In April, I had the pleasure of presenting a webinar to the California Fuels & Convenience Alliance webinar on Best Practices for Your Biodiesel. Even though biodiesel blending economics are still considered relatively poor right now, we are seeing groups across the country that are able to improve their margins, particularly in California. More biodiesel production is being pushed into California due to favorable State policies and incentives. The California Air Resources Board’s (CARB) Low Carbon Fuel Standard (LCFS) have added to the economic incentives for investing in biodiesel.
Here are a few of the important factors I shared with listeners:
Several policies are driving renewable fuels, allowing truckstop and travel plaza operators to take advantage of financial benefits when they choose to drop biodiesel in their tanks.
We started seeing a single gallon of fuel with multiple credits on it. When the biodiesel blender’s tax credit (BTC) comes back, it will provide another incentive on top of EPA RFS renewable identification numbers (RIN) and LCFS credits. As most states are eagerly anticipating the reinstatement of the BTC to improve blend economics, states such as California are already increasing margins for retailers.
If and when the tax credit does come back, coupled with other incentives (RFS and LCFS), incentives for B100 would be $2.59 per gallon.
- RFS – RIN credit should be passed down to the Blender who is ultimately responsible for reporting the blending and selling of the RIN credit.
- CARB – LCFS credits may be held by the supplier and sold into the LCFS credit market. This allows the value of the LCFS credit to be “baked” into the gallon of renewable fuel without the need for the Blender to perform compliance reporting.
- IRS – BTC value should be negotiated by parties to determine who will file for the credit if it becomes reinstated retroactively. For information regarding the treatment of the BTC (taxable income or non-taxable income) contact Alt Fuels staff.
NATSO’s Alternative Fuels Council has a calculator, available at natsoaltfuels.com, that operators can use to determine the benefit. It takes into account the current value of RINs, cost of ULSD and more.
Where to Start
For those considering biodiesel, I suggest you review your supply options, particularly those that are nearby, and determine how far they are from a terminal or rail as well as how much space they have to store product and any infrastructure they need. You want to calculate what this is going to do for your margins and these are estimates.
Next, operators must obtain an IRS 637M blender’s license and become registered under U.S.EPA Renewable Fuel Standard as a RIN Owner. Alt Fuels staff are assisting clients with these preliminary steps daily.
- IRS 637M Blender’s License – Remit federal fuels excise tax on B100 and apply for BTC when it becomes reinstated.
- EPA RFS Registration – Allows blenders to take title to RIN credits when blending.
- State Revenue Dept. – Licensing to blend and remit state fuels taxes.
Contact your local (state) regulators to determine if any additional dispenser labeling or fuel retailing laws exist. California, for example, has some unique reporting requirements under their Alternative Diesel Fuel (ADF) requirements as well as equipment compatibility demands.
Underground Storage Tank Requirements
During the webinar, I also delved into underground storage tank requirements for those selling anything above a B5.
For the most part, to go above a B5 we need compatibility information from the manufacturer saying the equipment is compatible up to a B20. [Note: On May 10, 2019, CARB issued proposed rules stating that biodiesel, up to B20, should be treated as unblended ULSD. If the proposed rule becomes finalized, retailers will no longer have to document equipment compatibility to their Certified Unified Program Agency (CUPA) for double-walled equipment.]
When preparing to store, blend, and distribute biodiesel, operators need to make sure they’re purchasing quality biodiesel, storing the fuel in clean, water-free tanks, and retailing using proper dispenser labels and periodic testing.
For more information on the advantages of biodiesel, alternative fuels, and the Alternative Fuels Council, visit https://www.natsoaltfuels.com.
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