ISA Newsroom

Agricultural news farmers want to know.

Iowa biodiesel plant shutters amid shaky policies

Article cover photo
The lapse in the biodiesel tax credit and the granting of small refinery wavers forced W2 Fuel to stop operations this week. (Photo: Joseph L. Murphy/Iowa Soybean Association)

By Bethany Baratta, ISA senior writer

The unknown future of the biodiesel tax credit and the endless granting of small refinery waivers has forced one Iowa biodiesel plant to close. W2 Fuel announced earlier this week that it would be shuttering two of its biodiesel plants in Crawfordsville and in Adrian, Michigan.

Nearly 50 employees have lost their jobs and demand for millions of bushels of soybeans has been destroyed.

“This is one more example of how the federal policies have an impact on real peoples’ lives,” said Grant Kimberley, executive director of the Iowa Biodiesel Board and director of market development for the Iowa Soybean Association.

At full capacity, the Crawfordsville plant produced nearly 10 million gallons of biodiesel. The Adrian plant produced about 15 million gallons per year. That’s now a lost market for roughly 16.67 million bushels of soybeans.

 “And there’s no end in sight until these issues are resolved,” Kimberley said.

W2 Fuel CEO Roy Strom testified before the EPA in March, warning the agency and the Trump administration of the harm caused by granting small refinery exemptions.

“To succeed, the biodiesel industry needs signals that allow us to forecast market demand. While the RVO (renewable volume obligation) should be the forecast, the current practice of granting retroactive small refinery exemptions undermines that signal,” he said on the record.

Now, almost six months after his testimony, Strom is directing cleanup crews before turning the lights off for good.

“I think if the biodiesel tax credit came back, I would need to see it include 2020 to make a go of it again,” Strom said.

The ultimate fix would be a reallocation of lost gallons as a result of the small refinery exemptions and an extension of the federal $1-per-gallon biodiesel tax credit to producers which blend biodiesel with petroleum.

Only the White House and the EPA can change the demand at this point. And it’s up to Congress to pass the biodiesel tax credit extension.

“When the tax credit is up in the air, you’re just gambling. Do I want to bet on the tax credit or not? It makes it very difficult to run a business,” Strom said.

The biodiesel industry is now running 21 months without the biodiesel tax credit. It’s clearly hurting the industry, said Brad Wilson, president and general manager of Western Iowa Energy and the newly-elected chair of the Iowa Biodiesel Board.

“I hate to see biodiesel plants closing, but I’m not surprised because when you’re operating without the tax credit and you have to sell biodiesel that includes the incentive, you’re selling your product at a loss,” Wilson said. “And after almost two years of not having it, it gets to be too much.”

There appears to be some momentum behind the extension of the biodiesel tax credit in the U.S. House of Representatives. Iowa Representative Abby Finkenauer introduced a bill in the House and has levied support from about 60 of her colleagues. The House must introduce the incentive for it to be taken up for a vote.

There’s talk of the action on the bill in late November, early December. While hopeful, Wilson said that’s too late for some—like Strom.

“Some aren’t going to be able to hang on for that long when they’ve been strung along,” Wilson said.

Strom wants action on the credit and the small refinery exemptions to save other plants.

“I would really hate to think that the government and this administration would intentionally inflict this kind of damage on an industry. I have to believe that they are more well-intentioned than that and this is just an oversight,” Strom said. “But this is serious for us; we’re a significant industry that supports 64,000 jobs. It’s time they take a look at us and take us seriously.”

Contact Bethany Baratta at bbaratta@iasoybeans.com.

For media inquiries, please contact Katie James, ISA Public Relations Manager at kjames@iasoybeans.com or Aaron Putze, ISA Communications Director at aputze@iasoybeans.com

For permission to republish articles or to request high-res photos contact Aaron Putze at aputze@iasoybeans.com. Iowa Soybean Association | 1255 SW Prairie Trail Pkwy | Ankeny | IA | 50023 | US

©2018 Iowa Soybean Association On-Farm Network®. All rights reserved. On-Farm Network® is a registered trademark of the Iowa Soybean Association, Ankeny, IA.Portions of some On-Farm Network trials are paid for in total or in part by the soybean checkoff.