ver the past several months, there has been a notable increase in announcements about renewable diesel production projects.
At the National Renderers Association annual conference in Laguna Niguel, California, in late October, Darling Ingredients Chief Executive Officer (CEO) Randy Stuewe gave an impassioned keynote address about rendered materials being used for biofuels feedstocks. He referenced that Darling’s Diamond Green Diesel facility, a joint venture with Valero, had been approved for phase III expansion to 675 million gallons per year (mgpy) at a cost of just over $1 billion. The project is a second, independent parallel 400 mgpy plant located next to the existing 275 mgpy facility. It will include a renewable naphtha finishing plant to produce approximately 50 to 60 million gallons of renewable naphtha (a co-product of the refining process often further refined into gasoline or a variety of petro-chemicals) adding incremental low carbon credit opportunities to the entire Diamond Green Diesel operation.
A few days later, World Energy announced a $350 million investment over the next two years to complete the conversion of its AltAir renewable jet, diesel, gasoline, and propane plant in Paramount, California, to 306 mgpy, reducing both refinery and fuel emissions while supporting more than 100 “green” jobs.
On November 1, Phillips 66 and Renewable Energy Group (REG) stated the two companies plan to build a large-scale renewable diesel plant adjacent to the Phillips 66 Ferndale refinery in Washington State using REG’s BioSynfining technology. Feedstock will include a mix of waste fats, oils, and greases, including regionally-sourced vegetable oils, animal fats, and used cooking oil. The companies have been collaborating on-site selection and preliminary engineering, and expect to make a final investment decision in 2019. If approved, production at the new facility is currently slated to begin in 2021.
These recently announced new and expansion projects are in addition to other renewable diesel startups and projects revealed by Neste in Singapore, Sinclair in Wyoming, Marathon in North Dakota, and Phillips 66 and Ryze Renewables in Nevada. All add incremental production capacity increases along with feedstock demand to existing renewable diesel facilities around the world operated by Neste, REG, Total, ENI, UPM, and others, not to mention current biodiesel and petroleum refinery co-processing projects. All of these will utilize the lowest carbon intensity feedstocks available, and that means rendered fats, oils, and greases. As Stuewe proclaimed in his presentation, “It’s a good time to be a renderer!”
Meanwhile, Colorado-based Crimson Renewable Energy has acquired SeQuential, a vertically integrated producer of biodiesel made from used cooking oil headquartered in Portland, Oregon. The purchase will enable Crimson to gain increased feedstock supply options for its biodiesel production facility in Bakersfield, California, and expand its ability to provide biodiesel to customers up and down the West Coast. The two companies will continue operating under their existing brands, with Harry Simpson serving as CEO for both Crimson and SeQuential and Tyson Keever assuming the role of chief operating officer for the combined companies. Additionally, the SeQuential management team will remain in their current roles and focus on expanding SeQuential’s regional used cooking oil and restaurant service operations and its Oregon biodiesel production and marketing efforts.
In other industry consolidation news, the former Tenaska Commodities biodiesel facility in Clinton County, Iowa, was acquired in September by Lake Erie Biofuels, doing business as HERO BX. The plant is being upgraded to increase efficiencies and is expected to begin producing once again in the mid-fourth quarter of 2018. This acquisition brings the production complement of HERO BX to Erie, Pennsylvania; Moundville, Alabama; South Roxana, Illinois; tolling at the Iowa Renewable Energy facility in Washington, Iowa; as well as blending and distribution in North Hampton, New Hampshire.
Green Energy Biofuel, based in Winnsboro, South Carolina (formerly known as Midlands Biofuels), has acquired an idle 40 mgpy biodiesel plant in Warrenville, South Carolina. After significant investment to rework the former Green Valley Biofuel plant in Warrenville, Green Energy Biofuel founder and co-owner Joe Renwick is preparing to begin operations at the facility, which has been renamed GEB3. The company’s flagship plant is a 300,000 gallon biodiesel production facility in Winnsboro that Renwick and his partners built 10 years ago. The feedstock collection services were subsequently expanded and the company began focusing on selling feedstock to other biodiesel producers. Almost four years ago, Renwick expanded his feedstock operations to a site in Knoxville on the University of Tennessee campus.
Antidumping Duties to be Re-evaluated
On November 5, the United States (US) Department of Commerce (DOC) granted a request from the government of Argentina to initiate a “changed circumstances” review of US trade duties imposed on Argentine biodiesel companies. The DOC imposed antidumping and countervailing duty orders earlier this year following investigations in which the government found that biodiesel imports from Argentina were massively subsidized and dumped, injuring US biodiesel producers. The National Biodiesel Board’s Fair Trade Coalition urged DOC to reject Argentina’s request and opposes its initiation of the review, which could result in resetting the duty rates calculated only months ago.
DOC’s initiation of this review just months after determining that Argentina had engaged in unfair trade practices creates a great deal of uncertainty for the US biodiesel industry at a time when the positive results of the original cases are just beginning to be realized. Once DOC leveled the playing field, domestic biodiesel producers stepped up their efforts, put substantial under-utilized production capacity back to work, and boosted domestic biodiesel production. It is unclear why DOC has agreed to review the tariffs and possibly open a path to a resumption of the imports, but the decision comes a few months after Argentina increased duties on biodiesel exports and cut tariffs on grains and soybean oil shipments, a key ingredient for biodiesel production in Argentina. The changed circumstances review process typically takes 270 days, meaning a final determination should be made by August 2019.
The orders on biodiesel imports from Argentina imposed by DOC earlier this year established final countervailing duty rates ranging from 71.45 to 72.28 percent and antidumping duty rates ranging from 60.44 to 86.41 percent. The Fair Trade Coalition filed petitions for relief to address a flood of subsidized and dumped imports from Argentina and Indonesia that resulted in market share losses and depressed prices for domestic producers. Biodiesel imports from Argentina and Indonesia surged by 464 percent from 2014 to 2016, displacing 18 percent of market share from US manufacturers. The artificially low-priced imports prevented US producers from earning adequate returns on their substantial investments and stifled the ability of US producers to make further investments to serve a growing market.
Argentina is one of the world’s top producers of biodiesel, exporting 1.6 million tons worth $1.2 billion in 2017. This year, biodiesel producers in Argentina exported almost 1.1 million tons of the fuel between January and August, of which 85 percent went to the European Union (EU), according to official data from Argentina state statistics agency INDEC. In September and October, however, the volume of biodiesel shipped abroad was zero. The halt in exports coincided with the EU’s expected decision on whether to sanction Argentina’s biodiesel industry over suspicions of receiving subsidies. The EU postponed its ruling in late September, saying it would continue its investigation.
More Opportunity for Renewable Fuels
The Oil Price Information Service, or OPIS, 10th Anniversary RFS2, RINs, and Biodiesel Forum was held in Chicago, Illinois, at the beginning of October and was well attended by industry stakeholders interested in learning more about the direction the US Environmental Protection Agency (EPA) Renewable Fuel Standard (RFS) program will be taking. As is usually the case at these industry events, the presentations were mostly attended by compliance and policy professionals from major refining companies and other obligated parties, while the hotel lobby was crowded with fuel and energy traders, brokers, and marketers.
Weaver energy consultant Sandra Dunphy, affectionately known as “RIN-derella,” offered a comprehensive review of the RFS and outlined important developments, including ethanol-15, small refinery exemptions, the reset and set provisions, and the impact these might have on attendees’ businesses. Other notable presentations were given by former EPA regulators Paul Agyropoulos and Andy Lipow. Agyropoulos discussed the current state of the RFS from his perspective as the former senior policy advisor at EPA’s Office of Transportation and Air Quality. He played a key role in shaping the second RFS, known as RFS2.
Lipow offered an overview of the impacts of the fast-approaching International Maritime Organization 2020 standards on renewable fuels. The new specification will significantly reduce the maximum allowable sulfur content of marine fuel consumed on open oceans from 3.5 percent to 0.5 percent (by weight) beginning January 1, 2020. Vessels that have scrubbers installed will be exempt from this rule, but effectively all others will need to begin using low sulfur diesel, creating new diesel demand of up to about 60 billion gallons per year. As the on-road market diverts low sulfur diesel into the marine fuel market, demand for biodiesel and renewable diesel will increase to fill the gap.