Winners, losers in US renewable fuels legislation

24 September 2008 23:21  [Source: ICIS news]

HOUSTON (ICIS news)--The US biodiesel industry breathed a sigh of relief on Wednesday as the US Senate extended subsidies for most, but not all, renewable fuel suppliers.

The Senate voted 93-2 late on Tuesday to extend for one year subsidies to biodiesel suppliers. House members have raised concerns about how to pay for the extensions but could vote on the bill by the end of the week, sources said. 

“The consequence of this not being passed would close a lot of plants and cost a lot of jobs. It’s imperative that this gets to the President’s desk and gets signed into law so it provides certainty for some of our members,” said National Biodiesel Board spokesman Michael Frohlich.

Frohlich acknowledged that much of the US biodiesel industry depended almost entirely on subsidies for survival, but said it was heading toward self-sufficiency. Tax credits supported 21,000 jobs and brought $4bn (€2.7bn) to the biodiesel field last year, he said.

A shift from the 5% blend known as B5 toward the B20 blend shows biodiesel is staking out its place in the market, he said.

The industry’s been around for a long time, but we’ve seen a rapid growth in the past four or five years. People are moving from a B5 blend to B20. This (bill) would keep biodiesel price competitive with petro-diesel,” he said.

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.

The bill would renew a $1/gal biodiesel production tax credit, but halves it for renewable diesel facilities that also process petroleum.

That provision caused oil giant ConocoPhillips and food processor Tyson to review the 175m gal/year renewable diesel venture they started in December. The project used Tyson animal fat and ConocoPhillips technology and refineries for production.

“Passage of the legislation would likely render the project marginally economic, so we will need to revisit this project to determine its future,” ConocoPhillips spokeswoman Nancy Turner said.

The Senate version also closed the “splash-and-dash” loophole that gave foreign producers a $1/gal credit for biodiesel they blended in the US and sold overseas.

The practice led to the European Commission opening in June an an anti-dumping investigation into US biodiesel producers.

($1 = €0.68)

Bookmark Simon Robinson’s Big Biofuels Blog for some independent thinking on biofuels

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By: Ben Lefebvre
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