Good morning, everyone, and welcome to the Calumet Specialty Products Partners LP First Quarter 2024 Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to John Kompa, Investor Relations for Calumet. Sir, please go ahead.

Good morning. Thank you, Jamie, and thank you for joining us today for our first quarter 2024 earnings call. With me on today's call are Todd Borgmann, CEO; David Lunin, CFO; Bruce Fleming, EVP Montana/Renewables and Corporate Development; and Scott Obermeier, EVP Specialties. You may now download the slides that accompany remarks made on today's conference call, which can be accessed in the Investor Relations section of our website at calumat.com. Also, a webcast replay of this call will be available on our site within a few hours. Turning to the presentation on Slide 2 and 3, you can find our cautionary statements and tax disclosures. I'd like to remind everyone that during this call, we may provide various forward-looking statements. Please refer to the partnership's press release that was issued this morning as well as our latest filings with the SEC for a list of factors that may affect our actual results and cause them to differ from our expectations. With that, I'll now pass the call to Todd.

Thanks, John, and welcome to Calumet's first quarter 2024 earnings call. We have a number of items to discuss today as we enter what we expect to be a spring and summer full of strategic value-creating catalysts here at Calumet. Let's turn to Slide 4, and I'll start with an update on our C-Corp conversion. In short, the conversion remains on track, and we are optimistic that we'll complete the process in the next 60 days. This process has moved quickly, and I'm thankful to the general partner, conflicts committee, employees, attorneys, and everyone else involved for a thorough negotiation and efficient process to date. During the first quarter, we announced the completion of the conversion agreement. We filed the S-4 with the SEC, and upon final feedback, we'll distribute the proxy and schedule an investor vote. We continue to be optimistic about the opportunity this conversion provides for Calumet and our unitholders. Our current shareholder base is comprised of our general partner, insiders, a small group of loyal and significant deep value investors, and a broad set of retail investors. It's a good, stable investor base, but it lacks large institutional investors and passive index funds. Passive investment strategies now make up over 50% of the public equity market, yet they own almost none of Calumet as most indices can't hold MLPs by Charter. From a pure technical trading lens, this conversion is arguably one of the most important strategic steps the company has ever taken. Since we initially announced the conversion, we've seen an increase in our average daily trading volume of a little over 20%. The trading volumes are still quite illiquid compared to most publicly traded companies, and this conversion is a major milestone in removing that burden. For example, Calumet C-Corp peers typically have 20% to 30% of their shares outstanding held by passive indices. Again, we have almost none. The ability to add significant demand to the investor pool is exciting in itself, but compounded with the fact that Calumet presents a compelling opportunity to larger active institutional investors. We've been on the road talking to this group since our announcement. Like I mentioned with passive indices, our MLP status put most of this group practically off limits. Of course, this all changes post conversion. The next near-term priority is taking the last step in demonstrating the competitively advantaged position of Montana Renewables. With the construction behind us, our start-up year in the rearview, and old expensive feed process, we believe financial demonstration of the top-tier position that Montana Renewables holds is the next step in capturing the value of MRL for our unitholders. Third, we're deep into the DOE loan process, which we hope will unlock our MAX SAF expansion soon. Last, we continue to demonstrate the uniqueness and wide moat that exists in our specialties business. I'll hit on each of these items further, but let's first move to the results on Slide 5. In the first quarter, we generated $21.6 million of adjusted EBITDA. We had previously communicated that the quarter was marked by a rate ramp-up and inventory drawdown at Montana Renewables and a successful turnaround at Shreveport, both of which impacted results within our expectations. The one negative expectation was the magnitude of the seasonal weakness experienced in the Northern Rockies, as both gasoline and asphalt realizations were lower than normal. Every year, the Montana retail asphalt racks close for the winter and our asphalt sales mix shifts to 100% wholesale. This past winter, that occurred as normal, but a huge increase in WCS costs created a major price lag. As we sit here today, we're seeing retail asphalt sales start to pick back up as the paving season, supported by our polymer-modified asphalt plant, will be full steam ahead in June like normal. Let's turn to Slide 6 and talk about Montana Renewables. In past calls, we've talked about the significant milestones MRL has accomplished as it turned from an idea into a leading SaaS and renewable diesel business in a few short years. The next milestone is demonstrating a clean financial quarter. As we talk today, we've been operating for 5 months since the December restart. Each month has improved sequentially as we've ramped up rates, increased SAP production, reduced our feedstock carbon intensity, and worked through the old expensive feed. A primary advantage for Montana Renewables is our access to a host of feedstocks and our ability to utilize our leading pre-treatment technology to switch quickly to whatever market opportunities exist, which simply was not an option when our tanks are full. We expect industry feedstocks to price at CI parity over time, at least in the clearing house on the Gulf Coast. But as we have often discussed, the various speed classes, including tallow, corn oil, and vegetable oil, rotate among themselves and we can take advantage of that. This optimization value is driven by a short local supply chain, and it started to help again in March as demonstrated by moving back into the black financially, and it's now unconstrained as we have cleared the backlog of inventory built in the second half of last year. Of course, the current question outstanding for all participants in our space is the market environment, which we track using the index for renewable diesel margins made from soybean oil. This index has become the standard industry benchmark in RD. A couple of weeks ago, we hosted an Analyst Day in Great Falls, and the industry outlook was the primary topic of the conversation. In fact, the slides and script from that event are on our website for anyone who would like to go deeper. Staying on Slide 6 and looking at the right-hand chart, we show the renewable diesel industry capacity as a supply stack based on total net cost, and we overlay the normal index margin across the top. This top line margin is the regime that has governed the industry margins historically, at least until September of last year. In its normal regime, renewable diesel players expect to see a fairly steady index margin around $2 a gallon. We've talked about this in the past, so I won't go too deeply into it here. But the premise is that the incremental competitor sets the market price. We specifically think that the incremental player is the group of small-scale biodiesel plants that run soybean oil. This group typically requires an index margin of about $2 per gallon to be cash flow positive. However, for the last few quarters, the industry has observed a lower index margin of around $1 per gallon. Although we expect that to be a temporary condition, it is already doing lasting damage to farmers, biodiesel, and even some renewable diesel producers. How did this happen? Historically, the EPA has set the RVO to incentivize all forms of renewable energy and raised it annually to capture any increase in renewable supply. In that normal regime, all elements of the margin equation, the LCFS, Diesel, the BTC, REN, and the price of soybean oil, must interact in a way that incentivizes the incremental player to produce or else the mandated renewable volumes will not be achieved. In contrast to this, the EPA has set a 2023 to 2025 RVO at a level that's substantially below the industry's production capacity. For example, the industry's capacity is well above 6 billion gallons per year, but the EPA RVO was set at an implied level of 4.5 billion gallons. This challenges all biomass-based diesel producers, and we're seeing both biodiesel and renewable diesel producers being forced to close and reduce rates. Many have said that the level was set this way because it was difficult to predict the reliability of start-ups in this new industry and questions existed about the ability to source feedstock. With most of the large start-ups either now up or coming out this year and the feedstock situation clarified, we think that it's logical to revert to the now proven and normal methodology of including all production capacity in the RVO. After all, the original statutory demand for renewable fuels was to have reached 35 billion gallons per year by 2022, and the country has fallen well short of that plan as we're just over halfway there. In fact, closure and rate reduction announcements made so far this year have the industry moving backwards, not forwards. We need every drop of renewable fuels production capacity available plus a lot more to ultimately achieve our objectives. In short, the EPA should increase the RVO. Regardless of index margin, competitive advantage depends on total cost structure. The index margin will lift or lower all boats, and the competitive advantage in this space is driven by access to a free treater, advantaged logistics costs, economies of scale, a flexible feed slate, product yields, specifically SAF, and access to the right end markets. On the P&L, these items all come together to represent everything between the industry's soybean index margin and EBITDA. In other words, the breakeven level to the soybean index is a function of a company's operating cost, SG&A, logistics costs, and relative yield and CI differences to the soybean index. Right now, we believe this breakeven EBITDA level is about $0.85 a gallon for Montana Renewables, which we think is best-in-class. Ultimately, we think our costs will be closer to $0.65 a gallon as we continue to gain efficiencies, which is the gist of our original guidance of $1.35 a gallon of adjusted EBITDA in a normal regime of a $2 per gallon index margin. As I mentioned earlier, we do expect this normal regime to return, but that will require the RVO to be adjusted to incentivize the energy transition as it has historically. The next catalyst for Calumet that will stay in the MRL category is our MAX SAF expansion. Of course, this is directly tied to the DOE loan process, which is in the late stages and continues to progress well. We're going to refrain from sharing too much more on this project until we get to the finish line with the DOE, but we're incredibly excited about it. SAF is a tremendous opportunity for the world and for our industry. It's the only proven way to materially reduce emissions in the harder-to-abate airline sector, and it's an area that is brand new and creates meaningful upside. Just recently, the U.K. issued a SAF mandate starting in 2026 and growing from there. Japan, Singapore and India have also issued mandates or are in the late stages. The United States Grandstaff challenge calls for 3 billion gallons by 2030 and 35 billion gallons by 2050. Not only is this a new world of opportunity for SAF, but the SAF supply also impacts the renewable diesel balances and margin outlook. To illustrate that, simply reference the RD supply stack chart mentioned earlier, add another 3 billion gallons to the existing RVO employed demand, and you'll see that if the Grandstaff challenge is met by conversion of renewable diesel plants, which is the only demonstrated proven option, we're once again in a scenario where demand, including all existing biodiesel, can't be met by current supply. Needless to say, not only is SAF a tremendous advantage for us right now, it's also an opportunity that will transform the underlying fundamentals of renewable diesel in a positive way as industry volumes grow. Let's transact back to specialties for a minute, and then I'll hand the call to David. At our recent Analyst Day, we opened with more info on specialties than we provided in some time, and the feedback was that while we've all been focused on a new Montana Renewables, we haven't spent as much time talking about the rock-solid specialties business we have at Calumet, and the growth that the team has delivered over the past few years. We've mentioned before that our specialties business has seen 5 straight years of margin growth, which is a major accomplishment. This has been a combination of a data-driven approach to commercial excellence, an asset base and market reach that is incredibly agile, a culture of innovation, and a differentiated appreciation and service of customers. It's these things that allow us to both weather storms as we saw during COVID and capture the upside of the extremely strong markets we've seen over the past couple of years. The current market is in between these 2 extremes. Back during peak margin times, we highlighted that the increase in specialty margins from the historic $40 per barrel range was about half market and half a function of our commercial focus. I think the specialty margins have bounced between $60 and $70 a barrel over the past few quarters. We're seeing that in a more mid-cycle environment, this expectation was appropriate. The other thing we've mentioned in the past is the investment and reliability. We've made meaningful progress over the past couple of years and still have room to go as we recently entered the third year of the plan. In the first quarter, we saw an example that we expect to see more of as we continue to fortify our operations. 2 of the past 3 years, we've had winter storms that have paralyzed not only our Louisiana facilities but a lot of Gulf Coast infrastructure. This past winter, we had a similar event. And while we experienced a few days of downtime, lessons learned and improvements made allowed the plant to restart in days as opposed to having an event that would impact us much further. With that, I'll turn the call over to David.

Thanks, Todd. Turning to Slide 7, our SPS business generated $41.8 million of adjusted EBITDA during the quarter. As mentioned, we successfully completed our planned turnaround in Shreveport on time and on budget, and we've seen a string of successful turnarounds here, which continues to give us confidence in our ability to execute on our capital plan. The turnaround took us offline for approximately 7 days. While back in the beginning of the year, we didn't expect to see much of an impact on the financials from this, we went into the turnaround with a little lower inventory than originally planned. So it did cost us between 200,000 and 300,000 barrels of sales. On the commercial side, our team continues to deliver. We saw crude prices increase $8 per barrel during the quarter. The related lag is the majority of the decrease we saw in specialties material margin for the quarter. Price increases have now been passed through. The crude price increase also impacted asphalt margin in addition to a seasonally weak winter. Moving to Slide 8. Our Performance Brands segment generated $13.4 million of adjusted EBITDA for the quarter. In this segment, we drove year-over-year volume growth of approximately 13%, reflecting excellent execution by our commercial team. Our first quarter 2023 adjusted EBITDA also increased by approximately 17.5%, or $2 million year-over-year when considering that the prior period reflected a $5 million insurance benefit. With the business on solid footing today, we remain focused on continuing to grow our core industrial business lines, particularly in mining, power, and marine applications. We also continue to remain excited about the opportunities we see as we view the specialties business as one whole business as opposed to 2 individual segments. Both STS and Performance Brands have benefited from leveraging the ingrained commercial options that exist in these businesses. Turning to Slide 9. In our Montana business, we recorded a loss of $14.5 million of adjusted EBITDA for the quarter. We've talked about the old expensive feed and how full inventory tanks block the ability to optimize feeds for some time now, so I won't rehash that here. Progressing through the old feed during the quarter, along with making sequential month-over-month improvements in essentially every facet of the operation, allowed us to close the quarter with positive adjusted EBITDA in March at MRL. Halfway through the second quarter, operations are holding strong. It's no surprise that industry index margins aren't helping any of us in RD at the moment, but we do continue to expect a clean quarter in Q2 and are focused on continuing to demonstrate the competitive advantages we have in this business. While we do that, we'll wait for industry margins to recover; we continue to believe that industry margins should improve as higher-cost producers shut down or cut back, the new LCFS levels solidify, and ultimately, the industry starts to gain information on new RVO levels that take into account the new production that has been added to the industry. As these steps occur, we expect industry margins to regain fundamental support levels and ultimately rise to the historically approximately $2 a gallon level that we've seen persist steadily for years. Turning to our CMR business. The first quarter started out with an extremely soft local gasoline and asphalt market in Montana. In fact, while we don't break out Montana Renewables and CMR businesses just yet, I can say that of the approximately $14.5 million of negative EBITDA in Montana and Renewables segment, the vast majority of the loss came from the legacy CMR business in Q1. Historically, Montana's asphalt plant is the most seasonal of our assets as it's highly dependent on wholesale, asphalt, and local gas demand. While we typically expect around breakeven results in Q1 that then historically improve as we gear up for the local paving season in spring and accelerates in the summer, the first quarter was tougher than normal. While wholesale asphalt margins are always less than retail, Q1 impacts were exacerbated by a rapid run-up in WCS prices, which further compressed margins. Production was also reduced due to a minor maintenance issue, and results were negatively impacted by a $4 million utility surcharge that stemmed from a number of negative 30-degree days and lower in January. In closing, let's move to Slide 10. We've highlighted a number of key catalysts in what we expect to be a transformative year for Calumet that are intended to support our strategy of maximizing value for unitholders. First, our C-Corp conversion remains on track to close mid-year. As we've said before, we believe our story is an interesting one for all investors, and we're excited to prove the ability for a broader set to be able to invest in the Calumet story. Plus, this conversion allows index inclusion, which will help support broader demand for our equity. We are extremely focused on also demonstrating the competitive advantage of our Montana Renewables business, driven by our superior logistics advantage and location. Again, we saw consistent improvements throughout the quarter across all relevant metrics: production, sales, cost, staff, and continue to make improvements into Q2. As Todd stated, our work continues on securing the DOE loan, which supports the final investment decision on our MAX SAF expansion project. Discussions are active and advancing. Finally, we remain committed to reducing our debt levels, and we repaid $50 million of our 2025 notes earlier in April. We believe we have a number of levers to continue to delever over time, including cash generation of our proven specialties business, the potential monetization of MRL, and upside potential from MRL's anticipated cash generation.

That concludes our prepared remarks. We'd now like to open the line for questions. If you can remind the callers of those instructions. Thank you.

I guess I'd like to dig in just a little deeper. Todd, you mentioned 5 months. Now you've been running MRL well and getting through the disadvantaged feedstock. Can you just kind of give us a little more detail on maybe that process of disadvantage to advantaged feedstock and then just kind of a quick little synopsis of how the hydrogen units working since that was part of the challenge to the shutdown last fall.

I'll start and then we'll jump to Bruce. I think the primary advantage on just working through the old feedstock is two-fold. One, obviously, it was more expensive. We've seen prices drop rapidly over the last 6 months since the RVO was set. The RINs have led the price down, and we've seen the feedstocks follow. Having a tank full of just inventory bought at previous times and contracts that were rolled from those environments was a major headwind for us, and we're glad to have that behind us. I think the second impact is our primary advantage or one of our front advantages in Montana Renewables is to be able to switch very rapidly and take advantage of more discounted feeds, lower CI, as you name it, feeds with higher SAF yields. We had that ability to switch in the fourth quarter and the first quarter results would have been dramatically different from what we saw. We saw some of that start to open back up in March. If you were to look at our feed runs, the feeds light, what you'd see is we primarily had to run vegetable oil purchased last year throughout the winter just because that's what we had contracted and what we had in our tanks. As we work through that, we had some flexibility to add more tallow to the mix and the likes. So happy to have that behind us, and we have that full ability available to us going forward into Q2. As far as the hydrogen plant, it's been running well. We started back up in December. Obviously, not everything is perfect. We're still in the early stages of operation. But all being said, we've improved every single month. If you saw some of the press release and the investor deck we put out this morning, in April, we're at full run rates. We're essentially at 12,000 barrels a day. Very happy with our SAF fields progressing. As I said, we have that ability to switch feeds and maintain our advantage. Overall, pretty happy with where we've been and where we sit at the current time. Bruce?

I think that was pretty thorough. I'll just add the mechanical availability of the site has been great. The fact that we had an unplanned reduction at half rate last August, which is of course behind us, backed up to about 650,000 barrels of incoming feed pointed at us by rail during that period. We had to spend down the railcars per day rate, and then you had to unwind that and spin it back up. Those are not instantaneous moves like they are with pipeline networks.

The other question I have in recognizing the start-up issues with MRL, the seasonal factors, what's the expectation we should have for cash flow generation, bringing down probably working capital as we look here at the summer months? Just kind of thinking of the broader cash flow and free cash flow expectations.

Roger, it's Bruce again. I would say, first of all, it's positive. You are recognizing that we built inventory, which cost us cash last year. As I basically just said, we're pulling it, which is correct. We're going to hit a normalized level, though, or have had a normalized level with the completion of pushing the old feed out. That's the old feed quality, the old feed price, and the old feed volumes, right? So I don't think looking forward, we're planning to have working capital moving.

I guess I was even meaning more for the broader corporation.

Okay. Apologies. I gave you the MRL answer. I'll get David to highlight.

Maybe I'll just pile on here. I think the same is true for the whole organization. Most of the working capital buildup that was absorbed in Q1 was in Montana Renewables. It was a function of the old feed higher than normal inventory levels more expensive than we're seeing in the current market, and we had to pay for those feedstocks as they came in. So that's normalized. We also see rates increase pretty dramatically. And as rates increase sequentially, as we talked about, you have to replace those feedstocks and you're buying more ahead and all of that. Like Bruce said, I think we'll see a little bit of a working capital swing. We had too much on the balance sheet in Q1. We'll see a little bit of that come back in Q2, and we think reach a normalized level going forward after that.

I guess, are you seeing leverage associated with Montana in Q2 '24 and for the year in general? And how are you progressing on the debt reduction front?

Hey Saumya, it's Bruce. I heard most of that. You were asking about Montana leverage and debt reduction. I'm going to let David and Todd tackle the corporate level debt positioning. Within the unrestricted subsidiary, the leverage is really going to be a function of the market margin. Todd discussed how that is artificially low due to some PPA actions, and we're expecting that to normalize. There's a lot of speculation in the industry about how fast it normalizes. I don't think we have a better crystal ball than others, but we expect all of this to be cleared out by the end of this year in terms of reversion to a normal market condition for renewables. For fossil, on the specialty asphalt side, Q2 and Q3 are normally the most cash flow-contributing quarters for the year. This is a much more strongly seasonal market than trailing U.S. averages. So we're expecting that the sum of all of those things is a little uncertain as to timing but is certainly normalizing by late fall.

Sure. Regarding leverage and indebtedness at MRL, there are no plans to take on additional debt, and any changes to that capital structure would only occur alongside a deal you might possess. I wouldn’t anticipate any developments in that area. While I can't provide specific guidance on ongoing discussions, we appreciate your patience. We do not expect to incur any additional debt unless it pertains to a DOE loan for the MAX SAF expansion. On a broader scale, Calumet is prioritizing reducing debt. Any operational cash flow will be directed towards paying down debt at the parent level, which outlines our deleveraging strategy for the entire group.

As well as monetization from Montana Renewables when the time is right.

I'm just going to ask, I don't know what you can say, because you said you can't say too much, but the expansion project, is there much you can tell us there about the potential size? I think you also talked about at some point breaking out results for MRL. Is that something we should expect next quarter?

Hey Gregg, it's Bruce. I'll start. In terms of breaking out the results, I'll pass that question. But on the MAX SAF, we've used an external placeholder of 18,000 barrels a day for a number of years now. We're very comfortable with that being at the floor or low end of what's going to be delivered. I don't think we need to re-guide that this morning, but I am super comfortable with that 18,000 that has been out there for a while.

Yeah. I think the expectation continues to be that we will split out Montana Renewables going forward. David mentioned in the prepared remarks a little bit about kind of the EBITDA split in the segment. Obviously, can't give specific numbers, but the vast majority of the loss in Q1 was from the legacy Montana asphalt business during the winter, which we expect to return, and Montana Renewables should be split out separately in Q2.

Got it. I know no one has asked about the RINs question yet, so I'll bring it up. There has been some good news from the Fifth Circuit. Can you update us on what happened there and what’s next?

Bruce again, I will start this off and then see if anybody wants to fill in. So the whole industry is still working through the EPA's total reversal, of course, on their administration of this. Those actions begin in the federal district courts. Some of them have been consolidated into the D.C. circuit, but not all. In the Fifth Circuit, which is where our Shreveport operation lies, the current rule that EPA's reversal was not proper, it was contrary to law, was contrary to the administrative record, and they remanded it back to the EPA for a deal offer. We're basically waiting to hear from the EPA how they would like to proceed. The Montana business is in the D.C. circuit. It's one of the consolidated cases. Those oral arguments have been held, and we will all be awaiting a court determination. Our view is it's likely similar to the Fifth Circuit for the same reasons, but that would be speculation. The lawyers tell us that, that's second half most likely when we get the published decision in the D.C. circuit. Does that help?

Yes. And then just the Montana decision then we would go back to the EPA again if it went in your favor. Is that correct?

Yeah. And again, this is not just Calumet. There's a lot of companies in the same bucket. It was actually in the 11th circuit involving some others and so on. I think the stage is reasonably set for a statesman-like gentle guidance that pulls the parties all back together. I do note that Senator Tester instantly introduced a bill to clean some of this up about a month ago.

Could you provide an update on the repayment of the inventory facility this quarter? Did that enhance your borrowing capacity, and what is its current status? Additionally, regarding the debt, could you remind us of the flexibility to utilize cash from MRL to assist in paying down the 25s, if that is an option?

If you look back to last year, we had three inventory financing facilities: one at MRL, one at CMR, and one at Shreveport. To clarify, the inventory from CMR was added to the ABL. We refinanced the Montana facility last year, and the refinancing that was completed in mid-January was for our Shreveport facility. It operates similarly to the previous one and has marginally improved our liquidity. While it wasn't a significant change, it did offer us a better facility overall. Regarding your second question, there is some capacity for cash to return to the parent company, and this will be clearly defined, potentially through dividends shared with our existing partner.

Got it. And just to clarify on the borrowing base. What is the borrowing base today, what was it as of quarter end? Just trying to figure out what your liquidity is on that.

Yes, so liquidity finished the quarter at about $212 million. The borrowing base was $564 million, but the total facility size is about $650 million. So it's well north of $200 million of available liquidity.

I want to first go on the monetization process of MRL. I think in the past you've kind of discussed it being a 2024 event, but just given some of your commentary on the near-term outlook for the renewable diesel margin environment, do you still see it being a 2024 event or do you see a better opportunity to maybe generate more proceeds if you push the monetization out a bit?

Hey Jason, it's Todd. I'll start, and let's see if Bruce adds on. We view it as an opportunity. We've been very clear that we want to monetize a portion of Montana Renewables. It's a piece of our overall deleveraging strategy for the organization, so that remains front and center. At the same time, there's no super urgency to go do something in the near term if the market is not supportive. What we want to do is balance the risk-reward there, if you will. If industry margins remain as low as they are and there are questions around the space and the eyes of investors, and we're not getting proper value for the asset, then you're right, it would be silly to go out and transact in that environment. That being said, I think with a clean second quarter, we can prove the competitive advantage of Montana Renewables, differentiate ourselves in the space, start to see a little bit of index margin return, and as investors get more confident in not only renewable diesel, but ultimately, our first-mover position in SAF, you could see someone reach out and want to move sooner than that and not necessarily have to see the perfect industry margin for some amount of time. So we'll remain opportunistic on that. We're super focused on reducing debt. We don't want to be overly greedy, but at the same time, we're focused on ultimately on shareholder value. So we love that balance.

And then on the treasury recently released guidance around 40B, the SAF lenders tax credit through 2025. Just wondering how that impacts your ability to generate value under that SAF credit. I know there were some unique carve-outs for vegetable oil based feedstocks, and you run a decent amount of canola oil at the site.

All of our SAF is produced from tallow.

Okay. Under the MAX SAF case, would that also be true?

We can. The best way to think of the MAX SAF is a yield flexibility project. I want to make sure that our investors all understand, this is not some giant bifurcated decision where we either have diesel or SAF, we're going to be just like the petroleum refiner; we're going to be able to toggle between those 2 distillate products smoothly, flexibly, and we're going to follow the markets.

Okay. But just to be clear, is your understanding for 40B that canola wouldn't generate much value if it was used to produce SAF under the guidance from treasury?

Jason, yeah. And I don't want to be cute here, but you're making an assumption on where we sold the SAF. I wouldn't make that assumption. The world has just set a SAF target in the very near term. Between Singapore, U.K. and the EU, they have called for 383 million gallons a year of SAF, which doesn't exist. The way the trade flows rearranged is a speculative endeavor. The interest that we've got is very, very tactical. We share our border with Canada. That's Canadian canola we're talking about. In the summer, we've seen 50% of our production turn around and go back north. The economics of that are going to have to overcome alternate dispositions. If the world calls for more mandated volume blending than SAF barrels exist, there's an implication for price in that. So we think that there's just going to be huge disconnects, a lot of volatility in the emerging SAF market. We think there's some evidence governments are competing with each other to be the ones that get it. A state incentive like the Illinois SAF lender tax credit at $1.50 a gallon for Illinois taxpayers who can access it is also on the table. There's going to be a lot of duck feet paddling under the surface on this for some time to come. We moved into underwriting several months back. I'm reasonably confident we announced that. That process is substantially advanced, and I think I'm going to leave it there.

I really like that slide you showed on the cost curve for renewable diesel and biodiesel. At current pricing, a lot of stuff is off that stack. So I just love your perspective of do you think we see industry rationalization here to help bring the market into balance if we don't get a firming up of LCFS and RINs, and we saw some evidence of that this week.

Sure. I'll start. A couple of things to keep in mind. First of all, we're already seeing industry rationalization. We've had 4 biodiesel plant closures in the last 6 months. We've now, amazingly, got renewable diesel producers switching back to fossil. These are not sustainable and a couple of things are going to happen. We'll have more closures. We'll have the EPA reset the RVO, and we're going to have crop prices continue to collapse. If you pull a history of a marker like the soybean oil priced off the Chicago Board, that's fallen 50% in the last 18 months. These are going to draw a regulatory response somewhere. The speculation is just who moves and when and how fast. Right now, to be clear, the EPA has set up a commission where the entire existing North American industry has to run something like 65% of utilization. That is absolutely going to sort out the players according to this cost stack.

I think what I'd add to that, Neil, is to Bruce's point, we're well below where the fundamentals would show on the supply stack. We haven't seen shutdowns happen as quickly as we would need to kind of balance out the curve. If you look at 4.5 billion gallons, you would say, hey, that should be set. Are those volumes met by large biodiesel? The current index margin is much lower than it needed to generate cash by that group. One thing that we've heard quite a bit about is how hedging plays into this. When you think about a crop cycle and hedges that are going summer to summer, we have a little bit of probably irrationality and day-to-day decision-making, which as that rolls off, that group of people will have to make different economic decisions. To Bruce's point on crop prices, an equal opposite reaction in any of the other margin elements would be needed, or else we wouldn't see continued production there.

Yes, mid-2024 is still the timeline. We've checked a lot of boxes along the process. It's been a very efficient process. We filed the S-4. We'll get the final amendment out and schedule a unitholder vote. Those are really the major 2 steps left to getting this done, which gives us confidence that it's kind of in the near term. As far as investor perspective, they've been quite positive and also eye-opening as to the restriction of the MLP. If we go back, we've known for some time that MLPs were out of favor. At some point in time, this decision would be ahead of the general partner and the conflicts committee, et cetera. I think what we probably didn't appreciate was just the amount of investors that are simply unable to invest in MLPs due to charter. A lot of the institutions we've talked to have said, we really like the Calumet story, have been following it generally. I know that it's a catalyst-driven story and also know that our support of the 2 long-term fundamental businesses and the growth trajectories, but we really haven't been able to invest in it. I think they're off doing work and getting deeper into the name now. They're not a magic bullet that happens on conversion day where all of a sudden our trading liquidity quintuples or something. But we certainly do expect a combination of new institutional investors who otherwise couldn't have invested before, but would like to come into the name, and we will also benefit from just the passive indexes adding us. Those things have become quite big. 50% of the general equity market is held under passive strategies right now, which is just an astonishing amount of investment dollars that Calumet doesn't have access to.

Thanks, Jamie. On behalf of the Calumet management team, I'd like to thank everyone for their time this morning and your continued interest in this company. Have a great weekend. Thank you again very much.

Ladies and gentlemen, with that, we'll conclude today's conference call. We thank you for attending today's presentation. You may now disconnect your lines.