US tax move may sink Conoco-Tyson biodiesel plant

23 September 2008 23:58  [Source: ICIS news]

HOUSTON (ICIS news)--The ConocoPhillips-Tyson renewable diesel project, one of the largest second-generation biofuels ventures, could come to an end if US lawmakers approve a bill that would end a key tax credit, sources said on Tuesday.

The Senate is expected to pass a bill this week that would bar any biodiesel producer using a thermal depolymerisation production process from receiving a $1/gal (€0.18/litre) tax credit.

Traditional biodiesel companies would still be eligible for the subsidy, sources said.  

ConocoPhillips-Tyson, which is apparently the only producer using the thermal depolymerisation process, would still be eligible for a 50 cents/gal alternative fuel tax credit.

Calls to oil giant ConocoPhillips and poultry processor Tyson were not returned.

Jeff Webster, senior vice president and general manager of Tyson’s renewable-products division, told the Dow Jones newswire that it was “highly unlikely” the project could survive without the subsidy.

The project started operations in December. It was expected to manufacture up to 175m gal/year of renewable diesel using ConocoPhillips technology and animal fats supplied by Tyson.

The Soap and Detergent Association and glycerine suppliers lobbied hard for the change, concerned that the new project would drive up tallow prices.

They charged that the Conoco-Tyson venture used existing refinery infrastructure and therefore did not require large amounts of new capital.

“We don’t have a problem with people using animal fats, but they shouldn’t get a government subsidy. Let the market decide what will work,” one producer said.

The revamped bill could also close the so-called “splash and dash” loophole that allows foreign suppliers a $1/gal tax credit on imported biodiesel they blend in the US and then sell overseas.  

The US produced 248m gal of biodiesel during the first five months of 2008, compared with 158m gal during the same period of 2007, according to US Energy Information Agency (EIA) statistics.

($1=€0.68)

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By: Ben Lefebvre
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