Chairman Curtis Wright, in his State of the California Biodiesel Alliance (CBA) Union, set the tone for the third annual California Biodiesel and Renewable Diesel Conference, held on January 20th in San Diego, by talking about our state's biodiesel industry in the context of the "Strong" theme of the co-located National Biodiesel Conference & Expo. He highlighted our industry's strong record of achievement with state agencies; our strong growth in the last two years with a record 30 million gallons of instate biodiesel production and three times that amount being blended here; new plants and expansions under way; and CBA's strong growth from a handful of companies a few years ago to over fifty members now.

But he also used the word strong to describe the qualities our industry must have to face a market in turmoil and the challenges ahead, especially on federal issues. In doing so, he set the stage for keynote speaker RADM Len Hering Sr., USN (ret), Executive Director, California Center for Sustainable Energy (CCSE), who inspired the group with a powerful speech on his history as a sustainability pioneer and called on everyone to work to meet the urgent environmental challenges of our time. A key follow-up was provided by National Biodiesel Board (NBB) staff, Joe Jobe, CEO, and Anne Steckel, Vice President of Federal Affairs, who spoke about oil industry challenges and the details of our efforts to bring a strong challenge to EPA's proposal not to raise 2014 RFS RVO volumes as well as the industry's commitment to renewing the federal tax incentive.

California Feedstock Panels

The first panel on Feedstock Development in California began with Stephen Kaffka, Director, California Biomass Collaborative, UC Davis. The state's leading expert on the potential of purpose grown energy crops talked about our 85 canola and 61 camelina varieties; options for growing oil seed crops between the tree rows of the state's vast orchard farms; and the possibility for castor's salt-tolerant quality to provide real advantages for western San Joaquin Valley farmers. His expertise is aided by the use of a crop rotation optimization model, the Biomass Crop Adoption Model, which estimates prices needed for crop displacement and new crops and generates data for both Land Use Change (LCA) and Indirect Land Use Change (ILUC).

Speaking about his field trials in the western San Joaquin Valley, Gary Banuelos, Plant/Soil Scientist, USDA-ARS, and adjunct professor, CSU Fresno, presented his research on the salt, boron, and selenium tolerance of drought resistant oil feedstock plants grown in poor soils with minimum quality water. His studies show that careful rotation of oil crops -- mustard, sunflower, safflower, and canola -- can provide an alternative, viable, and sustainable system on otherwise unproductive soils, which can cause stress to crops and are prevalent in the state. He added that it's key to

Citing huge results in algae R & D since 2009, including doubling yields and increasing lipid content, Stephen Mayfield, Director, San Diego Center for Algae, Biotechnology, UC San Diego and co-founder of Sapphire Energy, strongly stressed the need for patience from venture capitalists and especially for political leaders that understands the time frame needed for market viability. He said that algae is one-third of the way to the $1billion over 10 years needed to achieve the economies of scale that can produce the right energy return on energy investment.

Andre Basbaum, Director, Global Corporate Development, SG Biofuels, talked about his company's success in reversing Jatropha's bad reputation. Using the latest high tech methods to speed up the production of hybrids, SG has been able to develop 2,000 varieties and to produce astonishingly high yields in India, Brazil, and Guatemala. He strongly seconded the motion about the need for funders to take a long view.

Speaking from a national perspective and from his experience as a farmer, J. Alan Weber, Founding Partner, MARC-IV Consulting, talked about how diverse the world of biodiesel feedstocks is now that UCO, animal fat, and corn oil account for 50 percent of it. Emphasizing that state and federal governments and industry must help with the funding needed to develop new and alternative crops, he cited the extreme difficulty that farmers face securing bank loans and pointed out the critical prerequisites of risk mitigation and crop protection.

Paul Roos, Special Investigator, Meat, Poultry and Egg Safety, CDFA, detailed the IKG law, overseen by his agency, which requires that at each location renderers and collection centers maintain prominently displayed valid licenses and that renderers/collection centers maintain the "receiver" portion of manifest. It also specifies that vehicles transporting IKG have to be registered with CDFA and display the decal for the current year and maintain manifests to be produced on demand to CDFA or law enforcement. 

The importance of educating local law enforcement about grease thefts and their economic impact on local business was discussed by D.O. "Spike" Helmick, Jr., California Highway Patrol, Commissioner (ret). He also presented details of draft legislation to enhance the IKG law and significantly increase penalties for noncompliance.

The panel ended with an exuberant and very technical bang with a presentation by engineers Christina Borgese and Marc Privitera of PreProcess Inc. They took turns speaking about a range of issues with a focus on feedstock characterization and processing for various free fatty acid content levels, including 100% (supercritical).

California Regulatory Panels  

Jim Aguila, Manager, Substance Evaluation Section, CARB, discussed the regulatory process that has been underway that will make biodiesel the first Alternative Diesel Fuel (ADF) in the state.  He explained that based on CARB's studies, which showed NOx increases relative to CARB diesel beginning at a 10 percent blend, the ADF proposal would allow any blend of biodiesel to be sold and then would monitor NOx levels in aggregate, and require mitigation only when a certain significant threshold is met. The significance threshold is an effective blend level of 10% determined by a formula that accounts for increasing amounts of NOx-neutral or NOx-lowering elements -- including B5, renewable diesel, and animal biodiesel -- coming into the market. Given these realities, as well as fleet turnover rules requiring the NOx-eliminating new technology diesel engines, the expectation was that the significance threshold would most likely not be met. However, prior to the board hearing for adoption in December of 2013, stakeholder concerns for more strict regulations due to regional issues surfaced, and a February 13th workshop to discuss them was announced (see update in ADF policy blurb below).

The success story of LCFS, which has seen over-compliance since its inception with participants generating more credits than deficits each quarter, was detailed by Mike Waugh, Chief, Transportation Fuels Branch, CARB. He reported that there have been 200 LCFS transactions through the end of 2013 with prices from $0-$84 and trade volumes from 3-91K. The program is contributing to success in other areas through the Pacific Coast Action Plan, which includes Oregon, Washington, and British Columbia, where they are using the same reporting tool software. Talking about CARB's success in various court cases, he said that in the POET lawsuit, the ruling that they incorrectly adopted CEQA applies to all their work in the last thirty years, not just with LCFS, and added that CARB has answers and "we will fix this." He said that part of a legal "cure" is to adopt the ADF law. Regarding enforcement, Waugh said that the agency will increase its LCFS enforcement profile. A team is already poring over 2011 and 2012 reports to reconcile volumes and obligations and letters will go out to the handful of noncompliant companies so they can address the issues. The details of the upcoming workshops on updates to the LCFS regulation and to ILUC, which he referenced, are in the Policy Update section below.

Neste Oil, with operations based in Finland, Singapore, and Rotterdam, is the largest renewable diesel (RD) producer in the world and sold 100 million gallons in California in 2013, according to Dayne Delahoussaye, the company's Legal Counsel & Regulatory Affairs Manager (USA & Canada). He said that now with LCFS, Neste faces an even more complicated array of global standards and incentives affecting their production (Europe adopted low carbon fuels earlier than US), which uses 10 different feedstocks. He said that it's become more difficult to plan for the long-term as they work to figure out which compliance strategies are best.

Tim Olson, Office Manager, Transportation Energy Office, California Energy Commission (CEC), presented data from the Integrated Energy Policy Report (IEPR), a comprehensive report done by CEC every two years that looks at the state's energy picture broadly. Providing important context for the fact that demand for gasoline is down but diesel demand is growing at a rate of 1-2 percent a year, he focused on California's transportation energy initiatives. Importantly, he said that the state would meet its LCFS goals for 2020, something that just two years ago, it would not have been possible to say. According to CEC's estimates, 27 million gallons of biodiesel consumed in the state last year were produced from UCO, tallow, and corn oil, and the same feedstocks are projected to be used to produce 88 million gallons by 2015; 150 million gallons by 2017; and 188 million gallons by 2020 (based on surveys with producers looking at the potential of incentivizing scenarios). To create the alternative fuel industry needed to meet the long-term demands of the state's overall low carbon goals, he talked about the need for something like a Financing Syndicate that would employ a broad range of government sources and mechanisms beyond grants and low carbon credits, possibly including bonds, loan guarantees, various and pension funds.

An overview of the CEC's, AB 118 Alternative & Renewable Fuel & Vehicle Technology Funding Program (ARFVTP) was presented by Commissioner Janea A. Scott. The program, which invests up to $100 million annually, has put $420 million in over 250 projects, with biodiesel receiving roughly one-third of the $127 million put into biofuels since the program began in 2009. The program's biodiesel investments include five commercial projects totaling $19 million and nine projects totaling $16.9 million in research on conversion and feedstocks, including waste greases and oils, wastewater treatment plant residues and algae. See the CEC policy blurb below for current details.

California Infrastructure Panel 

Propel Fuels' Regional Operations Manager-South, Jorge Parra, talked about their experience with 40 retail stations in the state selling E85 and B20, citing successes with vehicles (OEM approvals and biodiesel performance); fuel quality and affordability; state grant funding; and the incentivizing effect of LCFS, which has contributed to their rapid growth. He said that with fewer than 50 alt fuels stations in the state (10K total), access is still challenging and mentioned a natural resistance to change among fleets, including a disconnect between federal EPAct requirements and actual fleet fueling habits.

Doug Meyers, Director, Business Development, Kinder Morgan Energy Partners, gave an overview of his company's biodiesel blending program at Colton, Fresno, and San Jose (coming in 2014). This program provides their customers with blending of biodiesel into KM pipeline-delivered diesel fuel and has provided a significant new opportunity for their customers (who enjoy the good value of getting the RINs and the LCFS credits by blending) and for California's biodiesel industry in the last year and a half. He talked about KM's 2014 Biodiesel Blending Infrastructure Projects saying that they will spend $3.5 to $6 million on: terminal infrastructure upgrades; modifications to truck rack for B100 offloading and to existing storage tank(s) for B100 storage (recirculation, heating, insulation); and the fabrication/installation of biodiesel injection systems.

The job of the California Department of Food and Agriculture's Division of Measurement Standards (DMS) to enforce minimum fuel performance and drivability standards and regulate fuel advertising and labeling, was presented by Allan Morrison, Senior Environmental Scientist, Fuels and Lubricant Laboratory. He explained that because motor vehicle fuels must have a quality standard developed by an ANSI approved consensus organization, which for liquid fuels is ASTM, their agency provides a Developmental Engine Fuel Variance for new fuels for the purpose or developing such a standard. Because B100 is a blendstock, not a finished fuel under ASTM, biodiesel blends greater than 20 percent are sold under this variance and the data collected is used by DMS toward that end. He presented samples of the labeling for biodiesel and biodiesel blends, which must meet the requirements of the Federal Trade Commission by including the name of the product and grade designation on all dispensers, advertising signs, and storage tank labels.

The very important details of the new permanent UST law that took effect in June of 2012 and the status of leak detection equipment approvals for biodiesel were explained by Laura Fisher, Chief, UST Technical Unit, State Water Resources Control Board, and can be found in the UST policy blurb below. She detailed her agency's cooperation with Propel Fuels in expediting the expansion of their retail fueling infrastructure. Pointing to future effort affecting her agency's work, she let the group know that NBB has proposed to work with the National Leak Detection Workgroup on listing or testing equipment with blends B21-B99 and to work with UL on testing and/or listing of biodiesel blends above B20.

LCFS and California in the Spotlight at the National Biodiesel Conference