Wall Street Journal/MarketWatch:
Biodiesel industry on hold after tax credit runs out
NEW YORK (MarketWatch) -- The
biodiesel industry is revving up efforts to reinstate the
U.S. biodiesel tax credit, warning that as many as 23,000
jobs could be at risk if lawmakers don't revive the program
that expired on Jan. 1.
During the health-care showdown
in the Senate last month before the holidays, Congress
failed to take some of its usual end-of-the-year actions on
the biodiesel tax credit -- seen as vital to the producers
of 500 million gallons of the fuel sold in 2009.
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Usually made from byproducts of
soybean processing for cattle feed, biodiesel received a $1
per gallon credit, which expired on Dec. 31.
The subsidy, in place since 2004
and last extended in October 2008, has helped biodiesel grow
as an affordable blending component of petroleum-based
fuels.
Despite Washington's promotion of
"green" jobs, the biodiesel industry could instead deliver
green-collar layoffs if the program isn't revived, industry
proponents argue.
"Production has pretty much
dropped to zero since the tax credit expired," said Michael
Frohlich, a spokesman for the National Biodiesel Board, a
trade association. "Plants are running idle and they're
cutting back more hours."
Frohlich added that the industry
hasn't announced any layoffs yet, but without the tax
credit, the business would not thrive.
While biodiesel production still
lags well behind corn-based ethanol, it's still a
significant business, with players such as Cargill , Archer
Daniels Midland Co. (NYSE:ADM) and Valero Energy Corp. (NYSE:VLO)
taking part.
All told, some 150 companies
count themselves as voting members of the National Biodiesel
Board.
Agriculture giant Archer Daniels
Midland runs a biodiesel plant in Velva, N.D., and jointly
owns a second in Mexico, Mo., but does not disclose its
biodiesel capacity. A company spokesman referred comments on
the biodiesel tax credit to the National Biodiesel Board.
Spring hopes
Biodiesel advocates hope to get
the tax credit back on the agenda shortly after Congress
begins its 2010 session in coming days, with optimism about
a reinstatement by February or March.
Late last year, Sen. Charles
Grassley, R-Iowa, got the ball rolling by launching a bill
to extend the tax credit for five years and make it a
production tax credit instead of a blending credit. The move
would make the tax credit more beneficial for companies that
make biofuel, rather than refiners that use it to blend into
their products.
"Without an extension of the tax
credit, all U.S. biodiesel production will grind to a halt,"
Grassley remarked in a speech last month. "Plants will be
shuttered and workers will be let go."
The biodiesel industry already is
working at just 15% capacity in the face of the global
economic slowdown and falling prices.
He said the industry already is
working at just 15% capacity in the face of the global
economic slowdown and falling prices for biodiesel, with
employment in the industry now down by about 29,000 jobs
from the healthier months of 2008.
While the Senate formally
reconvenes on Jan. 20, Houston-based Renewable Biofuels
continues to operate its big plant in Port Neches, Texas, at
a lower rate of production a year after it opened. Spokesman
Charles Deister said the facility employs up to 50 people
and that the tax credit remains vital for its business.
"The investment community has
placed several billion dollars behind the industry, and the
lapse of the tax credit and the EPA's failure to enforce the
Renewable Fuel Standard does not send a positive message to
Wall Street," Deister commented.
While the petroleum industry uses
biodiesel as a blending ingredient, the main fossil-fuel
trade group in Washington, the American Petroleum Institute,
hasn't issued any major statements supporting the biodiesel
tax credit.
"The API believes that the market
should determine what fuels are economically viable, and
that all fuels should stand on their own merits and not rely
on government subsidies," said its spokeswoman, Karen
Matusic. "If there is a biodiesel tax credit, it should be
applied to all forms of biodiesels."
She added that a joint project
between Tyson Foods Inc. (NYSE:TSN) and ConocoPhillips (NYSE:COP)
to convert animal fats into renewable diesel did not qualify
for the tax credit. |
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