choice, regardless of all the hurdles the second iteration of the renewable fuel standard (RFS2) provides. For several years now, Inspectorate America Corp. has helped to load, analyze and facilitate numerous imports of soy biodiesel from Argentina into the U.S. However, since the inception of the RFS2 and other requirements, these shipments have not qualified for renewable identification number (RIN) generation. As such, this has made imported biodiesel unattractive to certain market segments within the U.S. Due to a lack of blending infrastructure, there are a number of obligated parties that rely on the received RINs to help prove that they are meeting their obligated volumes of renewable fuels. At times when the imports are cheaper, in conjunction with the federal blenders tax credit, the price differential has seemed to ease the wariness. Now, to increase the marketability of biodiesel from Argentina, it is reported that the country is looking to register and comply with the RFS2 regulations in the U.S. Inspectorate America has been able to sample and test many of these imports to demonstrate that the product meets the

appropriate specifications, but validating political policies will require new controls. Official representatives from Argentina have been quoted saying they expect to have U.S. EPA approval in the next couple of months, but that is unlikely. According to the current RFS2 standards found within the code of federal regulations, the production facilities within Argentina would have several requirements to comply with, depending upon their desired level of participation under the EPA program. First, they must register. The federal program offers the flexibility to register in several ways, but each scenario requires an approved pathway that would allow the participant(s) the ability to prove no land use change and preserve the identity of certain production lots. The producer must also perform a life-cycle analysis to demonstrate a reduction in overall greenhouse gas emissions. Second, site assessments and engineering reviews are required to evaluate production facilities. Once the assessment process is complete, only then can an individual facility be considered registered and given EPA-issued company and facility identification numbers. Yet, this still might not allow the foreign producer to generate RINs. The recordkeeping requirements and annual compliance audits may be more than a burgeoning industry can handle. It could, however, allow a registered importer the opportunity to generate RINs for a batch of renewable fuel produced outside of the U.S. While the RFS2 program is robust and permissible in many ways, the EPA has always been slow and deliberate in its actions. Argentina has a number of reasons to look for alternate outlets for its growing biodiesel industry, including announcing that it plans to participate within the RFS2 program in the U.S. At the very least, it keeps the hopes of a growing industry alive as they reach for validation on an international scale. But, with the current prevalence of ever-changing regional policies and politics in a global marketplace, it may be too early to expect continued growth of the biodiesel industry in Argentina. Author: Scott Fenwick Technical Business Manager, Biofuels for Inspectorate 217-278-0963 Scott.Fenwick@Inspectorate.com

JULY | AUGUST 2013

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Save $200 Register Now

Deadline: 8/19/2013

Agenda Now Online www.algaebiomasssummit.org

“The ABS provided the right mix of industry, academia, and interested investors, committed to building and expanding the role of algae in biofuels, feeds, and products. Collaborations and partnerships developed at ABS will influence the field and industry for decades to come.” Ryan Dorland, Ph.D., Cellana LLC

“This conference is at the forefront of the latest and most-up-and-coming industry. From exhibitors, to speakers, to attendees, the conference bridged the gap between the unknown and achievable.” Erica Mason, M-E-C Company


EVENTS CALENDAR Collective Biodiesel Conference

LDCommodities.com

AUGUST 15-18, 2013 Colorado Mountain College Breckenridge, Col. The Collective Biodiesel Conference is is a non-profit event geared toward active and open collaboration among participants, including home brewers, grease collectors, multi-million gallon producers, and everyone in between. 970-485-4900 | www.collectivebiodieselconference.com

National Advanced Biofuels Conference & Expo

SEPTEMBER 10-12, 2013 CenturyLink Center Omaha Omaha, Neb. Proving Pathways. Building Capacity. Produced by BBI International, this national event will feature the world of advanced biofuels and biobased chemicals―technology scale-up, project finance, policy, national markets and more―with a core focus on the industrial, petroleum and agribusiness alliances defining the national advanced biofuels industry. 866-746-8385 | www.advancedbiofuelsconference.com

Algae Biomass Summit

SEPTEMBER 30-OCTOBER 3, 2013 Hilton Orlando Orlando, Fla. This dynamic event unites industry professionals from all sectors of the world’s algae utilization industries including, but not limited to, financing, algal ecology, genetic systems, carbon partitioning, engineering and analysis, biofuels, animal feeds, fertilizers, bioplastics, supplements and foods. 866-746-8385 | www.algaebiomasssummit.org

International Biomass Conference & Expo

MARCH 24-26, 2014 Orlando Convention Center Orlando, Fla. Organized by BBI International and coproduced by Biomass Magazine, the International Biomass Conference & Expo program will include 30-plus panels and more than 100 speakers, including 90 technical presentations on topics ranging from anaerobic digestion and gasification to pyrolysis and combined heat and power. This dynamic event unites industry professionals from all sectors of the world’s interconnected biomass utilization industries―biobased power, thermal energy, fuels and chemicals. 866-746-8385 | www.biomassconference.com

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JULY | AUGUST 2013

BIODIESEL MAGAZINE

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FrontEnd

Biodiesel News & Trends

US biodiesel imports on the rise U.S. imports of biomass-based diesel spiked in March as the nation imported nearly 17.3 million gallons, up from only 2.2 million gallons in February, according to Energy Information Administration data. Roughly half of that came from Argentina (6.1 million gallons) and Indonesia (2.1 million gallons). The rest originated from Germany (5.5 million gallons) and Canada (3.3 million gallons). The U.S. also exported biodiesel to Germany and Canada in March. In addition to biomass-based diesel imports, the U.S. imported nearly 8.5 million gallons of “other renewable diesel” in March from Finland, Singapore and Canada. EIA defines “biomass-based diesel” as biodiesel or renewable diesel, and “other renewable diesel” as product coprocessed with petroleum. “We’re clearly seeing some small volumes of imports starting to come in given market economics with the tax incentive,” says Anne Steckel, vice president of federal affairs for the National Biodiesel Board, “but we expect the vast majority of production will continue to be from domestic producers. We have always advocated that the biodiesel tax incentive be structured for producers instead of blenders, and we will continue to push for that change.” Another source says the March spike in U.S. biodiesel imports is “only the begin-

ning,” as the summer will bring about 21 million gallons of imports per month. “Most of it is RIN-less and is in very strong demand because there are no RFS requirements risks associated,” the source says. “The economics of the tax credit make it viable like no tomorrow. This is very complex but rest assured that this, combined with [provisional tariffs from Europe] and the potential of a newly implemented traceability requirement for [used cooking oil] to Europe, will be a game changer. The U.S. is clearly not prepared for the maelstrom that will happen. I expect

depression in feedstock prices. The soy boys will get a lesson in world economics.” This spring the EU installed provisional tariffs on dumped biodiesel from Argentina and Indonesia (see Legal Perspectives on page 6). Reports indicated that Argentine producers were attempting to gain RFS2 registration with U.S. EPA to export biodiesel to the U.S. and generate RINs. The March volumes from Argentina were the first shipments of biodiesel to the U.S. since 2009. The biomass-based diesel from Indonesia was the first from there on EIA record.

Duonix retrofitting 50 MMgy Beatrice, Neb., plant Benefuel Inc. has completed agreements with Flint Hills Resources Renewables LLC to develop biodiesel refineries in the U.S. using Benefuel’s patented Ensel refining technology, under development for six years. The joint venture, named Duonix LLC, is actively developing the first project, a retrofit of the 50 MMgy facility in Beatrice, Neb., acquired by FHR out of bankruptcy and has since been transferred to Duonix. The Beatrice plant will continue to be operated by FHR. Itochu Corp., one of Japan’s largest conglomerates and a current Benefuel shareholder, has invested in the Beatrice project as a strategic partner of Benefuel and as a result of its own extensive technology validation efforts. In addition to the Beatrice project, Benefuel and Itochu intend to develop international opportunities with a focus on Asia. “As a result of our year-long demonstration experiment in Japan with our partner company, we are confident of the enormous advanBIODIESEL MAGAZINE JULY | AUGUST 2013 10 

tage of the Ensel technology over conventional biodiesel production methods,” says Yasushi Kiyobayashi, deputy general manager of the corporate development department at Itochu. “The Beatrice project will be an important cornerstone for the biofuel industry in the U.S. but also in other countries. We are excited to explore the immense business opportunities in Asia with Benefuel.” Benefuel’s Ensel technology employs a solid acid catalyst reactor that combines esterification and transesterification into a single step. Ensel has been validated independently by FHR and Itochu at two separate 1-ton-per-day demonstration facilities. Benefuel is the exclusive, worldwide license-holder of the patented, intellectual property and catalyst, which was developed by National Chemical Laboratories and is produced by Süd-Chemie (now part of Clariant).


FRONTEND

US diesel car registrations up nearly 25 percent 2010-‘12 Clean diesel car registrations increased by 24.3 percent in the U.S. from 2010 through 2012 following similar trends of double-digit diesel car sale increases throughout the country, according to recent data compiled for the Diesel Technology Forum. The national registration information was compiled by R.L. Polk and Co. and includes data for all types of passenger vehicles—cars, SUVs, pickup trucks and vans—in all 50 states and Washington, D.C., from Jan. 1, 2010, through Dec. 31, 2012. Diesel car and SUV registrations increased from 640,779 in 2010 to 796,794 at the end of 2012, a 24.34 percent increase. During this same period, hybrid car and SUV registrations increased from 1,714,966 to 2,290,903, a 33.58 percent increase. In contrast, the total car and SUV registrations in the U.S. increased by just 2.75 percent during the same period. “When all passenger vehicle registrations are included—cars, SUVs, pickup trucks and vans—the diesels currently account for 6,658,399 vehicles while hybrids account for 2,295,500 vehicles throughout the U.S.,” says DTF Executive Director Allen Schaeffer, who notes that there are currently 27 diesels available in the U.S. market compared to 46 hybrids. “While total diesel vehicle registrations are slightly less than three percent in the U.S., auto analysts and market researchers virtually all agree diesel sales are going to increase significantly as the number of new diesels made available domestically will more than double in the next two years. Some analysts predict diesel sales will reach 10 percent of the U.S. market by 2020. In addition, clean diesel vehicle sales are also projected to increase as the U.S. moves toward increasing fuel efficiency

standards to 54.5 mpg by 2025. Because clean diesels are 20 to 40 percent more efficient than gasoline engines, diesel cars and trucks will play a major role in achieving these new standards. And an interesting wild card will be the emerging market domestically and internationally of clean diesel hybrid vehicles that will achieve astounding mpg numbers.”

Ensure the integrity, validity, and marketability of your RINs Get your Renewable Identification Numbers verified by First Environment, one of the first of only a handful of firms with an EPA-approved Quality Assurance Program to provide RINs verification services. Call or email us for more information or to request a proposal. RIN Verification • RFS Reporting • Third Party Engineering Reviews First Environment was voted best verifier for North American Greenhouse Gas Markets for the past five years, and best verifier for Voluntary Markets for the past two years. (Environmental Finance Magazine Annual Survey) www.firstenvironment.com • Luca Nencetti: lnencetti@firstenvironment.com • 646.873.6781 ext. 301 JULY | AUGUST 2013

BIODIESEL MAGAZINE

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FRONTEND

Plant project planned for Boulder, Colo.

BOTTOM-LINE RESULTS

Saving me and money is key.

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BIODIESEL MAGAZINE

MMgy. The two units will be run in parallel. Lange says his company originally planned this project about five years ago, but the industry endured rough times in 2008-’09 when project development halted. “It took a few more years for enough stability in the industry to make this project secure,” he says. “We originally partnered with Environmental Green Energy in Kansas to complete the first phase loop and provided biodiesel to the Boulder County municipal fleet for the past four years. They won an award from the National Association of Counties for the program that we created.” ClearEcos is assisting Dara Lor of Summit Greasecycling in organizing this year’s Collective Biodiesel Conference Aug. 15-18 in Breckenridge, Colo. Gregory Gettinger, CEO of GHP Biodiesel USA, says, “The synergies in production and logistics are striking. Moving up the value chain from used oil collection to an integrated energy provider is a logical strategic step in this industry.”

In June, Dutch company FirmTec was scheduled to deliver an enzymatic biodiesel plant using ethanol instead of methanol to Indonesian firm Waterland, which plans to convert camelina oil to biodiesel with the new unit. Conventional biodiesel processes use petroleum-based methanol. The worldwide patent on this alternative method, invented by the Fraunhofer Institute in Germany, has been bought by the Indonesian company Waterland. Waterland grows oil-bearing crops in proximity to food crops (intercropping) in countries across Asia. These crops are grown using sustainable practices, with minimal use of synthetic fertilizers and crop protection agents. The company also intends to produce its own ethanol, which is needed for the new process, meaning Waterland will soon be producing all the raw materials necessary for the new green biodiesel and no longer will be dependent on fluctuating global market prices for vegetable oil and methanol. This enzymatic biodiesel plant in Bali will be put into operation in mid-September. There are already a number of generators on

JULY | AUGUST 2013

PHOTO: FIRMTEC

FirmTec to ship novel unit to Waterland

Because we’ve completed more than 335 bioenergy projects around the world, the team here at BBI Consulng Services is able to streamline any bioenergy and engineering project. In return, you’ll save me and money, eliminang underfunded and undermanned projects. We’ll help you keep your project on the best track for success.

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Bio Plant Technologies LLC, operating as ClearEcos, and GHP Biodiesel USA Inc. have joined forces to establish a new 11.5 MMgy biodiesel plant in Boulder, Colo. Founded five years ago, ClearEcos is a Colorado-based grease collector. According to Kurt Lange, CEO of Bio Plant Technologies, the oil processing portion of the plant is already built and being expanded, while the biodiesel production aspect of the facility is in the engineering/ architectural/zoning and planning phase. Lange tells Biodiesel Magazine the processors, formerly installed in Germany, were scheduled to arrive in Boulder early this summer. GHP Biodiesel USA originated in Germany as a biodiesel production technology provider. Its technology focuses on a decentralized, modular and containerized approach. GHP Biodiesel produced biodiesel in Germany with those processors for more than four years, Lange says. “They are ultralow-emission, ultra-efficient, continuous flow processors,” he adds. One of the processors is scaled at 7.5 MMgy and the other is 4

INNOVATIVE DESIGN: FirmTec workers proudly pose in front of the company’s new enzymatic production unit that will use ethanol (not methanol) and camelina oil to produce biodiesel in Indonesia.

Bali, which provide the island with electricity. One of these generators will generate electricity using this new enzymatic biodiesel, which will be produced using the FirmTec system. The Indonesian government is also involved in the project and is assisting with rapid implementation of this type of biodiesel. Several world leaders and CEOs will be meeting at a conference on sustainability on Bali at the beginning of October, including U.S. President Barack Obama, who plans to visit the new plant.


PHOTO: ETCLEANFUELS

FRONTEND

FUELED UP: Atlanta’s Clean Energy Biofuels station, now in operation for more than a year, offers B20 and B100 to diesel drivers along the I-75 Green Corridor.

Atlanta biodiesel station celebrates 1st anniversary June marked the one-year anniversary of Atlanta’s first and still-only state-of-theart retail biodiesel station. This pioneering project, a collaboration between the Southern Alliance for Clean Energy and Clean Energy Biofuels, is a model for truly sustainable biodiesel production in Georgia and throughout the country. “Our biodiesel is the only fuel in the country produced using 100 percent renewable solar electricity,” said McKay Johnson, president and co-founder of Down to Earth Energy and CEB. “Our fuel is also entirely sourced from local restaurants’ waste oil, unlike most fuel that is grown in the Midwest or imported from overseas, so our product actually benefits our regional economy.” Over the past year, this station has provided fuel to a wide variety of drivers who range from local residents to crosscountry travelers, such as Woody Harrelson and New Belgium Brewing Company’s Tour de Fat. In just one year, the

fuel sold by this retail station has reduced oil dependence and prevented more than 400,000 pounds of carbon dioxide from being emitted into the air, reducing the impacts of hundreds of cars and trucks on the road today. “Clean Energy Biofuels’ biodiesel meets the ASTM standard, ensuring quality and consistency that rivals conventional diesel,” said Anne Blair, program director SACE’s clean fuels and bioenergy programs. “However, our biodiesel produces far less toxic emissions than conventional diesel, which means better air quality in our urban area.” The biodiesel fueling station is also part of the U.S. DOE’s I-75 Green Corridor Project that is creating the longest alternative fuels corridor in the U.S.—all 1,786 miles of I-75. Once completed later this year, it will be the longest biofuels corridor in the country, traversing six states and cutting through the core of the U.S. from Florida to Michigan.

JULY | AUGUST 2013

BIODIESEL MAGAZINE

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NATIONAL

BOARD

NBB Launches 3-Part Plan to Strengthen RFS Efforts Recent events in Congress have raised the volume level of the voices critical of the renewable fuel standard (RFS). Hearings in June held by a subcommittee of the House Committee on Oversight and Government Reform featured mostly anti-RFS industry officials including the head of the American Petroleum Institute. As the National Biodiesel Board continues to closely monitor RFS activities on the Hill, it is anticipated that the RFS will come under strong scrutiny in the coming months. The RFS is currently the strongest and most important federal policy issue related to biodiesel. We are prepared to respond rapidly to any direct criticism of the biodiesel industry and will be calling on biodiesel stakeholders to make their voices heard in Washington to protect the RFS. Members of NBB’s governing board had the foresight to see that, as the RFS continues to move forward and grow, the opposition would continue to ramp up its attacks. Thanks to that foresight from industry leadership, NBB is pleased to announce a new threepart plan to help fortify our ongoing resources and to go on the offensive for America’s advanced biofuel. The biodiesel industry continues to receive strong bipartisan support from both Congress and the administration; however, the RFS, due to many issues not related to biodiesel, has received a great deal of negative scrutiny in the House of Representatives. Biodiesel has never been a partisan issue but as the dynamics in Washington continue to change and become increasingly polarized, our challenge is to ensure that this bipartisan support continues, particularly with new members who are not familiar with biodiesel and are, at times, skeptical or hostile toward renewable energy. Due to these changing dynamics, NBB has hired former U.S. Rep. Kenney Hulshof, a Republican from Missouri, on an interim basis for direct outreach to this targeted group. Hulshof is a former member of the House Ways and Means Committee and has been a biodiesel champion for many years. His experience will be a major asset for the biodiesel industry in targeting the negative opinions of biodiesel on the House side. The second announcement relating to strengthening the biodiesel industry’s position within the RFS is on the regulatory side.

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To assist our team moving forward as we anticipate increasingly difficult regulatory battles on the RFS, NBB is proud to welcome Lindsay Fitzgerald to the staff as the director of regulatory affairs. Fitzgerald comes to NBB from the EPA’s Office of Transportation and Air Quality and has been working directly on the RFS for the past six years. Her extensive Joe Jobe, CEO, National Biodiesel knowledge of the program will be a key asset Board as the industry continues to work with EPA to implement the RFS. Part three is the recent launch of year three of the Advanced Biofuel Initiative, the national education campaign for biodiesel. Designed to educate and inform key audiences about biodiesel benefits, its timing and messages lay a fact-based foundation that complements the duesfunded advocacy efforts of the industry. The campaign has been highly effective the past two years to educate the public on what biodiesel is and what it can do. The third year of the campaign focuses on why Americans should care. The campaign makes the point that consumers and taxpayers are better protected by having a diversified portfolio of transportation fuels. The comprehensive campaign includes a 30-second TV commercial airing on national television networks and on Washington, D.C., broadcast, and cable news outlets. The campaign also includes print, radio, online, and social media ads, as well as an in-depth website that includes a nineminute minidocumentary. The campaign can be seen at www.americasadvancedbiofuel.com and is scheduled to run into the fall. This three-part plan will help fortify and strengthen our already robust program as we continue to maintain the biodiesel industry’s No. 1 priority, the RFS. Detractors of the RFS are leading well-coordinated and well-funded political attacks to scrutinize the policy. Biodiesel is one of the bright spots of the policy and these three new initiatives will help us tell our positive story. Joe Jobe, CEO, National Biodiesel Board


inside

NBB National ad campaign underscores key, well-timed messages Making the point that consumers and taxpayers are better protected by a diverse supply of transportation fuels, the National Biodiesel Board unveiled a new television advertising campaign at its June membership meeting. The 30-second commercial is airing on national television networks and on Washington, D.C., broadcast and cable news outlets. “Biofuels are helping to diversify America’s transportation fuels, which protects consumers by freeing the market from the instability of a single liquid energy source,” said Joe Jobe, NBB CEO. “And because it is diesel engines that move the freight that drives the economy, it begins a positive ripple effect for the prices of just about everything we buy.” The ad shows what it would be like to be in a world lacking in options as the narrator intones, “Without choice, we’re at the mercy of chance. Why chance our future on only one transportation fuel?” The voice is provided by Will Lyman, best known for his work as the narrator of the PBS series Frontline. In addition to the television commercial, the campaign includes print, digital and radio advertising, and an in-depth website that includes a nine-minute minidocumentary. The campaign was produced by Northern Virginia-based PCI and the advertising purchasing was executed by

the Dewey Square Group. Funding for the campaign is provided by the United Soybean Board, State Soybean Checkoff Boards, the U.S. Canola Association, the Northern Canola Growers Association and the National Biodiesel Board. Take a look at the campaign at www.AmericasAdvancedBiofuel. com.

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insideNBB

Structure change, renewable diesel membership category approved During the June National Biodiesel Board membership meeting in Washington, D.C., members of the organization’s governing board unanimously approved two bylaw amendments. The first change impacts the structure of the governing board. The 15-member governing board will be elected from the members at large where eight directors are elected by straight vote and seven are elected by weighted vote. The change in June removed the categories previously associated with the eight straight vote positions and will help streamline the yearly elections process. The second change adds a category of membership that would allow renewable hydrocarbon diesel producers to apply to become NBB members. This inclusion of qualified renewable diesel producers will unite the advanced biofuels industry in the diesel sector and will consolidate under one tent the larger biodiesel industry with the younger and smaller renewable diesel industry, creating a stronger and more effective voice for both. “We are excited to expand our membership to include

renewable diesel producers,” said Joe Jobe, CEO of NBB, which traditionally has represented only biodiesel interests. “While produced with different technologies, biodiesel and renewable diesel are close cousins with a lot of shared interests, particularly in policy areas such as the RFS and the blenders tax incentive. Joining forces puts us in a much stronger position as a coalition to make our voice heard and spread the word that these policies are working and that advanced biofuels are here today.” Representatives of the renewable diesel producers echoed Jobe’s statements. “We have long been impressed with the work NBB does to represent the biodiesel industry and felt that joining forces was the next logical step,” said Randall C. Stuewe, president and chairman of the board of Darling International Inc., which is a 50 percent equity owner in Diamond Green Diesel, a Louisianabased renewable diesel plant with production capability of more than 136 MMgy coming on line shortly. “Many of the same issues face both biodiesel and renewable diesel producers and we’re glad to be speaking with one voice on these issues.”

Political giving important piece of federal policy efforts Biodiesel is the only advanced biofuel commercially available across the country, but remains a relatively young industry when compared to conventional petroleum fuels. As the industry continues to mature, strong public policy remains critical. The biodiesel industry has long been commended for its advocacy efforts in Washington and grassroots lobbying strength, but political fundraising remains an important component of supporting effective public policy. “Political giving is an important form of free speech,” said National Biodiesel Political Action Committee Chairman Ron Marr. “Supporting the members of Congress who support us is mission-critical, and NBB members contributing to the PAC is an efficient and ethical way to do so.” NBPAC is the connected PAC of the National Biodiesel Board and is dedicated to electing and supporting political leaders

around the country who understand the vital role of biodiesel in the nation’s energy policy. All members of NBB are eligible to become members of NBPAC. During the recent NBB membership meeting in Washington, D.C., the biodiesel industry hosted a fundraiser meeting with Rep. Ed Whitfield, Ky.-01, in which NBPAC participated. Whitfield chairs the important House Energy and Commerce Committee that oversees the RFS2. Past fundraising events the NBPAC has participated in have raised contributions for Sen. Maria Cantwell, D-Wash.; Sen. Chuck Grassley, R-Iowa; Rep. John Shimkus, Ill.-13; Rep. Adam Kinzinger, Ill.-16, and others. Also during the NBB membership meeting, the NBPAC hosted a separate

NBB welcomes new members Wil Fischer Distributing Co. Inc.—Springfield, Mo. Green Waste Solutions of Alaska—Anchorage, Alaska North Dakota Soybean Growers Association—Fargo, N.D. 16

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Ron Marr, Minnesota Soybean Processors, is the current chairman of the National Biodiesel PAC.

fundraising reception to raise additional funds for future contributions. The PAC’s executive committee is currently planning fundraising events connected with the upcoming November NBB membership meeting and the National Biodiesel Conference & Expo Jan. 20-23 in San Diego. Additional information including approval forms can be found at www. biodieselpac.org.

United Metro Energy Corp.—Brooklyn, N.Y. Veros Energy LLC—Moundville, Ala. Synergy Biofuels LLC—Pennington Gap, Va.


insideNBB

Regional NBB meetings offer outstanding opportunity for collaboration, feedback NBB recently hosted a set of regional meetings to get feedback and offer support to members across the country. The meetings facilitated information-sharing and collaboration on hot-topic issues that affect members nationwide. They also allowed for more concentrated discussions on regional efforts. “The biodiesel industry has many commonalities that run throughout, but is a very diverse group from region to region,” said Doug Whitehead, NBB director of operations and membership. “Each location is unique to the industry and provides a different set of opportunities and challenges.” Meetings held in May included Atlantic City, N.J., Sacramento, Calif., and Des Moines, Iowa, with the final meeting scheduled for Houston July 16-17. NBB has hosted smaller informal regional meetings in the past with the success of those events leading to the larger, more formal effort. “The regional meeting here was an awesome opportunity to spend quality time with our national leaders discussing the regula-

tory issues, successes, and challenges that affect us in California,” said Jennifer Case, president and CEO of New Leaf Biofuel. “It was also really helpful to have NBB come out West because the distance often prevents California biodiesel producers from attending the Midwest and D.C. meetings.” NBB’s three annual membership meetings in January, June and November are focused on national efforts and the general business of the trade association and are located in Washington, D.C., St. Louis, Mo., and in conjunction with the National Biodiesel Conference & Expo. While important to the overall benefits to the industry, the smaller regional settings allowed for more in-depth discussions on topics such as state and regional policies, local infrastructure, and market opportunities. NBB is the national trade association representing America’s first advanced biofuel. The group works to create sustainable biodiesel industry growth through education, communication, governmental affairs, technical and quality assurance programs.

Industry honors, thanks champions for service The National Biodiesel Board recently recognized three industry champions for their outstanding efforts in advancing the biodiesel industry. They were recognized during the recent NBB membership meeting in Washington, D.C. Lyle Wessel (not pictured) has served as the primary representative for the Illinois Soybean Association at NBB since 1999 and is retiring this year from the position. Harold Kraus served as the primary representative for the Kansas Soybean Commission at NBB and is retiring from the position. Carmela Baily recently retired from USDA. She served as the grant administrator for the Biodiesel Education Grant for almost 10 years. The program provided outside funding to support NBB efforts. “The industry has grown out of infancy to a billion-gallon-plus industry due in large part to the efforts of champions like these,” said NBB CEO Joe Jobe. “They have been tremendous advocates for the biodiesel industry who will definitely be missed.”

Harold Kraus, left, celebrated retirement as primary representative for the Kansas Soybean Commission at NBB and was honored for his work by NBB’s CEO Joe Jobe, center, and Chairman Gary Haer.

Carmela Baily, center, was also recognized at the recent membership meeting by NBB for her decade-long service as administrator for the Biodiesel Education Grant. JULY | AUGUST 2013

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PHOTO: RON KOTRBA, BIODIESEL MAGAZINE

BusinessBriefs

RAMPING UP: Hill says the new USEI partnership will generate significant revenue via increased production.

U.S. Energy Initiatives Corp. Inc. signed a biodiesel production agreement with Temecula, Calif.-based Promethean Biofuels whereby the companies will work together to bring Promethean’s facility to its maximum capacity this summer. Promethean has the capacity to produce up to 3 MMgy at max production. This is a 12-month agreement and the parties agree to divide the revenue produced by the sale of fuel produced (less cost), which should exceed $6 million annually. “This is a significant milestone for USEI and it is an immediate entry into the fuel production arena,” says

Companies, Organizations & People in the News

USEI CEO Anthony Miller. “This relationship just allows the plant to operate 24 hours a day, seven days a week, well above current levels.” Todd Hill, managing principal of Promethean, says, “In the next few months, we will ramp up towards our nameplate capacity and generate significant capital. ”

Pacific Biodiesel Technologies hired Samuel Millington as new CEO for the 17 year-old Maui-based company. Millington, a longtime Hawaii resident, joins PBT with years of experience in the for-profit, nonprofit and public service sectors. Millington joins PBT at a pivotal moment for the rapidly growing company, with fuel production ramping up at Big Island Biodiesel, the company’s newest development—a new, zero-waste, 5.5 MMgy facility. PBT’s production now equals 10 percent of the onroad use of petroleum diesel

in Hawaii, and increasing demand for biodiesel requires advanced strategic planning, one of Millington’s specialties. Millington moved to Hawaii in the mid-1990s and has served on numerous boards, commissions and task forces.

Synthetic Genomics Inc. announced in May a new cofunded research agreement with ExxonMobil to develop algae biofuels. The new agreement is a basic science research program that focuses on developing algal strains with significantly improved production characteristics by employing synthetic genomic science and technology. In June 2009, SGI and ExxonMobil announced a research and development alliance focused on naturally occurring and conventionally modified algae strains. The new agreement focuses on SGI’s core strengths in synthetic biology and will allow the company to further explore this promising area of research to develop improved algal strains. The agreement places greater emphasis on basic scientific research to develop strains that reproduce quickly, produce a high proportion of


BUSINESSBRIEFS Sponsored by lipids and effectively withstand environmental and operational conditions.

Two companies achieved BQ-9000 laboratory accreditation recently: Intertek in Romeoville, Ill., and Community Fuels, a biodiesel producer in Port of Stockton, Calif. The certification process begins with a desk audit of the quality system to verify the National Biodiesel Accreditation Commission required elements are in place. The laboratory is then subject to a full on-site audit to verify the effectiveness of the quality system and the test methods performed. This certification process holds the laboratory to a higher standard and promotes consistency in testing and quality. Intertek's worldwide networks of biofuel laboratories test a wide range of renewable fuel products and blends, including biodiesel, ethanol and biomass fuels. Community Fuels says the BQ-9000 lab certification makes it the first

biodiesel producer in the nation to receive this third-party approval. Community Fuels earned its BQ-9000 producer status in June 2012.

in concert with technological advances such as diesel hybrids and light rail systems, can create an Aruba that is both energy independent and sustainable.

Methes Energies Canada Inc. signed a purchase and cooperation agreement with BioFuel Aruba of Oranjestad, Aruba, to initially purchase a Denami 600 biodiesel processor. As the first and only biodiesel producer in Aruba, BioFuel Aruba plans to expand its biodiesel production capacity by as early as third quarter this year. BioFuel Aruba also entered into pilot project agreements with the Aruba Airports Authority and the public transit company Arubus BV to implement a biodiesel blend into their fleets. Methes Energies and BioFuel Aruba will also be working with the government of Aruba to develop a biofuels mandate to be incorporated into its national energy policy. Founded by lifelong biodiesel activist Gregory Fung-A-Fat, BioFuel Aruba believes that the use of sustainably produced biodiesel, in combination with demand reduction measures such as mass transit and transportation alternatives

Renewable Energy Group Inc. executed a purchase agreement to acquire a 30 MMgy biodiesel plant from Soy Energy LLC. REG will acquire the plant—built in 2006, upgraded in 2010, and idled in 2012—for $11 million in cash and the issuance of a $5.6 million promissory note to Soy Energy. REG plans to repair then restart the refinery and further upgrade the plant in the future. The acquisition would increase REG’s biodiesel production capacity to 257 MMgy. REG also signed a contract manufacturing agreement with Washington, Iowa-based Iowa Renewable Energy LLC. Under the 12-month contract, REG is purchasing raw materials for the 30 MMgy multifeedstock plant and marketing biodiesel produced at IRE’s facility. REG served as the general contractor and technology provider for the construction of the IRE facility, which began production in July 2007.

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INFRASTRUCTURE

MIDSTREAM GROWTH: Kinder Morgan’s Colton, Calif., fuel terminal began blending biodiesel in December 2012 and utilizes manifold blending into diesel coming off its pipeline at a 5 percent ratio. Since September 2012, the company has equipped four western terminals with biodiesel blending. PHOTO: KINDER MORGAN

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INFRASTRUCTURE

Blend, Baby, Blend!

From midstream majors to one-off players, the U.S. fuel distribution system is blending more biodiesel BY RON KOTRBA

In the U.S., people often say state biodiesel incentives are a backstop to the federal renewable fuel standard (RFS) and, in many cases, they also drive where biodiesel blending infrastructure is installed. Incentives to blend biodiesel vary from usage requirements, such as those in Minnesota and Pennsylvania, to tax breaks and exemptions found in Illinois, Texas and other states. And then there is California’s low carbon fuel standard (LCFS), a unique, climatechange-driven standard, mired in court battles but thought to be the single largest emerging biodiesel market today. “I certainly see that it’s weak in states that don’t promote its use,” Jess Hewitt, CEO of Texas-based Gulf Hydrocarbon Inc., says of terminal biodiesel blending. “So what you get is this characterization, a few terminals in Texas have it, a lot of terminals in Illinois have it, but not that many others unless they’re mandated like in Minnesota or Pennsylvania. But with economics being what they are, most obligated parties would prefer blending millions of gallons that would be going into barges or a pipeline. That’s their preference, because it doesn’t involve quite the sophisticated infrastructure that inline blending at a terminal requires.” Doug Meyers, business development director for Kinder Morgan’s West Coast assets, knows pipelines as much as anyone. Since late 2012, Kinder Morgan has installed biodiesel blending operations at four of its West Coast terminals, in Fresno and Colton, Calif., and in Las Vegas and Phoenix. The Colton and Fresno terminals are fed by pipeline, and feature heated and insulated tanks and piping. Meyers says the company made the decision to invest in biodiesel blending in California to satisfy demand created by the LCFS, but until just recently, it has not been easy to for its customers to find enough regional biodiesel supply to make the capital expenses worthwhile for the midstream giant. Kinder Morgan spent about $5 million at each of the four western terminals to outfit for blending. Combined, they can blend roughly 5 million gallons of biodiesel a month. “I think

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INFRASTRUCTURE it’s safe to say that initial business started out slower as a result of the lack of B100 supply on the West Coast,” Meyers tells Biodiesel Magazine. “But we’ve since seen demand for the product drive additional sourcing and distribution supply chain of B100. Over the past several months, our customers have sought out and secured many more different supply options of B100, and we’ve seen the blending activity increase dramatically since the beginning of the year.” He says regional producers are ramping up production, and biodiesel is also being railed from the Midwest to transloading facilities near the California terminals, where it’s offloaded onto tanker trucks that deliver product to Colton and Fresno. It’s the customer’s job to source the biodiesel, purchase the product and to hold it in their inventories at Kinder Morgan’s facilities. Kinder Morgan is a service provider and charges fees for offloading, handling, storage and blending B100. “We are not in the blenders credit business, the RIN business, or the California LCFS business,” Meyers says. Services rendered are how Kinder Morgan makes its money in biodiesel—mostly. The company does have transmix facilities where comingled product interfaces (gas and diesel) from pipeline batch deliveries are separated via distillation back into salable product. “In that respect, Kinder Morgan is an obligated party, we have RIN requirements for doing that,” Meyers says, “and also at some of our operations we blend both biodiesel and ethanol on our account, because we do hold product,

and as a result we generate RINs ourselves. So, internally, Kinder Morgan does have a process center where we do generate RINs and have the ability to market those as well.” Meyers says obligated parties get a “double bang for their buck blending in California terminals” because not only do they capture separated RINs—perhaps alone not motivation enough to blend biodiesel, according to Hewitt—but they can also generate LCFS carbon intensity credits. “I don’t know that anybody would be willing to [blend] biodiesel for the RINs, because they can always just buy the RIN,” Hewitt says. For LCFS credits, Meyers says that all takes place upon entry into the terminal. “A customer who brings in a load of animal fat B100 would get credit for that, the paperwork and reporting would be done upon entry into our terminal on those bills of lading,” he says. Kinder Morgan recently enacted a process at its blending locations to help increase the amount of overall blending. “A customer can not only blend their own personal batch of diesel coming into our terminal, but they can also opt to blend diesel into our terminal where other customers have opted not to blend,” Meyers says. “We call it discretionary blending.” Schedulers record all individual batches into the terminal and know if a company has a 10,000-barrel (420,000-gallon) batch of diesel they aren’t going to blend. “The necessary arrangements can be made so the obligated party blender has the option to take advantage of that blend,” he


INFRASTRUCTURE says. “They make out and generate incremental RINs and Kinder Morgan makes out because we increase blending at our facility.” Gulf Hydrocarbon rents tanks and stores B99 for blending in two terminals, the Hartford Wood River terminal in Hartford, Ill., and Lone Star terminal in North Houston, Texas. “In Illinois, the state offers an exemption for a blended product that’s 11 percent or higher biodiesel, so that’s a tremendous incentive,” Hewitt says. “That’s a big incentive in Texas too. If biodiesel is used in diesel engines, then the biodiesel content is also exempt from state excise tax of 20 cents per gallon.” Lone Star is outfitted with inline blending at the rack, but the problem is there’s no diesel fuel stored there to blend with, thanks to competitive forces, Hewitt says. “There’s another terminal down the street and it’s [run] by the pipeline operator, so it’s very difficult for someone to justify the pipeline tariff to get in there,” Hewitt says. “I think the pipeline tariff is running about 1.5 cents and, in this business, that’s a lot of money.” In Hartford, Gulf Hydrocarbon’s biodiesel tankage is segregated from the rest of the diesel terminal, so splash blending is also the only option there. At Lone Star, customers bring in a tanker of diesel and splash blend biodiesel over top. Blue Sun Biodiesel has a production facility in St. Joseph, Mo., and in January 2012 Blue Sun made its first sale from biodiesel blending at the Cummins terminal in Knoxville, Tenn. The company doesn’t ship its biodiesel to Knoxville though; rather, it sources

more local supplies. Business Development Director Randy Rutherford says Blue Sun has a 13,000-barrel (546,000-gallon) heated, insulated tank dedicated to biodiesel storage in Knoxville. The tank, already insulated when Blue Sun took it over, is heated with a recirculating loop, meaning a pump circulates the biodiesel through a heater and then back into the tank. “We have 10-micron filtration going into and out of that tank into the loading rack,” Rutherford says. “All of our lines, including the filters as well, are heated and insulated.” Blue Sun offers biodiesel at three of the terminal’s six diesel loading lanes with two meters for biodiesel at each lane. “Cummins terminal uses a General Atomics terminal automation system that provides quite a bit of flexibility and robustness in the various ways that biodiesel can be blended at that terminal, meaning with our diesel or with our customers’ diesel,” he says. “Everything is ratio blended up to a B20, beyond that the terminal can load B100 with diesel fuel on top.” The Cummins terminal is unique, Rutherford says. “It’s actually two terminals, they have their own specific facility for just distillates, and at that diesel facility there are six lanes, so they do an awful lot of volume and they move the trucks through very quickly,” he says. “I think that by having two biodiesel meters per lane, it gives Blue Sun and Cummins the opportunity to load quickly and efficiently.” Kinder Morgan’s Fresno and Colton terminals utilize manifold blending. Meyers explains how this works. “A Chevron or Shell cus-


INFRASTRUCTURE tomer of the world would have a batch of diesel coming over our pipeline,” he says. “We deliver it into our terminals at Colton and Fresno and what we’ve done is install a biodiesel blending system at the incoming manifold for the pipeline that leads into our terminal, so as the diesel batch gets delivered on the pipeline and comes into our terminals to be routed into a storage tank, we flip a switch and it’s injected in a stream that comes into the terminal with 5 percent B100, so what ends up in the storage tank would be a B5 product.” All of the diesel storage at Colton and Fresno has been converted to B5 storage, so it’s no longer possible at those facilities for a distributor to pick up clear diesel there. It’s all B5, and 5 percent is all it blends at those facilities. “If a customer really wants to blend more than that, they would have to take it offsite and increase the blend percentage on their own,” Meyers says, adding that the operation was constructed to dial up the blend rate if a majority of its customers express that desire. “Right now, a lot of the B5 blend rate is driven by the fact that as long as you have a B5 or less in the diesel that goes into a retail service station, it doesn’t have to be reported, or advertised, or marketed any different,” Meyers says. “But once it goes beyond 5 percent, you have a whole slew of additional reporting and tax requirements and other issues that we don’t get involved with—and we don’t want to at this point—so we just do a B5 blend.” Blending at Kinder Morgan’s Las Vegas terminal came online in April and features rack blending. “The economics of blending in

NEW

Las Vegas is determined solely by the RIN requirement, along with the blenders credit,” Meyers says. Biodiesel is blended at the truck rack into the truck compartment, so the truck driver pulls up to the loading rack, punches in the correct code to get 2, 5, 10 or 20 percent biodiesel, and two independent streams deliver the specified percentage into the truck, Meyers says, adding that rack blending gives much more flexibility to dial up (to B20) or down the percentage. “There are some municipalities in the Las Vegas area that require public vehicles to use B20, so the terminal has the ability to do that,” Meyers says. “We would like to have had that flexibility at all our terminals, but the cost is very prohibitive.” Like in Colton and Fresno, manifold blending is utilized at Kinder Morgan’s latest blending terminal in Phoenix. The difference is Arizona state regulations require precisely known quantities for biodiesel going out over the loading rack. “In California and Nevada, they don’t care,” Meyers says. “As long as its 5 percent or less, it goes out as ‘may contain up to 5 percent,’ but in Arizona if it’s 2 percent, they want to know, if it’s 5 percent, they want to know.” As a result, the Phoenix infrastructure is more complex and more expensive than the others. “It left us with the ability to segregate Phoenix into both blended biodiesel and clear diesel storage,” Meyers says, “so we actually have both products available there.” For measuring quantity, Hewitt says the biodiesel industry prefers scales because they’re used in agriculture. “But scales have a problem in many cases because they don’t offer a method of over-

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INFRASTRUCTURE fill protection,” he says. Without metering and overflow protection, usually a visual inspection is needed, which means the driver has to get on top of the trailer, open the hatch and watch it fill up, and someone else has to start and stop the pump. “The petroleum industry doesn’t do that, except on occasion with jet fuel,” Hewitt says. “For the most part they have automated meters that are temperature compensating and have overfill protection. These are electrical connections on the trailer where each compartment in the trailer has a high-level trigger that, when activated, sends a signal that shuts down the pump. It’s a much safer way of loading and can be done in any kind of weather. It produces the same result with a record of what’s going into the truck. It’s a safety matter too.” North Star uses a Scully overflow protection system. Hewitt also says terminals should be equipped with separate lines for incoming and outbound product so receiving and delivering fuel can be done simultaneously. “To us, that’s extremely important,” he says. Blue Sun, like most biodiesel blenders and midstream holders, requires thorough product testing from new suppliers. It analyzes samples at its biodiesel lab in St. Joseph, Mo. Then, when the supply is actually physically railed to a Knoxville area transload facility, Rutherford says samples are taken and shipped to St. Jo where the lab turns results around in 24 to 36 hours, usually before the fuel, taken by truck from the transload facility to the terminal, is offloaded into storage. According to Hewitt, a must-have test for a terminal is the specific gravity test. Without it, “a terminal may not know if they’re receiving a load of glycerin or a load of biodiesel,” Hewitt says. “Generally what we do is give the terminal a range of acceptance.” Specific gravity of biodiesel can be measured with a hydrometer. Gulf Hydrocarbon also employs the pHLip test, a simple visual test created by Randal von Wedel with Cytoculture International Inc. Kinder Morgan has a single national product spec for B100, Meyers says, so what’s required for the winter in New York is what’s required for the summer in Las Vegas. At the terminal, as the truck pulls

up, a sample is taken and tested in the sample shack right next to the offloading facility. “It’s all in-house, it takes about 20 minutes,” Meyers says. The success of a terminal blending operation, no matter the technology, location or equipment, depends on the staff that established and runs it, says Rutherford. “In addition to the technology, and some of the equipment that’s onsite at a particular terminal, the staff—the personnel and the management—all play a key role as far as their understanding of blending and, more

specifically, biodiesel blending, to really help drive the questions that need to be asked in order to find the right solutions from those technology providers.” Author: Ron Kotrba Editor, Biodiesel Magazine 218-745-8347 rkotrba@bbiinternational.com

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That means: • 2,000,000+ RINS transacted daily on our RIN management platform; • 330,000,000 gallons of biodiesel annual production capacity under management; • 250,000,000 gallons of ethanol annual production capacity under management; • 30 biofuel plants and growing; • Volume-based pricing at a fraction of a penny per RIN!

Features: • • • • •

Batch level review and reports available to downstream parties; Daily RIN price index; Access to RIN insurance to further indemnify downstream RIN holders; Quarterly reports, engineers reviews, registration, annual attests; Available for advanced biofuel and foreign production.

The results: • Producers have more access to RIN markets and fair market pricing; • Blenders can trust the RINs they are separating; • Obligated Parties can trust the RINs they are buying.

Contact: Jim Baker, Sales and Marketing Director | Phone: 515-309-1279 (o) / 515-556-1936 (c) Email: jbaker@ecoengineers.us | Website: www.ecoengineers.us

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REGULATION

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REGULATION

Traversing the RIN QAP Proposal Dissecting comments to EPA’s proposed rule BY RON KOTRBA

By all accounts, the U.S. EPA’s proposed solution to the RIN fraud debacle is far too complex, cumbersome and, ultimately, costly. The RIN quality assurance plan (QAP) proposal, issued early this year, establishes a tiered “voluntary” system, QAP-A and QAP-B, with varying degrees of stringency. EPA’s default stance has been “buyer beware,” meaning if obligated parties retired invalid RINs, they bear replacement costs while being subject to fines and notices of violation. Option A and Option B both provide obligated parties with an affirmative defense against civil liabilities, but under Option A, the proposal requires the QAP auditor to bear the cost of replacement. Under Option B, the obligated party that retired the invalid QAP-B RINs would be responsible. Option A requires a much more rigorous and comprehensive audit procedure than Option B; the former involves near real-time, ongoing auditing and reporting while quarterly auditing suffices for the latter. QAP-A replacement by the auditor, as the proposed rule exists now, must be backstopped by one or more replacement mechanisms: a RIN escrow account, a RIN bank or a financial instrument. But even less-stringent QAP-Bs exceed the needs of simply assuring invalid RINs are not generated by fly-by-night scammers—the Rodney Haileys and Jeffrey Gunselmans of the world who never produced a drop of biodiesel, making hundreds of millions of dollars on fake RIN credits while nearly destroying this industry. “They don’t need to be built as bullet-proof plans,” American Petroleum Institute Senior Downstream Policy Advisor Patrick Kelley tells Biodiesel Magazine. “They just need to provide assurance that fraudulent RINs won’t be generated, and I think they go beyond that and built a bullet-proof plan. What the market needs is a cost-effective solution that meets the EPA’s goals while at the same time being cost-effective for the companies that are going to be implementing it. So we really hope they ratchet back the stringency.” The API and AFPM submitted their comments to EPA on the Notice of Proposed Rule Making jointly. Their comments essentially say that if the final rule exceeds what

is actually needed to simply prevent invalid generation of RINs, it would increase the cost of the QAP, lower participation and therefore fail to restore liquidity to the RIN market. For instance, quarterly requirements to review annual reports provide no risk reduction and only add costs. And while fuel quality is important, it’s beyond the scope of a program to reduce generation of invalid RINs. API/ AFPM believe all that’s needed in a RIN QAP is an initial site visit to ensure plant operating capacity (and related items) followed by annual visits; and the auditing of a statistically valid sample of receipts for feedstock along with monthly utility bills and bills of lading for fuel compared against feedstock receipts. The Petroleum Marketers Association of America also supports minimizing costs by allowing third-party electronic monitoring of RIN generation and transfer, feedstock use, and monthly mass-balance calculations, as opposed to quarterly site visits. “Quarterly site visits will place an undue burden on small facilities and disproportionally drive costs up,” PMAA states. Third-party auditors such as EM Biofuels also state quarterly site visits would cut out small foreign producers who could not absorb the cost to have such frequent overseas onsite audits. EcoEngineers, one of two parties preregistered for both foreign and domestic QAP-A and QAP-B RINs (the other is Genscape), asks EPA to consider reducing onsite visits for QAP-A from quarterly to yearly. Green Earth Fuels of Houston, which operates a 90 MMgy production facility, states, “While the intent (of the three-tiered structure) is to give the market greater flexibility, we are concerned that the market will move towards one option, QAP-A, which will prove to be an onerous and expensive option forced upon biodiesel producers. It would be much more expeditious to provide a two-tiered structure [that] simply includes business as usual (with no affirmative defense) or a simplified, well-understood QAP plan that affords an affirmative defense.” The National Biodiesel Board also suggests a three-tiered system is fatally flawed. A big issue for many biodiesel producers is retaining JULY | AUGUST 2013

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REGULATION ability to separate RINs at the plant. Most comments support this, some with caveats. Genscape states RIN separation for small producers is necessary to increase greater liquidity in the market to reestablish the capabilities of smaller producers to sell RINs. “RIN separation is core to the business model of producers who serve local and regional markets and who have retail and community-based business models. Separation activities need to continue for the livelihood of these producers.” However, while the QAP program has been proposed as voluntary, Genscape recommends that, in order to mitigate risk, EPA mandates a QAP program for RIN generators who separate. Jennifer Case, CEO of New Leaf Biofuels, believes QAP-B should be eliminated entirely since small producers will be forced to produce QAP-A RINs—and like GEFH, she also states there should only be status quo and a simpler nontiered RIN audit program. She, like all producers, says the ability to separate RINs is vital. “We have several jobbers that do not want to

participate in the RIN program, but they blend more than 125,000 gallons per year,” she comments. “As such, we are often forced to transfer extra RINs to our other blenders in order to stay in compliance with the RIN-hoarding rules, and those RINs rarely fetch more than 75 percent of the RIN’s value.” API/AFPM state this “loophole” allowing producers to separate at the plant must be closed. “It’s still a big concern of ours,” Kelley tells Biodiesel Magazine. “The EPA acknowledged in their development of RFS2 rules that there is a potential for playing games in the marketplace. There was a limited rationale as to why a biodiesel producer could, that’s where a producer is selling directly to an end user, and while that is still the exception in the marketplace, the practice is often the rule and widespread in the marketplace.” There is also a replacement cap for auditors under Option A and a limited exemption for obligated parties under Option B. Option A limits the replacement obligation of the au-

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ditor to 2 percent of RINs they audit over a five-year period. Under Option B, there is a limited exemption for obligated parties (for years 2013-’14 only) to not have to replace up to 2 percent of their total renewable volume obligation (RVO) if they retire invalid QAP-B RINs. API/AFPM support the 2 percent limited threshold exemption (LTE), and although EPA says this is only good for the first two years of the program, API/AFPM comments this should be for every year beginning in 2013 indefinitely. On the 2 percent LTE, Genscape comments that in today’s market, Genscape A-RIN assurance can be obtained for about 2 cents per RIN. “This also shows that the 2 percent replacement volume for a QAP provider creates a very manageable cost structure for the producers who need it. The 2 percent threshold also strikes a good balance between the QAP provider having enough ‘skin in the game’ and having a financial obligation that is manageable for the QAP provider.” Louis Dreyfus comments that the QAPA 2 percent cap and five-year period “is not a big enough liability on the third-party auditor to assure the accuracy of the validation of the RINs. Of course, imposing a higher level of liability on the third-party auditor would require [them] to increase and improve audit procedures to reduce the risk that fraudulent RINs could’ve been issued. … Our view is the concept of a QAP-A is unworkable because to impose a level of liability on the third-party auditor necessary to be nearly certain no fraudulent RINs could have been issued would make the plan so expensive biofuels producers could not afford to use it. In fact, with the low level of liability placed on the third-party auditor proposed in this rule, it is conceivable … that fraudulent RINs could be generated under a QAP-A.” Regarding the five-year look-back period, API/AFPM states, “It is not possible to go back in time and induce additional production; we question the rationale behind requiring a 2013 RIN be replaced when found to be invalid in 2017. EPA should limit the requirement to replace RINs to the current and previous year only. The financial burden for a RIN auditor to hold this liability on a balance sheet for five years potentially adds significant cost to the program. This two-year limitation should also apply to obligated parties under QAP-B.


REGULATION EPA should be able to conclude enforcement investigations within this time frame.” While API/AFPM do not support the proposed requirement for verified RINs to be replaced by an obligated party, the alternative replacement mechanisms discussed in the NPRM could have significant market liquidity consequences. “EPA discusses several mechanisms that rely upon documented financial assets to procure RINs, or the requirement to hold actual RINs in inventory for potential use if invalid RINs are discovered,” API/ AFPM state. “Any mechanism employed that holds RINs (such as a RIN bank) is an artificial restriction on the supply of RINs that could lead to a shortage of RINs and potential RIN price volatility. … EPA should promote RIN supplies for compliance [and] not promote RIN banking, hoarding, or other market supply constraints.” GEFH suggests obligated parties should be required to replace RINs under any circumstance. “Obligated parties can significantly de-risk their RIN purchases by simply purchasing and blending biodiesel themselves,” GEFH comments. Genscape recommends prohibition of liability insurance as a financial mechanism for A-RIN assurance for several reasons, including the fact that premiums would have to be paid five years in advance to avoid instability in the RIN replacement mechanism. Other important, specific aspects of the NPRM include a 24-hour reporting period for errors, downstream RIN tracking, and the issue of exports, to mention a few. Most comments suggest 24 hours is far too little time to investigate potential problems. While EcoEngineers believes 24 hours is not enough, Genscape says it’s “reasonable.” API/AFPM state that 10 business days rather than one should be given to report problems with suspect RINs. Also, since errors in RIN reporting are somewhat common and don’t rise to the level of “invalid” RINs, EcoEngineers suggests replacing the NPRM’s language of “potential problems” with “confirmed problems.” Murex states that requiring exporters to retire RINs at any higher frequency than annually is an unbalanced approach. VicNRG comments that it would like to see the window for retirement of RINs upon export to shrink to 90 days with appropriate quarterly documentation. Independent Terminal Operators suggest

retaining the current export compliance obligation (annual compliance with an exporter’s RVO). API/AFPM say it’s EPA’s responsibility to investigate and enforce export violations and this obligation shouldn’t be transferred to RIN auditors. They also highly disagree with downstream tracking of RINs. “No part of the proposed rule demonstrates the problems of expanding the scope of the verification program beyond production more than the discussion of downstream activities that could violate other RFS requirements,” API/AFPM state. “We think EPA is foisting some of their

obligations to enforce the rules onto the QAP provider, the RIN generators, and ultimately the obligated parties at the end of the day,” Kelley says. “The scope of the rule, this whole tracking RINs through the system, really needs to be pulled back, and have the QAP provider really focus on proper RIN generation and have EPA enforcement work on having people meet their obligation.” Author: Ron Kotrba Editor, Biodiesel Magazine 218-745-8347 rkotrba@bbiinternational.com

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DISTRIBUTION CONTRIBUTION

STEP ONE: Opening up access to station owners was just a first step in creating a retail sales network for SeQuential-Pacific Biodiesel.

Expanding Distribution Channels by Thinking Outside the Box Maintaining wholesaler relationships offers greater direct access to retailers BY GAVIN CARPENTER

Photos by SeQuential-Pacific Biodiesel

The U.S. biodiesel industry has evolved significantly since taking off in the mid-1990s. What started as a grassroots movement toward a cleaner-burning alternative to petroleum diesel, mostly championed by individual environmental enthusiasts, has become an accepted mainstream industry that creates viable business opportunities and shows no signs of slowing down. This expansion is due, in part, to innovative and creative thinking about how manufacturers can distribute their product to end users, giving biodiesel a greater share of the increasingly complex alternative fuel market. SeQuential-Pacific Biodiesel is the longest-running commercial biodiesel producer in the Pacific Northwest, so we’ve experienced

the evolution of the industry firsthand, and understand the importance of thinking outside the box when it comes to overcoming distribution challenges. We produce biodiesel from used cooking oil, which we collect from more than 7,000 local restaurants, schools and businesses. We then distribute biodiesel through a broad network of commercial and retail sales channels in the region. When SeQuential-Pacific was founded in 2005, the alternative fuels industry was just taking hold in the Pacific Northwest. Trucking fleets and other commercial entities were beginning to gain interest in running biodiesel blends in their vehicles, but few retailers offered biodiesel at their pumps. Those who did were often perceived as serving specialty

target markets comprised of consumers who were particularly energetic about what’s come to be known as “green” living. Those retailers weren’t obtaining product through traditional fuel distribution channels. To achieve the kind of growth SeQuential-Pacific envisioned, we needed to devise a new strategy for getting biodiesel into the hands of customers, while also working to grow the market for locally produced alternative fuel.

Rethinking Distributor, Retail Relationships To accomplish this growth, we developed a retail partner program that tremendously increased distribution channels, sparking exponential growth for the company and

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily refl ect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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DISTRIBUTION

Webster

®

component of fuel distribution and demand generation, a third-party distribution model is often quite limiting. Recognizing that wholesalers were invaluable to our ability to move product, we decided to redefine our partnerships to maintain wholesaler relationships while offering greater direct access to retailers. Instead of relying on the distributor to order fuel, SeQuential-Pacific approached retailers directly, highlighting the benefits of offering biodiesel at their stations. Interested retailers would then purchase SeQuential-Pacific product through one of our partner distributors. This simple shift opened up a host of new retail sales opportunities for BRAND LOYALTY: SeQuential-Pacific Biodiesel developed a branded pump program centered on B99 as part of its SeQuential-Pacific while also unconventional distribution strategy. enabling us to provide personalized topnotch customer firmly cementing the stability of the biodiesel service, and the ability to quickly address any concerns coming from retailers before industry in the region. Biodiesel distribution has largely fol- larger issues arise. Moreover, it also proved lowed the same model as petroleum-based to be a fruitful strategy for nonretail sales. fuels. Manufacturers partner with third-party SeQuential-Pacific Biodiesel has partnered distribution companies, providing wholesale with local distributors to provide fuel to a product that is then bought by retailers and variety of industry segments, including the other end users. This model is still valuable Washington State Ferry System, which was and widely used today. It’s efficient and among the first major maritime fleets to enables high-volume sales, but a drawback run on biodiesel. Opening up access to station ownto this model is that it can limit or even remove the manufacturer from interac- ers was just a first step in creating a retail tions with retailers. Without contact with sales network. We also worked to develop retailers, opportunities for manufacturers a branded pump program centered on B99 to establish brand loyalty with customers fuel. Retailers who purchased B99 from are severely diminished. As a result, they SeQuential-Pacific could rely on the comhave to rely on the distributor to act as a pany to take complete ownership for marmediator when product concerns arise, keting the fuel. The company branded the which can lead to lost business in some B99 pumps under the SeQuential logo and cases. Since retail availability—either via took responsibility for educating consumcardlock or public access—is an essential ers on the benefits of using high biodiesel

Fuel Pumps & Valves www.websterfuelpumps.com

Oil Safety Valve for BIO Fuel Webster now offers an Oil Safety Valve for Bio applications. This valve allows positive cutoff and opens only by vacuum created by the fuel pump. Available in 3/8-18 NPTF and 1/2-14 NPTF porting. This valve is U/L listed for Bio Fuel and is compatible with a wide range of other fuels such as B5–B100, #1-#2 Fuel Oil, Diesel, Kerosene, Diesel and Waste Oil. Temperature Range -40 to 140 Degrees Fahrenheit “Reference model numbers OSV38 and OSV50”

Mini BIO Pumps Webster also offers a line of mini pumps for BIO fuel.These pumps are available in the following configurations… CW or CCW rotation, 1725 or 3450 rpm, with flow rates of 3-15 gph. The units are factory set at 100 psi and adjustable to 150 psi. Viton components allows the unit to be compatible with B5-B100 BIO Fuel.

JULY | AUGUST 2013

Phone: 800.766.1233 Fax: 502.223.4629 www.websterfuelpumps.com webster@cctooolinc.com

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DISTRIBUTION

blends. By taking a strong stake in creating demand for B99, SeQuential-Pacific positioned itself as a trusted partner for retailers participating in the program. SeQuential-Pacific’s B99 retail partners benefit from more than just marketing support. The company also took on responsibility for the customer experience, automatically switching its B99 pumps to B50 in the winter months to prevent customers from experiencing gelling due to cold temperatures.

The twist on traditional retail distribution paid big dividends for SeQuential-Pacific Biodiesel. Today, we produce more than 6 million gallons of fuel each year and have a retail partner network with more than 30 stations, eight of which participate in the B99 pump program.

Advocating for Industry Support In addition to fueling rapid company growth, we believe that our strategy for

reaching retail partners helped spur the growth of the clean fuels industry in the Pacific Northwest. As demand for biodiesel grew, so did support for clean fuels in the region. Oregon approved a mandate for all diesel sold in the state to contain 5 percent biodiesel. The state of Washington issued a similar policy, and Oregon and California developed low carbon fuel standards to incentivize the use of biodiesel and other clean fuels. Legislation supporting the clean fuels industry has largely been successful because companies were able to increase distribution channels for their product, demonstrating that what was already a growing industry could continue to grow and provide both economic and environmental benefits to the region. In turn, policies incentivizing the use of clean fuels through fuel blending and other means have created even more distribution channels by bringing the petroleum industry into the mix and positioning biodiesel as a complement to petroleum diesel, rather than as just a competing product. As illustrated by the example above, rethinking the traditional distribution model can pay big dividends when it comes to developing an effective distribution strategy that helps make biodiesel more accessible in the industry. We believe the strategies that helped SeQuential-Pacific Biodiesel grow into a dominant player in the Northwest’s clean fuels industry can be effective in various market segments. Of course, continued growth leads to continued change. As the renewable fuels industry continues to grow, and biodiesel continues to occupy greater market space, it is likely that even more distribution channels will become viable. Recognizing those opportunities as they arise will allow manufacturers to keep pace with this continuously growing industry. Author: Gavin Carpenter Director of Sales, SeQuential-Pacific Biodiesel 503-585-1673 gavin@sequential.com

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Insurance Expellers French Oil Mill Machinery Company 937-773-3420 www.frenchoil.com/biodieselmag.shtml

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Lender Representatives Filtration Equipment MaxFlo Advanced Filtration Aids 337-421-6375 www.MaxFloFiltration.com

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