Long Road for Biofuels Industry

This year is setting up to be a long year for the biofuels industry. First on the agenda is the fate of the biofuels tax extenders, including the biodiesel blenders, renewable diesel credit, second-generation and alternative fuels credits, which all
By Michael McAdams | March 07, 2018

This year is setting up to be a long year for the biofuels industry.

First on the agenda is the fate of the biofuels tax extenders, including the biodiesel blenders, renewable diesel credit, second-generation and alternative fuels credits, which all expired at the end of 2016. These incentives were left in suspended animation in December as Congress passed a continuing resolution to keep the government funded through January, without addressing any of the numerous expired energy provisions.

As I wrote this column, Congress delivered a retroactive extension for these extenders through 2017, but, again, left 2018 unaddressed. It appears that companies are considering options to attempt to extend the credit through 2018, though this will be an uphill battle, given both the cadre of Republican members who would rather see the credit lapse, and the White House’s stated opposition to including extenders in the budget deal.

Moving on from tax, we’ve seen a flurry of recent press stories about the RFS’s role in bankrupting Philadelphia Energy Solutions. If you ask me, the headlines should read “Don’t let the facts get in the way of a great story.” However, members of Congress are now inquiring about the alleged situation, and, if it is true, what they should do about it.

Indeed, the American Fuel & Petrochemical Manufacturers continue to lead the charge to repeal or gut the RFS, aiming to lower refiners’ compliance costs (see last year’s efforts on the NODA and point of obligation). Moreover, more than 20 small refiners have now asked for waivers to avoid complying with the RFS program. With small refiners comprising over 10 percent of the market alone, there is great concern about how many obligated parties the EPA could excuse from 2018 compliance obligations. I applaud Bob Dinneen and the Renewable Fuels Association for their memo directed at the administration calling for increased transparency and clarity on the criteria for granting these waivers.

We also begin the year knowing that we will need to go through the RVO setting process for 2019. In last year’s RVO, I was particularly disappointed by the reduction in the cellulosic pool, both in the overall number, as well as the liquid fuels number. I hope we will make improvements on both of these numbers in 2019. Furthermore, we will need to ensure the numbers accurately reflect the opportunity to grow both the biomass-based diesel and advanced pools.

In the wake of the U.S. Department of Commerce’s decision to impose hefty duties on biodiesel imports from Argentina and Indonesia, we must be vigilant in watching as countries may seek to create reciprocal barriers to entry for U.S. exports, in efforts to protect their own markets. The ethanol industry exported over 1 billion gallons last year, and this could increase to nearly 1.5 billion gallons in 2018. As such, we must strike the right balance on global trade policy, maintaining our ability to play both at home and abroad.

Finally, in the short-term, we can expect to see movement on Capitol Hill to reform the RFS. Efforts are already afoot to develop compromise RFS reform legislation. Although the 2018 congressional calendar makes for a short legislative year, I anticipate seeing several different bills dropped by the end of March.

It is still too early to predict the contents of such proposals, though it is safe to say the price of the conventional D6 RIN is among the primary drivers in the debate. I also expect the nation’s largest environmental organizations to raise issues such as feedstock use and environmental performance. ABFA is actively engaged in these efforts, tracking the interests of the various stakeholders in play.
I usually close these columns by touching on the U.S. EPA’s administrative agenda. Unfortunately, at this point, it is difficult to forecast what—if anything—the EPA is planning to take on this year. The industry did a great job uniting in 2017 to beat back proposals such as the NODA and shifting the point of obligation. Per usual, I urge all of you to stay engaged, and ready to make your views known if additional threats emerge. I’m sure this year will hold new surprises, so stay tuned.


Author: Michael McAdams
President, Advanced Biofuels Association
michael.mcadams@hklaw.com
www.advancedbiofuelsassociation.com