Dear Stakeholder in the California Low Carbon Fuel Community:

The California Biodiesel Alliance (CBA) is a not-for-profit trade association promoting the increased use and production of high quality, renewable biodiesel fuel in California. CBA members include California biodiesel producers, feedstock providers, marketers and other stakeholders. As Chairman of CBA, I am writing to ask for your help in a grassroots campaign regarding an issue that could significantly impact the California biodiesel community in 2014 and 2015.

As you know, biodiesel in California has had its ups and downs through the years. While biodiesel has always enjoyed strong and energetic support from users, the industry has faced major state and federal regulatory challenges. These challenges have slowed the development of biodiesel infrastructure and production as well as the development of new feedstocks.

Fortunately, the past few years have been a period of progress with in-state production and consumption increasing more than 300 percent. Major infrastructure investments have been made. New biodiesel production facilities have come online, while existing plants have expanded. And due to these efficiencies and scaling opportunities, prices for biodiesel are better than they have ever been. Of course, all of this has happened because of increasing regulatory certainty and improved policies at both the state and federal levels.

Unfortunately, our major federal policy, the Renewable Fuel Standard (RFS), is currently at risk. As you may know, the U.S. Environmental Protection Agency (EPA) recently released a proposed rule that would require obligated parties to blend 1.28 billion gallons of biodiesel in 2014 and 2015. Since the required volume obligation (RVO) in 2013 was 1.28 billion gallons, it would appear on the surface that EPA is holding biodiesel consumption constant. However, upon closer inspection, this is not the case.

Biodiesel qualifies for both the Biomass-Based Diesel (D4 RINS) and Advanced Biofuel (D5 RINS), and has therefore had a strong demand above and beyond the EPA's statutory mandate for Biomass-Based Diesel.  In fact, the industry is currently producing at a run rate of 2 billion gallons per year.  

But under the current proposal, both the Biomass-Based Diesel and Advanced requirements are significantly reduced from current production, leaving very little opportunity for growth beyond the Biomass-Based Diesel requirement. In addition, the RFS allows obligated parties to carry over a certain amount of RINS from one year to the next.  It is estimated that this year, RINS for 280 million gallons of biodiesel will be carried over into 2014.  As a result, the 1.28 billion gallon requirement proposed by the EPA could be closer to 1 billion gallons in the real-world market. That would mean a reduction in the overall demand for biodiesel by a staggering 50 percent -- from the current rate of 2 billion gallons down to an estimated 1 billion gallons!

So why does this situation threaten the California industry? It does so because California biodiesel producers have likely benefitted more than any in the country from the recent expansion of the federal RFS and would probably be the first to be negatively impacted by a major reduction. Larger, more mature, and more stable markets, such as those in the Midwest and Texas, will be in a much better position to weather this storm, while the California markets may atrophy. In a few years, when the California Low Carbon Fuel Standard becomes more robust, the federal RFS may become less critical. For now, however, the RFS serves as the major driver for our California industry, so we must protect it.

What can you do to help? Follow the instructions at the top of the left column and send letters to the EPA and to Senators Boxer and Feinstein, who do not yet support our position. 

Thank you, in advance, for taking a few minutes to help with this very important issue and thank you for your continued support of biodiesel, America's first advanced biofuel!

Sincerely,

Curtis Wright,

Chairman

California Biodiesel Alliance