Special interests have successfully lobbied the U.S. Department of Treasury to exploit a loophole in a renewable diesel tax credit law for their own benefit.

“Certain powerful oil companies have managed to get the government to expand the definition of a separate provision that was added into the biodiesel tax credit law late in the legislative process,” said Joe Jobe, CEO of the National Biodiesel Board (NBB). “It’s our belief that this credit was developed to help a specific emerging technology, and not to further subsidize existing petroleum refineries.”

The provision in question allows fuel made from a specific process called thermal de-polymerization (TDP) to qualify for the same dollar-per-gallon incentive that was created for biodiesel produced from agricultural resources. The TDP process is a new technology to turn hazardous wastes, plastics, and food wastes like poultry offal and carcasses into a boiler fuel. Congress never had a chance to debate the provision, but it passed, along with the biodiesel tax incentive extension, in the 2005 Energy Policy Act.

Now the Internal Revenue Service (IRS) has ruled in the oil companies’ favor to expand the TDP definition to include the conventional petroleum refining process. Those companies want to add raw vegetable oils and fats at their existing oil refineries and qualify for the credit.

“This is bad energy policy, bad agricultural policy and bad fiscal policy,” Jobe said. “If Congress lets this stand, our government will be handing over U.S. taxpayer money to some of the richest companies in the world, and it will not provide many of the benefits that the biodiesel tax incentive has given back to America.” 
In early April, the U.S. Department of Treasury gave its approval to oil company
requests to expand the definition of “renewable diesel” so that the oil industry can
benefit from the $1-per-gallon tax credit. NBB is communicating to Congress and
media regarding the negative impact of this decision.

“I believe the Treasury Department got this ruling wrong. This was not our intent
when the tax credit was written. We are going to explore available legislative
options to fix this problem.”
– Rep. Kenny Hulshof (R-MO)

In addition, Senator Maria Cantwell (D-WA) said April 19 that she and other members
of Congress will work to overturn Internal Revenue Service Notice. Read the BNA
story here, http://nbb.grassroots.com/DCCapRpt/BNA_CantwellArticle/.
Also, please ask Members of Congress to co-sponsor the House and Senate bills to extend
the biodiesel tax credit. Representatives Earl Pomeroy (D-ND) and Kenny Hulshof
(R-MO), introduced the Renewable Fuels and Energy Independence Promotion Act (H.R.
196) as their first legislation in the 110th Congress, which convened on January 4.
It now has 12 co-sponsors. The legislation would make permanent the federal excise
“blender” tax credit for biodiesel and the Small Agri-Biodiesel Producer Credit.

In March, Senators Blanche Lincoln (D-AR) and Norm Coleman (R-MN) introduced S. 872 to extend the biodiesel tax incentive to 2017. See an updated list of co-sponsors here, http://thomas.loc.gov/.

Senators Blanche Lincoln (D-AR) and Norm Coleman (R-MN) introduced
legislation on March 14 to extend the federal excise tax credit and income tax
credit for biodiesel to 2017. If adopted, the legislation would continue the era of
growth in the biodiesel industry that similar Lincoln-sponsored legislation launched
when it became law in 2004. The legislation can serve as a legislative vehicle that
could be conferenced with the Renewable Fuels and Energy Independence Promotion Act
(H.R. 196) that Representatives Earl Pomeroy (D-ND) and Kenny Hulshof (R-MO)
introduced on January 4. The House legislation would make permanent the federal
excise blender tax credit for biodiesel and the Small Agri-Biodiesel Producer
Credit. Contact your Member to request that they support these important bills. See
an updated list of co-sponsors to H.R. 196 here, http://thomas.loc.gov/.

I’m not so sure.  Everywhere I turn, I hear about local, state, or federal government impeding the growth of the biodiesel industry.  In my previous article, I spell out one of the common myths and misconceptions about biodiesel, but I’m beginning to wonder if it’s more than that.

In a nutshell, it’s probably just the fear of change.  We’re used to petroleum.  In the late 1890’s, when gasoline as a fuel was new and the majority of the few automobiles that existed were actually steam or electric, people feared gasoline as a dangerous explosive that would detonate spontaneously.  People had to be reassured that gasoline was safe.

Rudolf Diesel had a solution, burn peanut oil in his new engine.  It was much safer than gasoline, was renewable, and smelled better when it burned. The diesel engine had better reliability and fewer parts.  But, the petroleum industry refineries had cheap fuel, and a really sulfurous (and otherwise useless) fuel oil byproduct that could be burned in Diesel’s engine with little to no modification.  Thus, the petroleum industry had yet another avenue for their products, and the renewable fuel industry was killed before it was ever even born.

It seems to me we’re in a slightly different, but still very reminiscent place today.  Petroleum is becoming scarce, and renewable fuels, still the same after all these years, are ready to step in.  Yet I keep reading about (and experiencing first hand) proposed biodiesel plants being blocked by fire marshals, planning and zoning commissions, historical societies,  and even mayors.   Why?

Most small to medium sized biodiesel plants are not funded by large conglomerates such as ADM or Cargill.  They are being built by entrepreneurs such as TBI which in most cases wish to reuse existing facilities such as chemical plants, textile plants, dairies, warehouses, or fuel depots and revitalize the local economy while doing so.  What’s so bad about that?

Biodiesel as a product is extremely safe, and the process to produce it is considered safe as well if properly planned and effectively managed.  Most processes are self-contained, fumeless, and pose very few hazards in the way of environmental impact.  This isn’t fiction. There are already hundreds of biodiesel plants in many parts of the world that are located in urban, industrial locations without problem.  Europe is a great example.

So, does our government really want biodiesel?  I don’t know.  They say they do, but their actions don’t really convey the same message.   “It’s much too dangerous to build a biodiesel plant near residential or commercial locations”, “We don’t want to smell your refinery belching out putrid smoke all hours of the day”, “You’re going to have to have double or even triple containment around your tanks” (for class IIIB liquids, no less), “You have to install a sprinkler system in your plant” (for an oil fire, no less), “You are classified as a low level hazardous waste facility” (my favorite).  

Nonsense.  It’s just change.  And, it’s good change.  (Standing on soap box, waving the American flag)  It helps the local economy, it is renewable, it’s safe to store and use, it’s more ecologically friendly, it’s more physiologically friendly, and it reduces our dependency on foreign oil.  How can all that be bad? 

Want to help?  Ask your local city councilman, state representative, or congressman what he or she is doing to help promote biodiesel in your area.   Get them thinking about renewable fuels and instead of just talking about it, doing something about it.  Make them hear you, a phone call or a letter a day for three days ought to do it.  Tell them you want to see biodiesel and ethanol pumps in your neighborhood.

I keep reading and hearing about how Biodiesel is such a dangerous product because it’s a fuel, and because it requires such dangerous chemicals used to make it. This seems to be to be a clear case of FUD (fear, uncertainty, and doubt), and spread by people who are knee-jerking or simply just spreading mis-information because they won’t take the time to actually do their own homework.

So, just to spell it out in black and white, I’ll explain a little about the production process and chemicals used in making biodiesel. Biodiesel is made from essentially three ingredients:

• Vegetable Oil or Animal Fats
• A simple alcohol such as Methanol or Ethanol
• A catalyst, such as Sodium Hydroxide or Potassium Hydroxide

1. Vegetable Oil – While flammable, it has a flash point of around 400 degrees Farenheit. You can’t light it with a match. It’s used in almost every restaurant and fryer line in the world, not to mention being used for pharmaceutical, cosmetic, industrial, or electrical uses; and is stored, shipped, and used in large quantities (thousands of gallons) worldwide on a daily basis.
2. Methanol/Ethanol – Again, flammable, much more so than vegetable oil but not as much as gasoline, and is used in many businesses on a daily basis, and stored and used in large quantities. As a general rule, most medium size biodiesel plants store and use less alcohol on a monthly basis than the amount of gasoline stored on any one day at a typical gas station.
3. Potassium Hydroxide (KOH) – A caustic chemical, it is used to “force” the reaction for biodiesel to strip the triglycerides in the oil to simple mono-alkyl esters (commonly called biodiesel). KOH is commonly used in making alkaline batteries, and it’s used commercially to wash fruits and vegetables, thicken ice cream, soften olives, and to make foods such as hominy and cocoa.

When these chemicals are combined, the resultant mixture forms a fairly stable liquid that is mixed and ultimately separates into biodiesel and glycerol. For more information, see the TBI website or Wikipedia (“http://en.wikipedia.org/wiki/Biodiesel“).
In short, these “dangerous” chemicals are used EVERYDAY, EVERYWHERE in modern commercial industry. Yet somehow, because biodiesel is new and has little regulation around it, it scares people into creating artificial issues with it that are unfounded and totally unnecessary.

US Congressmen Kenny Hulshof (R-MO) and Earl Pomeroy (D-ND) have introduced the Renewable Fuels and Energy Independence Promotion Act (H.R. 5650), which would make the federal excise tax credit for ethanol and biodiesel permanent.

The bill removes sunset provisions for ethanol and biodiesel incentives that accompanied the Volumetric Ethanol Excise Tax Credit (VEETC), which took effect Jan. 1, 2005. Currently, the incentives will expire in 2008.

The incentive is a volumetric-based tax credit aimed at helping lower the cost of ethanol and biodiesel to consumers who pay road taxes, such as truckers, and in tax exempt markets, such as school districts.

Since taking effect, the incentive has been the primary stimulant for a dramatic increase in new biodiesel plants—there are currently 65 operational plants, with 50 more under construction.

Renewable fuels are a critical component to our nation becoming more energy independent. By making the tax credits for biodiesel and ethanol permanent, we are providing the stability these emerging industries need to grow.

—Rep. Pomeroy

Several bills have been introduced in the Senate to extend these tax credits, including S. 2401 by Sen. Chuck Grassley (R-IA), Chairman of the Senate Finance Committee.

We’ve got a centrifuge, thin film evaporator and temp controller/chiller.  Hopefully, the centrifuge will suffice for glycerine, soap and other contaminant removal.  The evaporator and chiller will be part of the methanol recovery system.  A condenser is in the works.  We are still having trouble with our 1000 gallon heated processor, but recalibration and an agitator should do the trick.  Our 500 gallon processor is still working like a champ and a new source of feedstock should fit the bill for ramping up production.

Well, the convention was extremely informative. I learned quite a bit about the IRS and EPA registration processes that I didn’t know (and did wrong). I also learned about some new processes and equipment that are becoming available. Some of the tips about product quality and how to check and verify for it were well worth the trip.

I also found a good line on some centrifuges that we’ll use to separate components and make our hybrid production process a bit more efficient (and cost effective).

What surprised me the most was how much production is coming online. A total of over 900 million gallons is scheduled to come online this year, that from just 354 million the year before. That’s still a drop in the bucket, but it shows incredible interest in the market.

What did dissapoint me from the conference was the obvious skew towards the big petroleum and big agricultural markets. The show was clearly dedicated to them, with the highest blend of biodiesel mentioned being B20. That’s fine, but there is a very real market for B100 consumers, and practically nobody at the conference really wanted to discuss it. It was all about blending “above the rack”, or above the fuel distribution point where the trucks are loaded at the petroleum refinery. And in most cases, it was about blending B2 or B5.

B2 and B5 will become important to the market this year, when the government removes the sulfur from all diesel fuels sold in the US. Biodiesel will replace the lubricity lost in Ultra Low Sulfur Diesel from removing the sulfur. Still, I’d rather see more emphasis on B100 which has significant improvements in emissions, rather than just augmenting the petroleum industry…

Well, not really, but I did see her four times in the same day.  She was all over the National Biodiesel Conference here in San Diego.  First I saw her at the convention center, then on the street after I had lunch, and then a couple of times at the hotel where the Sustainable Biodiesel Conference was held.  I never did introduce myself, but I almost stopped her to ask her why she was following me…

In all seriousness, it was good to see her taking both an active role in the NBB’s stake in Biodiesel (she did a spot for Fox news on it), but also actively participating in the Sustaniable Biodiesel Conference.  As most in the industry know, she’s been an avid environmentalist for quite some time.  Good.  I think using the trendiness of alternative fuels is a poor platform for celebrities to gain press exposure, yet I seem to find it popping up from time to time.  So it’s nice to see a celebrity exploiting her celebrity status for her convictions, instead of the other way around. 

I also read a good article on her on Green Trusts website: http://www.off-grid.net/index.php?p=313
 

Heading to the National Biodiesel Conference next week in San Diego.   I’m hoping to gain some information about tax incentives, GMP and quality initiatives, and newer production methods like continuous processing or even more exotic concepts like super critical methanol reactions.  Mostly we’re going just to see who’s who and what’s what in the industry.  My past lives have taken me to events like Comdex and ASIS shows, which number in the thousands of people and exhibitors.  I wonder how this will compare.

For more information, visit http://www.biodieselconference.org/2006/