A California Law Is Driving The Darling Ingredients-Valero JV Expansion

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About: Darling Ingredients Inc. (DAR), VLO, Includes: MPC, PSX, REGI
by: Tristan R. Brown
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Tristan R. Brown
Alternative energy, long/short equity, commodities, energy
Summary

The Darling Ingredients and Valero Energy JV Diamond Green Diesel has announced multiple large capacity addition projects over the last year.

DGD produces renewable diesel from lipid feedstocks that contributes to the federal biofuels blending mandate and Californian alternative fuels mandate.

Production margins for renewable diesel sold outside of California have likely fallen over recent quarters in response to weakened federal policy and low diesel fuel prices.

California's strengthened Low Carbon Fuel Standard mandate has strongly incentivized renewable diesel due to the fuel's low carbon intensity, resulting in high margins for DGD.

Darling Ingredients (DAR) is a food processing company that operates food, feeds, and fuels segments. Valero Energy (VLO) is an independent refining and ethanol production company. The two firms operate a