Revenue losses, idled plants, auctions, and bankruptcy have plagued the biodiesel industry over the years, but as 2012 was coming to a close, those announcements were heard all too often. Two reasons being blamed for the hiccups in the United States (US): the expiration of the renewable fuel tax credits at the end of 2011 and the biomass-based diesel requirements under the Renewable Fuel Standard being met by the end of October, depressing renewable identification number prices from a high of $1.50 to a low of 40 cents. As for Europe, the explanation is overcapacity.
In North America, Renewable Energy Group (REG), the largest biodiesel producer in the United States, announced its adjusted third quarter 2012 EBITDA (earnings before interest, taxes, depreciation, and amortization) was a loss of $2.3 million, a decrease of 105 percent compared to $45.7 million for the same period in 2011. The company pointed out that its balance sheet remained strong with cash of $88.3 million, it had sold 62 million gallons by the end of September, up 40 percent year-over-year, and its revenue of $323 million was up 26 percent over the same period last year. REG just recently added two more biodiesel production plants to its inventory (see further in this article).
Although Syntroleum Corporation, a renewable and synthetic fuels technology company based in Tulsa, OK, reported operating income of $10 million ending September 30, it recorded a loss of $5.7 million from its subsidiary Dynamic Fuels, creating a net loss of $1 million. Dynamic Fuels is a renewable diesel producer that uses animal fats and used cooking oil as its feedstock. Syntroleum reports Dynamic Fuels on a three-month lag so the loss was incurred for the period ending June 30, 2012. As of September 30, Syntroleum’s available cash was $17.6 million.
In Canada, Biox Corporation, a renewable energy company that designs, builds, owns, and operates biodiesel production facilities, has temporarily suspended production at its Hamilton, ON, biodiesel facility based on the existing conditions within the US biodiesel market. The company said it would monitor market conditions, including biodiesel production volumes as well as trading liquidity and pricing, to determine the appropriate time to resume production.
Along with the suspension, Biox has reduced its operations group by 17 positions on a temporary basis. Biox will continue to operate the recently commissioned stand-alone glycerin refinement system to upgrade crude glycerin in inventory to technical grade glycerin.
“Given our balance sheet, we are in a strong position to manage through this short-term setback,” said Kevin Norton, chief executive officer, Biox. “We remain confident in the long-term fundamentals of the broader biodiesel market, specifically given the 28 percent increase in the mandated minimum volume of biomass-based diesel for 2013, and we expect to resume production in due course.”
The current market conditions are also impacting the construction of Biox’s second facility in New York Harbor in New York. The company has deferred purchasing certain long-lead time, capital-intensive components and reduced its project planning team related to construction. An estimated commission date of the facility has not yet been announced.
In Europe, Austrian-based BDI – BioEnergy International AG, a technology supplier and plant manufacturer in the waste-to-energy market, reported an EBIT loss of 1.5 million euros ($1.9 million USD), compared to a gain of 3.2 million euros ($4 million USD) the previous year, and a reduction in sales of 30 percent to 19.1 million euros ($24.3 million USD) for the first nine months of 2012. The company attributes project delays to the lower sales. BDI stated that due to a difficult market situation and poorer sales and earnings than planned in the biogas segments, it made extraordinary goodwill write-downs totaling three million euros ($3.8 million USD).
“In spite of positive financial earnings and income from investments, this led to period earnings of a loss of 3.3 million euros ($4.2 million USD) in the first nine months of the fiscal year,” the company said in a statement.
In Germany, Cargill has closed one of its two biodiesel plants because of overcapacity in the biofuels sector. The 120,000 metric ton annual capacity facility at Wittenberge in East Germany has stopped production and a new investor is being sought for the plant, which has 28 employees, is a joint venture with German agricultural cooperative Agravis, and primarily uses rapeseed oil. Cargill also has a 250,000 metric ton biodiesel plant at Hoechst near Frankfurt.
According to reports, Germany’s biodiesel industry, Europe’s largest, has only been running at about 50 percent capacity since the country taxed biodiesel, cutting consumption. At the beginning of 2012, about half of Germany’s plants had been idled or declared insolvency.
On the bright side, Paseo Biofuels, LLC, a joint venture of Cargill, the Missouri Soybean Association, and hundreds of agriculture producer investors, is expanding its Kansas City, MO, plant capacity by 40 percent to meet what it says is the increasing demand for biodiesel. Using soybean oil as its primary feedstock, the facility, which opened in 2008, produces 40 million gallons of biodiesel and 30 million pounds of food-grade glycerin annually. The expansion is expected to be complete by March 2013.
The European Commission (EC) published a proposal in mid-October to limit the use of food crop-based biofuels to just half of the 10 percent renewable energy target of the Renewable Energy Directive. The five percent cap is an effort to stimulate the development of alternative, so-called second-generation biofuels from non-food feedstock that emit substantially less greenhouse gases than fossil fuels and do not directly interfere with global food production. The estimated global land conversion impacts – indirect land use change (ILUC) – will be considered by the EC when assessing the greenhouse gas performance of biofuels.
According to a statement by the EC, recent scientific studies have shown that when taking into account ILUC, for example when biofuel production causes food or feed production to be displaced to non-agricultural land such as forests, some biofuels may actually be adding as much to greenhouse gas emissions as the fossil fuels they replace.
The commission is therefore proposing to amend the current legislation on biofuels through the Renewable Energy and the Fuel Quality Directives and in particular the following.
• Increase the minimum greenhouse gas saving threshold for new installations to 60 percent in order to improve the efficiency of biofuel production processes as well as discouraging further investments in installations with low greenhouse gas performance.
• Include ILUC factors in the reporting by fuel suppliers and European Union (EU) member states of greenhouse gas savings of biofuels and bioliquids.
• Limit the amount of food crop-based biofuels and bioliquids that can be counted towards the EU’s 10 percent target for renewable energy in the transport sector by 2020, to the current consumption level, five percent up to 2020, while keeping the overall renewable energy and carbon intensity reduction targets.
• Provide market incentives for biofuels with no or low ILUC emissions, and in particular the second- and third-generation biofuels produced from feedstocks that do not create an additional demand for land, including algae, straw, and various types of waste, as they will contribute more towards the 10 percent renewable energy in transport target of the Renewable Energy Directive.
The European Biodiesel Board is opposed to the EC proposal, saying it is “based on unfounded and immature ILUC science and a five percent cap in 2020 would destroy the biofuels industries and related sectors such as crushing and sugar facilities. Any change in policy must safeguard the investments made and ongoing toward fulfilling the commission’s initial objectives of 10 percent renewable energy for transport production in the EU. Fundamental problems remain in the EC proposal which will have devastating impact on the biofuels industries and diversification of farmers’ revenues.”
A newly formed technology center created by Boeing and Commercial Aircraft Corp. (COMAC) of China has announced that Hangzhou Energy Engineering and Technology Co., Ltd. (HEET) will conduct the center’s first research project.
HEET, a company with experience developing alternative energy technologies, will focus on ways to convert discarded cooking oil into a component of sustainable aviation biofuel at the Boeing-COMAC Aviation Energy Conservation and Emissions Reductions Technology Center in Beijing, China. The project aims to identify contaminants in used cooking oil, which often is described in China as “gutter oil,” and processes that may treat and clean it for use as jet fuel. The focus of the project for the first year will be to demonstrate the feasibility of achieving significant cost reduction in converting gutter oils and other waste oils into jet fuel through improvement of conversion efficiency and associated technology.
The Boeing-COMAC technology center is working with China-based universities and research institutions to expand knowledge in areas such as sustainable aviation biofuels and air traffic management that improve commercial aviation’s efficiency and reduce carbon emissions. Funded by both companies, the center opened in August at COMAC’s new Beijing Aeronautical Science and Technology Research Institute (BASTRI).
“China is the world’s fastest growing aviation market and the biggest consumer of cooking oil,” said Qin Fuguang, president of BASTRI, COMAC. “There’s great potential for converting the waste cooking oil into sustainable aviation fuel.” China annually consumes about 29 million metric tons of cooking oil, while its aviation system uses 20 million metric tons of jet fuel.
British chemical equipment supplier Biodiesel King, LLC has selected Cumming, GA, as the home of its United States headquarters and distribution center, according to the Cumming Forsyth County Chamber of Commerce. The company specializes in supplying chemicals, fuels, additives, equipment, and accessories to the biodiesel industry. Collection of used cooking oil from restaurants, hotels, and other sources is a primary service offered by Biodiesel King, as well as an incentive of paying up to $1 per gallon to area suppliers. Managing member Ian Dawson said the company would create about five new jobs.
National Biodiesel Board (NBB) members selected their association leadership, electing three returning governing board members and four new members to lead the group.
Officers elected are Gary Haer, Renewable Energy Group, chair; Ed Ulch, Iowa Soybean Association, vice chair; Ron Marr, Minnesota Soybean Processors, secretary; and Steven Levy, Sprague Operating Resources, treasurer.
NBB members also voted to fill seven board member spots. Elected to the governing board along with Levy are Greg Anderson, Nebraska Soybean Board; Jennifer Case, New Leaf Biofuels; Mike Cunningham, American Soybean Association; Brandon Foley, Sanimax; Tim Keaveney, Hero BX; and John Wright, Owensboro Grain Company.
Bob Metz, Robert Stobaugh, Kris Kappenman, Ed Hegland, and Jim Conway also continue to serve on the governing board.
Assunto Importante SA has upgraded its existing biodiesel plant in Sines, Portugal, to utilize multi-feedstocks, opting to use animal fats and used cooking oil. The local mineral oil industry will be the end-user of the second-generation biodiesel produced. BDI – BioEnergy International AG was the contractor for the 25,000 metric ton per year plant.
The objectives of the project were not only to increase the raw material flexibility of the existing plant but also to improve the quality of the biodiesel so as to satisfy the requirements of the stricter-quality European standard EN14214/2013 that will have to be observed in the future. This was done under BDI’s retrofit program that modernizes existing biodiesel plants, irrespective of the original technology used.
BDI noted that this commission demonstrates the increasing demand for second-generation biofuels. “The use of waste materials is not just good for the environment, it also enables the quantity targets set by the European Commission for the proportion of fuel accounted for by sustainably manufactured biodiesel to be met,” stated BDI.
Within three weeks, Renewable Energy Group (REG) acquired two 15 million gallons per year biorefineries, one in New Boston, TX, the other near Atlanta, GA. The company paid $300,000 in cash and issued 900,000 shares of its common stock to North Texas Bio Energy for the multi-feedstock biorefinery located about 22 miles west of Texarkana. It is REG’s second Texas biodiesel production facility following its 2008 acquisition of its Houston-area plant.
The New Boston facility began production in June 2008 and has been idle for four years. The plant will undergo some construction and minor upgrades prior to start-up, which is expected in the first quarter of 2013. REG plans to utilize animal fats and other high free fatty acid feedstocks to produce biodiesel at the refinery, and hire nearly 20 employees.
REG has also purchased the former BullDog Biodiesel operation, a multi-feedstock facility in Ellenwood, GA, 11 miles southeast of Atlanta, for cash and in-kind consideration of about $2.6 million. No stock was issued related to this deal. No production date has been set for the re-start of the facility that will operate as REG Atlanta, LLC, which has run intermittently since January 2008. REG tolled the facility from April 2011 through April 2012 to support the company’s biodiesel sales in the Southeast. BullDog ceased operations in April 2012 due to a combination of poor market conditions and upgrades needed to make the facility more efficient.
Enterprise Holdings, owner and operator of the Enterprise Rent-A-Car, National Car Rental, and Alamo Rent A Car brands, is piloting a program with Mansfield Oil Company to use renewable synthetic diesel fuel in its airport shuttle buses at Louis Armstrong International Airport in New Orleans, LA, and Houston Hobby Airport in Houston, TX.
“By using synthetic diesel and embracing alternative fuels, we are following our ongoing commitment to help grow the clean fuel market and increasing opportunities for alternatives to become commercially viable,” said Lee Broughton, head of corporate sustainability for Enterprise Holdings. Benefits of synthetic diesel compared to petroleum-based diesel include 16 percent reduction in particulate matter, 68 percent reduction in non-methane emissions, 33 percent reduction in nitrogen oxide gases, and 23 percent reduction in carbon monoxide.
Enterprise is the first car rental company in the United States to utilize renewable synthetic diesel to power their shuttle buses, according to Mansfield Oil, which sources the renewable diesel from Dynamic Fuels in Louisiana. Dynamic Fuels uses animal fats, used cooking oil, and other waste oils to produce the alternative fuel.
Enterprise also supports renewable fuels research. Since 2006, Enterprise’s owners, the Taylor family, have given $35 million to the Donald Danforth Plant Science Center and its Enterprise Rent-A-Car Institute for Renewable Fuels.
The United States (US) Environmental Protection Agency (EPA) has not found evidence to support a finding of severe “economic harm” that would warrant granting a waiver of the Renewable Fuels Standard (RFS). The decision is based on economic analyses and modeling done in conjunction with the US Department of Agriculture (USDA) and US Department of Energy (DOE). The governors of several states requested that EPA waive the national volume requirements for the RFS program based on the effects of the drought on feedstocks used to produce renewable fuel in 2012-2013. Several other parties submitted similar requests.
“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” said Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation. “But our extensive analysis makes clear that congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact.” Economic analyses of impacts in the agricultural sector, conducted with USDA, showed that on average waiving the mandate would only reduce corn prices by approximately one percent. Economic analyses of impacts in the energy sector, conducted with DOE, showed that waiving the mandate would not impact household energy costs.
EPA found that the evidence and information failed to support a determination that implementation of the RFS mandate during the 2012-2013 time period would severely harm the economy of a state, region, or the United States, the standard established by Congress in the Energy Policy Act of 2005. The act required EPA to implement a renewable fuels standard to ensure that transportation fuel sold in the United States contains a minimum volume of renewable fuel. A waiver of the mandate requires EPA, working with USDA and DOE, to make a finding of “severe economic harm” from the RFS mandate itself. This is the second time that EPA has considered an RFS waiver request. In 2008, the state of Texas was denied a waiver.
December 2012 RENDER | back