The money chase: Obama and the biodiesel tax credit

By Nicholas Zeman | February 23, 2010
During his State of the Union address in January, Pres. Barack Obama pleased some alternative fuels producers by giving special mention to "advanced biofuels." Biofuels have received presidential utterances in past addresses, but results haven't always been forthcoming. "First of all, there were no specifics, so there was really nothing there," said Jatrodiesel president Raj Mosali. "The president mentioned biodiesel specifically when he was campaigning, and now he's talking about 'biofuels,' which could mean anything-and that's concerning."

In addition, grants, loan guarantees and even American Recovery and Reinvestment Act funds are not going to biodiesel producers for the purposes of plant optimization and upgrades. "That's 100 percent true," Mosali says. "All of this assistance is being directed toward things like fuel cells, cellulosic ethanol and electric motors-all technologies that are still far off."

The Obama administration coming out with billions of dollars from the American Recovery and Reinvestment Act to increase "clean energy manufacturing" could seem almost like a taunt to biodiesel producers.Obama announced "awardees" of the $2.3 billion clean energy manufacturing tax credits as existing biodiesel producers languish over the lapse of their specific federal blender tax credit. "Projects are assessed based on the following criteria: commercial viability, domestic job creation, technological innovation, speed to project completion, and potential for reducing air pollution and greenhouse gas emissions," the White House stated on Jan. 8.

While the word "biofuels" was good to hear spoken by the president, there's a word that describes the 2009 biodiesel year-idle. Huge plants sat quiet for months as vegetable oils were high and diesel prices were not. Imperium Renewables Inc., which suffered an explosion at its Grays Harbor plant in Washington State, said it was in no big hurry to make repairs while the tax credit is nonexistent.

"I don't think this Obama administration is any different than any other-Republican or Democrat-in that often the right hand doesn't know what the left is doing," said Joe Gershen of Los Angeles' Tellurian Biodiesel. "So it does hurt, but I will say that I don't think they're doing it on purpose."

The renewable energy sector can have legitimate economic impact for farm areas, usually far away from population centers where builders and other entrepreneurs often look for labor resources. Wind, ethanol and biodiesel have fewer formal labor requirements so their expansion can help rural development, said Ernie Goss, professor of economics at Creighton University in Omaha, Neb. "The incentives are fairly generous," Goss said. "The cost per job in the renewable energy sector is high, but it's easier to support in underdeveloped areas."

The ARRA has already made history and headlines with various programs like "Cash for Clunkers," where new car buyers were able to trade in their used vehicles for a generous rebate. But there have been several bureaucratic bottlenecks in the way the funds are distributed, there are concerns about massive frauds and the ill, uninformed spending of funds, Goss told Biodiesel Magazine.

The National Biodiesel Board said it was pleased that the president noted the important role advanced biofuels play in the nation's energy policy, but action is needed more than words to help the faltering biodiesel industry. "If Congress and the Administration truly want to protect and promote green job creation, they should act immediately to extend the biodiesel tax incentive," said Manning Ferraci of NBB's Washington office. On February 11, the Hiring Employees to Restore Employment Act was unveiled, which included the biodiesel tax credit. Less than a day later, Senate majority leader Harry Reid, D-Nev., decided on a scaled-down version of the bill without the credit.

Biodiesel Magazine sources indicate that many plants are shut down, eagerly awaiting reissuance of the incentive. Some have tried to pass the now-additional $1-per-gallon cost for biodiesel along to customers, with little result. Others don't have the cash to float waiting for payback from the government when the credit does get reissued.
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