An American industry struggles for existence

Posted May 14, 2010

The National Biodiesel Board hosted a Webinar May 13 featuring four biodiesel producers and NBB CEO Joe Jobe discussing the severe damage to American biodiesel companies, and local economies, resulting directly from the lapse of the federal biodiesel tax credit more than four months ago.

The message was sad, listening to hard-working Americans being forced by Congress' inaction to lay off employees and shutter domestic biofuel refineries while one of the most environmentally and economically disastrous oil spills in American history unfolds in the Gulf of Mexico; as Americans fight and die overseas to protect us from extremists in those countries on which we are most dependent for crude oil.

Bernie Crowley, a partner with Delta American Fuel in West Helena, Ark.-one of the most impoverished areas in the nation-said his company could directly support between 75 and 80 full-time jobs between the biodiesel plant and the terminal Delta American Fuel owns. He said there is no way they could bring their plant online now, and the effects from the tax credit lapse are going to "pull our other business under the water," Crowley emphasized, due to "serious cash flow issues."

But the direct effects are only the beginning. Bobby Heiser, a partner in Nittany Biodiesel LLC headquartered in State Park, Pa., which owns the 15-MMgy Bulldog Biodiesel in Georgia, says the indirect effects on the community are also devastating. When running at capacity, Bulldog Biodiesel has 45 trucks a week deliver feedstock oils, 12 more a week for other materials, and 45 trucks a week carrying product out of the plant for distribution. Not to mention the oil collection businesses hurt by an idled biodiesel industry, in addition to third-party labs used for testing.

Heiser said Nittany Biodiesel was started by a small group of American investors and $30 million. "Our intention was to build four or five plants, but that's fading," he said, adding that since January he has held on to what may be the only bipartisan issue in American politics-energy independence. "But three weeks ago we were forced to let go 20 people," Heiser said. "We reached the limits of our funding. Our lenders are growing ever doubtful and they may want to call in our debts. You see where this is going."

Jeff Stroburg, CEO of Renewable Energy Group Inc., the largest biodiesel company in the U.S. with 360 MMgy capacity produced or marketed by REG, said lender uncertainty right now is huge. "The debt market is extremely skittish," he said. "To attract debt capital, we need a three- to five-year credit in place to attract debt back into this market." Most troubling is what's happening to small investors, because when those investors get wiped out, they are not likely to come back. And if the credit were back in place today, Stroburg said REG would be looking to fill 129 jobs.

"People are looking for work and we sure wish we could employ them," said Scott Johnson, president and CEO of Gen-X Energy Group headquartered in Pasco, Wash., with a biodiesel plant in Burbank, Wash. He said Gen-X Energy has been planning a new 6 MMgy plant in Richland, Wash., but plans are on hold. If the tax credit hadn't expired, Johnson said, "Our new facility would already be online."

Panelists discussed how the biodiesel industry actually generates more revenue than the cost of the tax credit, creating $445 million in taxes paid to the federal government; adding $9 to a head of cattle; 25 cents to a bushel of soybeans; and much more.

Jobe discussed the ongoing lawsuit the petroleum associations filed against U.S. EPA regarding the renewable fuel standard, RFS2. "The lawsuit is meritless," Jobe said, adding that Big Oil is simply trying to reduce their obligations under federal law and set up scenarios for waivers. The petroleum industry has screamed for all hands on deck to help fix the oil spill in the Gulf, Jobe said, yet they are wasting resources on this lawsuit that could be spent saving the already sensitive ecosystems in the Gulf. "If the credit were turned back on today, tomorrow we could begin contributing energy to the economy, 10 times the amount of toxic crude spilling into the Gulf."

"We're close to the point where it's time to shut the whole thing down," said Crowley of his biodiesel business, Delta American Fuel. "That's on the horizon" without the credit in place, he said.

The House Ways and Means Committee is talking about getting the already-passed but divergent Senate and House versions of the tax credit reconciled, Jobe said, and they are trying to find revenue to fund it under the PAYGO (pay-as-you-go) rules .

Crowley promised biodiesel production and his business could work, however, so long as the current credit is reissued, the RFS2 is implemented as intended, and a longer-term credit is passed before the end of the year.