Alabama biofuel producer files for bankruptcy

Vertex Energy, an Alabama-based biofuel producer, filed for bankruptcy after struggling to stay afloat for months.

The company said a sale may be one of its options as it succumbs to an unfavorable macroeconomic environment that earlier this year forced it to close its biodiesel production facility in Mobile, Alabama.

Vertex’s woes likely stemmed from the rapid growth of biofuel production capacity in the United States in recent years. Even traditional refiners have converted their refineries to biofuel production facilities in anticipation of substantially higher biofuel blending requirements from the federal government.

However, the Environmental Protection Agency announced only a moderate increase in future blending quotas, disappointing many biofuel hopefuls and forcing some to convert their refineries back to hydrocarbons.

Vertex was one of those: In May, the company said it would convert its biodiesel hydrocracking unit at the Mobile refinery to hydrocarbons by the end of this year.

“Due to the significant macroeconomic headwinds for renewables over the past 12 months, many of which we believe will continue to emerge over the next 18 months and beyond, we have decided to strategically discontinue our renewable diesel business and transition to fuels conventional from the hydrocracking unit,” Vertex chief executive Ben Cowart told investors at the time.

That was apparently too little too late, as last month Vertex posted a second straight quarterly loss and hired a chief restructuring officer to help it sort things out. “There is substantial doubt about the company’s ability to continue as a going concern,” Vertex said in an SEC filing.

The Wall Street Journal recently summarized the woes of the biofuels industry, which has seen energy companies pull away from the segment with disappointing performances. Among them are majors BP and Shell, which have suspended biofuel projects in view of disappointing demand.

By Charles Kennedy for Oilprice.com

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