'Uncertainty' the watchword at US biodiesel conference

It was just like the old days.

In 2015, I attended my first National Biodiesel Conference in Fort Worth, Texas.

At the time, the industry -- indeed, the entire US renewable fuels sector -- faced key questions about its future. Chief among those concerns was when the US Environmental Protection Agency would release the long-delayed 2014, 2015 and 2016 blending mandates.

Without the mandates, producers had to forge ahead into 2015 without knowing just how much biodiesel was needed for the year, an unenviable position.

Three years later, and -- to steal from Yogi Berra -- it's deja vu all over again.

Last week, I returned to the National Biodiesel Conference, again in Fort Worth. And just like in 2015, questions about government policy loom large over the industry.

This time, though, the questions don't concern the EPA, but rather Congress -- specifically, if and when it would reinstate the $1/gal biodiesel blenders tax credit.

National Biodiesel Board Chief Executive Officer Donnell Rehagen told reporters at the conference that he's confident the lawmakers will reauthorize the tax credit as part of a tax extenders package. When, however, is a different story.

Market sources told S&P Global Platts in recent weeks that they expected the extenders package would be passed by January 19, when government funding was scheduled to run out. However, that data came and went without mention of tax extenders.

Instead, Congress grappled with a government shutdown and an eventual short-term continuing resolution to extend government funding.

Will the extenders package be tacked onto an omnibus funding bill? Another continuing resolution? Or perhaps some other type of legislation? Right now, it seems like anyone's guess.

Sources have said that in 2017, the tax credit was "baked into" biodiesel prices in expectation that Congress would extend the tax break.

As the year progressed, worries arose that those who had purchased biodiesel in expectations of getting the credit could be in a precarious position should those expectations prove unfounded.

Biodiesel producers I spoke with at the conference were eager to get the tax credit back. But regardless of the credit's fate, they say, producers want to know something definite.

"Uncertainty" was a word I heard often, and it wasn't in glowing terms.

If the credit is reinstated, producers can plan their production accordingly. If the credit isn't coming back, one producer told me, it's better to find that out sooner. The market can react, correct itself and move on.

What can't continue to happen, others told me, is the on-again, off-again nature of the credit. Not knowing whether the credit will last from one year to the next hinders companies' ability to plan long-term investments such as plant expansions and new hiring.

The industry would prefer a long-term credit that would allow for better investment planning the encourage growth.

But that doesn't seem to be in the cards now. Most expectations are for a credit that's retroactive for 2017 and in place for 2018.

The current year will be an important one for the US biodiesel industry. Recently imposed tariffs on Argentinian and Indonesian biodiesel into the US have sharply curtailed imports.

US producers in 2018 will be counted on to produce enough biodiesel to fulfill the federal government's 2.1 billion-gallon biodiesel mandate.

Rehagen, and producers I talked with, are confident that they can meet the mandate. One producer told me that he knows of several plants that are working far under capacity and are ready to make the jump to higher utilization.

Learning the fate of the tax credit, however, is the first step. Until then, uncertainty is the watchword for the industry.