LINCOLN, Neb. (DTN) -- With a meeting on the Renewable Fuel Standard expected to take place Tuesday between a coalition of biofuels and oil interests and officials at the U.S. Environmental Protection Agency, Administrator Lee Zeldin is getting pressure from different sides of the debate on biofuels policy.

DTN confirmed with a source on background that the scheduled meeting includes officials from the American Petroleum Institute, American Soybean Association, Clean Fuels Alliance America, Growth Energy, National Oilseed Processors Association and the Renewable Fuels Association.

According to statute, the EPA was required to finalize 2026 volumes by November 2024, but the Biden administration pushed it back by one year, leading to a lawsuit filed in federal court by Clean Fuels Alliance America and Growth Energy. Read more about that here: https://www.dtnpf.com/….

Fuel distributor groups that reportedly are not taking part in the EPA meeting, raised concern with Zeldin in a letter on Tuesday.

The letter from the National Association of Convenience Stores, NATSO -- Representing America's Travel Centers and truck stops, and SIGMA -- America's Leading Fuel Marketers, told Zeldin that increasing advanced biofuels including biomass-based diesel volumes in an expected upcoming RFS proposal could have negative consequences.

"Our members have grave concerns that setting volumes for total advanced biofuels at levels that the market is unable to economically absorb will result in steep increases in renewable identification number prices and by extension in the retail price of diesel," the letter said.

"If this occurs, the cost of consumer goods will noticeably increase as well."

However, they said that setting volumes for total advanced biofuel blending including biomass-based diesel at "unreasonably high levels -- though it would result in near-term commercial benefits for our industry -- will create a wet blanket over the broader economy and, over time, undermine the very markets that the RFS is intended to support."

TAX INCENTIVE CONCERNS

The groups said they're concerned that the current tax-incentive situation for biofuels could ultimately harm consumers at the pump.

In particular, the $1 per-gallon biodiesel tax credit expired at the end of 2024. That expiration, the groups told Zeldin, has "eliminated any retailer or consumer tax incentive for blending and purchasing advanced biofuels."

The industry's expected shift to the 45Z Clean Fuel Production Tax Credit beginning in 2025, they said in the letter, "incentivizes the production of advanced biofuels, not the consumption of advanced biofuels.

"EPA should not be misled: in no way does the 45Z credit lower the price consumers will pay for biofuel at the pump," the groups said.

"Even if biofuel and agricultural stakeholders successfully convince Congress to make changes to 45Z as part of the ongoing reconciliation process, the changes they seek would in no way alter this fundamental reality."

The groups told Zeldin that unless the biodiesel tax credit is extended "an overly aggressive increase in advanced biofuel blending mandates under the RFS will be punitive" for American consumers.

The groups provided a chart with a list of 22 biomass-based diesel plants that have closed, converted production to other products or gone idle leading up to and after the end of the $1 biodiesel tax credit.

"At least nine facilities in the U.S. have confirmed they will be shutting down or idling production this year until further notice," the letter said.

"Collectively these facilities represent nearly 750 million gallons per year of biodiesel/renewable diesel capacity (about 15% of the market)."

INDUSTRY WARNINGS

Paul Winters, director of public affairs and federal communications for Clean Fuels Alliance America, said the biomass-based diesel industry warned federal officials for months that the tax policy uncertainty would harm the industry.

"We tried to make clear to Treasury that producers and feedstock providers needed to know the rules at least three months before the start of the year," Winters told DTN.

"They negotiate feedstock purchases and fuel sales contracts a minimum of a quarter year in advance. So, it's no surprise that our industry started the year without those contracts in place. And many producers had to shut down or slow down."

With the January guidance on calculating the 45Z credit, he said some companies have enough information to move forward with contracts. Read more about that here: https://www.dtnpf.com/….

"There is existing guidance on transferring the credit to others, on the registration requirements and on the form to file to claim the credit," Winters said.

"Others do not have enough confidence in the guidance or clarity on certain aspects, like qualifying sales or when/how to file. So, individual companies are making case-by-case decisions on restarting production."

The groups told Zeldin in the letter that as a result of facility closures, total renewable diesel and biodiesel volumes are down by about 59% since the end of 2024 and total volumes are down by about 50%, year-over-year.

Domestic renewable diesel volumes are down by nearly 52% since the end of 2024 and 34%, year-over-year, the letter said. Domestic biodiesel volumes are down by about 58% since the end of 2024 and domestic biodiesel volumes are down by nearly 42% year-over-year.

"While this state of affairs may help certain domestic biofuel producers, it hurts retailers, trucking companies, and consumers," the letter said.

"That pain would be greatly exacerbated by unviable RVO (renewable volume obligation) increases. Although the RFS's blending mandates are an important tool in the tool chest that can help reverse this troubling trend, setting unrealistic mandates, particularly when they are not paired with the relief that the BTC (biodiesel tax credit) could help provide, would be destructive of the market and impose palpable inflationary pressures that will hit American consumers directly in their wallets every time they buy virtually any good in the nation."

Todd Neeley can be reached at todd.neeley@dtn.com

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