Boosted by strong federal policy aimed at diversifying the transportation fuels market, the U.S. biodiesel industry reached a new production record for the first half of the year and is on pace for its best year ever, according to new EPA figures.

Biodiesel refiners across the country have produced more than 636 million gallons through the end of June, the EPA reported. That puts the industry on pace to break the previous annual biodiesel production record of just under 1.1 billion gallons and to significantly exceed this year's volume requirement under the Renewable Fuel Standard.

Biodiesel, made from a diverse mix of resources including soybean oil, recycled cooking oil and animal fats, is the only EPA-designated Advanced Biofuel with commercial-scale production nationwide, and the first to reach 1 billion gallons of annual production. In 2011, production reached nearly 1.1 billion gallons. It remained flat at that level in 2012 after Congress allowed the $1-per-gallon biodiesel tax incentive to expire.

But this year, after Congress restored the tax incentive and the EPA finalized a volume increase under the RFS, the industry is poised to shatter previous records.

"We've been steadily increasing volume and are planning to run at maximum capacity for the rest of the year," said Karl Radune, president of BioDiesel One Ltd., a small producer in Southington, Conn., that makes biodiesel from recycled cooking oil. "It's allowed us to build inventories, reach out to new customers, and recapture some of the customers we lost when the tax incentive lapsed last year."

Radune said he also is hoping to boost staffing but remains concerned that Congress might allow the tax incentive to expire again at the end of the year, as it did in 2010 and 2012.

"The uncertainty around the tax incentive makes it very difficult to plan for growth," he said.