Tri-State Biodiesel — Your Green Fuel Supplier

Declining oil prices, ‘government inaction’ hurt biodiesel plant in Southington

A lot has happened since 2008, when oil was nearly $150 per barrel and gasoline was hovering around $4 at the pump. Cries that the world’s oil supply was finite sparked the biofuel and biodiesel industries. Biodiesel collectors and refineries were coming on line in Cheshire and Southington with state government doling out low-interest loans.

In Cheshire, plans for a collection and production plant fell apart after the owner encountered legal problems. But a plant in Southington, Bio Diesel One, opened in 2008 under expectations it would produce about 4.5 million gallons of fuel per year, making it one of the largest operations in the state. Bio Diesel One had arrangements with commercial users to collect used cooking oil and refine it into diesel fuel.

But operator Karl Radune was forced to shut down his plant recently. He blamed lower fuel prices and a lack of government direction.

The interest in alternative fuels, including biofuels, was prompted by the high price of oil. But the discovery of available oil outside of areas of political unrest in recent years has helped drive oil prices down to $50 per barrel.

According some in the industry, the government is not helping biofuel producers. Under the Clean Air Act, the U.S. Environmental Protection Agency is required to set the annual standards for the Renewable Fuel Standard program each year. The RFS dictate the percentage of biofuels and renewable fuels that apply to all gasoline and diesel produced or imported for the year. The biofuel dealers rely on the percentages to set production goals and pricing.

The EPA failed to issue any standard in 2013, and didn’t set 2014, 2015 and 2016 until May 2015, leaving producers like Bio Diesel One guessing its annual yield.

“The EPA destroyed the industry,” Radune said. “I don’t know how much I can produce and get paid for. I’m already working on tight margins.”

Whereas, the state had four bio-fuel refining plants in 2008, it now it has two large operations; Bridgeport Biodiesel. Tri-State Biodiesel is the fuel distribution network to gas stations and heating oil suppliers.

In New Haven Harbor, Kolmar recently acquired the former Greenleaf Biofuels LLC and renamed it American GreenFels LLC.

Former Commissioner of the state Department of Energy and Environmental Protection Daniel Esty agreed both oil prices and government inaction likely contributed to the closure of some collectors and refiners.

“The dominant factor is the dramatic drop in price on gasoline and oil which has put a huge pressure on alternative fuels and notably on biofuels,” Esty said. “The folks you’re talking to are at least partially correct insofar as The EPA has not provided clarity and certainty in the marketplace by failing to putting forward regulations in a timely manner.”

Esty, an environmental law professor at Yale University, said his experience in Connecticut taught him that it’s critical for “government to provide certainty and predictably in a timely manner so market participants can make investments and know what the price arrangements they can count on are going to be.”

“They are suffering from a lack of EPA clarity and within the regulatory domain,” he said.

Brent Baker, chief executive officer of Bridgeport Biodiesel and founder of Tri-State Biodiesel said there have been some peaks an valleys in the biofuel roll out.

“It’s been a couple of tough years,” Baker said. “Petroleum prices are at a 10-year low. People were saying we’re going to run out of oil. That’s not the narrative any more. There’s a lot more oil than we thought and that makes it cheap in this environment. Wholesale diesel, and alternative fuels need a subsidy to survive. They were a couple of years late coming out with some numbers; that was difficult.”

The EPA has had a lot of pressure from the petroleum industry and from the environmental groups, making it difficult to set realistic targets, Baker said. But he is relieved to see targets set through 2017.

“I’m grateful the EPA has come out with some fairly strong standards,” Baker said.

Staff reporter Jesse Buchanan contributed to this story. (203) 317-2255 Twitter: @Cconnbiz