Biodiesel industry growing frustrated with tax credit delay
By Heather Thorstensen
hthorstensen@agrinews.com
Date Modified: 05/06/2010 9:28 AM
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It's been about four months since the federal biodiesel tax credit expired at the end of 2009. Congress ran out of time to extend it before its expiration date.
"What this lack of extension has done is effectively shut down the industry and very little trade is taking place in biodiesel," said Randy Olson, executive director of the Iowa Biodiesel Board.
The purpose of the $1 per gallon credit was to make the price of biodiesel competitive with petroleum-based diesel. People in the biodiesel industry consider it a critical provision that helped the United States reach commercial-scale production.
The U.S. House of Representatives passed a bill last December to extend the one-year credit retroactively, so its benefits would pick up where they left off Jan. 1. The Senate followed suit in March. Legislators have to agree on a final version, specifically how to pay for it, before it can go into effect.
"The next opportunity for us to get this tax credit is when Congress is in session right now before the Memorial Day recess. We need all biodiesel supporters to contact their elected officials in Washington and ask that they re-instate the biodiesel tax credit," said Olson.
On Earth Day, April 22, the National Biodiesel Board urged Congress to bring the credit back immediately.
"Green jobs are being lost every day that Congress neglects to act to extend this important energy policy," said NBB CEO Joe Jobe. The industry provides an estimated 23,000 jobs nationwide.
Minnesota's three operating biodiesel plants — Minnesota Soybean Processors in Brewster, FUMPA Biofuels in Redwood Falls and Ever Cat Fuels in Isanti — are running at vastly reduced or intermittent rates, according to Mike Youngerberg, executive director of the Minnesota Biodiesel Council. The plants are making just enough to meet previous sales or to meet demand from the B5 mandate, which requires the state's diesel fuel contain 5 percent biodiesel. The B5 rule may be keeping the state's plants in a slightly better situation than others in the country. Youngerberg said plants are running at 15 percent to 20 percent capacity nationwide.
Minnesota has 100 to 150 jobs directly related to biodiesel production, he said. Layoffs have occurred, but plants hope to bring employees back once the credit is renewed.
A B5 mandate was proposed in the Iowa Legislature this year, but the House didn't act on it before the session closed.
Of Iowa's 15 biodiesel plants, seven are operating at low production rates, six are not producing fuel but are in standby mode and two are closed, according to the Iowa Biodiesel Board.Eight of the plants were running at some level when the tax credit expired.
"We know from news reports that many operations have laid off additional personnel in 2010 because of the extreme slow down in the industry," said Iowa Biodiesel Board's Olson.
In 2009, biodiesel production in the state supported an estimated 2,900 jobs. This number not only includes plant employees but also support positions, such as truck drivers who transport the fuel. The state's biodiesel board estimates half or as high as two-thirds of those jobs are now gone.
Plants in Mason City, Clinton, and Keokuk have filed for bankruptcy while plants in Wall Lake and Newton have announced layoffs of 50 percent or more of their employees, Olson said.
"The tax credit is clearly in the forefront of our minds," said Monte Shaw, executive director of the Iowa Renewable Fuels Association.
Help may be on the way from a new renewable fuel standard issued in February by the Environmental Protection Agency. One of the first requirements of RFS2 is that 1.15 billion gallons of bio-based diesel is used domestically between 2009 and 2010.
However, no increase in biodiesel demand has been seen so far because of it, Shaw said. The new rule doesn't go into effect until July 1.
National Petrochemical and Refiners Association and the American Petroleum Institute have both filed a petition for review with the U.S. Court of Appeals to challenge portions of RFS2. API has stated EPA's retroactive approach, such as the bio-based diesel rule that includes 2009, is unfair and unlawful.
Iowa Biodiesel Board expects the standard to eventually create demand.
"We still expect major oil companies will be meeting their requirements to blend biodiesel, which should provide a shot in the arm to the industry," Olson said.