Biofuels:

Renewable Energy Group's Oh discusses impact of biodiesel on 2014 volume mandate

As the Office of Management and Budget deliberates the renewable fuel standard and the 2014 volume obligation for biodiesel, what role could biodiesel play in helping to meet the mandate? During today's OnPoint, Dan Oh, CEO of the Renewable Energy Group, talks about the challenges facing the biodiesel industry as it tries to play a more prominent role in the biofuels discussion.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Dan Oh, CEO of the Renewable Energy Group. Dan, thanks for coming back on the show.

Daniel Oh: Yeah, thanks for having us.

Monica Trauzzi: Dan, you're in D.C. meeting with the Office of Management and Budget on the RFS2 on the 2014 volume obligation for biodiesel that OMB is currently deliberating. Biodiesel production has steadily gone up. What role are you anticipating it will play in the 2014 targets?

Daniel Oh: Yeah. And thanks for pointing out the meeting. I was there with the National Biodiesel Board and all the members, as we were there trying to tell the great story of biodiesel. So, fundamentally, biodiesel is in a great place where it can be heavily relied upon to provide advanced biofuels. We've commercialized over 15 years. We have a large installed base. We now are able to produce from a wide variety of raw material. And that really matters when you are thinking about keeping costs down and having broad choices in terms of how you can produce. So the study on your production has been result of innovation.

Monica Trauzzi: So what's the tone in Washington towards biodiesel? I mean what sorts of questions do you hear when you go into these meetings?

Daniel Oh: Yeah, in general, I think the tone is favorable and supportive. You can look at the 13 final rule on the RVO that came out with EPA. They certainly highlighted in there how strong biodiesel is, and what a good position it's in right now. It's very much not part of the blend wall discussion because we don't have a blend wall. You know, we can blend it at high levels in varying ways around the country, and it is such a good carbon intensity count that people really like it.

Monica Trauzzi: So then what are your projections for what role it will play in 2014?

Daniel Oh: Well, it should go up. We're certainly asking for a robust increase. And if you look at production that is occurring right now, yesterday we just saw some numbers come out. Production, including some imported product, is at a run rate, if you add a little bit of utilization of about two billion gallons of year. So it stands ready to fill the gap in case anything else can't be there.

Monica Trauzzi: Why is biodiesel's story differed so greatly from that of other biofuels?

Daniel Oh: Well, we do benefit from a history that started in Europe, so really biodiesel has been in place since the seventies. And American agriculture and infrastructure and petroleum distributors, any petroleum company, have worked hard to actually create a distribution delivery and refining system that works. But ultimately because it blends right into the distillate stream, it's easy to handle and it's easy to use.

Monica Trauzzi: The oil industry has petitioned EPA for a 2014 waiver, and it's not without merit. There were some real problems in 2013. What are you hearing on the possibility that that waiver will be granted?

Daniel Oh: Well, I think there's robust and vibrant discussion occurring. And RFS2, in general, has performing well, and brings a larger volume of advanced fuel, biodiesel in particular. You know, the meetings with OMB and others are trying to make sure that we've got a good data fact set. But, in general, what we have today is the EPA has the ability to manage, and, if necessary, adjust on a temporary basis. And that tool gives the flexibility necessary so that we really don't need to do anything to change our RFS2 in any fundamental way at all.

Monica Trauzzi: What changes need to come to the credit trading market? A lot of people criticize saying that there is not enough transparency there. Could that be worked into the proposal?

Daniel Oh: Well, I actually think there is a pretty vibrant market. So we trade, our competition trades, and even the value chain trades in RINs daily. The growing market is what will actually create transparency. As you have more volume of RINs trading, you'll have more discussion. You'll have a greater opportunity to have risk contracts that you can use for risk management, and it will be traded on the board at some point in a bigger way. That will be very helpful, but volume will bring that.

Monica Trauzzi: All right. We're gonna end it right there, and we're expecting to see those numbers from EPA over the next few weeks. It'll be interesting.

Daniel Oh: Yeah. It will be very good.

Monica Trauzzi: Thanks for coming on the show.

Daniel Oh: Thank you.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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