Tidewater Renewables prepares trade case against Canadian imports of US renewable diesel

Canadian renewable diesel producer Tidewater Renewables said in its third-quarter earnings report that it has engaged external trade-law counsel for a trade-remedy complaint it plans to submit to the government of Canada soon against U.S. renewable diesel entering the Canadian market.

Tidewater Renewables said its management believes U.S. renewable diesel entering Canada is unfairly priced and having “a significant negative impact on the competitiveness of our domestic operations.”

A trade case against renewable diesel imports from the U.S. “has a reasonably high likelihood of success,” Tidewater said its management believes, based on available information and advice.

“Preparation of the corporation’s trade complaint is progressing at pace,” the company stated. “Filing of a complaint may occur before the close of 2024 and, if a government investigation initiates and concludes that unfairly traded imports are harming Canadian production, duty relief would then be available in 2025.”

Tidewater Renewables said it is seeking fair competition to support the viability and further growth of the Canadian renewable diesel industry, which will also enhance Canadian energy security.

“Looking ahead, if no substantive changes to the regulations have been implemented by the end of the first quarter of 2025, and if no regulatory relief is forthcoming in response to the corporation’s antidumping and antisubsidization complaint, Tidewater Renewables will be compelled to consider alternative strategies to address the challenges facing the business,” it stated. “Additionally, if there are no indications of demand and price recovery in the emissions credit market by that time, the corporation may need to take actions to ensure its financial stability and sustainability.”

The company said it may explore options including further asset dispositions, corporate restructuring, alternative debt and equity financing, and refinancing arrangements.

“Should these efforts ultimately prove insufficient or unsuccessful, the corporation’s ability to continue as a going concern may be in jeopardy,” Tidewater Renewables said. “The corporation is fully aware of the potential risks and challenges inherent in these courses of action and will take all necessary steps to protect the interests of its stakeholders while navigating these difficult market conditions and decisions.”

The company has been actively engaged in discussions with the governments of Canada and British Columbia regarding potential modifications to low carbon fuel policies that currently allow subsidized U.S. renewable diesel producers to take advantage of overlapping U.S. and Canadian policies.

In September, Tidewater Renewables completed a transaction with Tidewater Midstream, selling its canola coprocessing and fluid catalytic cracking infrastructure, various refinery interests and a natural-gas storage facility, along with the assumption of certain liabilities, for CAD$122 million (USD$86.6 million).

The company said the completion of the transaction improved its leverage profile and reduced cash-interest costs, thereby helping to address short-term liquidity issues caused by the significant decline in BC LCFS credit prices attributed to the overlapping U.S. and Canadian low carbon fuel policies, and the resulting inflow of U.S. renewable diesel from the oversupplied U.S. renewable fuel market into the higher value British Columbia market.

“While the transactions immediately enhanced Tidewater Renewables’ leverage profile and reduced cash interest costs, uncertainty remains regarding the future market demand for, and prices of BC LCFS and Clean Fuel Regulation emission credits,” the company said. “If such emission-credit prices and the demand for such emission credits do not recover before the second quarter of 2025, the corporation’s ongoing operations, financial position and liquidity will be significantly and adversely impacted.”

Tidewater Renewables said in the longer term it believes that the combination of supply and demand fundamentals forcing the shut-in of high-cost U.S. renewable fuel production, tightening California LCFS compliance obligations, and tightening BC LCFS compliance obligations, should ease the pricing pressure on, and increase the demand for, BC LCFS credits and renewable diesel.

“In addition,” the company added, “cold-weather diesel specifications are expected to limit physical imports of renewable diesel into BC in the fourth quarter of 2024 and first quarter of 2025, which should also assist in increasing demand and easing pricing pressures.”

Also in September, Tidewater Renewables closed the sale of assets from its used cooking oil feedstock business, generating total proceeds of CAD$10.6 million (USD$7.5 million).

The company’s renewable diesel unit in Prince George, British Columbia, achieved average daily throughput of 2,849 barrels (119,658 gallons) during the third quarter, representing a 95 percent utilization rate.

Over 140 million liters (37 million gallons) of renewable diesel has been produced and sold into the local British Columbia market since the complex began commercial operations in November 2023.

Tidewater Renewables also said it continues to make significant progress on the front-end engineering design (FEED) of its proposed 6,500 barrel-per-day (273,000-gallon-per-day) sustainable aviation fuel (SAF) project.

The project remains contingent upon a final-investment decision, which is anticipated in 2025.

For the three months ended Sept. 30, 2024, the corporation reported a net loss attributable to shareholders of CAD$367.1 million (USD$260.6 million), compared to net loss attributable to shareholders of CAD$9.4 million (USD$6.7 million) in the third quarter of 2023.

The increase in the loss was driven by losses incurred on the sale of assets, and realized losses on derivative contracts, as well as higher financing costs, which were partially offset by higher operating income and deferred tax recoveries.