REG announces more layoffs, blames US biodiesel tax credit stall

01 April 2010 16:15  [Source: ICIS news]

Tax stall causes biodiesel layoffsHOUSTON (ICIS news)--US biodiesel major Renewable Energy Group (REG) said on Thursday it laid off 22 additional employees at its Iowa operations, a move it called “a direct result”  of Congressional delay in re-implementing a $1/gal blending credit

This was REG’s second round of lay offs since January, one that has brought its staff in the region to nearly half of what it since the credit expired on 31 December.

“Since January 1 the industry has ground to a near halt. Demand for biodiesel is extremely limited because our customers are no longer taking the risk of purchasing biodiesel without the tax credit,” Stroburg said in a letter to Representative Sander Levin (Democrat-Michigan), chairman of the House Ways and Means Committee.

US soy methyl ester (SME) biodiesel prices were assessed at $3.38-3.43/gal on 25 March, according to according to global chemical market intelligence service ICIS pricing. Without the tax credit bringing that price lower, the fuel is at about a 46 cents/gal premium to traditional diesel, a difference that makes it unattractive for blenders.

REG idled its 12m gal/year Ralston plant and 30m gal/year Newton plant, both in Iowa. The company in January laid off 21 people at its Iowa Renewable Energy and Western Dubuque Biodiesel plants.

The cuts bring the company’s Iowa staff to 45% of what it was at the beginning of 2010, Stroburg said. Further delay in passing the credit could force additional staff cuts at its plants in Texas and Illinois, he said.

The House approved extending the tax credit in December, but its passage in the Senate became bogged down as Congress addressed health care reform legislation.

The Senate finally approved the credit in March as part of a larger jobs stimulus bill, but the fate of that legislation is now in turmoil as Congress tries to plug a budgeting gap in it.

As a whole, the US biodiesel industry is estimated to be running at less than 10% of capacity as the tax credit remains in limbo and the petroleum industry issues legal challenges to the US Environmental Protection Agency’s (EPA)  regulations mandating biofuels usage.

($1 = €0.74)

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