Biodiesel Tax Credit Update –


The Iowa Renewable Fuels Association (IRFA) is continuing to push for the $1/gal biodiesel tax credit to be reinstated as soon as possible.

“As the U.S. Senate continues to tinker with the tax extenders package, biodiesel plants in Iowa and around the country remain idle and continue to lay- off workers,” said IRFA Past President and Western Iowa Energy Board Member Denny Mauser, in a statement issued on Friday.

The one-year, retroactive extension of the biodiesel tax credit is included in a tax extenders package (H.R. 4213) that remains in the Senate. Last Thursday, despite attempts to further reduce the cost of the $118 billion tax extenders package, the Senate was unable to approve cloture — essentially limiting debate on the measure and moving towards passage — on an amended version of the bill by Senate Finance Committee Chairman Max Baucus (D-Mont.). To approve a cloture motion, 60 approval votes are needed, but the Senate only received 56, with 40 votes against the motion.

“The president stated on Tuesday [during his Oval Office address] that he would not settle for inaction on tackling America’s addiction to fossil fuels, but that is exactly what happened,” Mauser continued. “The Senate failed once again to jumpstart the proven petroleum-displacing ability of America’s first advanced biofuel. By restoring the biodiesel tax incentive, one billion gallons of renewable fuel can begin displacing crude oil immediately,” he noted.

Additionally, on Friday the Senate passed legislation to prevent Medicare doctors from receiving a 21% pay cut starting this week — a provision called “doc fix” that was taken out of the tax extenders bill, Mauser explained. “It took one hundred senators to agree to the ‘doc fix.’ While I understand that is important, how can the biodiesel industry be left in the lurch as a million or more gallons of crude oil continue to spew into the Gulf waters each day?,” he continued. “Any one senator could have stood up and said, ‘Let’s end the pay cuts and job losses for workers in the biodiesel industry at the same time as we pass the doctor pay-cut fix.’  After six months of devastating inaction, its past time for that type of Senate leadership,” he added.

Meanwhile, legislative sources following the tax extenders issue expect the Senate to continue discussing the package, with supporters likely to cut more funding in order to gain the necessary 60 votes to pass the tax package.

Although, sources believe the biodiesel tax credit is not on the chopping block.

H.R. 4213, also known as the JOBS bill, is an amended version of the legislation that passed the House in late May, after some cuts were made to help offset the cost of the bill and gain congressional support. Since the Senate is likely to make changes to the House version of the bill, the measure will have to be re-approved in the House before it is sent to the president for his signature.

Still, it remains a frustrating time for the biodiesel industry. The biodiesel tax credit expired at the end of last year, and since then, the U.S. industry has been operating at reduced rates.

Meanwhile, even if the tax extenders bill with the biodiesel tax credit extension is passed into law, which only provides an extension through the end of this year. But sources say the priority “first and foremost” remains on the retroactive extension.

Earth Day News from the NBB

With Earth Day here, I thought it slightly ironic that the biodiesel tax credit still has not been passed, yet a large gathering in the National Mall in Washing DC is underway.  Earth Day is about climate change.  Biodiesel certainly has it’s place there since it burns much cleaner than petroleum diesel, but biodiesel is much more than that too.  It’s domestic, produced here in the USA.  It’s non-toxic and very safe to use and transport.  It’s biodegradable.   It’s a drop in replacement for existing fuel, no huge infrastructure changes required, and (by some accounts) if it were as heavily subsidized as petroleum, would be damn near free.   Congress is claiming that the tax credit will be passed by the Memorial Day recess.  Here’s hoping…

From the NBB:

Jefferson City, Mo. – With the 40th Anniversary of Earth Day upon us, it is imperative that Congress move immediately to ensure the survival of America’s first advanced biofuel – biodiesel.

“Lawmakers need look no further than the National Mall to see cleaner-burning biodiesel at work powering generators this Earth Day,” said National Biodiesel Board (NBB) CEO Joe Jobe.  “Not only does biodiesel have the best greenhouse gas reduction of any domestic transportation fuel, but also it is the only advanced biofuel currently in the U.S. commercial marketplace.”

In recognition of Earth Day, the National Biodiesel Board is urging Members of Congress to reinstate the biodiesel tax incentive immediately.  Since the credit lapsed on December 31, 2009, domestic biodiesel production has plummeted to nearly a standstill.  One of the most successful energy policy initiatives ever enacted, the program makes biodiesel price competitive with petroleum diesel.

The biodiesel tax credit allows the U.S. to reap the significant environmental benefits associated with the sustainable fuel, including:

Biodiversity: Biodiesel is the most diverse fuel on the planet, made from a wide variety of oil and fat by-products of regional crop and livestock production.

Regional diversity: More than 150 biodiesel plants support green jobs and green investment in nearly all 50 states, producing fuel from regionally available resources.

Carbon reduction: Last year, biodiesel’s contribution to reducing greenhouse gas was the equivalent of removing over 774,000 passenger vehicles from America’s roadways.

Energy balance: Biodiesel produces 4.5 units of energy for every 1 unit it takes to make the fuel, boasting the highest energy balance, and the highest energy content of any American-made renewable fuel.

Both the House and Senate have passed bills to retroactively extend the biodiesel tax credit.  However, the two chambers must still reconcile the differences between the two versions of the bill before it can be sent to the President.

Biodiesel Sampls

Soy Biodiesel Lab Samples

Biodiesel Tax Credit Update

From the National Biodiesel Board:

On Wednesday, April 14, 2010, the U.S. House Committee on Ways and Means, the committee with jurisdiction over tax issues, held a hearing on energy tax incentives. While the hearing focused primarily the energy tax incentives enacted early in 2009 as part of President Obama’s economic stimulus package, several members of the committee expressed concern with the lapse of the biodiesel tax incentive and signaled their desire to resolve this issue. Michael Mundaca, the Assistant Treasury Secretary for Tax Policy, also confirmed the Obama Administration’s position in support of extending the biodiesel tax incentive retroactively through the end of 2011. The NBB submitted written testimony explaining the time sensitive need to retroactively extend the biodiesel tax incentive as well as the merits of H.R. 4070 and S. 1589, legislation to provide a multiple year extension of a reformed biodiesel tax incentive.

During the hearing and in subsequent press accounts, U.S. Representative Sander Levin (D-MI), the Chairman of the Ways and Means Committee, signaled his desire to complete consideration of the tax extender package that contains an extension of the biodiesel tax incentive prior to the Memorial Day recess. The biggest barrier to passage remains identifying revenue raisers to offset costs associated with the extension of expired tax provisions. NBB’s Washington, DC staff will continue to advocate for immediate action to address this issue. NBB members and biodiesel stakeholders are urged to contact their federal elected officials with a similar message. Please visit the Members Only section of the NBB website to review the written testimony submitted to the U.S. House Committee on Ways and Means and additional information on this important topic.

Federal Grants for Biodiesel Being Revoked?

Last week I received an email from the grant administrator for a Department of Energy (DOE) grant we had been awarded in 2009.  The grant was awarded in June of 2009 but was being held up because of a new review process to determine if the funds were going to legitimate plants that were meeting federal requirements for fuel quality.  Fair enough.  However, almost 9 months later, I still have received no funds.  Hard to plan equipment purchases, contracting, and employee hiring under those circumstances, eh?

But the latest email I received last week told me that upon further review, we were not being awarded the grant money after all because we did not meet the criteria for renewable energy and sustainability.  What?!  We’re a biodiesel plant.  We take waste cooking oil, and turn it into a fuel you can burn in your truck.  How is THAT not renewable?  How is THAT not sustainable?

Rest assured, I was told, we were not the only applicant to be denied.  The other 4 biofuel plants in NC were also denied under similar circumstances.  Well, at least I wasn’t being singled out…

So what does that tell us?  It tells us that there is a policy shift going on somewhere in Washington.  Either they don’t actually have the money to fund the grants, and are delaying the awards until they do; or somebody somewhere decided that grant funds should be going to a different group than biofuels.

Regardless, I was encouraged to “repurpose” my grant application and resubmit it, which I quickly did; hoping that it will be received and accepted under whatever ethereal guidelines determine its worthiness.  Fingers crossed.

Oddly enough, I am in the middle of drafting a grant proposal for 2010 funds that will fall under the very same guidelines.   Wonder what will happen to this one.  For those of you who don’t know (as I didn’t until I was knee deep in this process), writing a grant proposal is not a trivial process.  It has a certain structure, must meet certain criteria, takes time to write, requires money for subconsultants and engineers to develop your grant proposal basis (in my case energy and thermal calculations), and time and effort to get quotes from installation contractors and equipment suppliers.  All of this effort for something you may not even get awarded to you.  Couple that, with the review process taking longer than expected (which means the vendor quotes you got, which are typically only good for 90 days, are no longer valid), and it makes it very difficult indeed to use grant money to fund anything that is critical (or maybe even useful) for business operations.

So, the trick is to write a grant proposal for something that is nice to have, but not something you absolutely need to have, unless you are a patient person (which I am not).   Unfortunately, we’re still in the “need to have” phase.  We need these funds in order to expand.  We are able to grow.  Other plants are going out of business, and I’m trying to expand, in the worse economic period in recent history.

We have a government that pledges it will support biofuels, and says it wants to support small business.  Great.

So it creates grants to provide funding but doesn’t ever award them, provides stimulus money to banks that won’t lend it to consumers, and won’t renew tax incentives for biofuels to encourage producers to make it and consumers to buy it (see other rants here in my blog about that one).

It is not yet clear what is going on in Washington around biofuels.  I’m in a microcosm.  I really only follow politics related to stuff that affects my bottom line.  Maybe EVERYBODY is dealing with this because as a country we’re broke.  I don’t know.  But hopefully there will be a change here soon so that we can get back to business.

We have the ability to make a domestic product right here in the USA.  Not many of us factories left here.  I want to add jobs.  We make a renewable product from a waste stream.  We make a product that burns 80% cleaner than petroleum.  We have a plant that is making this product right now, right here, using existing technology.  This isn’t a “pilot” project, or a “theoretical model”.  It’s here, now.

Just exactly what else would we need to be in order to be more attractive to government policy makers?

Biodiesel Pump

Biodiesel Pump

100 Days and Counting

Congress is on its Easter recess until April 12.   Today was the 100th day since the tax expired.   Meanwhile, plants across the US are idled, or out of business.  In NC, two biodiesel plants are still in operation, out of 8.

Triangle Biofuels is one of them, producing about 2 truckloads a week currently.   But without the tax credit, we cannot continue to operate unless the commodities market inverts (vegetable oil being cheaper than petroleum).

The second jobs bill that has the $1-per-gallon tax credit for biodiesel for 2010 awaits action by the House Ways and Means Committee.  The bill, H.R. 4213, is called the American Workers, State, and Business Relief Act.

There is some buzz, mostly rumors I hope, that the large Ag concerns are lobbying hard for congress NOT TO PASS the bill anytime soon in order to weed out the small biodiesel plants.   It’d be easy to play up on that from the conspiracy theory standpoint, but it’s gossip as far as I know.  The evidence sure seems to point that way though.

Want to help?  Email, call, or write your senator and congressman and ask him/her why they haven’t moved HR 4213 into law.

The Case for Soy

With the recent crazy pricing for Waste Vegetable Oil (WVO), we have begun to analyze looking at alternative feedstocks (remember when WVO was an alternative feedstock?). I developed a spreadsheet where I could plug in the price per lb of the feedstock and the conversion efficiency of that feedstock based upon FFA, moisture, and glycerin value. What I quickly discovered was that virgin soy currently has a higher value than WVO as a biodiesel feedstock! Don’t believe me? Follow the math.

Crude Degummed Soybean Oil – < 1% FFA, < 1% MIU
WVO Yellow Grease – 7% FFA, < 4% MIU

Cost FOB Per lb Per gal
Soy $       0.40 $       3.00
WVO $       0.28 $       2.10

Looking at the material costs only, not overhead (additives, labor, production costs),  the table below shows the cost of the feedstock, raw materials and the costs needed due to the conversion factor of the feedstock (due to the impurities in the WVO, and it takes more methanol and catalyst to process WVO).

Per Gal to process Soy
Feedstock $       3.00 $       2.42
Methanol $       0.23 $       0.40
Catalyst $       0.10 $       0.15
Wash $       0.02 $       0.04
Total COGS $       3.35 $       3.01

So far this makes sense, Soy costs more, so it costs more to make biodiesel.  Right?  But wait.  The value of B100 (as of today) made from soy is more than WVO, and the glycerin purity is higher and worth more.  Thus, per gallon, the total value per gallon of soy biodiesel is higher than WVO.

B100 Value $       3.52 $       2.94
Glycerin Value $       0.22 $       0.11
Recovered MeOH $       0.02 $       0.06
Total Value $       3.76 $       3.11
Profit $       0.41 $       0.10

So something is clearly wrong when the Jacobsen report is showing WVO at .28 per lb for WVO and Virgin Soy is at .40.  This, at a time when B99 biodiesel is selling cheaper than petroleum diesel fuel.   Something is very wrong in Kansas, and our congress just sit on their hands.  So, for now, we’re buying Soy.  If you’re selling WVO, get your pricing right, or don’t bother calling us.

Soybean Oil for Biodiesel Feedstock.

Food for Fuel, Again.

Well, it’s March, and the biodiesel tax credit has been in limbo for it’s third month, with no real idea when it will be reinstated.

Given the media hype in the recent past about renewable fuels causing food prices to skyrocket, you’d think that the market would breathe a huge sigh of relief and that commodity food prices would have plummeted to the bottom.  After all, almost 85% of the biodiesel plants in the USA are either idled or out of business. So where’s the pressure to keep price up, right?

Well, as of today, soybean oil is $.40 /lb. That’s $3.00 per gallon. Waste Vegetable Oil (WVO), another biodiesel feedstock, is $.26 / lb, or $1.95 per gallon. The average price per gallon for biodiesel right now is just slightly more than petroleum diesel, at around $2.25. What were prices for soybean oil and WVO back in March of last year? Around $.32 / lb for soybean oil, and around $.21 lb for WVO.

So who’s driving the price of raw feedstock materials up?  Not biodiesel, that’s for sure.   To me, it looks like the agricultural and food industries, just like they were before. They are currently exporting oils to Asia and South America. That’s good for everybody, except biodiesel. But yet the public perception when I talk to people is that we’re driving the price of food up.   Alternative feedstocks, such as algae oil, hold high hope for renewable fuels.   It provides a cheaper feedstock for us, and shuts up the critics of current feedstock supplies, unless they find something wrong with algae…

Soybean Oil Price Graph 2009

Biodiesel Tax Credit Delays and Impact on Industry

Well, just as the NBB predicted, the Senate and House delays on reinstating the federal tax credit for biodiesel has caused the biodiesel industry to grind to a halt. I got a call yesterday from another company in NC that is going out of business. That makes three total within 6 months.

We’re still here. We’re still producing biodiesel every day, although in much less capacity than before. As far as I can tell, we’re the only biodiesel plant in North Carolina that is still actively producing truckload quantities of biodiesel. Our price is still roughly the same, about $.60 per gallon higher than petroleum diesel fuel.

North Carolina could help by adding additional tax incentives to biodiesel like many other states already do, but so far, nothing appears to be happening at the state level. We’re hearing rumblings that the US Senate may be getting something approved in the next several weeks. What we’re hoping for is a multi-year tax incentive that is retroactive back to January 1st. Anything less than that puts us right back in the same situation next year and will only further to inhibit the growth of renewable fuels like biodiesel.

Biodiesel $1.00 Tax Credit Not Working

It’s pretty obvious by now, to everyone except Washington, that the $1.00 per gallon tax credit for biodiesel producers isn’t working. What it has seemed to accomplish however, is to drive the cost of soybean oil up by $1.00 per gallon. Bravo. As of today, soybean oil is $.37 per pound or $2.77 per gallon. Diesel is $1.45 per gallon at the rack (before taxes). The math is pretty simple.

So after all this talk of making a “green” economy, biodiesel and ethanol plants are shutting down because they can’t compete with petroleum (again) and the Ag companies are raking in cash.  What’s the best part?  The biodiesel companies have to file all the paperwork with the IRS and wait a couple of months to get their subsidy back!  The Ag companies get their cash up front, and have no extra paperwork to file for it.   Nice.

Seems like we never learn.

What should they do? Well, for starters, the tax credit should be indexed against the market. Having a flat $1.00 per gallon credit just doesn’t make sense. Second, the credit should be given in such a way that it provides incentive for CONSUMERS to purchase biodiesel instead of to the producing companies or feedstock suppliers.   Less paperwork for us, direct benefit to the consumer (who’s the one actually using the fuel).

Alternatively, in an environment where Ag companies are used to price supports and price fixing, it’d also be nice to see a fixed price per gallon for inedible soybean oil that is specifically used for biodiesel, and mandatory allotments that must be sold. (Think tobacco, and it doesn’t sound that harsh.)

Whatever the solution, what we’re currently doing isn’t working. Everybody seems to be getting fat except the industry that is supposed to benefit from it.   Don’t believe me?  Ask any biodiesel producer about the wonderful US EPA Renewable Fuel Standard and RIN credits.  As a biodiesel producer who typically sells pure biodiesel, we don’t get a penny of the RIN credits unless we actually blend the fuel down to B80 (80% biodiesel / 20% diesel) or less (which means we have to become a petroleum blender).  The credit ends up getting passed on to, you guessed it, the petroleum industry for all their “hard work” in blending the fuel and selling it.   Again, great work Mr. Bureaucrat, you’ve stuffed more money in the Big Oil’s pocket once again.

Hey, I’m ready for that “Change” everybody was singing about back in November.  It can start any time.