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Renewable Energy Group to shut Houston biodiesel plant: company

Highlights

35 million gal/year plant to shut in November

Trend of biodiesel plant shutdowns continue

Renewable Energy Group will close its 35 million gal/year biodiesel plant located in Seabrook, Texas, due, in part, to its inability to process multiple feedstocks, the company said in a Sept. 29 statement.

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"We have made the decision not to renew the lease for our REG Houston biorefinery, which would have imposed an uncompetitive fixed cost on the plant," said Renewable Energy Group CEO CJ Warner.

"The plant has run very well but has always been relatively challenged due to its leasing agreement coupled with a lack of REG's hallmark multi-feedstock processing capability," she added.

The company acquired and commissioned the plant in 2008 and will completely shut down the Houston plant in November 2021.

Renewable Energy Group operates 12 biorefineries in the US and Europe. In 2020, Renewable Energy Group produced 519 million gallons of cleaner fuel delivering 4.2 million mt of carbon reduction.

Biodiesel plants shutting down

The closure of REG's Houston plant will leave the US Gulf Coast region with 14 plants, down from the 18 in 2019, and the US total at 74, according to Energy Information Administration data. This is down from the 102 plants operating across the US in 2019.

Biodiesel capacity has been dropping due to rising feedstock costs, as biodiesel vies for supply against the rising production of "drop in" fuels like renewable diesel, or RD. Soybean oil has been a mainstay for both fuels as a feedstock but beef tallow is also used.

Platts assessments show the BO-HO factor – the price difference between soybean oil futures and ULSD futures – has fallen recently to average $1.9686/gal so far in the third quarter. This is down from the $2.6736/gal in the second and the lower price has improved blending economics for biodiesel, RD, and sustainable aviation fuel (SAF).

Another factor impacting biodiesel economics is the fall in the price of D4 RINs -- the renewable energy credits from the Energy Information Administration's Renewable Fuel Standard.

D4 biomass diesel RINs are averaging $1.3025/RIN so far in the third quarter, down 35.5 cents/RIN from the second quarter, according to Platts assessments.

RD produces 1.7 D4 RIN/gal, compared with the 1.5 D4 RIN/gal produced by biodiesel. Besides the higher RIN value, RD also has the additional advantage of California's Low Carbon Fuel Standard credits, increasing its economic attractiveness relative to biodiesel.