In late November 2016, the United States (US) Environmental Protection Agency (EPA) finalized increases in renewable fuel volume requirements across all categories of biofuels under the Renewable Fuel Standard (RFS) program for 2017 and for biomass-based diesel for 2018. This is positive news for the rendering industry as more than 30 percent of US biodiesel and renewable diesel is produced using rendered animal fats and used cooking oils.
Under the new RFS final rule, biomass-based diesel requirements would increase to 2.1 billion gallons in 2018, up from 2.0 billion gallons in 2017 and 1.9 million gallons in 2016. Biomass-based diesel – a diesel subset of the overall advanced biofuel category – is made up of biodiesel and renewable diesel. Additionally, the new RFS rule increases advanced biofuels to 4.28 billion gallons in 2017, up from 3.61 billion gallons in 2016 with biomass-based diesel continuing to fill a large portion of the advanced program.
However, as of press time, EPA has delayed the effective date of the final rule to March 21, 2017, to allow officials time to further review new regulations per a memorandum issued by the assistant and chief of staff to President Donald Trump. This regulation was one of 30 published by EPA since October 28, 2016, delayed by the agency.
The National Renderers Association (NRA) submitted regulatory comments to EPA last summer supporting increases in the RFS with guidance from its Biofuels Committee and in coordination with the National Biodiesel Board (NBB). Per NBB, any future increases in the RFS will likely be in alternative biofuels (not ethanol) since EPA set the ethanol RFS at its maximum legal limit. However, still unknown is the position of President Donald Trump’s new administration on alternative fuels coupled with serious interest to overturn the RFS in the new Congress.
The RFS levels finalized might have been higher if EPA had not been concerned about feedstock availability in 2017-2018. However, based on regulatory comments from NRA, NBB, and others, EPA was persuaded that there would be sufficient supply available to increase the RFS from its proposed level last May. NRA and NBB had advocated even higher RFS levels.
The RFS – a bipartisan policy passed in 2005 and signed into law by President George W. Bush – requires increasing volumes of renewable fuels to be blended into the US fuel stream. The law is divided into two broad categories: conventional biofuels that must reduce greenhouse gas emissions by at least 20 percent, and advanced biofuels, which must have a 50 percent reduction. Biodiesel is the first advanced biofuel to reach commercial-scale production nationwide and has made up the vast majority of advanced biofuel production under the RFS to date.
In late January, EPA announced that nearly 2.9 billion gallons of biodiesel and renewable diesel were consumed in 2016, an increase of 800 million gallons from 2015 and all-time high. At the same time, domestic production rose from around 1.4 billion gallons in 2015 to more than 1.8 billion gallons last year, albeit well below available capacity.
Imports of biodiesel and renewable diesel also increased in 2016 to over 1.0 billion gallons, up substantially from the estimated 670 million gallons imported the previous year.
The biomass-based diesel category under the RFS alone saw a record 2.6-billion-gallon market last year, allowing the advanced biofuel program to reach over 4.0 billion ethanol-equivalent gallons. These numbers exceeded EPA’s estimates for 2016 and track the National Biodiesel Board’s projections, showing the industry can deliver on the goals set by Congress.
EPA estimates total biodiesel and renewable diesel use to again be about 2.9 billion gallons in 2017 with about one-third of that volume coming from imports.
Suez and Total are joining forces to collect and recycle used cooking oil (UCO) into biofuel in France. As part of their 10-year partnership, Suez will supply 20,000 metric tons of UCO a year to Total, who will process it into biofuel at its La Mede biorefinery, France’s first and one of the largest in Europe.
Currently, 45,000 metric tons of UCO is collected annually in France out of an estimated 100,000 metric tons countrywide. The partnership between Suez and Total will increase the amount of UCO collected by more than 20 percent and improve its conversion through a short-energy production loop beneficial to the environment.
Iowa’s biodiesel production last year reached a recording-breaking 297 million gallons, surpassing the 242 million gallons produced in 2015 by 55 million gallons. The 23 percent increase is largely attributed to policy certainty at the federal level during 2016, including the biodiesel tax incentive and Renewable Fuel Standard. State-level policies targeting higher biodiesel blends, such as Iowa’s excise tax differential on 11 percent biodiesel blends with petroleum diesel, also helped drive demand.
Compared to 2015, soybean oil remained the largest feedstock for Iowa biodiesel production at a steady 66 percent. Animal fats dropped slightly to 14 percent of production, while corn oil held at around 10 percent. Used cooking oil and canola oil doubled their 2015 numbers, combining to account for roughly 10 percent of 2016 biodiesel production in Iowa.
Jeffrey Wilson and Craig Ducey were sentenced in December to serve prison terms of 120 months and 74 months, respectively, for their roles in multi-million-dollar fraud schemes involving biodiesel tax credits, renewable fuel credits, and shares of Imperial Petroleum Inc. In addition, Chad Ducey was sentenced to an 84-month prison term for his role in the same schemes. These defendants were the last to be sentenced from a group of seven charged co-conspirators. The others, Joseph Furando, Katirina Tracy, Brian Carmichael, and Chris Ducey were sentenced at prior hearings. Although charged in three separate cases, all the defendants participated in fraud involving federal incentives to produce renewable fuels, specifically biodiesel.
The December sentences were the first to address securities fraud charges leveled against Wilson and Craig Ducey. That fraud stemmed from lies those defendants told in the course of their dealings with investors, auditors, and the Securities and Exchange Commission (SEC) while representing Imperial Petroleum. Wilson, president and chief executive officer of Imperial Petroleum, drafted and certified the accuracy of Imperial’s quarterly and annual reports and made those reports available to the investing public through filings with the SEC. He also lied to the company’s outside auditor to keep him from learning of the scheme. In April 2015, Craig Ducey admitted to related crimes and began cooperating with United States authorities; he testified at Wilson’s trial and the court recognized his assistance by giving him a lesser sentence than Wilson.
The securities fraud began when Wilson learned that e-biofuels LLC – a business that Wilson arranged for Imperial Petroleum to buy – was falsifying paperwork to claim incentives for biodiesel it had not manufactured. As e-biofuels managers fraudulently claimed millions in federal tax rebates and other incentives that had no basis in real manufacturing, Wilson directed the managers to move more gallons of such fuel rather than incur the cost associated with legitimate biodiesel production. Despite their knowledge that the e-biofuels facility was dormant, Wilson and Craig Ducey told investors, auditors, and SEC that it made millions of gallons a month from raw materials like chicken fat. This defrauded biodiesel buyers – who were duped into taking bad tax credits and renewable fuel credits – and also defrauded investors.
Chad Ducey was sentenced for his role in the underlying wire, tax fraud, and environmental crimes that were hidden by the securities fraud (he was not charged with securities fraud). He owned e-biofuels together with his brother Craig Ducey until they sold it to Imperial Petroleum. Chad Ducey was intimately familiar with how the e-biofuels facility worked and knew that it was not manufacturing biodiesel between July 2010 and June 2011. Nevertheless, he twice persuaded an outside engineer that the facility was a biodiesel producer as essential steps to registering and claiming renewable fuel incentives.
In addition, Chad Ducey worked with Wilson and others to try to establish “beachheads” in Texas, which is a fuel transload facility used to disguise the transfer of biodiesel to an e-biofuels customer from a Texas fuel terminal where it was purchased. Workers at e-biofuels called these remote, no-production transfers “ghost loads” and the transload facility was planned to hide those loads. Ghost loads occurred in Texas and between fuel terminals and e-biofuels customers in Illinois, Indiana, and Pennsylvania.
In a separate case, William Letona, an employee of a New Jersey feedstock collector and processor, pleaded guilty to conspiracy for his role in a scheme to alter and destroy documents following the company’s receipt of a subpoena issued by a federal grand jury. Letona admitted to conspiring with others to obstruct a grand jury investigating the fraudulent generation of renewable fuels credits (known as RINs) and Internal Revenue Service (IRS) tax credits connected to the purported production of renewable fuel. Specifically, documents were falsified and destroyed in order to hide the fact that fuel purchased from a broker by Letona’s employer, Unity Fuels, was sold back to the broker as “recycled vegetable oil blend.” This maneuver enabled RIN and IRS credits to be claimed multiple times on the same material.
Neste has launched a renewable diesel made from waste and residues under the brand name Neste MY Renewable Diesel, which replaces the previous brand name NEXBTL, at select service stations in Finland’s Helsinki region. The waste-based fuel reduces greenhouse gas emissions by 90 percent throughout the life cycle of the fuel compared to conventional diesel. The product is priced somewhat higher than Neste Pro Diesel, which contains at least 15 percent renewable diesel.
In addition, Neste has signed partnership agreements with Schenker Oy and Lassila and Tikanoja for use of Neste MY Renewable Diesel. Some 20 Schenker vans and trucks in the Helsinki metropolitan area and six to eight transportation vehicles in Turku will be fueled by the renewable diesel while select waste transportation vehicles in Lassila and Tikanoja’s Helsinki metro-area fleet will use the fuel. In December 2016, Neste and Lassila and Tikanoja worked together in a campaign that encouraged people to recycle the waste fat from their roast ham to be used as a feedstock for renewable diesel. Lassila and Tikanoja collected the waste fat donated from 40,000 homes and transported it to preprocessing. Neste then turned the fat into 2,600 gallons of renewable diesel.
In late November, the government of Finland approved a new national Energy and Climate Strategy outlining how the country plans to reach both domestic and European Union climate targets by 2030. In the outline, Finland’s government set a goal to have the share of renewables in the Finnish energy pool surpass 50 percent during the 2020s, with a long-term goal of reaching carbon neutrality.
The share of biofuels in the fuel pool will be increased to 30 percent by 2030 as part of emission reduction plans’ special focus on road transport, where the government said the potential for reduction is the greatest. Finland also wants to speed up renewing its car fleet and have 250,000 electric and 50,000 gas-fueled vehicles on the road by the end of the strategy.
Subsidies for investment will be targeted primarily at commercializing new technology and at the burden-sharing sector, with a focus on advanced biofuel facilities. Imports of petroleum products – including petrol, diesel, fuel oil, jet fuel, and kerosene – for domestic use will be decreased by 50 percent from 2005 levels by 2030. The government is also examining further steps to steer Finland toward an energy economy based entirely on renewables by 2050.
Two Singapore-based companies, Agritrade Resources Ltd. and Solfuels Holdings Pte Ltd., have jointly acquired the former Delta American Fuel LLC biodiesel plant in Helena, Arkansas. The 40-million-gallon-per-year facility originally built to process soybean oil has been idle for an extended period of time. The new owners will retrofit the plant to use multi-feedstocks, including yellow grease, animal fats, inedible corn oil, and refined vegetable oil and expect it to be operational by April 2017.
Agritrade Resources is an integrated energy and shipping solutions provider while Solfuels is an experienced biofuel operator.
February 2017 RENDER | back