On March 13, 2012, the Senate voted down two amendments that would have extended the biodiesel tax incentive through the end of the year.
“This is another missed opportunity for Congress to do something to boost the economy. We’re talking about thousands of jobs across the country that are affected by this, and the very real possibility that biodiesel plants will go out of business,” said Anne Steckel, National Biodiesel Board’s vice president of federal affairs in a news release. “It’s also a missed opportunity for Congress to do something about these oil price spikes by diversifying our fuel supplies and reducing our exposure to the global petroleum markets.”
The organization did thank Sen. Debbie Stabenow (D-MI) and Sen. Pat Roberts (R-KS) for including biodiesel in their amendments.
Congress allowed the $1-per-gallon biodiesel tax incentive to expire on Dec. 31. The incentive is credited with helping the biodiesel industry achieve record production in 2011 of nearly 1.1 billion gallons and NBB notes employs more than 39,000 people.
<i>Fuel Oil News</i> interviewed NBB spokesman Ben Evans on the ramifications of the vote and what comes next.
FON: Were you surprised with the votes?
Evans: It wasn’t a huge surprise to us because we saw last week that it was starting to get caught up in these larger, broader energy issues that are a little bit more partisan. But what is surprising to us is that when you look at the two votes’there were two amendments where the biodiesel tax incentive was included, one was Republican and one was Democratic’between the two you had almost 90 senators voting to support an extension of the biodiesel tax incentive. It was one of the few things that made it into both amendments. We were encouraged by that and that it had clearly bipartisan and overwhelming support.
So, what is surprising to us is that the Senate cannot find a way and the Congress cannot find a way to pull out those things where they can agree in a bipartisan way and go ahead and pass those because the tax incentive helps bring down the price of biodiesel, and it’s creating jobs by helping producers across the country hire new people and expand their production. That was proven last year with our record production.
FON: Was that $1 per gallon tax incentive typically passed 100 percent through to the consumer? The thought being if the dollar goes away, is there wiggle room to cushion any price increase with blended products?
Evans: I wouldn’t say it was 100 percent, but it was certainly in the value chain of the entire biodiesel economy and that helped reduce the price. That would depend on the business model and the purchasing contracts and in certain cases, such as with fleets, it was probably very close to 100 percent.
FON: What is the current market comparison between biodiesel or Bioheat and diesel or No. 2 heating oil?
Evans: Currently, diesel wholesale prices are about $4.15 per gallon and B100 biodiesel wholesale prices are about $5.30 or so. But, that is the wholesale price, which does not capture the RIN value and right now RINS on a wet gallon of biodiesel are at about $2.10. So in effect the real price in the market for a savvy purchaser would be that $5.30 minus the $2.10, which makes biodiesel look a lot better and cheaper than diesel. And we’ve had a lot of companies tell us that.
FON: At this point, do you see any opportunities in the current Congress to push something through or are you waiting for the next Congress to move ahead?
Evans: I think there are opportunities in this Congress, though it can get more difficult as the election moves closer. There is talk of small business bills, some sort of jobs bill’who knows? An energy package might come together to address rising energy prices. Basically, what we are going to keep doing is urging Congress to include this on any vehicle where it is appropriate. And again you have overwhelming bipartisan support. Our perspective is that this will help reduce fuel prices and in the long-term help diversify our supply so that when you do have these oil price spikes you have more options and that’s through developing a domestic energy industry.
FON: You had a big production year in 2011’have you any estimation on how this will impact production in 2012?
Evans: We don’t have any specific numbers yet because the EPA has been delayed in publishing production numbers. What we saw is that producers were rushing to produce under the tax credit last year and in December we had record volumes’I think it was 160 million gallons’so clearly after that type of production they’re going to cut back a little. This usually happens in January and February anyway because they are winter months and a new year and people are retooling so we don’t have a clear picture right now. But certainly not having that $1 in the value stream hurts the economics of production and selling bio diesel.
FON: It’s really hard to say at this point in the election season exactly what we’ll have after November from the White House to the Senate to the House. With that in mind, is there anything you anticipate happening politically relative to the product after November?
Evans: As you noted, it’s very difficult to prognosticate as to what will happen. Some people are saying the Senate will go Republican, others are saying the House might revert back to Democrats, but we anticipate that whatever happens it will continue to be fairly split and we don’t feel that they is going to be a huge majority either way in any case. And as we’re seeing, you have to have about 60 votes to get much of anything through the Senate these days.
So, the way we look at it is that we have to continue building that bipartisan support, and we currently have support that is regionally diverse across the country and bipartisan. Obviously, there has been more of an emphasis lately on budgets and deficits and that comes into play with the tax incentive because there is a cost to the treasury, but we feel that cost is more than outweighed by the benefits both in terms of tax revenues that are generated by the industry and the jobs that are created and diversifying the fuel supply and improving the environment.
FON: To sidetrack for a second, President Obama recently brought up algae related to biodiesel production. It’s something we have followed in our magazines for some time as kind of the Holy Grail feedstock for biodiesel. Can you give us any feedback as to what the state of that technology is today?
Evans: I’m not really the expert on it here, but it is definitely coming along. They are making great progress, and it’s still a very promising feedstock. Right now, of course, the issue is cost and scalability, and there are still some challenges there, but we are working towards that.