...the transition of the biodiesel tax incentive from a blender
to a producer credit, the sliding value of it, along with the need
of accurate systems to fairly determine a fuel’s carbon intensity,
are creating some significant unknowns downstream...
partners and restrict regional fuel
supplies. It is also possible this policy
may violate World Trade Organization
rules.”
Clean Fuels Alliance America
stated that, for the next two years
while certainty of the blenders credit
exists, it will focus on regulations
implementing the producer credit—
and making sure all its members have
fair access to it.
There is a lot to unpack here and
there is more in IRA yet to cover.
However, as you might expect, the
transition of the biodiesel tax incentive
from a blender to a producer
credit, the sliding value of it, along
with the need of accurate systems to
fairly determine a fuel’s carbon intensity,
are creating some significant
unknowns downstream.
IRA also provides $500 million over
10 years for downstream biofuelinfrastructure
grants, supporting
the Trump-era cost-sharing grant
program from the U.S. Dept. Of Agriculture
(USDA) called the Higher
Blends Infrastructure Incentive
Program. Importantly, as amended
by IRA, the Program provides “home
heating oil distribution centers or
equivalent entities” and biofueldistribution
systems with up to 75%
in cost-sharing grants for blending,
storing, supplying or distribution of
biofuels. These changes were included
in NEFI-backed legislation, and NEFI
“strongly encourages” wholesale and
retail fuel marketers to apply for
these grants.
On Aug. 23, USDA opened a $100
million round of funding for these
projects, specifically noting that the
funds are open to home heating oil
distribution centers. However, fast
action is required, because grant applications
are due by Nov. 21.
The infrastructure must support
biodiesel blends of at least 20% and
may include “installing, retrofitting
or otherwise upgrading fuel dispensers
or pumps and related equipment,
storage tank system components, and
other infrastructure” related to dispensing
of biofuels. Transportationrelated
infrastructure that is not
located on-site is excluded.
The final bill also includes crucial
changes advocated for by NEFI and
the Oilheat Manufacturers Association
that allow an oil-fired furnace
or hot-water boiler to qualify for a
$600 tax credit if it’s placed into service
after Dec. 31, 2022 and before
Jan. 1, 2027, meets or exceeds 2021
Energy Star® efficiency criteria, and
is rated by the original equipment
manufacturer (OEM) for use with
at least 20% biofuel blends. If the
equipment is placed into service after
Dec. 31, 2026, it must achieve at least
90 annual fuel utilization efficiency
(AFUE) and be rated by the OEM for
use with at least 50% biofuel blends.
The writing is on the wall, and the
takeaway message to heating oil dealers
is that survival lies in the transition
to higher blends of Bioheat®
fuel. This will save your business and
the more businesses like yours that
are saved, the more industry too can
find salvation. However, this blended
clean fuel won’t just fall in your lap.
You have to work for it.
Securing Bioheat® Fuel
in Today’s Market
I can’t tell you how many times, particularly
in today’s market, that I’ve
heard dealers say they would offer
higher blends of Bioheat® fuel, but
they can’t find the biodiesel to make
it happen. Today, wholesaler tank inventories
of heating oil are purposely
low, sometimes just fumes, because
of backwardation. If terminals and
wholesalers are not bringing in more
heating oil volumes than what’s
committed to because inventory
carried into next month will create
unsustainable losses, then they’re
not bringing in biodiesel either—
because there’s no discretionary
heating oil volumes with which to
blend it on-site.
In other words, as crazy as this
might sound, biodiesel supply availability
is not the reason biodiesel
supply is not available. What I’m
trying to say here is that we must
reengineer the thought process of
the buy-sell agreement.
Getting B20 on demand in this
market is unlikely to happen because
of the reasons mentioned here. There
are ways, however, to successfully
secure B20—but it requires communication.
You have to communicate
with the wholesaler and tell them
straight up, “I’m a million-gallon
fuel dealer and I want to sell B20. I
need this much by this date—what’s
my number?”
Conversation, commitment and
collaboration are needed in this new
era of purchasing. I strongly encourage
you to work with your chosen
suppliers, whomever they might
be, to open the discussion. Believe
me, they want to sell product to you.
With renewable diesel on the rise
out West, the Northeast is a bastion
for biodiesel—perhaps one of the
strongest out there—but domestic
biodiesel producers need to know
there are those willing to commit
to purchasing this low-carbon fuel
from them.
We can’t control commodity values,
the war in Ukraine or what the
Administration does, but don’t tell
me you can’t get blended fuel. You
can make a deal and make it happen,
but you have to be prepared to
pick up the phone and make that
call. This may be a different way of
doing business, but it doesn’t cost
a penny. ICM
ICM/November/December 2022 9