Persistent volatility drives consistent uncertainty for renewable diesel and biodiesel producers. With increased regulatory action and production growth on the horizon, alongside mounting geopolitical tensions, stakeholders need a weekly insight into their operational costs and returns.
What happened?
US renewable diesel margins retreated off one-month highs as losses in diesel and D4 RIN credits eroded returns, while lower feedstock prices limited losses.
Calumet plans to add 3,000 Bbl/d of capacity to its 15,000 Bbl/d, Great Falls, Montana Renewables refinery by 2025. The Great Falls plant is currently undergoing repairs to a steam recovery system and moved forward a turnaround originally planned for 2024 to November. Calumet is mulling plans to ultimately maximize SAF production at the Great Falls facility.
Louis Dreyfous aims to build a 1.5 t/year soybean processing plant in Upper Sandusky, Ohio with construction to begin in early 2024. The plant is expected to be completed by 2026 and will have a capacity to produce 320,000 t/yr of RBD soybean oil. Earlier this year, Louis Dreyfous said it will double the capacity of its canola crushing plant in Yorkton, Saskatchewan.
September RIN generation fell under two billion credits for the first time since April. Total generation of 1.95 billion was up 13% on year-ago levels, but down 1.3% on the month prior. D6 credits led the decline, shedding 83 million credits from the month prior to 1.18 billion credits. D4 production was down 29 million credits from August at 673 million credits. D3 RIN generation slipped to 59 million credits, taking total 2023 production to around 60% of the total obligation.
A California judge ruled that P66’s 67,000 Bbl/d RD Rodeo facility may not operate until permitting issues are resolved.The largest RD refinery conversion in the country is allowed to continue construction. The original permitting work for the plant took nearly a year to complete in May 2022. P66 aims to begin RD production at Rodeo by Q1 2024.
The US Energy Information Administration (EIA) raised its 2023 RD production forecast by 0.6% to 170,000 Bbl/d in its October Short-Term Energy Outlook. RD production for 2024 was forecast at 228,000 Bbl/d, up by 5.6% from the previous month’s estimate.
The Washington Clean Fuel Standard posted a net credit surplus for the first quarter, according to the state’s inaugural quarterly report. A total of 275,442 credits were generated, with ethanol accounting for 64% of the total and renewable diesel making up 12%. Deficits came in at 227,768, for a quarterly surplus of 47,674 credits. The market reacted bearishly with prompt credits tumbling to $79/t from $101/t, or 22%, over the span of just a week.
EPA Fuel Program Center Director, Paul Machiele, said the oversupply of D4 credits is not currently a concern at the EPA as the agency’s primary driver in setting the 2023-2025 mandates was feedstock availability, according to Carbon Pulse. Machiele noted that the surge in imported feedstock was not taken into account when considering the final Set Rule, speaking at the OPIS RFS, RINs and Biofuels Forum in Chicago. Changes to exiting mandates are unlikely to be taken up during an election year. President of Advanced Biofuels Association, Michael McAdams, cited an unnamed source that the earliest the EPA would take action is 2026.
August total RIN generation came in at 2.04 billion credits, up 2.4% on the previous month and nearly 11% over year-ago levels. D4 generation came in at over 701 million credits, up 13% from the previous month’s levels and 46% from year-ago levels. Total D4 production reached 5.03 billion credits, less than 2% short of satisfying the entire 2023 advanced biofuel mandate. Domestic and foreign renewable diesel production accounted for 57% of total D4 output, domestic and foreign biodiesel made up 42%, while SAF accounted for less than one percentage point.
D3 RIN generation fell 8% from the previous month and is running just 17% over year-ago levels compared to a 25% growth rate used by the EPA to set the 2023 final mandate. Total D3 RIN generation of just under 65 million credits is running nearly 23% under the final mandate of 84 million RINs.
Airlines reported 8-10 million tons of SAF across 59 offtake agreements between January 2022 and June 2023, according to data from International Air Transport Association (Iata). The Hydro-Processed Esters and Fatty Acids (Hefa) pathway accounted for 53% of the reported offtakes and 85% of global renewable capacity. Iata reported a SAF blend ratio of 30-40% since 2022.
Darling International Inc. confirmed that the Diamond Green Diesel, Norco, Louisiana, facility was running following a 10-day outage. A fire was reported at DGD’s Norco, Louisiana, facility on August 20. Diamond Green Diesel is the world’s second largest RD producer at 1.2 billion gallons per year. The 750 million gallon per year Norco facility primarily uses UCO, tallow and DCO as feed.
Calumet Specialty Products reported a leak in a steam recovery system at its Montana Renewables Facility. Calumet expects to produce 8,000-8,500 Bbl/d at its Great Falls, Montana, facility during the third quarter, and aims to complete repairs in mid-September. Untreated feedstock makes up 70% of throughput at the Montana Renewables Facility, with reported margins of $1.25-$1.45/gallon for July.
US northeast energy supplier, Sprague Operating Resources LLC, announced August 15 that it is offering renewable diesel for both delivery and transport rack loading at their Bronx terminal, New York City’s largest storage and rack loading facility.
CVR Energy Inc. aims to startup the pretreatment unit (PTU) at its Wynnewood, Oklahoma, refinery by the end of 2023. The plant has been running soybean oil and treated corn oil until the PTU enters service. A catalyst change during the second quarter saw throughput drop to 17.8 million gallons, down from 22.4 million gallons consumed during the first quarter. CVR estimates Q3 throughput of 17-22 million gallons.
PBF Energy Inc. announced August 3 that its St. Bernard renewable diesel facility in Chalmette, Louisiana, is operational. This includes a pretreatment unit (PTU) at the 320MM gallon per year facility. St. Bernard Renewables (SBR) is a 50-50 JV with Italian oil giant ENI.
Vertex Energy Inc. reached 8,000 Bbl/d phase 1 capacity at its Mobile, Alabama, facility during the second quarter. Vertex received federal approval to generate D4 RINs earlier this year. The company announced its first sale of 110,000 Bbl to Idemitsu Apollo in June 2023. Vertex aims to move away from refined, bleached, and deodorized (RBD) soybean as a feedstock citing poor margin conditions. The company will increasingly use DCO, technical tallow, crude de-gummed SBO, and canola oil during the third quarter and is exploring the use of UCO and other fats and greases.
Valero’s renewable diesel arm Diamond Green Diesel (DGD), a joint venture with Darling Ingredients Inc., reported $440 million in operating income for Q2, more than doubling the $152 million recorded last year. RD sales came in at 4.4 million gallons per day, doubling last year’s output. Valero expects renewable diesel output to total 1.2 billion gallons for the year. DGD’s 470 million gallon Port Arthur RD/SAF facility is on schedule for 2025 completion. Half of the capacity will be dedicated to SAF production.
Global Clean Energy secured a $110 million loan to proceed with construction of its Bakersfield, California renewable diesel facility. The project is behind schedule and has run more than $600 million over budget prompting ExxonMobil to nullify its offtake agreement. The 15,000 Bbl/d project is the site of the former Big West refinery and will use camelina as feedstock.
Twelve broke ground on a commercial scale power-to-liquid eSAF facility on July 11. The facility is expected to produce 5 Bbl/d, or approximately 40,000 gallons per year, by mid-2024, with plans to rapidly increase capacity. Alaska Airlines, Microsoft, and Shopify already have offtake arrangements with the Moses Lake facility.
ExxonMobil exited its renewable diesel offtake agreement with Global Clean Energy Holdings as the 210mn USG/yr is running behind schedule and overbudget. The energy giant originally stated it would take such action if no product was received by July 2022. The Bakersfield, California facility is slated to run on camelina oil. Global Clean Energy Holdings rejected the notice and stated it has until 30 November to complete the project, according to the Bakersfield Californian.
Cargill announced it has put its Missouri soy crush facility on hold, citing market dynamics. The 62mn bushels per year facility was originally slated for completion in 2026.
Marathon announced that it is on pace to complete Phase II of its Martinez Project with Neste by year end bringing total production capacity to 730 million gallons/yr. Phase I was completed during 1Q23 ramping up 260 million gallons/yr of renewable diesel capacity.
Oleo-X launched a 300 million gallons/yr feedstock pretreatment facility in Pascagoula, Mississippi. The company aims to process low-carbon inedible oils and poultry fat.
Par Pacific announced a $90 million investment to build a RD/SAF facility at its existing refinery in Kapolei, Hawaii. The facility is expected to produce 4,000 Bbl/d of RD and SAF as well as renewable naphtha and LPG by 2025.
Parkland Corp. announced its decision to halt its renewable diesel project in British Columbia, Canada. The company had been coprocessing at its Burnaby Refinery with plans to build a 273,000 gallons/yr RD facility, set to come online in 2026. The company cited rising feedstock costs and advantages to US producers afforded by new credits carved out in the Inflation Reduction Act (IRA). The move could be a harbinger of slowing momentum for the RD industry which has increasingly worried about rising feedstock costs, while the numerous advantages of the US market are likely to open export markets soon.
The Washington State Senate passed a Sustainable Aviation Fuel (SAF) tax credit, following actions from the state of Illinois which issued its own SAF credit with additional tax advantages for the fuel. Washington aims to establish a $1/gallon credit with a $2/gallon cap as additional value can be earned for fuels with lower carbon emissions. The Illinois SAF credit is set at $1.50/gallon and will run from June 1, 2023, through June 1, 2033, making the state the highest returning market for SAF.
Shell scrapped plans for a 550,000 t/yr RD and SAF facility in Singapore. While no rationale was put forth, feedstock supply and the lack of mandates throughout the Asia Pacific region are likely culprits. While feedstock prices have been falling, recession fears have also been weighing on diesel values, limiting margin growth.
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