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January 2, 2010 in Business
Biodiesel production tanks
Federal subsidy of $1 per gallon ends
In April, Lyle Rudensey holds a cup of refined homemade biodiesel that he made from used cooking oil in his garage in Seattle.
(Full-size photo)
OKLAHOMA CITY – An alternative fuel for diesel engines is off to a shaky start this year though it emits fewer pollutants and cuts down on petroleum use because it’s made from environmentally friendly waste and vegetable oil.
A federal tax credit that provided makers of biodiesel $1 for every gallon expired Friday. As a result, some U.S. producers say they will shut down without the government subsidy.
Biodiesel’s woes come on top of a year of problems for the fledgling biofuel industry – an irony given the push to cut down on greenhouse gases and ease the nation’s need for foreign oil. A key driver for the alternative fuel – the high cost of oil – disappeared as diesel prices dropped 18 percent since the beginning of the recession. Then in March the European Union placed import-killing tariffs on biodiesel and other biofuels.
It was a huge hit for U.S. biofuel makers, with Europe taking 95 percent of all global exports.
Biodiesel, which is usually blended with traditional fuel, had over the past few years been the fastest-growing fuel among fleet vehicles like buses, snow plows and garbage trucks.
Those fleets, however, can shift to traditional fuel, as some have, when the price of diesel drops.
The biodiesel industry is now operating at only 15 percent of its potential capacity, according to the National Biodiesel Board, largely because the price of traditional diesel has collapsed. There are close to 180 biodiesel plants operating in about 40 states.
The country’s largest biodiesel refinery, in Houston, sits idle. Another major refinery in Hoquiam, Wash., that was restarted recently to meet alternative fuel mandates in Oregon and British Columbia, was shut down after an explosion in December.
The loss of the tax credit, which helps pay salaries, buy new equipment and in good times turn a profit, will hit small producers particularly hard.
A one-year extension of the biodiesel tax credit was included in a bill that was approved by the U.S. House recently, but it never made it through the Senate.
Lawmakers say the tax credit will be retroactive if approved.
Production will cease in Valliant, Okla., where Dwight Francis created a biodiesel startup this year as the local timber economy tanked.
For each of the 12,000 gallons of biodiesel that Francis produces each week, he has received a $1 tax credit to help keep operations going.
His company has been riding out the economic downturn until now, thanks to the tax credit.
“By the time you buy the feedstock and the chemicals to produce the fuel, you have more money in it than you get for the fuel without the tax credit,” Francis said. “We won’t be producing any without the tax credit.”
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Northwest wheat 
Marksman on January 02 at 7:51 a.m.
Heres an idea; restore the tax credits for oil and gas exploration, open offshore areas for oil and gas exploration and make America truly energy independent. Or, keep hoping that “green” energy will someday become cheap and plentiful and won’t require continual subsidies. Or we can all go starve in the dark!
Ninch on January 02 at 8:50 a.m.
FACT: Not all biodiesel is “green” energy. Too much of biodiesel (e.g. that made from “feedstock”) uses more energy over the entire cycle (i.e. agricultural production) and thus produces more CO2 than regular diesel…. and therefore it is a positive step that so-called green energy producers lose their tax credits. Ironically, Obama who wanted to be the “green” President does NOTHING except talk and never walks the walk. He blames Bush for everything but it was his vote as Senator that helped pass the Bush-Cheney energy bill which gave Illinois huge subsidies for corn ethanol (a very wasteful, energy-intensive product) to the detriment of other viable bio-fuels… Plus Obama with his travels to exotic vacation spots and way too many trips to Europe has set himself up as having one of the largest carbon footprints ever.
Ninch on January 02 at 9:05 a.m.
BTW: Using wood cellulose technology to create biofuels would be more effective because it would utilize waste from logging and thinning operatons and it would EMPLOY many more people in the Pacific Northwest… but then again subsidies for corn ethanol have actually obstructed other biofuel technologies such as this.
P.S. Oil prices are expected to reach new high levels as the rest of the world rebounds economically… which it is doing ahead of the U.S. Obama’s focus on government/public jobs (instead of the private sector) has effectively retarded America’s recovery… that is what the non-Obama-propaganda economists say.
P.S.S. I believe that when the U.S. ends subsidies on its biofuel products that Europe will remove its taxes and tariffs on such… ergo opening up the market again. Those producers with a viable self-sustaining business model will not go out of business with the end of subsidies but will instead make nice profits at that time.
aXe on January 02 at 4:45 p.m.
I suggest reducing the need for biodiesel. Its called Birth Control and reducing the earths population to a manageable reneweable level.
Why practice conserving resources if someone else is just going to use them?