W2Fuel is pursuing a state grant that could support a major expansion at its biodiesel facility in Adrian, Michigan, potentially increasing annual production capacity from 15 million gallons to 20 million gallons by the end of the year.
Speaking in an interview with OPIS on the sidelines of the Clean Fuels Conference in Orlando, Florida, W2Fuel CEO Roy Strom said the grant would cover roughly 70% of the $4 million project cost.
The expansion would focus primarily on infrastructure improvements, particularly rail access, which Strom described as a current constraint, explaining, “Right now, [we] don’t have the infrastructure to handle additional trucks or rail cars,” he said. “If [we] … get the grant, [we] can do a lot of business by rail.”
Strom told OPIS that the timing of the grant decision remains uncertain, stating, “We’re thinking it might be March. We’re hoping sooner.”
When asked how confident he was that the application would be approved, Strom was cautiously optimistic. “That’s a good question; we hope that it’s 80% to 90%.”
If awarded, Strom said the project would begin immediately. “The project would start the day after they say yes,” he said, adding that construction would take three to six months. That timeline would allow the plant to reach the 20-million-gallon-per-year mark, “by the end of the year.”
During the OPIS interview, Strom also credited recent federal policy changes for allowing W2Fuel to resume operations after a shutdown, sharing, “I must give a shout-out to Senator Grassley. When they reinstated the small producer agri-bio credit, [W2Fuel] was actually able to start up and run in 2025.”
He explained that weak margins had previously forced the plant offline, stating, “Margins to that point had prevented us from running. The credit helps small producers like [W2Fuel] compete against larger-scale plants.”
The Adrian facility had been idled due to what Strom described as “margins and lack of guidance,” but is now operating close to full capacity. Strom explained, “January [we were] at capacity. February and March [we were] at about 80%.”
Strom said the company expects stronger bookings as market conditions improve. “We hope to book it out completely. We think we’ll be up to 100% for those months. The market just hasn’t provided the margins needed for us to finish booking Q1 out yet.”
He added that attention is now turning to the second quarter. “We’re hoping as the news comes out about finalizing RVOs [renewable volume obligations] and finalizing guidance on 45Z that the market will adjust and the margins will support us booking out Q2,” he explained. “They just don’t support us booking out Q2 at this point,” Strom added.
Despite past shutdowns, Strom said he is not worried about another near-term halt in production. “I think we’re going to get guidance on RVOs from EPA, and we’re hopefully going to get some kind of a proposed rule from Treasury,” he said. “We’ve got a strong RVO out there that’ll have to be met. I believe our ability to meet these RVOs will require participation by independent biodiesel producers, such as [W2Fuel], so margins will likely adjust to support it.”
W2Fuel’s tolling arrangement with Iowa Renewable Energy concluded in late 2024, and Strom said uncertainty around federal tax credit guidance makes its future unclear. “That one is really hard to say because of the lack of 45Z guidance regarding tolling arrangements,” he stated. “As far as I can tell, I am the only person who’s asked about where tolling fits into 45Z. I haven’t heard back from Treasury one way or the other, so we’ll have to wait and see. I would love to do it if supporting guidance comes out.”
In November 2024, W2Fuel sold its shuttered 10-million-gallon-per-year biodiesel plant in Crawfordsville, Iowa. Strom explained that, “No matter what we did with it, between its location and lack of infrastructure, especially rail, it was never going to be able to compete. It got dismantled and turned into a storage facility.”
As for future acquisitions, Strom said the possibility remains open, stating it was, “Always on the table.”
Article adapted from a post originally shared by OPIS. Image credits: Michigan Advanced Biofuels Coalition.