>
>
> U.S. producers reap federal subsidy while selling most
> of the fuel
> overseas
>
>
> By BRETT CLANTON
> Copyright 2008 Houston Chronicle
>
>
> Nov. 29, 2008, 8:03AM
>
>
> Federal subsidies to the U.S. biodiesel industry were
> supposed to help wean the nation from foreign oil, and a new
> law in 2009 will bolster the effort, but the money has
> fueled a controversial side business.
>
> Domestic producers of the renewable fuel have been selling
> huge quantities of biodiesel in Europe and in other foreign
> markets, where prices are often better, and then receiving a
> $1-per-gallon tax credit from Uncle Sam.
>
> Biodiesel, made in the U.S. mostly from soybean oil or
> recycled cooking oil from restaurants, is blended at low
> levels with petroleum diesel to reduce emissions and
> reliance on fossil fuels.
>
> Today, American exports of biodiesel represent more than
> half of domestic output.
>
> Biodiesel's $1-per-gallon subsidy, known as the
> "blender's tax credit," is available to U.S.
> companies that blend biodiesel with petroleum diesel and was
> intended to boost biodiesel production and encourage diesel
> marketers to buy the fuel.
>
> Exports have helped some biodiesel companies survive a
> difficult period in recent years, when high costs and a weak
> U.S. market forced firms to close plants.
>
> But exporting has been criticized as an abuse of a federal
> subsidy that was presented to the American public as a down
> payment on a future in which the U.S. would rely less on
> fossil fuels.
>
> "This is a government boondoggle financed by the
> taxpayers," said Tom Elam, an agricultural economist
> with FarmEcon in Carmel, Ind., who estimates biodiesel
> exports could be costing American taxpayers several hundred
> million dollars a year.
>
> Texas has more installed biodiesel production capacity than
> any other state, and several companies along the Houston
> Ship Channel participate in the export business.
>
>
> Industry cites benefits
>
> The industry defends exports as a temporary but important
> practice that has created thousands of "green"
> jobs and helped build a domestic infrastructure to make the
> fuel.
>
> In 2009, a new energy law will require blending of 500
> million gallons of biodiesel into the nation's fuel
> supply, growing to 1 billion gallons by 2012.
>
> "It is reasonable to assume that the vast majority of
> U.S. production will be needed to meet domestic use
> requirements," said Manning Feraci, vice president of
> federal affairs at the National Biodiesel Board, a trade
> group based in Jefferson City, Mo.
>
> For now, however, the business of exporting the renewable
> fuel is still going strong.
>
> Through August, the nation's biodiesel exports hit 511
> million gallons, with most of that going to European Union
> nations and small quantities heading to Mexico and Canada,
> according to Census Bureau data tracked by the U.S.
> Department of Agriculture.
>
> That's 85 percent of the estimated 600 million gallons
> that American biodiesel producers will make this year—and
> that's only for the first eight months.
>
> In 2007, the U.S. exported 291 million gallons of
> biodiesel, and domestic producers made 490 million gallons,
> government figures show.
>
> Critics say the data highlight how little oversight there
> is over biofuels programs despite huge federal spending on
> them.
>
> "It's probably an indicator that our renewable
> energy strategy in the United States needs to be
> revisited," said Texas Agriculture Commissioner Todd
> Staples, whose office oversees state biofuel initiatives.
>
> But while the biodiesel industry acknowledges the fuel is
> going overseas, it contends government figures are not
> reliable and may overstate the issue.
>
> Federal biodiesel export figures actually reflect exports
> of refined U.S. vegetable and animal oils, which mostly
> means biodiesel.
>
> Current export data also do not draw a distinction between
> domestically produced biodiesel and foreign-produced
> biodiesel that passes through U.S. ports.
>
> Through August, the U.S. had imported 232 million gallons
> of biodiesel, Census figures show.
>
> Yet even if all the foreign fuel were included in the 511
> million gallon export figure, domestic producers would still
> be sending about half their output abroad.
>
> Like ethanol, biodiesel has been touted as a homegrown way
> to help reduce U.S. dependence on oil, cut tailpipe
> emissions and aid American farmers. Ethanol, which is
> blended with gasoline, also is subsidized, but almost all of
> it is consumed domestically.
>
> The $1-per-gallon biodiesel tax credit was created under
> the 2004 American Jobs Act. The tax credit had been set to
> expire at the end of 2008, but recently received an
> extension for another year.
>
>
> Vegetable oil costs
>
> Today, the domestic biodiesel industry has more than 2
> billion gallons of installed production capacity from more
> than 170 plants in 40 states.
>
> Texas has 686 million gallons of production capacity in 31
> plants. More than half of that capacity is located along the
> Houston Ship Channel, said Jess Hewitt, president of the
> Biodiesel Coalition of Texas.
>
> But many U.S. plants shut down temporarily this year after
> soaring vegetable oil prices made production too costly.
> Some of those that kept working relied on exports to stay
> afloat.
>
> John Kellogg, spokesman for World Energy, a Boston-based
> biofuel marketing firm that exports biodiesel out of the
> Ship Channel, said he sees no conflict with sending U.S.
> subsidized fuel overseas.
>
> "Support from the federal government in the form of a
> tax credit is appropriate to allow biodiesel to become a
> global business and a global competitor," he said.
>
> /[EMAIL PROTECTED]
> <mailto:[EMAIL PROTECTED]>/
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