By Laura Sanicola
(Reuters) - Chevron (NYSE:CVX) has indefinitely idled two biodiesel production facilities in the U.S. Midwest, the company confirmed on Friday, citing poor market conditions.
The second-largest U.S. oil producer bought biodiesel maker Renewable Energy Group (NASDAQ:REGI) for $3.15 billion in 2022 to expand its renewable fuels production to 100,000 barrels per day by 2030. The deal brought it 10 biodiesel plants and one renewable diesel facility.
Chevron idled plants in Ralston, Iowa, and Madison, Wisconsin, that combined can process 50 million gallon per year of biodiesel. Biodiesel production capacity was 2.07 billion gallons in December, according to U.S. government estimates.
Biodiesel is made from agricultural oils and animal fats, is more costly to make than petroleum-based diesel but is a cleaner burning fuel. Production also generates credits that can offset the cost of production.
Prices have slumped in recently months as supplies have grown and the value of renewable credits recently fell to a three-year low. The price of a blend of 20% biodiesel fell last month to $3.45 per gallon of gasoline equivalent, from the peak of $4.80 per gallon in October 2022.
President Joe Biden's administration last year increased the amount of biofuels that oil refiners must blend into the nation's fuel mix over the next three years, but the plan includes lower mandates for corn-based ethanol than it had initially proposed and sent credit prices lower.
Production of renewable diesel, another type of fuel produced with animal fats that can be used unaltered in diesel engines, is expected to reach 230,000 barrels per day this year, according to the U.S. Energy Information Administration.
Producers of renewable diesel generate more renewable credits due to their lower carbon intensity score than biodiesel.