The Oilheat industry has made significant progress over the past 20 years improving energy efficiency through equipment and design innovations. Radiant heating, hydro air and multi-zoned systems have provided the Oilheat consumer more options, greater total home comfort and financial savings overall.

Fuel additives have also become a low cost, yet high return innovation. Improving fuel quality goes hand in hand with energy efficiency. Fuel quality and efficiency need not only be measured in the combustion chamber—the first opportunity to improve efficiency begins with the fuel itself.

The 8th Annual National Biodiesel Board (NBB) Conference and Expo were just held at the Phoenix Convention Center, from Feb. 6 to 9. I have had the pleasure to attend all but one of these conferences over the past eight years and found this year’s conference to be very unique and inspiring.

In 2010, the biodiesel industry was faced with two significant challenges. First was what feedstock sources would be allowed to participate in the new RFS-2 rulemaking process and what impact would this make in the Advanced Biofuels marketplace. The second challenge encompassed whether or not the U.S. Congress would extend the $1 per gallon biodiesel blender tax credit. What seemed like storm clouds in 2010 turned out to be a pathway for new economics and business development opportunities for what the EPA now classifies as “Advanced Biofuels.”

It became very clear to me after several conversations with key biodiesel and petroleum leaders at the NBB Conference that the Oilheat industry is about to see changes to the fuel—not simply because of the environmental benefits or national energy security concerns, but because it is becoming a case of simple economics.

The Renewable Fuel Standard (RFS) program regulations were developed in collaboration with refiners, renewable fuel producers and many other stakeholders. The RFS program was created under the Energy Policy Act (EPAct) of 2005 and established the first renewable fuel volume mandate in the United States. Under the Energy Independence and Security Act (EISA) of 2007, the RFS program was expanded in several key ways:

• EISA expanded the RFS program to include diesel, in addition to gasoline;
• EISA increased the volume of renewable fuel required to be blended into transportation fuel from 9 billion gallons in 2008 to 36 billion gallons by 2022;
• EISA established new categories of renewable fuel, and set separate volume  requirements for each one.

EISA required EPA to apply lifecycle greenhouse gas performance threshold standards to ensure that each category of renewable fuel emits fewer greenhouse gases than the petroleum fuel it replaces. RFS-2 lays the foundation for achieving significant reductions of greenhouse gas emissions from the use of renewable fuels, for reducing imported petroleum, and encouraging the development and expansion of our nation’s renewable fuels sector.

So why does this impact my current business as an Oilheat provider? Oilheat is a recognized fuel under the RFS-2 rulings, thus it allows heating oil to be utilized as a defined market under the diesel fuel requirements.

To meet the new RFS-2 rulemaking process, refiners, importers and blenders of distillate fuels are beginning to utilize heating oil as an additional fuel to meet the RFS-2 requirements, with energy traders currently hedging biodiesel against heating oil contracts.

In 2011, the diesel requirements under RFS-2 are no less than 800 million gallons moving to 1 billion gallons in 2012.

The overall success of marketing Bioheat requires a collective distribution effort through coordinating biodiesel producers, petroleum terminal operators and Oilheat dealers.

Through the last five years, biodiesel producers have been up to the challenge of facilitating all of the demand requirements of the distillate markets. The availability of ratable biodiesel distribution and Oilheat demand has seemed to have a chicken and egg dynamic at times through the same period.

I have heard complaints from several Oilheat dealers through the years that they would really like to become a Bioheat marketer, however biodiesel is not available to them from their current suppliers.

With the new RFS-2 rulemaking process, distillate terminal operators face the choice between buying RINs or installing the biodiesel blending capacity to become compliant within the new laws as stated by the EPA.

As we move into the future, my belief is that we will see greater biodiesel availability at the terminal level. The question is what Oilheat marketers will step up and recreate their brand and which will sit it out for now and see what happens.

The federal government has made a firm commitment to improve the nation’s carbon footprint and air quality. Biodiesel is now recognized by the EPA as an Advanced Biofuel and the biodiesel industry has grown rapidly over the last decade, even with the hurdles it overcame in 2010.

The Oilheat dealer who may have been a bit apprehensive about the future of biodiesel should now feel confidant and assured that Advanced Biofuels are here to stay. As we wind down another heating season, you will likely begin to think about what types of marketing plans to consider to grow your business in 2011.

Is the next heating season going to be the time that your organization moves from a 20th century oil heat dealer to a 21st century Bioheat marketer? It is probably worth noting that your competitors will be asking themselves the same question as well. So do you want to take the lead or follow?

In suburban Connecticut and many other Northeastern suburban communities, the latest buzzwords to describe the current local economy is the “new normal.” Thousands of independent, small and medium-sized businesses are facing extraordinarily sized contractions to their sales and revenues. Financial services firms, real estate and construction companies, retail main street businesses and service companies are financially suffering to the tune of 30 to 50 percent declines in revenues over the past 5 years. The reality of high unemployment and reductions in consumer spending are beginning to settle into the current economy. We all hope this economic correction will end soon, but there are few, if any, optimistic signs in the new normal.

In 2010, the U.S. biodiesel industry also experienced a drop in domestic gallons produced and distributed, largely due to the failure of Congress to reinstate the $1 per gallon biodiesel blenders excise tax credit, and key market segments such as Bioheat are feeling its effects. The independent retail oilheat marketer is not insulated from the new normal. With the family budget under siege, conservation at home is having a significant impact on overall gallons sold. Other constant economic challenges for the oilheat marketer are sudden commodity changes in the price of oil, poorly hedged contract positions, natural gas competition and even Mother Nature, as temperatures fluctuate. Now more than ever, the oilheat industry must recreate its brand image. Integrating biodiesel into the existing petroleum infrastructure provides the oilheat marketer a new, improved liquid fuel for the existing oilheat consumer. In this fast-changing world, Bioheat represents a sustainable growth opportunity, presenting the independent oilheat marketer opportunity to grow and green their business in the new normal.

For marketers and distributors searching market certainty in uncertain times, Bioheat has become a significant beneficiary of the RFS2 rulemaking process. U.S. EPA now recognizes biodiesel as an advanced biofuel. Heating oil integration is allowable under RFS2 and provides an opportunity and a likely source for many mandated biodiesel gallons in coming years. The term Bioheat is a registered industry trademark whose definition is ASTM D396 heating oil blended with ASTM D6751 biodiesel.

RFS2 and renewable identification number (RIN) markets provide certainty for the long-term usage of biodiesel—Bioheat marketers can feel secure about marketing this renewable energy source. Another benefit of the new RFS2 rules is that all of the new regulatory reporting, RIN tracking calculations and other compliance regulations are all handled upstream between the biodiesel producer or importer and the oilheat and diesel fuel terminal suppliers. The oilheat marketer will continue to purchase Bioheat through its current petroleum suppliers, with regulatory reporting and RINs calculations in most cases already figured into the wholesale pricing, eliminating pricing confusion.

This past spring and summer, I spoke with numerous oilheat dealers at petroleum industry conferences, state association meetings and in several private discussions. I clearly sensed some concern from them about the future of biodiesel, because of the absence of the tax credit and the availability of ratable biodiesel supply. The truth is, with RFS2, a Bioheat marketer now has the ability to market an advanced biofuel to the consumer. Biodiesel is a liquid drop-in fuel of the highest quality; a renewable energy that possesses a minimum 50 percent reduction in carbon emission compared to distillate fuel. This reduction calculation takes into account indirect land use criteria as well as the life-cycle analysis of biodiesel.

Biodiesel is one of the few renewable energy technologies that has made its way out of the lab as a theoretical application, to become a viable renewable energy. Bioheat is ready for primetime distribution and consumer use today in existing heating equipment—without any modifications.

My son, Cole, and I we re watching the first round of the Major League playoff divisional series this weekend. Cole is 11 years old and is an avid baseball fan that receives a subscription to Sports Illustrated for Kids.

Cole was referring to his early season inside baseball edition, evaluating all of the playoff teams and the teams’ predictions prior to the season in relation to where they actually finished the season and why. As I listened to him, I began to all consider all of the variables, uncertainties and ebbs and flows of a long 162 game baseball regular season.

It started me thinking about the biodiesel industry in 2010—it too has had to encounter many variables, uncertainties and ebbs and flows. While there have been some real challenges with regard to the United States Congress passing an extension of the biodiesel tax credit, more recently there are increasing market pricing opportunities emerging upstream to the biodiesel producers and diesel fuel and heating oil terminal operators through this year’s release and final ruling of the RFS II.

On Feb. 3, 2010, the Environmental Protection Agency (EPA) issued the final Renewable Fuels Standard (RFS), provided in the Energy Independence and Security Act of 2007, the relevancy of which provides for a increasing number of mandated gallons of renewable fuel from now until 2022. More than 1 billion gallons of biodiesel is mandated for 2011 through the RFS II rulemaking process.

Heating oil integration is allowable under RFS II and provides an opportunity and a likely source for many of these biodiesel gallons. These EPA mandates provide greater certainty for the commercial distribution of biodiesel blended with diesel fuel and heating oil.

Although the reinstatement of the biodiesel tax credit is still the significant priority for establishing new infrastructure and distribution investments today, the biodiesel markets are finding new legs through RFS II and the subsequent RINs trading market, which has been established.

A RIN, or Renewable Identification Number, is the basis of compliance for the RFS. A RIN, simplistically, represents a barcode for a gallon of renewable fuel. Each type of renewable fuel under the RFS has its own specific barcode or RIN. The purpose of these barcodes is to track the mandates set forth in the RFS.

These RINs let the federal government know that the renewable fuel mandates are being met. Without the development of the RIN, the federal government would have a much more difficult task of keeping track of the RFS mandates.

RINs are generated by renewable fuel producers (e.g., biodiesel producers) and importers of renewable fuel. For every gallon of renewable fuel a RIN or RINs must be generated. The number of RINs generated depends on the type of renewable fuel produced or imported.

For example, every gallon of biodiesel will require a producer or importer to generate 1.5 RINs per gallon. On the other hand, a producer or importer of corn-based ethanol will only be allowed to generate 1 RIN per gallon.

So, the important question is, how does this affect me as a Bioheat® dealer?

Fortunately for Oilheat dealers and Bioheat dealers, the RFS II and RINs markets provide market certainty for the long-term usage of renewable fuels like biodiesel. Simply stated, a Bioheat marketer can feel secure about marketing this renewable energy source for the foreseeable future.

Other significant benefits of the RFS II rulemaking process to the Bioheat dealer include that all of the regulatory reporting, RINs tracking, calculations and other compliance regulations are all being handled upstream between the biodiesel producer or importer (obligated parties) and the Oilheat and diesel fuel terminal suppliers.

The Bioheat and heating oil marketer will continue to purchase Bioheat, as usual, through their current petroleum suppliers, with all of the regulatory reporting and RINs calculations in almost all cases already figured into the wholesale pricing so as to eliminate any pricing confusion.

This summer, I spoke with numerous heating oil dealers at petroleum industry
summits and conferences. I clearly sensed some concern about the future of biodiesel,
because of the absence of the $1-per-gallon tax credit. The truth is, with RFS II, biodiesel is now recognized as an “Advanced Biofuel” by the EPA, which insures its rightful place as a fuel of the highest quality, which possesses a minimum 50 percent reduction in carbon emission as to that of distillate fuel.

This 50 percent reduction calculation takes into account indirect land use and life-cycle analysis of biodiesel as well. Biodiesel is emerging as one of the few renewable technologies that has made its way out of the lab as a theoretical application to a viable renewable energy that is ready for primetime distribution and use today.

There is no updated news as I write this article regarding when the biodiesel tax credit will be extended. The National Biodiesel Board (NBB) is working very diligently with members of the United States Congress on the re-instatement of the biodiesel tax credit in Washington, D.C. State petroleum associations, the New England Fuel Institute (NEFI) and the National oilheat Research Alliance (NORA) have also been very supportive allies providing assistance in this effort.

The Oilheat marketplace provides today’s consumer with an opportunity to enjoy using a renewable energy to heat their homes without having to make any equipment modifications. We have the right story to tell and the Bioheat marketer is positioned perfectly to deliver the message and the fuel.

Bioheat Inside Baseball Prediction

It has been a very long season with many market variables in play for biodiesel in 2010.

The Oilheat marketer in 2010 and beyond has the opportunity to integrate an Advanced Biofuel, as stated by the Environmental Protection Agency. The continued collaborative efforts between the biodiesel industry and heating oil industry provides the ability to re-create the image of heating oil from a refinery by-product to the new space heating and hot water liquid fuel for the future, marketed directly to the consumer through the current independent oil dealer network. Looks like a winner!