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Biodiesel: RFS2, the Tax Credit, and the Future of the Industry
The owner of nationally recognized biodiesel consulting firm, Lee Enterprises, is passionate and outspoken about the industry. This week he shared his thoughts on the industry.
“The thing giving the industry heartburn right now is the $1 tax credit” says Lee. “This tax credit is for 2010, the year is half over, and we don’t have an answer. I place the blame squarely on Congress” Lee says. “The credit appears to have overwhelming bipartisan support, but they keep attaching it to controversial legislation. That is inexcusable”
Lee sees the real tragedy as those producers who trusted the government to do as it promised and pass the credit. “Only about 15% of the plants had that trust and remained open after the first of the year” Lee said, “and many of them have been rewarded with bankruptcy and foreclosure – and Washington wonders why there is an anti-incumbent sentiment”.
While price is always the key factor, Lee notes how little the price of biodiesel impacts the overall cost of a blended gallon of diesel fuel. “In a common 2% blend, a $3.00 per gallon diesel blended with $3.50 per gallon of biodiesel, produces a $3.01 per gallon blended product” says Lee. “That does not even consider that each gallon of biodiesel also carries 1.5 RINs, valued at about $.75 in today’s market” Lee noted. “If I owned an oil company, I would be buying lots of biodiesel right now” he says, “because big oil is going to need them by year’s end”. Lee stresses that the sole factor limiting the industry is the tax credit uncertainty. “It keeps everyone unable to agree on price”.
“I believe that big oil is keeping this issue convoluted” says Lee. “I expect them to come in at year’s end and say that they could not comply with RFS2 because they couldn’t find biodiesel to buy. My hope is that the EPA will stand fast. The product is out there for people that want it – it is simply a matter of agreeing on price”.
The major automakers have all accepted biodiesel blends for use in autos and Lee sees the future of biodiesel as very promising. “Unlike other alternative fuels, there qegkj aren’t as many options with diesel” he says. “You can’t run a cruise ship, airplane or tractor trailer rig on batteries”. Lee maintains that biodiesel is not simply an environmental issue, however. “When oil hits $125 per barrel, OPEC is going to control one half the world’s wealth” Lee says. “That should scare everyone. Additionally, we are in a tough economy right now and if we replaced even a fourth of our imported oil with alternative fuels, the economy would turn around quickly” he said. “These are national security and economic issues” Lee says. “I think voters are really beginning to see this and demanding results” he said. ”We are in a tough situation in America right now. If our elected officials cannot deliver, we will elect some that can”.
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