Fueling Frustration: Southeast Iowa Biodiesel Plant Halts Production Amidst Uncertainty

United States: In Crawfordsville, a Biodiesel refinery that had the capacity to produce up to 10 million gallons of fuel annually has ceased operations. W2Fuel's CEO, Roy Strom, expressed his disappointment, stating that they made all efforts to keep it running but needed more certainty. Unfortunately, investing in equipment that may not pay off due to uncertain federal policies towards the industry was too risky. The specific concern was regarding the extension of the $1-per-gallon federal tax credit for Biodiesel production in future years and expansion of federal mandates for biofuel usage.

last year 11 Biodiesel refineries in the state produced approximately 349 million gallons of fuel, including the facility in Crawfordsville. This was a slight increase of 3% from the previous year, but still lower than the 365 million gallons produced in 2018. In September 2019, the Crawfordsville facility temporarily ceased production due to the lapse of per-gallon tax credit for Biodiesel production. However, later that year, the tax credit was reinstated and applied retroactively to the fuel produced in both 2018 and 2019.

W2Fuel attempted to resume operations at their facility and eventually succeeded in June 2021. However, they have encountered several issues operating consistently since shutting down in September 2019. In November 2021, the company's audit and compliance manager acknowledging the startup issues and the failure to conduct adequate air emissions testing for methanol and carbon. As the department insisted on tests of the plant's air emissions, the company had hoped to conduct the tests at full production rates in the first half of this year. Unfortunately, in April, W2Fuel notified that production would come to a halt by the end of May.

According to Strom, the shutdown process of the W2Fuel plant began a couple of months back and is now nearing completion. The company has no plans of selling the facility at present, leaving its future uncertain. Strom approximates that the plant produced around one million gallons of Biodiesel in the previous year. However, W2Fuel's Biodiesel refinery in Michigan will remain operational. Grant Kimberley, the executive director of the Iowa Biodiesel Board, stated that the closure of the plant is unlikely to impact overall Biodiesel production in Iowa since other facilities have additional capacity. Nevertheless, the uncertainty surrounding federal policies may have a more significant impact.

Kimberley expressed the difficulty in investing in upgrading and improving efficiency for their facility due to the lack of economic scale. He pointed out that the Crawfordsville plant has one of the smallest production capacities in the state, making it a challenging decision to make investments. Furthermore, Strom shared that hiring employees had also been a struggle, with only five workers present at the plant before the shutdown. Out of those five, two will be transferring to the Michigan facility, while the remaining three have secured employment elsewhere.

The production of Biodiesel is leading to an upsurge in the demand for soybeans in the state. The association estimates that a bushel of soybeans can witness a value addition of approximately 13%. Reports suggest that about 71% of Biodiesel produced in Iowa is made using soybean oil. However, it is also manufactured using animal fats, canola oil, and used cooking oil. Biodiesel is usually mixed with Diesel derived from oil and sold as fuel, often with concentrations of up to 20% Biodiesel.