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ABFA President Speaks on the Future of Biomass-Based Diesel  

Thursday, May 25, 2017

The following are the prepared remarks shared by ABFA President Michael McAdams on May 25, 2017 at the LCFS, Renewable Fuels and Feedstock Conference in Chicago.

I am delighted to be with you this afternoon. I’m Michael McAdams, and I represent the Advanced Biofuels Association in Washington, D.C. ABFA is an association of over 35 companies in America and around the world who collectively produce and distribute over three billion gallons of biodiesel and renewable diesel per year, as well as a variety of drop-in fuels such as isobutanol, DME, cellulosic ethanol, and cellulosic heating oil. ABFA’s members, both domestic and international, believe that the future of the American biofuels industry depends on providing high-quality, low-carbon fuels to Americans at competitive prices.

Today, I thought I could bring value to this conversation by reflecting a bit on the biodiesel industry: where we are, and where we want to go with the opportunities moving forward. In good faith, I aim to be constructive today, though I believe my remarks may differ in part from those of my colleagues here on the stage.

I doubt I need to tell any of you in the audience that our industry faces significant challenges these days. The most frequent call I get from my members in the biodiesel sector asks whether the biodiesel tax credit will be retroactively renewed by the end of the year. The second most-asked question involves the sizes of the biomass-based diesel pool and advanced pools under the RFS. There is a lot of uncertainty in the air concerning today, tomorrow, and the post-2022.

I would submit for your consideration that this industry’s most important challenge is to construct a firm market base that delivers long-term confidence. A base that works for all the stakeholder groups involved in the use of biodiesel and renewable diesel: producers, blenders, marketers, and consumers. I have never known an industry to do well over the long-term without prioritizing its consumer and considering price impacts on them. The lasting health of a commodity market requires the creation of a solid demand, and then serving it with adequate supply that supports a fair economic bargain for the end-users of the product.

Now our market is unusual in the first place, as it is a regulated, mandatory market. But, at the top level, the United States uses over 50 billion gallons of diesel annually, while our mandated component represents a mere 4%. As the United States is the bastion of the free market, does anyone in the audience believe that we will have a permanently mandated biodiesel market? As we look in the mirror and evaluate our industry, we must take this into consideration as we gauge what we can do to make our long-term future achievable in terms of building a larger biomass-based diesel supply.

This leads me to my second point.

Public policy has always been a unique driver for the biofuels industry. For the last twenty years, the corn ethanol industry was able to utilize a blenders tax credit to help establish the U.S. as the largest producer of this type of fuel in the world. The credit was a formula designed to help all those involved in familiarizing the American public with ethanol production, blending, distribution, and using the new fuel. Needless to say, the same credit has also worked for biodiesel. So, I beg the question: what makes it necessary now to switch to a production credit, therein denying so many stakeholders involved in the process of providing biodiesel to American consumers any portion of the credit’s benefits?

Let me warn you, my friends, that this political environment is not one to gamble in. Its not the time to walk away from a tax policy that works, let alone divide our industry. While some in the room may see a political opportunity to drive out competition in the domestic market place, I warn you that this is short-sighted. The gallons coming in from other countries give confidence to the continuing rise of the RVO mandate, which we all support. Deincentivizing the supply of our neighbors in Canada and the Southern hemisphere threatens the delivery of efficient, dependable products to U.S. consumers—delivery which will ultimately leads to price impacts for our customers. Rejiggering the tax policy that has already built a demand nearly three times the size of original RFS target is an impetuous move that could threaten the future of our industry.

Between my colleagues’ antidumping and countervailing duties suit and their advocacy on switching to a production tax credit, I fear they are prime to eliminate all competition for domestic producers. As shoeless Joe Jackson said from the 1923 Chicago Black Sox, “Say it ain’t so.”  That just is not American. Americans compete, and succeed, in the global marketplace. We can do it here.

I believe that we are at a crossroads for our industry. Many of the companies that I have the privilege to represent are now questioning the very nature and reason for the Renewable Fuels Program. These companies have been partners who moved, blended, and sold these fuels to our customers; the very people who use our fuels and pay the price at the pump. We should avoid giving our customers a sharp stick in the eye and keep our stakeholders on our bridge to the future.

Rather than taking a short-sighted, protectionist approach, let’s build a durable bridge together. One that rewards market fundamentals: efficiency, good logistics, and the best price for the customers. I believe if we do this, we stand a far better chance as an industry and protect the things that got us here in the first place.

ABFA advocates every day for policies that will enable the industry to continue thriving decades from now. I stand ready to work with each of you in pursuit of this long-lasting future for the biodiesel and renewable diesel industry. Thank you for the opportunity to speak with you, and I look forward to answering any questions.

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