Houston (Platts)--25Jul2013/246 pm EDT/1846 GMT

US biomass-based diesel production in June climbed 4.67% on the month to 146.52 million gallons, data released Thursday through the US Environmental Protection Agency's Moderated Transaction System website showed.

Last month's output was the highest since December 2011.

Biodiesel producer and trading sources said the rise in production was not surprising, as prompt prices had consistently hit record highs throughout June.

US biodiesel assessments hit record-high levels for the third straight session Wednesday, with Chicago SME biodiesel and US Gulf Coast SME biodiesel assessments at $5.1470/gal and $5.2470/gal, respectively.

Production has risen for five of the past six months since the January 2 return of the $1/gal biodiesel blending tax credit, alongside a 10 cents/gal credit for agricultural biodiesel producers.

"This is further proof that policies like the RFS are delivering," Anne Steckel, vice president of federal affairs at the National Biodiesel Board, said in a statement. "Just this week, gas prices were the third highest on record, even as we're drilling more and more oil here at home. It just shows that we need alternatives if we're going to escape this cycle of price spikes in the oil markets."

With the 2013 biodiesel target for the Renewable Fuel Standard-2 at 1.28 billion gallons, total domestic biodiesel production had accounted for 54.83% of the targeted mandate at the halfway point.

Based on the pace through June, total biomass-based diesel production is projected at roughly 1.40 billion gallons, significantly higher than the projection of 1.15 billion gallons through the first three months.

Monthly biodiesel production, indicated in the biomass-based diesel (D4) category by the EPA, met the 1 billion gallon 2012 biodiesel target for the RFS-2, totaling 1.1 billion gallons last year.

"It's another record-breaking month, but it's a shame that it doesn't really matter now that we are hitched to the ethanol wagon," a biodiesel producer source said, referring to the fact that biodiesel not used toward the mandate can be applied to the targeted ethanol mandate in the RFS.

--Jordan Godwin, jordan.godwin@platts.com --Edited by Kevin Saville, kevin.saville@platts.com

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