The Dreaded 'What If' Question

By Ron Kotrba | June 15, 2010
Late May was intense, watching and waiting for the House to act on H.R. 4213 and the $1 per gallon biodiesel tax credit, which it finally did on Friday afternoon before the Memorial Day holiday break. By the time this July issue is published, I hope the Senate will have done the same to reinstate the credit and get this industry back on its feet.

I don't envy the biodiesel lobbyists, who have their work cut out for them in the second half of this year to push for a longer term biodiesel tax credit, which many believe is desperately needed to bring investment and confidence back to this great industry.

H.R. 4213 contains legislation raising the oil spill liability cap, and one would think popular sentiment would be strongly in favor of raising it, considering the catastrophe in the Gulf of Mexico. The situation is still unfolding and time-lapsed reports show the oil, if not properly contained, can foul virtually all of Florida's beaches and make its way up the East Coast, and into the Atlantic Ocean toward Europe. One person told me, "I'm so aghast at the oil thing that my first defense is to not pay much attention. That's not an okay position, I know."

A network news broadcast went to the shores of Alaska where the Exxon Valdez oil spill occurred in 1989. After all of the cleanup that was done, and after more than 20 years, black crude still soaks the beaches. Move a rock and there is oil. Dig a few inches and there is more oil. It's not going away for a long, long time.

According to a New York Times article, "BP later acknowledged to Congress that the worst case, if the leak accelerated, would be 60,000 barrels a day, a flow rate that would dump a plume the size of the Exxon Valdez spill into the gulf every four days. BP's chief executive, Tony Hayward, has estimated that the reservoir tapped by the out-of-control well holds at least 50 million barrels of oil."

Certainly everyone in the biodiesel industry is doing what they can to see that the tax credit is reissued as soon as possible, but assuming it's passed by the Senate by the time this issue is printed, will the same thing happen next year? The entire situation begs the question; can the industry survive without the tax credit?

Convention says no, it cannot, which is why the federal credit needs to be reissued immediately. However taboo it may be to discuss this scenario, an exercise in "what ifs" may prove valuable, just in case.

What would be necessary for the industry-or perhaps more appropriately, "an" industry, since any biodiesel industry forming in an America without the credit would likely be very different compared to the existing one that grew over five years with it-to survive without the tax credit?

RIN credit prices of a dollar would be a good start, and much higher petroleum prices would be needed. It's sort of funny that the only people who seem to want and need higher petroleum prices are those in the renewable fuels business. Consistently low feedstock prices, and much more reliance on lower-cost waste oils, fats and greases, would also be required, as a gross majority of biodiesel production input costs come from feedstock. But what about novel technologies that can reduce chemical and energy input costs and consumption, or lower the cost of fuel washing and polishing, or improve glycerin profits or usefulness in the plant as either a feedstock itself or an energy source?

I believe all of these things would be necessary for a new and more streamlined biodiesel industry to emerge from the darkness in which we all find ourselves today. And if none of these things can make a gallon of biodiesel cost-competitive with fossil diesel fuel, there still remains the fact that many consumers find solace in paying a higher price for an environmentally responsible product, which biodiesel most certainly is.

This was one of many topics on my weekly blog, F.A.M.E. Forum, which received some interesting feedback from readers. Check it out at www.biodieselmagazine.com/fameforum.
 
 
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