Shared from the 1/12/2020 The Providence Journal eEdition

Newport Biodiesel weathers headwinds

Company sees its fuel as a bridge to the future, despite obstacles from the fossil-fuel industry

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U.S. Sen. Sheldon Whitehouse examines a sample of processed biodiesel during a tour of the Newport Biodiesel facility.

[THE PROVIDENCE JOURNAL / BOB BREIDENBACH]

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U.S. Sen. Sheldon Whitehouse, center, tours the Newport Biodiesel facility on Friday, flanked by the company’s vice president, Myles Standish, right, and president, Blake Banky, after the recent reinstatement of a federal tax credit designed to help the industry grow. [THE PROVIDENCE JOURNAL / BOB BREIDENBACH]

NEWPORT — Every business needs regulatory certainty to survive. That may be especially true for a small company like Newport Biodiesel, which competes with the juggernaut that is the fossil-fuel industry.

Yet a federal tax credit that has been key to the growth of biodiesel from a curiosity to an integral piece of the nation’s fuel mix has never been a certainty. Since it was enacted in 2004, the $1-a-gallon credit for biodiesel producers has neared expiration at least half a dozen times — only to be renewed each time.

However, when the credit lapsed at the end of 2017, there was no last-minute push to extend it again. This past December, as part of a larger spending bill, Congress reinstated the incentive, extending it to 2022 and retroactively to the beginning of 2018. But in the two years it wasn’t in place, as many as 10 biodiesel plants across the country shut down, according to industry groups.

Newport Biodiesel weathered the storm by using cash reserves and prudently investing in equipment that made its facility off Connell Highway more efficient, according to company executives.

“Now we’re in a better position to do what a tax credit is supposed to do: incentivize more investment,” said Robert Morton, co-founder and chairman of the company's board.

He was speaking to U.S. Sen. Sheldon Whitehouse during a recent tour of the company’s plant, which operates around the clock, 365 days a year. Whitehouse, along with fellow Rhode Island Democrat Sen. Jack Reed, was a supporter of bringing back the credit.

Whitehouse says the help is justified for a still-maturing industry that is going up against established oil and gas companies that are heavily subsidized by taxpayers, whether through their own set of tax credits or by not paying the costs of health and environmental impacts.

The amendment that inserted the biodiesel tax credit in the recent spending bill originally included additional incentives for solar and wind power, battery storage and electric vehicles. While none of the others survived, the biodiesel credit had bipartisan support because large agricultural interests in Midwestern states are major players in the industry.

“It sends a message: ‘Don’t mess with this coalition,’” Whitehouse said of the bill’s passage.

Of course, it’s not just soybean farmers in Iowa who benefit.

“It’s important to get Democrats from New England to support us, too,” Morton said.

Biofuels are nontoxic and biodegradable. They are commonly made from corn, soybeans or palm oil, but Newport Biodiesel exclusively uses old cooking oil, filtering out organic solids, which are sent to anaerobic digesters to generate electricity, and purifying what remains to create a tea-colored liquid with a mild smell.

While there is a debate over whether the environmental benefits of using plant stocks to make biodiesel outweigh the costs, those questions don’t apply to recycling cooking oil. The life-cycle greenhouse gas emissions for a unit of biodiesel made from grease are 86% lower than for conventional diesel, according to the U.S. Environmental Protection Agency.

Founded in 2007, Newport Biodiesel has gone from producing just 170,000 gallons of fuel annually in its earliest years, to 7.5 million gallons in 2017, to its current 10 million gallons. And there is room for further growth, said company president Blake Banky.

Expansion is dependent on demand, and the company sees its future in an increase in the amount of biodiesel used to replace heating oil. Rhode Island currently requires 5% of heating oil to be biodiesel, but potential legislation would gradually raise that ratio to 20% — the same standard as in New York state, the largest market in the Northeast.

State Rep. Deborah Ruggiero, D-Jamestown, proposed the legislation last year, but the American Petroleum Institute raised objections and the bill never made it out of the House Environment and Natural Resources Committee. There are plans to reintroduce the bill this session.

The measure has the support of heating oil companies. At a national conference in Providence last September, the industry agreed to net-zero carbon emissions by 2050. Replacing conventional heating oil with biodiesel is key to the plan.

“As an industry, we are committed to ramping up,” said Roberta Fagan, executive director of the Energy Marketers Association of Rhode Island, which represents local heating oil suppliers.

There are other factors that will help determine Newport Biodiesel’s future. One big one is access to cooking grease. When the company started out, it paid nothing for used grease, but now that grease is treated as a commodity that biodiesel companies must pay for. Prices are so good in Europe that used oil from Canada is being shipped there, said Banky.

A network of some 4,600 restaurants from around New England sell their grease to Newport Biodiesel. The company also buys partially processed feed stock from as far away as Maine and Delaware, and it’s always on the lookout for more supply.

What could be the real determinant of biodiesel’s future is the pace of converting automobiles and heating systems to electricity. Communities in California, Washington state and, most recently, Brookline, in Massachusetts, have restricted the installation of oil and gas pipes in new building construction.

Morton argues that biodiesel can be a bridge fuel, a cleaner one than natural gas.

“We know electrification is coming, but that’s a long way off,” he said. “Biodiesel is here today.”

Banky, too, is optimistic about the industry’s prospects.

“I think at this point you can’t stop it,” he said. “There’s too much momentum.”

But Whitehouse said there’s still pushback from fossil-fuel producers.

“You’re just going against a big headwind,” he said.

akuffner@ providencejournal.com

(401) 277-7457

On Twitter: @KuffnerAlex

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