CALIFORNIA'S BIODIESEL INDUSTRY TRADE ASSOCIATION


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ADF Regulation Reporting Workshop May 23, Sacramento

On May 23rd in Sacramento, ARB staff will hold a workshop on the Alternative Diesel Fuel (ADF0 Regulation reporting and recordkeeping requirements. CBA has been engaged in providing feedback to ARB staff on the ADF reporting form, which was posted on March 2, 2016 and will participate.

The ADF regulation became effective January 1, 2016, and includes reporting and recordkeeping requirements applicable to entities in the biodiesel industry. The first quarter reports must be submitted by June 30, 2016. Biodiesel producers, importers and blenders are required to report and keep records concerning biodiesel production, sales, and blending. Biodiesel distributors and retailers are only required to keep records. Staff will provide an explanation of the reporting and recordkeeping requirements as well as solicit feedback on the reporting form posted on March 2, 2016. This reporting form was developed to assist regulated parties to organize and submit the information required in the ADF regulation. Additionally, following the Staff presentation, there will be an open Q&A session. Meeting notice/agenda: http://www.arb.ca.gov/fuels/adf/adf.htm.

Following the workshop, stakeholders may send additional feedback by email to adf@arb.ca.gov. Prior to the workshop, the staff presentation will be posted at the url above.





California's Biodiesel Industry

California currently has 8 biodiesel production plants, with 2 plants under construction, and major expansion underway at several of the state's largest plants. In 2015, instate production reached 32 million gallons, and we hope to see significantly increased volumes in 2016.



CA Biofuels Cap & Trade Initiative Gains Momentum

The California Biofuels Cap & Trade Initiative, a proposal to allocate $210 million from Cap and Trade auction proceeds to low carbon biofuels, has built an impressive list of supporters since this exciting coalition effort was initiated by CBA in early 2014. These efforts led by CBA lobbyist, Louie Brown, have increased the proposed state investment in biofuels to $65 million--$40 million to support the instate production of biofuels, in addition to the $25 million the Governor is proposing for the CEC.

The California Biofuels Cap & Trade Initiative coalition came together to make the case that low carbon fuels are available now and must be aggressively scaled up if Governor Brown's goal of reducing petroleum use in the state by 50 percent by 2030 is to be met.

An important element of the proposal includes not just concern about reaching the climate change goals of AB 32, but also that biofuel production and infrastructure should be encouraged in disadvantaged communities as put forth in SB 535. That law calls for stimulating employment and economic improvement in those communities as defined by CalEnviroScreen.

The funds would be split equally among three biofuel types (diesel alternatives, gasoline alternatives, and biogas/syngas) based upon stimulating (1) California-based biofuel production; (2) the low carbon intensity of biofuels, and (3) the benefits to disadvantaged California communities.

For further details and to add your organization's name as a signatory to the Biofuels Initiative, contact Russ Teall at rteall@biodico.com.



AB 1032 Goes Into Effect Jan 1st 2016
Tax Refunds Now Available for Dyed Blended Biodiesel


CBA was the proud sponsor of AB 1032, which passed the state legislature and was signed into law by Governor Brown this year and will be Implemented January 1st 2016. This very important new law corrects a long-standing tax problem affecting our industry, and we look forward to increased biodiesel sales now that this obstacle has been removed.

"Our industry estimates that the problem has been effectively preventing biodiesel from being blended into 15-30% of the diesel volume depending on how much dyed diesel that terminal is handling," said Harry Simpson, President of Crimson Renewable Energy and CBA board member. "The problem has affected every terminal and refinery rack in the state that is blending, or contemplating blending, biodiesel," he added.

Below is the text of a Special Notice, dated November 2015, from the California State Board of Equalization:

"Refund of Diesel Fuel Tax Paid Available to Suppliers of Dyed Blended Biodiesel Removed from the Rack"

"Effective January 1, 2016, licensed diesel fuel suppliers may claim a refund or credit for the excise tax they paid on the biodiesel portion of dyed blended biodiesel fuel removed from a terminal rack by the same supplier. Suppliers must be able to show that they paid the excise tax on the biodiesel fuel portion of the blended biodiesel. For more information on the legislation creating the change to allow a refund of the diesel fuel tax, download Assembly Bill 1032 (Stats. 2015, Ch. 481) at www.leginfo.ca.gov/bilinfo.html.

What Changed?

Current Diesel Fuel Tax Law does not provide for reimbursement of the excise tax-paid portion of the biodiesel fuel removed from the rack as dyed blended biodiesel. Therefore, suppliers who blend tax-paid biodiesel fuel with ex-tax diesel fuel that is removed as a dyed blended biodiesel, are unable to recover the excise tax from the customer and unable to seek reimbursement for the tax from the Board of Equalization.

Effective January 1, 2016, Revenue and Taxation Code section 60501(b) will allow a supplier to claim a refund or credit for the excise tax that was paid on the biodiesel portion of dyed blended biodiesel fuel. Suppliers may file a claim for refund using BOE-101, Claim for Refund or Credit.

How to Claim a Credit on Your Supplier Return

Instead of filing a refund claim, licensed diesel fuel suppliers may claim a credit on BOE-501-DD, Supplier of Diesel Fuel Tax Return, for tax-paid biodiesel blended with diesel fuel and removed as dyed blended biodiesel fuel. Suppliers may claim a credit only to the extent of the excise tax-paid biodiesel portion of the dyed blended biodiesel removed. For further information, see BOE-810-FTE, Instructions for Preparing Motor Fuels Schedules, or our Diesel Fuel Tax program webpage FAQs.

If you have any questions regarding dyed biodiesel fuel blends, you may contact the BOE through our website at www.boe.ca.gov/info/email.html. You can also call our Customer Service Center at 1-800-400-7115 (TTY:711). Customer service representatives are available to assist you weekdays from 8:00 a.m. to 5:00 p.m., (Pacific time), except state holidays."




FEDERAL ISSUES

Last year saw positive developments at the federal level, including a favorable Renewable Fuel Standard (RFS) rule and a two-year retroactive reinstatement of the $1-per-gallon blenders tax credit.










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State Budget Proposal Includes $65 Million for Low Carbon Biofuels

CBA Lobbyist Leads the Charge




In addition to strategizing the who, what, and when involved in his skillful shepherding of CBA's other legislative and policy initiatives, CBA's lobbyist, Louie Brown, leads weekly meetings of the California Biofuels Cap & Trade Initiative, a coalition effort to secure $210 million from auction proceeds for in-state low carbon biofuels production incentives.

Toward this goal, Louie has organized meetings with the governor's office and key legislators and is now setting up the second CBA Lobbying Day of the year to be held in May in Sacramento. CBA credits his leadership for the increasing recognition of the value of biofuels -- long an under emphasized element of the state's climate solutions strategies -- by key state government staff and officials, as evidenced by the proposed funds. The funds are Cap and Trade auction proceeds allocated through the state budget's GHG Reduction Fund (GGRF), which is administered by the California Air Resources Board (ARB).

ARB'S LOW CARBON FUELS INCENTIVE: $40 MILLION

The Governor's 2016-17 Budget Proposal now includes a new element to ARB's Low Carbon Transportation Incentive program -- $40 million for "per gallon" subsidies for in-state producers of low carbon fuels with a certified LCFS fuel pathway. As proposed, benefitting disadvantaged communities, lower CI scores, and sourcing from feedstock produced in-state provide for additional "per gallon" subsidies.
We consider this very important progress toward the Biofuels Initiative goal and look forward to continuing to work to create the best program possible.

CBA Board President, and our representative in the Biofuels Initiative coalition, Russ Teall, participated in ARB's April 4th workshop that discussed this proposal and the April 19th follow-up work group meeting. ARB plans to release the proposed FY 2016-17 Funding Plan on May 20 for public comment. The Board is scheduled to consider the plan at their June 23-24 meeting.

CALIFORNIA ENERGY COMMISSION (CEC) BIOFUELS GRANTS: $40 MILLION

If approved, the $25 million in the Governor's budget proposal designated for biofuel program grants under the CEC's Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) will be the subject of a special workshop.

SB 1402 (PAVLEY)

Louie, along with other Biofuels Initiative coalition partners, testified in support of Senator Fran Pavely's bill SB 1402 at a recent hearing. CBA is following this bill closely and engaging with staff to help shape the final language. The bill would define the parameters of an incentive based program to support and increase the in-state production of biofuels.




ARB Begins LCFS QAP Rulemaking

Industry Comments Focus on Foreign Pathways, Chain of Custody, Palm



On March 8th, the California Air Resources Board held its first workshop on an LCFS Monitoring and Verification Program as part of a new rulemaking process for the regulation. CBA, after considerable local industry discussion and coordination with the National Biodiesel Board, submitted comments on what we believe are key requirements for maintaining the integrity of the LCFS.

First, CBA reiterated concerns, stated in previous comments on foreign pathway applications, about the potential misrepresentation of CI scores for fuels by foreign producers and that foreign pathways continue to be approved without verification commensurate with the significant risk for fraud.

To address these issues, CBA called for bonding requirements for foreign pathway applicants patterned after the federal RFS program (40 CFR 80.1466(h)) but with an increase significant enough to actually deter fraudulent players from entering the market.

Regarding verification and auditing, CBA recommended that ARB's resource allocation be commensurate with the potential for abuse. Specifically, CBA asked that all producers, especially foreign entities, be subject to random, unannounced audits from ARB; that ARB not approve a foreign pathway if it does not have the resources to conduct such audits; that the burden NOT fall more heavily on domestic producers; and that QAP providers be U.S.- based for enforcement purposes and to reduce the potential for corruption.

Also, to address the improper mass balancing of feedstocks, which is resulting in Palm-based biodiesel coming into the LCFS program, CBA recommended that ARB limit the mass-balancing approach to production plants that do not utilize Palm-based feedstocks. If the producer utilizes multi-feedstocks, one of which is Palm-based, the mass balancing approach should be disallowed.

Second, the comments weighed in on Chain of Custody issues based on serious concerns about the possible export of fuel without retirement of the LCFS credits. Due to the fact that the current LCFS Reporting Tool (LRT) does not follow the chain of custody of the fuel itself, but rather follows only the CI credits, CBA recommended that the LRT system be enhanced to require a balancing transaction for the physical product in addition to the CI credits. To prevent further administrative burden, it was recommended that ARB coordinate with the Alternative Diesel Fuel regulation (ADF) team who will already be gathering chain of custody information through the ADF Reporting Form.

Third, CBA's comments discussed how the vague definition of "waste oils" and "recovery oils" in the regulation is allowing for the use of Palm Fatty Acid Distillates (PFAD) as a feedstock in Renewable Diesel (RD) pathways. The EPA has specifically excluded the use of PFAD to generate D4 RINs (D4s have a 1.5 equivalence value, used by advanced biofuels). However, grandfathered facilities that use PFAD can generate a D6 RIN (this is the lower valued RIN that corn-based ethanol can generate). There is a significant amount of RD being imported in to California that is generating a D6 RIN and an LCFS credit. Since D6 RINS are much less valuable than D4 RINS, this signals that the RD is made with PFAD. Once the PFAD is turned into Renewable Diesel, it is indistinguishable from any other renewable diesel, so it is impossible to test.

Our industry recommended that ARB specifically exclude all Palm Oil products (with the exception of UCO) from being utilized as feedstock for any fuel under the LCFS program. This would provide assurance that there is no economic gain for the Palm Oil industry resulting from the LCFS program.




CBA Comments on CEC's Biofuels Draft Solicitation Concepts


On March 30th, CBA's written comments were supported by Joe Gershen, CBA's representative on the California Energy Commission's (CEC) Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP) Advisory Committee, and read into the record by CBA Board President Russ Teall at the CEC's public workshop for the Biofuels Program of the ARFVTP. The workshop discussed the new CEC effort to set up a permanent public forum for planning California biofuel investments and gathered input for an upcoming biofuel production solicitation, likely in 2016 Q2.

CBA made the following eight comments regarding the CEC's Biofuels Draft Solicitation Concepts -- Pilot-Scale and Commercial-Scale Advanced Biofuels Production Facilities:

"1. We are concerned that the proposed solicitation only allocates $17 million for biofuels out of the current Investment Plan budget of $20 million. In FY 12/13 $18M was awarded, in FY 13/14 $23M was awarded, and in FY14/15 $20M was awarded. Can you have staff provide an accounting of biofuel budgets and actual allocations for the past 5 years? We understand that the $3 million PON released last year for early stage projects took money from "future" solicitations. We would ask for a more streamlined process that gets PONs out in a timelier manner -- as is done with other funding categories, which often have 2 or 3 PONs in a year -- to avoid this kind of reallocation. As you know, we have been commenting for years that the funding for biofuels should be increased commensurate with our obvious, real and immediate contributions. Since biofuels have been providing close to 90% of LCFS GHG reductions, we feel it would be more appropriate to increase the allotment in the approved ARFVTP budget rather than decrease it.

2. The biofuels sector has been asking that the allotment be divided equally into silos, one each for diesel substitutes, gasoline substitutes and bio-methane, but we do not see that spelled out in this Biofuels Draft Solicitation Concepts document, even though this has been successfully occurring in recent program budgets.

3. $5,000,000 for small projects should be eliminated as a separate category because it not appropriate for all of the biofuels silos, and diesel substitutes in particular would suffer in this category. At this stage of development, there is no reasonable ROI on any diesel substitute category project of under 1 Mgpy. CBA suggests that there be a minimum project production limit of 1 Mgpy. If there are some small projects eligible for funding in one or two of the 3 silos then that amount should come from those categories' silo(s). Furthermore, the last PON issued in this category was exclusively for small, pilot projects (PON-14-602, issued October 2014), while commercial scale projects have not had an opportunity to apply since January 2014 (PON 13-609).

4. There is a demonstrated historic likelihood of success for expansion of existing projects versus new projects by inexperienced promoters using un-vetted technologies. This should be reflected in the scoring of proposals.

5. We think that there should not be a production capacity multiplier as suggested in the Concepts document because one large project could use up all of the funds in a silo. The elimination of the multiplier will maintain diversity of projects being funded and spreads out investment risk by awarding multiple projects in each silo.

6. Maximum awards for each project should be $2M (with no additional multiplier) so there can be 2 to 3 awards in each silo.

7. ARFVT Program benefits are designed to address California climate policy with a priority on carbon reduction. It is important to maintain program focus on actual GHG reductions (volume of biofuel produced multiplied by CI reduction) as the highest return of program benefits for the investments made, and should be reflected as such in scoring criteria.

8. In-state biofuels plants are providing well-paid jobs as well as tremendous health and economic benefits in disadvantaged communities. CBA thinks our suggested modifications will best support the continuation of these benefits for all of California."

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Staff announced at the meeting that the additional $25 million in the governor's budget proposal for 2016-'17 in potential biofuel program grants under the CEC's ARFVTP will be the subject of another workshop, if approved.

Meeting details are here: http://www.energy.ca.gov/altfuels/notices.




CALIFORNIA ENERGY COMMISSION (CEC): AB 118 FUNDING

At the public workshop for the Biofuels Program of the ARFVTP on Wednesday, March 30th, these dates discussed for the $17 million proposed soliciation for Pilot-Scale and Commercial-Scale Advanced Biofuels Production Facilities were: June for pre-proposal abstracts; results in July; full proposals due in September; NOPA released in November. An additional $25 million in the Governor's budget proposal for 2016-2017 in potential biofuel program grants under the CEC's ARFVTP will be the subject of another workshop, if approved. To stay abreast of ARVFTP program news, sign up for the Alternative Fuels List Serve at: http://www.energy.ca.gov/2014-ALT-01/documents/.




STATE WATER BOARD: UNDERGROUND STORAGE TANK ISSUES

The State Water Board has sent out a notice to underground storage tank owners and operators announcing that new revised federal UST regulations were issued on July 15th, 2015. According to the document, the Water Board is reviewing the federal regulations to see if new California statute and regulations are in order. The notice says that a switch in fuels to a blend above B20 would require the owner to notify the CUPA 30 days prior and that owners/operators must demonstrate compatibility for as long as the substance is stored.


Biodiesel is an advanced biofuel made from waste or virgin vegetable oils or animal fats. It is a sustainable, cleaner-burning, diesel fuel replacement that meets strict quality specifications. Biodiesel derived from waste can reduce greenhouse gas emissions up to 86%.