Biodiesel blending interest soars with tax break restored

Truck hauling biodiesel

Biodiesel blending, which took a big hit while a federal incentive was in limbo, is attracting small companies jittery about whether they could make a viable business of the cleaner-burning fuel.

Biodiesel adds soy oil and animal fats to petroleum-based diesel. The result is a cleaner-burning fuel that reduces particulate and planet-warming greenhouse gas (GHG) emissions.

President Donald Trump signed a $1.4 trillion spending package on Dec. 20, 2019 that gives blenders a $1 credit per blended gallon retroactive to 2018. The incentive expires at the end of 2022. 

“The big players who have been doing it for a long time, they didn’t bat an eye,” said Scott Disselhorst, president of All-Line Equipment Co., which sells blending systems “They had confidence it was coming back. They always make it retroactive, so these guys were like, ‘Just relax.’”

Scott Disselhorst, president of All-Line Equipment Co., said interest is up in the biodiesel blending system his company sells following the renewal of the federal biodiesel blending tax credit. (Photo: FreightWaves/Alan Adler)

Now the previously spooked smaller companies are joining in. All-Line says business is up 30-40% for the $60,000 systems since the credit was restored.

“We’ve been swamped with new opportunities,” Disselhorst told FreightWaves on Saturday at the NATSO Connect conference in Denver. 

NATSO, formerly the National Association of Truck Stop Owners, is the trade group for travel plaza and truck stops.

Longer term uncertainty

The Pilot Co., which has more than 750 travel centers in 44 states and six Canadian provinces, is one of those “big players.” Pilot’s $250 million investment is safer now than when the tax credit was in play.

“We know the future now for 2021 and ’22, and I’m not sure what will happen after that,” Pilot CEO Jimmy Haslam told FreightWaves in an interview at NATSO on Friday. “I think it’s something we’ll begin taking a look at probably this time next year after you get through the elections, and when there’s a couple of years left on the current bill.”

In addressing the 600 NATSO members at their conference on Saturday morning, David Fialkov, the trade group’s vice president of government affairs, said helping get the credit included in the budget may have been the biggest achievement in NATSO’s 60-year history.

Then he showed the audience a chart with a cliff for the biodiesel credit after 2022. Uncertainty could return by late 2021 or early 2022 without legislative action more substantial than the recent renewal, he said.

“The fact that we now have knowledge that we’re going to go three full years with the tax credit in place will get people turned off by the volatility in the market (to) begin examining reentering,” Fialkov told FreightWaves. “For the time being, I am pretty bullish on the investments.”  

New friends

Biodiesel is quietly gaining some support from the oil industry. ExxonMobil is testing its latest diesel fuel formula, Synergy Diesel Efficient, at various blending levels in Chicago and parts of Texas.

“I personally think that it’s going to be a great complement to the fuel,” said Lilo Hurtado, applications engineer and manager for ExxonMobil’s Fuels, Lubricants & Specialties Marketing division.

Instinctual optimism

“My instincts are that with the way the world is going greener, that there’ll continue to be incentives, whether there’s federal or state, to burn clean fuel,” Haslam said. “And biodiesel will be one of those fuels.”

Disselhorst is even more bullish.

“The more people get into it, the bigger the pack is going to be to keep doing it,” he said. “It’s going to be like Food Stamps or Social Security. They’re never going to turn it away, not at this point. I think blending is here to stay.”