Interview: National Biodiesel Board's Rehagen sees record year for US biodiesel after tax credit reinstatement

The US biodiesel industry is poised to set production records in 2020 as the reinstatement of a federal tax credit at the end of last year drives a recovery across the sector, according to Donnell Rehagen, CEO of the National Biodiesel Board.

"Two years without the blender's tax credit put a lot of financial pressure on our member plants, but we still expect 2020 to be a record year for production," Rehagen said Wednesday on the sidelines of the National Biodiesel Conference in Tampa, Florida.

"Plants that shut down, you don't just turn a plant off and back on, you have to hire people back and train people. Some production likely won't come back until the second quarter, and some plants that didn't shut down were financially drained. It's for them important to see the tax credit checks from the IRS."

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As part of a recently passed spending bill, the US government reinstated the $1/gal blender's tax credit, both retroactively to the beginning of 2018 and extending it through 2022.

That retroactive reinstatement of the tax credit could take time to distribute to all the market participants along the biodiesel supply chain who traded over the past two years, but should turn deals that had been at a loss into profitable ones.

PUSHING FOR DEMAND GROWTH

Rehagen said that the number one goal for the group is growing the biomass-based diesel portion of the Renewable Fuel Standard, the federal program that mandates biofuel blending with transportation fuel.

The Environmental Protection Agency sets blending mandates, and has already set the final volume for 2021.

"Our next chance to affect blending mandates is 2022, so it's imperative we see growth in that category," said Rehagen.

Small refinery exemptions have also drawn the ire of the US biofuels industry, which sees the exemptions as undercutting demand for biofuels.

The EPA has the authority to grant a hardship exemption to refineries with less than 75,000 b/d of throughput if that refinery can demonstrate that complying with biofuel blending mandates would cause severe economic harm.

Rehagen said that the industry continues to fight against the EPA's practice of granting the exemptions.

"There's more going on than what you see," he said. "While we've been unsuccessful in turning the tide historically, we've had positive conversations and meetings with the White House. This administration has a better understanding of the effects of small refinery exemptions."

The industry is also looking at growth in the Northeast region, where biomass-based heating oil is seeing demand growth. Though heating oil has not historically been viewed as a large source of demand, local and state incentives for biodiesel are spurring additional growth in the region.

Rehagen sees biodiesel growth as a key source of support for the agriculture industry as a whole.

"It's imperative that the White House understands the potential of this industry," added Rehagen. "Biodiesel creates jobs and can be a boon for the agriculture industry. If we have this potential, why are they holding this growth down?"

US biodiesel production totaled 1.46 billion gallons over January-October 2019, down from 1.53 billion gallons in the same period of 2018, according to the most recent data from the Energy Information Administration.