Biodiesel flickers out leaving investors burned
Written by Atheo | Aletho News | January 5, 2010
The future of biodiesel fuel looks highly uncertain as federal tax credits that provided refiners $1 for every gallon produced expire with the new year. While many fleet vehicles have been manufactured to use the fuel, few will continue to do so since they are convertible to traditional fuel.
The National Biodiesel Board reports that the industry is currently operating at 15% of capacity. The largest US refinery, located in Houston, is sitting idle.
Prospects for extending the tax credit have been hampered by a major scandal involving Alabama’s Cello Energy, a “next-generation” biofuel company specializing in plants-to-fuel technology. A federal jury found that it had defrauded investors and ordered a $10.4 million payment for plaintiffs. Cello had claimed that it could produce $16/barrel fuel at its refinery using hay, switchgrass and wood chips. The Alabama Press-Register reports that “a string of witnesses testified that samples of the fuel allegedly produced at Cello’s facility… were derived entirely from fossil and not renewable sources”. Grassoline it was not. The EPA had been counting on a tripling of Cello’s refining operations to meet 70% of its target of 100 million gallons for 2010 production. Lawmakers have lost confidence in the entire biofuel industry, including biodiesel which happened to have the immediate need for subsidy renewal.
Biodiesel production, which uses soy beans produced through industrial agriculture, is simply not economically viable. Leaving aside the moral implications of dedicating arable land to fuel production, which results in higher market prices for basic foods, the higher production cost of biodiesel reflects a likely net energy loss once the entire process is accounted for.
The economic hope for soy-biodiesel had been predicated on promised cost advantages in GMO crops which turned out to be largely hyperbole and wishful thinking. With oil and gas prices stable, and with new non-conventional production methods that are vastly increasing economically recoverable oil reserves, it is unlikely that biodiesel of any type could be competitive any time in the foreseeable future.
Reuters | February 16, 2010
WASHINGTON – Senate leaders have dropped from a jobs creation bill a U.S. tax credit for biodiesel, creating uncertainty for biodiesel makers, who say they need the incentive to keep running.
A $1-a-gallon tax credit, which expired at the end of 2009, was in the first draft of the bill. But Senate Majority Leader Harry Reid pared back the bill on Thursday, dropping the biodiesel tax credit, among other tax measures. […]
The American Soybean Association has said biodiesel production has essentially stopped since the tax credit expired at the end of 2009. – source
The Senate has voted down a bill that would have reinstated the $1 per gallon biodiesel tax credit through the end of 2010… source
Investor Jim Berliner estimates altogether some 123 investors made payments to Canadian-based Sunx, which had planned on building up to 330 small-scale biodiesel processing plants in North America, according to a former version of the now-defunct Sunx website. In a brochure for potential investors, Sunx had touted securing more than 100 owner/operator agreements worth more than $60 million.
The biodiesel industry’s wait for the return of its subsidy continues.
The Senate turned back an effort Thursday by Sen. Chuck Grassley, R-Ia., to revive the $1-a-gallon tax credit as part of a small-business bill. The subsidy lapsed at the end of 2009 and repeated efforts to attach it to bills in the Senate have failed.
Grassley’s move needed 67 votes but received only 41…
December 17, 2010
Last night, the US House of Representatives voted by a 277 to 148 margin to approve the Obama tax deal, which extends the ethanol tax credit through 2011, and retroactively extends the biodiesel tax incentive and the renewable diesel incentive through 2011. The bill also renewed the 54-cent tariff on Brazilian ethanol through 2011.
Kate McMahon, Biofuels Campaign Coordinator, Friends of the Earth
“Shoveling out billions of dollars for oil companies to blend dirty corn ethanol into gasoline – if even for just another year – is a waste of taxpayer dollars. Extending these subsidies is simply bad policy hidden within the political mess of a trillion dollar tax package.”
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