Eco Crystal Ball: Biodiesel & Renewable Diesel webinar transcript

The third and final installment in our “crystal ball” series focused on biodiesel and renewable diesel! Our in-house experts discussed the trends with low-carbon fuel projects, various carbon credit markets, and predictions for the future of low-carbon fuel standards. Read the transcript from the webinar below.

Lyndsey Nielsen (00:00):

I guess we’ll kick it off here. Hi, everybody. My name is Lyndsey Nielsen, and I’m the marketing coordinator at EcoEngineers. I’m delighted to welcome you all to the third and final installment of our “crystal ball” series. Our first webinar in December of last year covered the RNG marketplace and it’s varying emerging markets. And then we followed up in January with a look back and a look forward at the ethanol industry, including low carbon farming practices and carbon capture and sequestration. Our “crystal ball” webinars also talked about the changing administration and how the changing administration could impact the future of low carbon fuels. Our previous webinars in the series have been posted to our YouTube account, so you can make sure to check those out if those topics are of interest. Today, you will hear about the biodiesel and renewable diesel space.

Lyndsey Nielsen (00:50):

But I do want to talk about a couple of housekeeping items before we start. We will have a Q&A session in the last 20 to 30 minutes of the webinar. So feel free to type your questions into the chat function. I think it should say questions, on your GoToWebinar little toolbar there during the presentation. And we’ll try to answer as many as we can before our time is over here today. As usual, the webinar will be recorded and will be shared in the weeks following the event. And you will also receive a link for a survey, at the end when you close out of the webinar and also in a follow up email. We just want to know what you thought of it, if you have any suggestions for future webinars or if you want to reach out and talk to any of our experts about any services that we offer. So before I hand it over to Roxby Hartley, our Biodiesel LOB Manager, I want to play a brief video explaining how EcoEngineers can help you in this low carbon world.

Narrator (01:49):

Carbon is the biggest disrupter of the 21st century, and the world as we know it is changing. EcoEngineers can guide you to make the best decisions as you navigate towards your clean energy goals. Our diverse team of carbon analysts, engineers, scientists, auditors and regulatory specialists are trusted advisors of the clean energy fuel sectors worldwide. Clean energy regulations are a maze – we simplify them with an unbiased approach and fully manage your compliance. Modeling your carbon reduction is complicated – we quantify your emissions with a rigor based in science. Together, we can create markets that will protect and grow your investment. We create sustainable solutions for a better tomorrow. We are EcoEngineers.

Lyndsey Nielsen (02:45):

All right, Roxby. I’ll kick it off to you. And you can introduce our speakers and talk a little bit more about EcoEngineers.

Roxby Hartley, Ph.D. (02:54):

Well, thanks watching the video, everybody. And thank you, Lyndsey. That’s really EcoEngineers in a nutshell. We’re really lucky here, we see the clean energy economy happening. We touch a significant number of the projects in the US and everything from, a biodiesel plant looking for auditors, to a brand new company looking to bring a new fuel type into the US or into California. Because we’re in touch with so many of the projects, we get to see the nitty gritty of what’s going on, the get deep into regulations. And because we see so many projects we get to see a little further into the future. And I think most people do. Our experience in helping our clients is really distilled down into six separate areas. We find that these are the areas that businesses have to have competency in or need helping to manage their transition to the low carbon economy.

Roxby Hartley, Ph.D. (03:54):

And those areas are learning the marketplace and the regulations, such as driving the change, measuring carbon footprints, interfacing with the regulators, building assets, measuring carbon compliance, and securing third party certifications and audits. And that’s EcoEngineers. And from that, I’d like to introduce our panelists. That’s myself Roxby Hartley. I’m the line of business manager as Lindsey said, biodiesel and renewable diesel. With me, I have Andrew Clapp, who is an auditor. He’s my counterpart on the auditing side and monitors the biodiesel and renewable audits. And then we have Sarah Caswell who has experience with lobbying and with guiding through regulations and she’s going to give us insights into the regulatory changes that might be coming up.

Roxby Hartley, Ph.D. (04:53):

So today, we’re going to have a look back as to what happened with biodiesel and renewable diesel. A look forwards to what we think will happen. We’ll look at the emerging markets for that coming up. Talk about a new Biden administration and we’re going to look at the new audit regulations that have come about and the impact that they’re going to have. Okay. So let’s talk about what happened on the RIN prices. Well, as I think everybody knows RIN prices are in upward trend. There wasn’t a significant hit on the D4, D5 prices from COVID as you can see from the graph. If you compare with an ethanol graph, you can see that the green line on this, then you can see that there was a big drop in the prices in Q1 and Q2, but the biodiesel RINs and the renewable diesel RINs carried on the trend.

Roxby Hartley, Ph.D. (05:55):

And then we can look at the LCFS credit prices, and this is for California. And this graph stretches back to January ’14, up to Q3 last year. And then you can see that the credit prices have tracked up to close to $200 a ton. There’s a small blip in Q1, Q2 this year from the impacts from the pandemic, but credits that are trading close to that cap, and will probably continue on that trend. For regeneration, this is what fuels contributed to the RINs in biomass based diesel last year. As you can see, the biggest gallon contributor was domestic biodiesel. Imported by diesel was about 200 million gallons. Domestic RD and foreign RD were similar about 480 and 357 million gallons. And renewable jet was a small contributor. The amount of gallons exceeded the RVO. There was a few D6 RINs generated. And domestic RD production is close to nameplate capacity of the domestic RD plants. COVID impacts were not as significant as for the gasoline industry.

Roxby Hartley, Ph.D. (07:28):

This is the California LCFS market. But this is broken down into which fuels contributed the most metric tons. Now as you can see, the largest contributor was renewable diesel over the last few quarters. It overtook ethanol, and biodiesel also as being ramping up its metric tons of contribution. And this isn’t with CI changes, this isn’t generating more metric tons on the same gallons. This is simply because there are more gallons coming to California. Biodiesel was expanding quite slowly up to the beginning of 2020. And since then, there has been a change in regulation in California which was for allowing up to 5% blends of biodiesel in underground storage tanks. And that, and I think the fact that some of the truck stops in California have executive orders to allow higher blends, that both those factors have contributed to that increase and that’s likely to continue as well.

Roxby Hartley, Ph.D. (08:43):

And I’m going to hand it over to Andrew Clapp now for the LCFS verification update. And this is important. This is back to the nitty gritty of what we’re talking about the beginning of the presentation.

Andrew Clapp (08:55):

Thanks Roxby. As Roxy said, I’m Andrew Clapp. I am the Compliance Auditor and team lead here at EcoEngineers for the biodiesel and renewable diesel audits that we do. Mainly in the in RFS QAP. And now starting in 2020, the LCFS verification program. I’m going to focus today on LCFS verification. QAP has been around a while and this sort of the biggest change here in 2020 has been the institution of CARBs LCFS verification program, where auditors are now reviewing alternative fuel pathways on an annual basis. Fuel pathway applications for each [inaudible 00:09:46] submission and quarterly fuel transaction reports along with other project reporting and petroleum crude reporting by manual basis. In the 2019 rulemaking, LCFS rulemaking, the verification program was established. It’s mandatory for most regulated entities to obtain some verification statements on an annual basis. This 2020 compliance here is the first year. So starting with August 31st, 2021, the first annual verification reports will be due.

Andrew Clapp (10:22):

And starting in 2020, third party verification bodies began to validate alternative fuel pathway applications. So that’s what EcoEngineers has been doing most of 2020. And starting here in the summer of 2021, we’ll be doing some those annual verification reports. Those who require verification include first fuel reporting entities in the alternate fuel space, importers, producers and producers for import, exporters of fuel and alternative fuel pathway holders that have a GREET 3.0 pathway. This is a high level timeline slide we put together, a while back in preparation for LCFS verification. We’ve progressed quite a way along here, GREET 2.0 pathways has expired at the end of 2020. So if you don’t have your 3.0 pathway yet, that should be in process. Starting in, your end quarter one, you should have your 3.0 pathway established.

Andrew Clapp (11:31):

The monitoring plan is how the verification proceeds. The producer provides the monitoring plan or the regulated entity should develop a monitoring plan, provide to the verifier who then reviews it and develops their risk assessment sampling plan and how they will perform the verification. For those of you who will require verification, you should have your monitoring plan up to date and keep it up to date as a living document. In 2019, CARB staff was performing validation of all pathway applications. So some folks completed their 3.0 pathways back in 2019 under CARB validation. Third party verifier started performing that validation in 2020. And will continue to do so going forward. So aside from CARBs that depicts the cycle of verification. Up here in the upper left corner, we’ve got our initial fuel pathway application to establish carbon intensity. That will go to the verifiers for validation and then to CARB for final fuel pathway code certification.

Andrew Clapp (12:46):

Between that CI application and validation of CI application step, that orange arrow. There is a CARB completeness check for both Tier 1 and Tier 2 pathways. That is a crucial step prior to the pathway application being released to the verifiers. Eventually, certified fuel pathway codes will be utilized on quarterly fuel transaction reports which result in credits or deficits being issued by CARB. Annual pathway data will be reported by March 31st of every subsequent year, which will then be verified along with the quarterly fuel transaction reports, resulting in potentially revisions to those reports if discrepancies in this reporting emissions are found, and then there’ll be resubmitted and finally validated or verified the final time. And that cycle will continue through the foreseeable future.

Andrew Clapp (13:49):

So validation of pathways, EcoEngineers and other third party verifiers have been performing this function throughout 2020. It’s been a relatively successful process so far. Validation must be completed within six months of the date of the application submission, if not, fuel pathway applications are rejected without prejudice and must be resubmitted. The timeline for that includes that initial check from CARB staff at the fuel pathways group, that has varied in the amount of time it takes CARB staff to get through that process a month, maybe two, maybe three months depending on how many unique operating conditions are being applied for in the process of the application. So the more unique characteristics your facility may have, the longer this may take and it’s best to be proactive work with CARB staff on the front end as much as possible to inform them of your operating conditions, and work towards approval prior to submission so that that lag time with CARB staff is limited, and you can get your application to the verification body as quickly as possible, to provide them enough time to complete their analysis, data checks and final reports.

Andrew Clapp (15:13):

Upon completion of the Tier one pathway in a quarter and is deemed complete, that pathway will be able to be reported upon retro actively for that whole quarter. So let’s say you get your pathway deemed complete here today, you would be able to report all your quarter one sales or purchases or whatever it may be on that fuel pathway code, for the whole quarter. Pathway is deemed complete when the validation statement is submitted to CARB staff by the verifier. This process then would go to the CARB staff to complete certification but if you get the validation statement in, that’s your deemed complete date and you can retroactively apply fuel to those fuel pathway codes for the quarter. If you have a 2.0 pathway, and you do not have your 3.0 pathway yet, or are in the process of gathering data for 3.0 pathway and planning to apply, there is the option to obtain temporary pathway for an initially two quarters, potentially get that extended for reporting fuel into California without a 3.0 pathway. So a 45 CI score is the default for used cooking oil and tallow. 65 for DCO, soy, canola.

Andrew Clapp (16:36):

A big piece of the puzzle of verification for renewable diesel and biodiesel is a specified-source feedstock. CARB has called out these specific specified-source feedstocks, those that are waste oils that carry with a reduced carbon intensity for the fuel, as requiring additional verification steps to ensure that the material is indeed what it has been described as being, and that the quantities are reasonable. This includes used cooking oil, tallows, animal fats , brown grease, distillers corn oil, all of those byproducts type oils that carry a lower CI. This can get murky, depending on the supply chain. Verifiers are required to include chain of custody evidence review for specified-source feedstocks in validation and verification. For supply chains where the verifier is unable to reach positive conclusion on the feedstock type and the quantity, there is potential for that material to either be identified as an unidentified feedstock for which it would be not included in the application pathways, or in the annual verification could result in fuel that was reported on a UCO pathway, let’s say being reallocated to the baseline potentially or potentially up to an animal fat pathway.

Andrew Clapp (18:16):

It’s unclear if the material was used cooking oil or if it was tallow or a mixture of the two. This of course, can vary in complexity from relatively simple supply chains, producer collections, direct sales from a rendering facility or an ethanol plant to a producer to include brokers or aggregators, collecting material from multiple sources, multiple locations and other entities which can cause this to become difficult and potentially add risk to potential credit generation or the whole entire process of verifying pathway code. So we’re looking at risks for the fuel pathway codes, what are we going to see? And basically, fuel pathway code right? Represents the carbon intensity score for fuel and is used to help generate credits or deficits depending on the score. When you have a certified fuel pathway code is potentially could have been applied for provisional pathway anywhere from three months to 24 months of operational data.

Andrew Clapp (19:31):

That certified fuel pathway code CI will almost certainly be somewhat different than what you report the subsequent year as operations change, facilities fluctuate process energy requirements, shutdowns can cause efficiency issues or efficiency may improve year by year, right? So we’ll likely see some variation in certified fuel pathway code and what is reported on an annual basis and verified. That can result in either a higher score which may result in credit invalidation or rebalancing of accounts, or potentially from the specified source feedstock traceability issue, there could be reported fuels that will need to be reallocated from lower CI pathways to higher CI pathways, which then result in the potential for invalidated credits. I think it’s advisable for folks in the industry to look towards proactive mitigation for these types of things.

Andrew Clapp (20:43):

Quarterly reviews for producers is an option within the annual verification process. The joint application is an offer that CARB included in the regulation for feedstock suppliers, and biodiesel producers to work in tandem on an application, which would in turn make the feedstock supplier a regulated entity and require them to obtain their own verification, which allows them to protect the confidential business information. Also, producers could work towards the independent vetting of specified source feedstock suppliers that are potentially another option to ensure you’re staying within your certified CI range, it would be ongoing tracking of your carbon intensity score using the Tier 1 calculator or Tier 2 calculator or whatever you were approved on for your fuel pathway code. But the other reports for many in the biodiesel renewable diesel space that will require verification are the quarterly field transaction reports. Submitted each quarter.

Andrew Clapp (21:51):

Each year, verifiers will look back at your fuel quarterly field transaction reports. And certain transaction types are subject to verification including imports, production, fuel import, production in California, exports in gain and loss inventory. So if you have any of those types of transactions on your quarterly field transaction reports, you need to reach out to verifier and get verification beginning with this first round here in the 2021 for the 2020 quarterly field transaction reports. There’s all sorts of potential for folks to have potentially gone out of business over the last year, in which case, those would need to be verified or there’s the potential for fuel pathway codes to have need to be reallocated some fuel from one pathway code to another, which could result in invalidated codes. So, how CARB is going to handle this likely will be on a case by case basis. May have included in the regulations, a buffer account to work through some of these invalidated credit issues. But also folks who hold these credits or have generated credits against fuel pathway codes may have to make the market hold.

Andrew Clapp (23:10):

As we talked about, the joint application is a opportunity for a specified source feedstock suppliers to team with biodiesel producers, renewable diesel producers to establish their own pathway and get their own verification. This would reduce audit burden on some of the fuel producers as well as you would have control of your own information as a feedstock supplier. And could result in a lower carbon intensity for the feedstock as the default rendering energies are quite high, if you go through the application process to establish your own rendering energy, which results in a lower CI and a easier marketable fuel for the West Coast and the… Of course, you’re then a regulated entity and require obtaining your own verification which may be a disadvantage. I think that is my last slide and at this point, we will pass it back to Roxby, I believe.

Roxby Hartley, Ph.D. (24:17):

Thanks Andrew. That’s really good. Okay. So we’re going to look forward. Briefly we’re going to look at the RINs, the LCFS credit markers and talk about what new technologies might be coming forward. 2021 the RFS/RIN outlook is the obvious likes to be the same as 2020. We can expect increased points of production though from RD. There’s been a lot of talk about how much RD is coming into the marketplace. And that’s likely to increase buyers of RD dramatically. Now we can speculate some will be lower SREs, and Sarah’s going to speak to that in her section. And overall, we’re quite bullish for the RIN market in 2021. So the LCFS is kind of more interesting. And we’ve done a quite deep look into this, recent study. We know for a fact that the LCFS is working. It’s been copied or similar programs are going to be implemented in, or likely to it’s been implemented in many states.

Roxby Hartley, Ph.D. (25:32):

And it’s accomplished its of decarbonizing transportation, it’s been very successful. And to be very successful launching new low carbon fuel supplier and driving investments. And what we’re seeing from this is that, with the credits we’re seeing is that there are three fuels that are really succeeding, that’s better than the others. And they are the fuels that can use existing infrastructure. And that’s electricity and renewable diesel and biomethane. For the diesel market in California, the amount of RNG and EV that comes to my place is fairly fixed. We anticipate that the RNG CI, the carbon intensity of the RNG in California is going to drop dramatically. Even with the current fixed volumes that are available in the marketplace, the amount of credits generated are going to increase. When we see some, the number of dairy digester projects with the way low CI is going from 10 or 20, up to over 100.

Roxby Hartley, Ph.D. (26:49):

And that leaves the remaining credit generator, the other large credit generated to be renewable diesel. Ethanol is is fairly fit, we’ve got a good handle on how much ethanol is coming into the marketplace, and how many credits they’re going to generate. Now, therefore, we can look at how much energy is going to be calculated by renewable diesel and biodiesel and suggests where the market will be and how much renewable diesel and biodiesel is going to be required to meet the credit market hold. We know in Q3 of this year, the credit market is a surplus. So if we look at that we can make some estimates and we think around 1.3 billion gallons of renewable diesel and about 400 million gallons of biodiesel will pretty much met the credit market being balance even with the increasing costs of the compliance curve. And at that point, if you have more renewable diesel than that, you’ll start seeing credit surpluses in the credit bank. And it may impact the credit market going forward, from 2023 onwards.

Roxby Hartley, Ph.D. (28:07):

So let’s talk about feedstocks and technologies. We have seen quite a few projects, nascent projects with woody biomass, municipal solid waste. So these both these feedstocks are outside of the liquid base, traditional RD and biodiesel comes from and might prove to be competitive in the future. UCO, we anticipate that there’s going to be more effort put into specified-source feedstock tracing, To make sure that UCO is what it says and to access larger markets for your UCO so that they can be used for the fuel industry. And there’s likely to be other innovations such as increasing oil yields for crops and planting other crops to generate oil. In technology, there’s potential new technology for generating D975 diesel from other sources besides the liquid based feedstocks. The importance of this is that if you don’t make D975 out of your plants, then you qualify as a buyer intermediary and you don’t get RINs for your fuel. And that’s been a large hurdle, which is been overcome recently.

Roxby Hartley, Ph.D. (29:35):

And then there are the potentials for learning the CI of renewable diesel, which are from RNG, from methane, from steam methane forming, to make hydrogen potentially can capture and sequestration of CO2 from the plants. And with that, I’m going to hand it over to Sarah Caswell, who’s going to talk about different markets on the new administration. Here you go Sarah.

Sarah Caswell, Esq. (30:05):

Thanks Roxby. Thank you. As you’ll see, there are several significant opportunities over the next few years for biodiesel and renewable diesel stakeholders, to impact key rulemakings and legislation that can help drive further investment and production in the industry. For instance, as Roxby and Andrew discussed, by all accounts the low carbon fuel standard has successfully helped to drive the biodiesel and renewable diesel markets. The body that regulates the LCFS, the California Air Resources Board or CARB began a major rulemaking process last fall to update the regulation. This will involve an informal process during which carb staff hold a series of workshops on specific topics, after which stakeholders will have two weeks to submit written comments. And then it will involve a formal process during which CARB will issue a proposed rule, which may include some of the suggestions staff received during the informal part of the workshop process.

Sarah Caswell, Esq. (31:15):

Stakeholders will have an opportunity to submit formal written comments on the proposed rule that CARB will consider before issuing a final rule. And that final rule will represent the update to the regulation. The timing of the final rule is unclear right now. It could come as early as January 2023 and as late as January 2025. The industry will also have the opportunity to impact potential emerging markets and states beyond California. This list represents just some of the states and locations where clean fuel programs exist or where legislation is somewhere along the legislative process. Whether it’s being considered, it’s already been introduced or it’s been passed out of committee, for instance. Biodiesel and renewable diesel stakeholders are and should be engaged on each of these to ensure the programs will continue to drive the industry. President Biden has made it clear that climate is a top priority of his administration. He’s elevated the issue to the cabinet level, and he’s directed that all agencies consider climate impacts in everything they do.

Sarah Caswell, Esq. (32:37):

His new Department of Agriculture Secretary, Tom Vilsack was the USDA Secretary during the entire Obama administration, and he’s the former governor of Iowa. This is significant to the biodiesel and renewable diesel industries, because we know Vilsack’s record of supporting biofuels and the RFS. And the industry will have a clear cabinet level champion as the administration moves forward with its work. The Senate recently confirmed Pete Buttigieg to head the transportation department, and is expected to confirm former North Carolina environment department head Michael Regan and former Michigan governor Jennifer Granholm to lead the EPA and Department of Energy respectively. Biden and Buttigieg in particular have stressed that policies to drive EVs and their infrastructure, will be key to the administration’s work to achieve the President’s ambitious greenhouse gas reduction goals.

Sarah Caswell, Esq. (33:49):

As an aside, the biofuels industry has begun to talk about the need for decarbonization, and not electrification. So that those policies that move forward are fuel agnostic. Secretary Vilsack has stated publicly that he will work with other agency heads to stress the need for policies that drive biofuels. And the last thing I’ll mention here, concerns the EPA. Reagan is thought to be relatively new to the RFS. However, there’s already senior political staff in place at the EPA that helped implement the law under the Obama EPA. The 2021 and 2022 proposed RVOs are expected to come out as a combined proposed rule sometime in the May to July time period. The 2021 RVOs are expected to be finalized earlier than the 2022 RVOs. But both are expected to be finalized by the statutory November 30th deadline.

Sarah Caswell, Esq. (35:01):

On the SRE issue, the last minute SRE is that the Trump administration granted or stayed by a court. The Biden EPA is not expected to grant SRE petitions to the same extent, or in the same manner as the Trump EPA. They’re likely to only do so when actual economic need is demonstrated. In addition, waved gallons could be reallocated among remaining obligated parties instead of going away from the RVO levels entirely. There will be significant opportunity for the biodiesel and renewable diesel industries to advocate for federal legislation that will impact them during this Congress. In the near term, Congress is expected to take up a 1.9 trillion COVID relief bill and an infrastructure bill. Both pieces of legislation will include provisions to stimulate US job growth, including in the clean energy economy.

Sarah Caswell, Esq. (36:10):

Longer term, Congress will be working on the next reauthorization of the Farm Bill, which now includes in energy title, and the next version is expected to include a new climate title perhaps. In addition, the dollar biodiesel tax credit that was reauthorized at the end of 2019, expires at the end of 2022. So there may be an opportunity to either extend it again, or to recraft it as the House Ways and Means Committee and the Senate Finance Committee consider tax legislation going forward. Roxby, back to you.

Roxby Hartley, Ph.D. (37:02):

Okay. So just a quick summary slide for biodiesel, renewable diesel and sustainable aviation fuel. We think that biodiesel and renewable diesel will be used for heavy goods transportation for the foreseeable future. Sustainable jet fuel is one of the key solutions for airlines to meet sustainability fuel goals. It’s going to be very hard for any fuel to replace the high energy density from a liquid fuel. And these fuels are key for the US and the world to meet its climate goals, to decarbonize the economies. And I think also that there is potential for renewable diesel and biomass, other biomass based diesel, biodiesel to achieve carbon neutrality in their fuels. Be it from innovative feedstocks or innovative processes that will eventually drive us to carbon neutrality. Thank you very much, everyone. And I think we’re going to move to the question and answers.

Lyndsey Nielsen (38:19):

Hey, so if anybody has any questions feel free to type them in the chat. And Roxby I think, can you repeat or maybe Andrew, some of those important deadlines that are coming up in terms of LCFS verification and what producers will need to look forward toward?

Roxby Hartley, Ph.D. (38:36):

Andrew do you want to take that? I’m happy to. You’re the obvious experts.

Andrew Clapp (38:41):

Sure. Of course. March 31st is the deadline for annual fuel pathway reports, for those fuel pathway holders who have GREET 3.0 pathways. March 31st is also the deadline for the quarter for fuel transaction report, which would be the final one for 2020. And then, upon submission of the quarter four report or your annual pathway report, the verifiers will begin the work of verifying and need to have their reports in by August 31st of this year. Those are the dates to keep in mind.

Lyndsey Nielsen (39:29):

Okay, thank you. So what is the view on feedstocks for these renewable fuels? As in will there be enough feedstock?

Roxby Hartley, Ph.D. (39:38):

It’s a really good question. But I think as feedstock prices go up with the increasing demand in the marketplace, and you’d anticipate that supply will grow with it. It maybe a lag but there will be some gearing that will have to happen to the economy. But I think it will catch up.

Lyndsey Nielsen (40:03):

Roxby maybe you know this one too. Can you tell us the volumes of RD currently being produced in the US and Europe or elsewhere in the world?

Roxby Hartley, Ph.D. (40:17):

I can-

Lyndsey Nielsen (40:18):

Or prospectively maybe.

Roxby Hartley, Ph.D. (40:20):

I can go about it. I haven’t got the numbers to hand. For the US you saw there’s about 450 million gallons produce of RD in the US, last year that generated RINs, there’s a few key D6 RINs from other… and imported was about 300 million gallons. So they’re the ones that impact the US of 700 to 800 million gallons is my ballpark estimate for the US. And most of us plants have announced large expansions. Diamond Green, Alta, Neste, REG have all or expanding their plants. And there are a multitude of other plants been developed, be it new plants or conversions of all definers is three or four of those out there as well. So I didn’t expect that there’s going to be a loss of extra volume, that that can be added to the marketplace by 2023.

Lyndsey Nielsen (41:27):

Going a little back to your answer on the feedstock renewable fuels. We had a follow up here. Is that new supply ag based or waste based? What you were talking about? Or a mix of both?

Roxby Hartley, Ph.D. (41:37):

It will be a mix of both. I think the waste base is limited and the expansion of that market depends on how strong audit trails are. The sea based is likely just to increase because of the price being driven up for those oils.

Lyndsey Nielsen (42:05):

Have a question on LCFS verification, what are the main components of the monitoring plan? I know EcoEngineers can help you with your monitoring plan. Besides from that Roxby, Andrew?

Roxby Hartley, Ph.D. (42:22):

Andrew or I can do this. There are three main sections. There’s a general requirements section, that is fuel pathway section, then there’s an LRT section. The LRT section is easier. It’s just making sure that all your documentation support your volumes that you’re passing the LRT is in place. The fuel pathway code is slightly more extensive and it looks at all the feedstock transportation distances, how the [inaudible 00:42:54]equations have been used, how volumes are aggregated, all those sorts of things. And then there are job provisions which lean towards what pod systems are in place. And how effective is the metering? And how well is the metering monitored? Essentially, anything that goes into your fuel pathway has to be explained about how that data comes about. And I’m sure Andrew can add to that as well.

Andrew Clapp (43:26):

Yeah, that’s great, Roxby. For, the very precise details that are also vague at the same time, you can go to the LCFS regulation 95491.1 sub-section C. You can read all about it for sure.

Lyndsey Nielsen (43:47):

Could you explain how the third party verification could or would apply to a fuel marketer in California?

Roxby Hartley, Ph.D. (43:57):

It depends on if you’re an importer or you are the last credit generator. If you’re an import or a credit generator and you’re over 6000 metric tons of credits that could be generated to fuel that’s imported or that you’ve generated in savings marketplace without obligation, then you will be subject to investigation.

Lyndsey Nielsen (44:23):

Here we have a question that says, “If the California market becomes saturated with the announce RD capacity such that the RD becomes the price setting fuel, what effect will that have on LCFS prices? Is it realistic to plan on 200 plus dollars, LCFS credit prices over the next five to 10 year time frame?

Roxby Hartley, Ph.D. (44:48):

We have generated three separate models in our report with that basic details, all of that. We could talk about that offline, if you like.

Lyndsey Nielsen (45:00):

Yeah, feel free to contact us if you want any of additional information about our report, that’s looking ahead of LCFS market next couple of years. The pricing of RD has it reached the level of competitive fuel anywhere.

Roxby Hartley, Ph.D. (45:14):

Most RD in the US are sold in the California marketplace. I do not believe that that is going to change, at least for a year or so. Until the other market is developed. The other market is starting to see volumes, start to see volumes in 2019. Some goes to British Columbia, I’ll say it will depend on the new LCFS programs that come about where the RD goes.

Lyndsey Nielsen (45:46):

Here’s one that you might be able to answer, Sarah. It says, “The Obama administration was not overly favorable to the biofuel industry. You mentioned that bio intermediaries are still not able to get RINs. Can you expand on that?”

Sarah Caswell, Esq. (46:01):

I don’t think I mentioned that but I’m aware of the issue.

Roxby Hartley, Ph.D. (46:05):

I think, it can I chip in a little bit.

Sarah Caswell, Esq. (46:08):

Yeah.

Roxby Hartley, Ph.D. (46:09):

Okay.

Sarah Caswell, Esq. (46:09):

I expect there to be a decision on that shortly. But [crosstalk 00:46:15]-

Roxby Hartley, Ph.D. (46:16):

Bio intermediaries don’t get RINs because it’s been substantially altered. And I think there are issues with using them, that they have to be… The president might create problems for allowing them. So I think there’s a lot of precedents that have to be thought through and analyzed before they can really say, “Yes, we can do this.” And there’s probably going to be a number of caveats. That’s just my opinion there all right. It seems to be a rather dangerous precedent to set.

Lyndsey Nielsen (46:50):

And this is, I don’t know if this is a question that we’re even… that we can answer. But it’s something that I’ve thought about a couple times. If one looks at the full environmental impact of batteries, take into account the mining of heavy metals to create them. One would see that EVs are not actually better for the environment. And Tesla has done a great job of selling this message. But so what are your thoughts on that and how they play into the biofuels industry with electric vehicles?

Sarah Caswell, Esq. (47:21):

I think that goes into that messaging bit, the biofuels industry is starting to put forward in Washington, D.C and other emerging markets that we talked about during the presentation. In terms of stressing decarbonisation and not electrification, there appears to be an education effort that needs to happen because for various reasons the… and you mentioned Tesla’s success in terms of messaging on EVs. There seems to be an effort among leaders, political leaders around the country. Governor Newsom in California, President Biden, others, mentioning EVs and the potential of EBS to help us achieve our lofty greenhouse gas emissions reductions goals. And it appears that they may not be educated or have taken into account the full lifecycle of the batteries involved with EVs and also the potential for decarbonization from the biofuels industry, which has made significant strides in terms of greenhouse gas emissions reductions since the last RFS was passed, at the federal level in 2007.

Sarah Caswell, Esq. (48:54):

There’s just a report out I think, this week or last week, that the average greenhouse gas emissions reductions from ethanol is actually 46%. At the time in 2007, the baseline, the threshold to qualify for the RFS, as everyone knows is 20% greenhouse gas production. So, the biodiesel industry, renewable diesel, ethanol, all biofuels across the board have just made significant strides and should be a part of the decarbonisation effort, as policies go forward at the administrative level and at Congress. And so the onus is on us as an industry to help educate policymakers and leaders.

Lyndsey Nielsen (49:46):

This is a good one to kind of piggyback that Sarah, are all other jurisdictions likely to adopt the CARB assessment method for issuing LCFS credits? With all these other states that are creating programs, what are we going… is it be piecemeal? How can we help it be the same?

Sarah Caswell, Esq. (50:08):

Well, two things. First, in terms of how can you help it be consistent? That the answer is engagement. I mean, the only way to help it be consistent is to ensure that you’re engaged in all of those emerging markets where all of the bills and legislation and regulations are being considered on that list. Number two, in terms of the structure of the clean fuels legislation and policies that are moving forward or existing. Mostly market based systems like CARB put forward with the LCFS. But for instance, Iowa governor Reynolds just recently had introduced a piece of legislation to create a volume type of system, sort of structured based on the RFS, which is very different than the market based system in order to encourage a certain percentage of biodiesel and ethanol in the fuel supply in Iowa, throughout the year. So it really depends on the jurisdiction in terms of the structure. But engagement, engagement, engagement is the key. Right?

Lyndsey Nielsen (51:37):

For sure. More feedstock questions here. Can we talk a little bit about the different feedstocks and what’s kind of most desirable? What is easiest to get? What is going to have the best scores? Things like that.

Andrew Clapp (51:50):

Do you want to take this one, Roxby?

Roxby Hartley, Ph.D. (51:52):

Yeah, go ahead. Thank you.

Andrew Clapp (51:55):

Yeah, sure. So in terms of general CI rankings, in the LCFS space for feedstocks, Hugo’s tend to be the lowest. Then you’re going to see any DCO, distillers corn oil, then Paolo, then your crops. Crop oil, soybean, and canola. I’m not going to be able to provide insight on prices and markets because I’ve got to [inaudible 00:52:30] but maybe we actually could.

Lyndsey Nielsen (52:31):

I’m sure it’s a case by case basis as well.

Roxby Hartley, Ph.D. (52:36):

Yeah. It depends on the CI of the plant, but that’s roughly right. I mean, the UK has its own problems that’s the hardest because you have to do all the contact, the tracing, you have chain of custody. And then of course, the seed oils are the easiest. It’s very easy to get seed oils and just use them. They tend to be cleaner as well. Plants are the easier you have to do less pretreatment.

Lyndsey Nielsen (53:03):

Does the residual waste stream after the feedstock has been processed into fuel have an impact on the CI?

Roxby Hartley, Ph.D. (53:10):

It depends.

Lyndsey Nielsen (53:10):

It depends.

Roxby Hartley, Ph.D. (53:17):

It depends on the waste and how it’s been used. But it’s really truly a waste or not.

Lyndsey Nielsen (53:21):

Got it. Yeah. So what’s the current status of the clean fuel standard in Canada? And will that create an export market for theses fuels?

Sarah Caswel, Esq.l (53:35):

Roxby do you want to take that since I think you’ve been working with that.

Roxby Hartley, Ph.D. (53:39):

Sure. There’s an initial regulation has been released and we go through what contains at the moment. The regulation will come into force, December 1st, 2022. And yeah, I’m sure there will be some export into the marketplace depending on individual situations.

Lyndsey Nielsen (53:58):

I think we went over this a little bit, but we could better repeat it. What is the forecasted growth of renewable diesel production? And similarly, what is the expected growth of biodiesel production?

Roxby Hartley, Ph.D. (54:14):

There aren’t many barges of plants being announced to be built. However, there’s a lot of RD plants announcements. If you add up all the RD plants, you expect over 4 billion gallons by 2024, I believe. And you have to make the assessment on all of those. All of those nameplates actually exists at that time. So it’s hard to do a prediction. I think that gives you the maximum and then you have to do assessment of how feedstock prices move. How much renewable diesel can the California markets down both in terms of volume of fuel. The liquid fuel markets only like to be three and a half billion gallons for diesel. And that’s going to be taken up by biodiesel and renewable diesel.

Roxby Hartley, Ph.D. (55:09):

One advantage though, is that biodiesel’s is effectively now the supply to California. There’s something like 1.1 billion gallons that had at least 2.0 pathways into California. And that has kept the prices relatively low. And the prevalence of an RHTB 20 blend in trip stops where you can monetize both the biodiesel and renewable diesel is increasing rapidly. I think that’s partly driving the biodiesel that we’ve seen in the credit generation. So with that, I think that you’ll find… and the other thing about renewable diesel is it mitigates NOx for under the authentic diesel fuel regulation that’s required to be met in California. So I think those are going to go hand in hand. A biodiesel will push renewable diesel first because it’s required to mitigate NOx. And renewable diesel will grow because biodiesel is it’s very lucrative to sell.

Lyndsey Nielsen (56:13):

Have you heard anything about opt in mechanisms for allowing marine fuels to generate LCFS credits?

Roxby Hartley, Ph.D. (56:20):

Andrew, do you ave any? I don’t know about the marine fuels. I’ve heard a bit Jason around it but I’m not sure if it’s in relation yet.

Sarah Caswell, Esq. (56:31):

I know that there was a presentation during the first workshop at CARB last fall, the first workshop to update the LCFS regulation. Part of the updates for the LCFS regulation will be substantive. So I guess we’ll see in terms of whether or not they would allow that in the final.

Lyndsey Nielsen (56:56):

I do have one here. One last question, if anybody has anything else we’re running low. So type in your questions if you have any. Is there anything a soybean crusher can do to help the carbon intensity score for soybean oil, renewable diesel?

Roxby Hartley, Ph.D. (57:13):

Most of the confusion from soy, I look kind of forecasts I’m not sure how much the crash adds. But if you can measure the energy in the crash, we can definitely run it for you to show you if it will make money or not load the CI score. You would have to be a joint applicant with a producer. So the way that would go is remodel the plan, see what the CI score is? And then if you’re selling into the fuel industry, then you say, “Okay. We have this. This crush is saving you half the points of CI, because of its efficiencies and therefore, can you do a joint applicant with us and would our soya be worth?”

Lyndsey Nielsen (58:06):

Do we know when there will be a decision on whether bio intermediaries qualify for RINs?

Sarah Caswell, Esq. (58:13):

I need to double check but I think that there is language in the omnibus spending bill that was signed by President Trump in December, directing EPA to inform Congress in terms of how it was going to rule on it. So one way or another, within I want to say 90 days. So that would put us to March April. But it didn’t say how to rule.

Lyndsey Nielsen (58:50):

So that comes to the end of our questions. If anybody has anything else feel free to type it in in the next couple seconds. If not any final thoughts, Roxby, Sarah, Andrew.

Roxby Hartley, Ph.D. (59:02):

Thank you all for attending and listening to us. And glad to hear from you later, if you have any more questions.