Advanced BioFuels USA

by Ron Kotrba (Biodiesel Magazine)  … “We are surviving day by day,” Peterson (Chris Peterson, president of Hero BX) said. “All our people are still employed.”

According to Peterson, Hero BX owner Pat Black strives to provide stability for his staff to assure them with confidence that, no matter what happens, paychecks will be issued, and medical benefits will stay in place.

Like millions of other businesses trying to survive the historic pandemic, Hero BX is working to utilize the tools provided in the $2 trillion CARES Act, such as the Paycheck Protection Program. “Since we are making a conscious effort to keep people employed and not laying them off, if our government is willing to help us by providing low-interest loans that are potentially forgivable if we keep people employed, then yes—absolutely,” Peterson said. “With the PPP and the added unemployment benefits, hopefully people find the help and support they need. The government seems to be working overtime to get dollars in people’s pockets.”

Peterson said Hero BX had yet to receive its biodiesel tax credit refund from 2018 and 2019, as of April 9. In late December, after the $1 per gallon biodiesel blenders tax credit was expired for two years, Congress reinstated the incentive retroactively from 2018-’22 in end-of-year appropriations spending.

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Hero BX’s flagship biodiesel production facility in Erie, Pennsylvania, a 50 MMgy plant, continues to operate, as does the 20 MMgy Hero BX Alabama facility in Moundsville.

In May 2018 Hero BX began a tolling arrangement with Iowa Renewable Energy in Washington, Iowa. Peterson said IRE was not running April 9, but the facility has been operating sporadically. “We’re waiting to get off winter-spec fuel there,” Peterson said. “Once we’re out of winter fuel blending season and we can move to a higher cloud point fuel, we’ll bring in some animal fats and run it harder.” He said by late April or early May, Hero BX tolling at IRE will be ramping up.

In summer 2018, Hero BX bought at auction the former Midwest Biodiesel Products facility, an idled 12 MMgy biodiesel plant in South Roxana, Illinois. After Hero BX purchased the plant, its original plan was to make it multifeedstock-capable and slightly increase capacity from 12 to 15 MMgy. But once the company dug into the engineering, it soon realized the cost difference to move from 15 to 20 MMgy was negligible.

“We’re finishing final engineering for South Roxana,” Peterson said. “As soon as the weather and the pandemic allow, we will be putting construction people to work.”

He said the site needs environmental remediation before construction crews can disturb the land, and to do this, the ground temperature must be at least 55 degrees Fahrenheit. 

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Despite this bullishness, travel to perform due diligence is difficult—certainly not advised—in today’s climate with the coronavirus crisis in full swing. “Furthermore,” Peterson said, “bankers are tepid to put new money out without a line of sight on how long this will last.”

Peterson said feedstock prices have “not moved much,” but given restaurants’ limited output in only offering curbside pickup and delivery, “used cooking oil will be priced at a premium at some point in the near term,” he said. “Pandemic aside, the recycled waste feedstocks like used cooking oil, distillers corn oil and some animal fats have largely transitioned to low carbon markets. It is a natural progression for those to find their way in larger quantities into California and other West Coast carbon markets. They’re paying premiums out there.”

With low carbon markets soaking up available recycled feedstock and the health crisis limiting output of used cooking oil, Peterson said Hero BX is making adjustments.

“We’re running heavier rations of soy oil,” he said.

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RIN prices “have been relatively flat,” Peterson added. “They’re creeping up, but given biodiesel feedstock and fuel prices, they’re nowhere close to where they need to be to make our economics work. Some things are beyond our control. The biggest thing is to worry about what you can control, and don’t worry about what you can’t. There’s no sense in getting in a lather over something that is beyond your control. We are doing what we can to minimize our losses and keep our customers wet. Things will sort themselves out.”

How 2020 shakes out with respect to the Renewable Fuel Standard and oil companies’ renewable volume obligations (RVOs) is yet unknown. However, it seems clear that RVOs will be lower than planned since they are based on percentages of overall fuel demand projections for any given year. And with the steep decline in gasoline consumption as a result of the health crisis and stay-at-home orders for a vast majority of Americans, overall fuel consumption will be significantly less than projected.

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The shelter-in-place orders are obliterating gasoline demand, but Peterson said diesel use is holding steady, or maybe even increasing. “If anything, we’re hearing our customers saying quarter over quarter diesel demand is actually up compared to previous quarters,” he said. “People are still putting fuel in trucks and taking products to market. We’ve also heard rail volumes have not been as strong, and more products are moving in trucks vs. rail.  READ MORE