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BIODIESEL INDUSTRY UPDATE
January 2019Donnell Rehagen, CEO
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BIODIESEL INDUSTRY UPDATE
Federal Policy Update
TAX INCENTIVE: LETTERS TO CONGRESS
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Dec. 10 – NBB organized 60 member companies to sign a letter to House and Senate leaders, advocating the multiyear biodiesel incentive extension.
Nov. 13 – NBB joined 62 organizations in a letter to House and Senate leaders supporting all tax extenders.
TAX INCENTIVE: EARNED & PAID MEDIA
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Editorial by NBB CEO Donnell Rehagen in The Hill (Washington, DC) – Dec. 14.
Editorial by ISA President Lindsay Greiner in The Gazette (Cedar Rapids, Iowa) – Dec. 9.
Ad in The Hill – Dec. 13.
NBB FUELING ACTION CENTER
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245
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441
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498
765
765
Rep. King (R-IA)
Sen. Smith (D-MN)
Sen. Klobuchar (D-MN)
Sen. Grassley (R-IA)
Sen. Ernst (R-IA)
Rep. Davis (D-IL)
Sen. Duckworth (D-IL)
Sen. Durbin (D-IL)
Emails Received by Illinois and Iowa Legislators
Advocates
Emails
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
November, 1,121
December, 1,170
November, 3,434
December, 3,909
7,343 Emails Sent from2,291 Industry Supporters
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BIODIESEL TAX INCENTIVE EXTENSION Grassley Proposal:
Schedule of tax credit extension through 2024.
Termination after Dec. 31, 2024.
Retroactive payments for 2018:
180-day window to submit claims for credit on 2018.
No other changes to credit.
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Year Amount
2018 – 2021 $1.00
2022 $0.75
2023 $0.50
2024 $0.33
NBB is strongly supportive of the 7-year extension negotiated by Sen. Grassley and Rep. Brady.
We are working with allied associations to align on this priority.
We continue to urge Congress to approve a long-term extension of the biodiesel tax incentive, retroactive for 2018 calendar year.
We are working with our Congressional champions to identify an appropriate legislative vehicle.
Regardless of the vehicle, the biodiesel tax incentive needs to be extended as soon as possible for as long as possible.
GOVERNMENT SHUTDOWN
Lame Duck session confounded with partisan bickering culminating with government shutdown on December 21.
Resulted in no ability to pass legislation, including our BTC.
Government remained shut down until last Friday, January 25.
Longest shutdown in history.
Now will have the opportunity to seek the legislative vehicle for moving our BTC forward.
Stay tuned.
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BIODIESEL INDUSTRY UPDATE
RFS Update
CONGRESSIONAL RFS REFORM
After two-year effort, Sen. Cornyn (R-TX) never released reform proposal. Now deferring to Sen. John Barrasso (R-WY), Chairman, Senate
Environment & Public Works Committee.
Rep. John Shimkus (R-IL) and Rep. Bill Flores (R-TX) introduced a Discussion Draft in November. Shimkus remains ranking minority on House Energy & Commerce
Environment Subcommittee.
Shimkus-Flores propose to sunset RFS after 2032: Sunset conventional biofuel (undefined) after 2022;
Set annual biomass-based diesel volumes (2023-2032) per prior year RIN volume.
NBB Vice President of Federal Affairs Kurt Kovarik testified at December hearing: Message: provide more certainty in annual growth of biodiesel volumes.
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EPA’S RFS RESET
With final 2019 rule, EPA triggered reset for all categories with remaining statutory volumes (cellulosic, advanced, and overall).
EPA will need to set each of those volumes through 2022 based on a “review of the implementation of the program” and an analysis of six statutory factors.
The proposed reset rule could include the annual rule for 2020 and the BBD volumes for 2021.
Will not change the BBD volume for 2020.
EPA began work on a proposed rule and meeting with stakeholder groups in summer.
2020 2021 2022
Cellulosic 10.5 13.5 16
Biomass-based Diesel 2.43 * *
Advanced 15 18 21
Overall 30 33 36
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2018 RFS LITIGATION
Oral argument scheduled for Feb 20.
Shutdown has not impacted court date – but could.
NBB’s Arguments:
Small Refinery Exemptions
EPA must do something to account for small refinery exemptions. Doing nothing fails to “ensure” volumes are met.
2018 Advanced Biofuel Volume
EPA cannot make cost its only consideration for setting the 2018 advanced biofuel volume.
Arguments by other petitioners:
Obligated Parties
EPA should have found severe economic harm AND inadequate domestic supply.
EPA should have considered granting RINs for exports.
EPA should change the point of obligation.
EPA should consider harms to small retailers.
Sierra Club
EPA must perform an Endangered Species Act consultation every year.
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BIODIESEL INDUSTRY UPDATE
Trade Update
TRADE CASE IMPACTS BIODIESEL IMPORTS
0
20
40
60
80
100
120
2014 2015 2016 2017 2018
In m
illio
ns o
f gal
lons
Monthly Biodiesel Imports 2014-2018
Other Argentina Indonesia
Cash deposit requirements
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Source: U.S. Bureau of Census import statistics, HTS number 3826.00.1000.
0
5
10
15
20
25
Jan2018
Feb Mar Apr May Jun Jul Aug Sep Oct
In m
illio
ns o
f gal
lons
Monthly Imports 2018
Canada Germany France Korea Other
TRADE CASE IMPACTS DOMESTIC PRODUCTION
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CHANGED CIRCUMSTANCES REVIEWS OF ARGENTINA ORDERS
On Sept. 21, 2018 Government of Argentina (and Vicentin and LDC Argentina) requested “changed circumstances” reviews of CVD and AD orders for Commerce to recalculate subsidy and antidumping rates.
Basis for requests is the reduction in differential between export tax rates on soybeans and biodiesel.
GOA argued that reduced differential virtually eliminates the subsidy and finding of a “particular market situation” in AD case.
GOA also argued that prohibitively high CVD/AD cash deposit rates prevent shipments to US and use of administrative review process.
In October 2018, NBB Fair Trade Coalition filed two sets of written comments and met with senior Commerce officials to oppose GOA requests.
Commerce initiated reviews on November 5.
Reviews typically take 270 days, which would result in final decisions in early August 2019. NBB met with Commerce Nov. 19 and filed comments Dec. 3, urging that
Commerce conduct extensive-fact finding and analysis before considering any changes in CVD/AD rates.
Commerce has communicated to GOA that:
Commerce has “very limited ability” to negotiate a settlement with GOA,
U.S. industry is strongly opposed to any modification in rates, and
GOA should not infer that Commerce’s decision to initiate a review might lead to affirmative findings.
Commerce planned to issue initial questionnaire to GOA before Christmas, but that action was delayed.
Commerce staff are now furloughed during government funding impasse.
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BIODIESEL INDUSTRY UPDATE
State Policy Update
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0
200
400
600
800
1000
1200
1400
1600
2016 2017 2018
MINIMUM STATE VOLUMES
CA TX IL MN OR NY IA PA RI
California California
Texas
TexasIllinois
Illinois1.1 Billion Gallons1.2 Billion Gallons
1.4 Billion Gallons
California
Texas
IllinoisIllinois
Texas
California
Minnesota
RIIowaNew YorkOregon
STATE VOLUME DRIVERS
Requirements
Financial Incentives
Carbon Reduction Policies
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B2
B2
B20
B5
B2
B5
STATE REQUIREMENTS
Currently ImplementedAwaiting Implementation
CT: B20MA: B5RI: B5VT: B3
Note: “Downstate” New York has a B5 Bioheat® requirement.
B5
STATE ECONOMIC INCENTIVES
$.20-$.50$.50-$1.00$1.00 or >
Note: Incentives are valued on a B100 basis.
LOW CARBON POLICIES
ImplementedPotential
5 billion total gallons of diesel demand
MAJOR STATE POLICIES
MAJOR STATE POLICIES
Half of all biodiesel sold in these states.
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BMBD GROWTH IN CALIFORNIA
0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016 2017 2019 2021 2023 2025 2027 2029 2030
BMBD Volume
25Source: 2011-1017 CARB quarterly reports.
507 million gallons of BMBD.>13% of diesel market.14 MG of BMBD.
.003% of market
LCFS CREDIT PRICES
$0
$50
$100
$150
$200
$250
In Dollars per Metric Ton (MT). Jan, 2018 - Jan, 2019.
Source: Progressive Fuels Ltd.
$197/MT
$111/MT
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0
20
40
60
80
100
120
UCO Corn Oil Tallow Canola Soy
LCFS Carbon Intensity Values – in $/gallon
Carbon Intensity (g/MJ)
$1.25$1.28
$1.71$1.82
$2.04
Example values calculated for $197/MT.
Year ImplementationSchedule
2015 1.0%
2016 2.0%
2017 3.5%
2018 5.0%
2019 6.25%
2020 7.5%
Year ImplementationSchedule
2021 8.75%
2022 10%
2023 11.25%
2024 12.5%
2025 13.75%
Year ImplementationSchedule
2026 15%
2027 16.25%
2028 17.5%
2029 18.75%
2030 20%
Source: https://www.arb.ca.gov/fuels/lcfs/lcfs_meetings/092217workshop_presentation.pdf.
LCFS IMPLEMENTATION SCHEDULE
PROJECTED BMBD VOLUMES UNDER LCFS
0
500
1000
1500
2000
2500
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Low BMBD High BMBD
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1 Billion Gallons
1.75 Billion Gallons
1.8 Billion Gallons
2.15 Billion Gallons
Source: CARB Illustrative Supply Scenario Calculator (https://www.arb.ca.gov/fuels/lcfs/rulemakingdocs.htm)
OREGON CLEAN FUELS PROGRAM
Implementation Schedule
Year ImplementationSchedule
2016 .25%
2017 .5%
2018 1.0%
2019 1.5%
2020 2.5%
2021 3.5%
2022 5.0%
2023 6.5%
2024 8.0%
2025 10.0%
OREGON CLEAN FUELS PROGRAM
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0
10
20
30
40
50
60
2015 2016 2017Biodiesel Renewable Diesel
WASHINGTON STATE
Composition of Legislature: Senate: 26 Democrats; 23 Republicans. House: 50 Democrats; 48 Republicans.
Governor: Democrat.
2019 Legislative Session: HB 1110, Clean Fuels Program (CFP) bill (Rep. Fitzgibbon).
Patterned after California LCFS & Oregon CFP.
10% carbon reduction in 2028, 20% in 2035.
Passed Environment Committee on January 15th.32
TEXAS (BD&RD)
The portion of the biodiesel blend is exempt from the state’s $.20 per gallon excise tax.
For example, B20 would receive an exemption worth 4 cents.
Q: Is the exemption limited to B20? No.
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KENTUCKY (BD&RD)
$1 per gallon tax credit for producer or blender.
Capped at $10 million.
Pro-rated.
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ILLINOIS (BOTH BD& RD)
Blends above B10 receive a full exemption of the state’s 6.25% sales tax on fuel.
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IOWA (BD ONLY)
3 cpg road tax differential (29.5 vs. 32.5 cents)
Production incentive extended to January 1, 2025 (2 cpg).
Consumption incentive extended to January 1, 2025.
Reformulated to 3.5 cpg on B5 and 5.5 cpg on B11.
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INCENTIVES (OTHER)
Maryland (BD only)
3 cpg state income tax credit for all gallons of B5 or higher Bioheat blends purchased.
Rhode Island (BD only)
Biodiesel portion of blend is exempt from road tax.
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NEW YORK STATE
New York State: (BD only)
Bioheat® consumer tax credit of 1 cent per percent of biodiesel in finished blend of heating oil.
Expires December 31, 2020.
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RGGI & RPS States
400 MGPY potential
NORTHEAST CARBON POLICIES
2017 LCFS CREDIT GENERATION
Ethanol Biodiesel RD CNG Electric RNG Other41
Ethanol35%
Biodiesel14%
Renewable Diesel30%
RNG7%
Electric12%
Fossil NG1%
Source: CARB quarterly reports. “Other” category includes Fossil LNG, Hydrogen, CARBOB, Diesel, Innovative Crude.
Other1%
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0
20
40
60
80
100
120
UCO CornOil
Tallow Canola Soy CaneEthanol
CNG CornEthanol
ULSD
LCFS Carbon Intensity Values
Carbon Intensity (g/MJ)
102.76
80.0979.46
51.8350.23
32.8328.6819.87
48.06
BiodieselCI Values
Other Values
ILUC OVER TIME
0
10
20
30
40
50
60
70
US EPA, 2008 CARB, 2009 US EPA, 2010 CARB, 2015 Argonne, 2017
Soy Carbon Score
Carbon Score
43Note: Values in g/MJ of CO2.
OREGON CLEAN FUELS PROGRAM
Ethanol Biodiesel Electric RNG Other
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Other: Diesel, gasoline, LPG, fossil CNG.
Ethanol58%
Biodiesel35%
Electric5%
