The Complex California Biofuels Market

By Tina Caparella


“California is the fastest growing market for biofuels thanks to the Low Carbon Fuel Standard,” announced Jennifer Case, president of New Leaf Biofuel and chair of the California Biodiesel Alliance (CBA), at the group’s sixth annual California Biodiesel Conference held in Sacramento, California, on March 1. “But I feel like we’re barely surviving instead of thriving,” as concerns swirl over uncertainty about President Donald Trump’s view of renewable fuels, expired federal tax credits, and a new lawsuit in California that is leading state government to talk of separating biodiesel from the state’s Low Carbon Fuel Standard (LCFS) Program.

“Yet among the negative news are bright points that are looking fantastic,” Case went on. One highlight is the estimated 400 million gallons of biodiesel and renewable diesel consumed in California in 2016, almost 10 percent of the 4.2 billion gallons of petroleum diesel used in the state, up substantially from about 30 million gallons of just biodiesel in 2012. With in-state biodiesel production just over 39 million gallons last year, the vast majority of biomass-based diesel consumed in California is imported (more renewable diesel than biodiesel by almost one-third), an amount that is expected to grow, causing concern for in-state producers.

California’s LCFS is a key component of an ambitious target to reduce greenhouse gas (GHG) emissions in the state 40 percent below 1990 levels by 2030 as transportation is the single largest contribution of GHGs. The LCFS’ goal of reducing the carbon intensity (CI) of transportation fuel by at least 10 percent by 2020 could grow the demand for biomass-based diesel to 1.8 billion gallons by 2030, according to California Air Resources Board (CARB) data.

As reported at the conference, half of California’s biodiesel is produced using distillers corn oil as a feedstock, 31 percent is made with used cooking oil, 11 percent utilizes canola oil, while two percent is produced with tallow, one percent is made with soy oil, and five percent uses other feedstocks. The choice of feedstock is usually driven by the CI CARB assigns each oil based on life cycle analyses, with the lower CI feedstocks being preferred by CARB. Currently, used cooking oil has the lowest CI range of 8-28, followed by distillers corn oil at 28-38, tallow at 28-41, soy oil at 49-60, and canola oil at 51-62. CARB is reevaluating the life cycle analysis of the various oils, including working with one rendering company in California in an effort to get a more facility-specific CI that could lower the current rating for tallow.

Anil Prabhu, manager of CARB’s Fuels Evaluation Center, said the board needs to focus more attention on CI verification, including for used cooking oil, because there is potential for vegetable oil or other higher CI feedstocks to be mislabeled as used cooking oil. CARB wants biomass-based diesel producers to use third-party verification programs such as those offered by EcoEngineers, a private consulting firm and project developer in the renewable energy sector. Shashi Menon, managing partner at EcoEngineers, explained that an LCFS verification program creates market confidence by de-risking the credit marketplace. Based on his experience with the fraudulent use of federal renewable identification number credits, Menon recommended CARB mandate a prescriptive verification program so all biofuel producers must comply.

Floyd Vergara, chief of CARB’s Industrial Strategies Division, stated the agency’s direction is to push for zero or near zero GHG emissions as much as possible and is looking forward to working with the biomass-based diesel industry in order to meet the state’s reduction target.

“The LCFS is a long-term key program that supports many of the objectives here in California and we are here to work with you to make sure these products are being made or brought into California as clean as possible,” Vergara commented.

Don Scott, director of sustainability at the National Biodiesel Board (NBB), reported that a new preliminary indirect land use change model from Purdue University is more accurate than previous models. He described how biodiesel actually helps the food supply by utilizing the excess fat and carbohydrates produced when more protein is grown or raised for an increasing population.

Taking a look at the national biofuels market was NBB Chief Executive Officer Donnell Rehagen, who said domestic production of biomass-based diesel in 2016 was 1.8 billion gallons while imports accounted for about 1.0 billion gallons. To help curtail the growing imported fuels, NBB is working with the United States Congress to change the expired blender’s tax credit to a producer’s credit.

“The industry wants to see a level playing field with incentivized imported fuels,” Rehagen commented before confirming there is enough domestic production capacity to meet the nearly 2.9 billion gallons of biomass-based diesel consumed in 2016. He explained NBB’s 10×22 vision that calls for biomass-based diesel to comprise 10 percent of the country’s diesel fuel by 2022, creating a 4.0-billon-gallon-per-year market, before highlighting various state policies that drive about 1.0 billion gallons of biomass-based diesel usage in the country.

Shelby Neal, director of state government affairs at NBB, dissected CARB’s complex LCFS requirements, presenting various scenarios to meet the targeted GHG reductions that include other alternative fuels and zero-emission vehicles. He believes CARB’s estimation of 3.5 million zero-emission vehicles and 640,000 hydrogen fuel cell vehicles eventually being driven in the state is aggressive while NBB’s more bullish figures mean 1.2 billion gallons more of biomass-based diesel would be needed to meet the target. One way to meet that threshold would be for CARB to increase the current 20 percent biodiesel blend maximum in the LCFS, although challenges exist from original equipment manufacturer approval, the state’s difficult underground storage tank certification program, and the food versus fuel misperceptions.

Tyson Keever, president and chief executive officer of SeQuential, reported that Oregon is a big supporter of biofuels, increasing its renewable fuel standard to 5 percent biodiesel inclusion in the state’s petroleum diesel in 2011. The state also offers a 10-cent-per-gallon biomass tax credit on used cooking oil collected and sent for biodiesel production in Oregon that will expire at the end of this year. The Department of Energy reports Oregon is home to 85 of the 209 fuel pumps dispensing 20 percent or higher biodiesel blends nationwide. One bit of news Keever revealed was that there are now more clean energy jobs than fossil fuel jobs in the United States.

Ian Thomson, president of Advanced Biofuels Canada, stated that a discussion paper on Canada’s new Clean Fuel Standard was released for public comment on February 24, 2017. Many of Canada’s provinces currently have incentives in place for using cleaner fuels, including British Columbia’s LCFS that was expanded to 15 percent reduction by 2030.


April 2017 RENDER | back