When the Petroleum Industry is Lying to you…

Reading an article where Chet Thompson claims that ethanol and biodiesel production are at all time highs and further mandates would hurt the industry and cost consumers more money. Nothing could be further from the truth. At least 10 of the major biodiesel plants in the USA are idle, and in the last 3 years, dozens have gone out of business. In North Carolina alone, there used to be 5 biodiesel plants operating, now there are just 2, and 1 is idle.

Don’t believe the propaganda, this is at best a wildly distorted perspective, but more likely just one establishment industry trying to kill another one to reduce competition.

BS link below:


Why Buying a Biodiesel Plant Now Makes Sense

Most people in the biodiesel industry recognize this is currently not a good market for biodiesel. In fact, some consider this one of the worst markets we have had. Personally, I think in 2011 and 2012 when diesel fuel was over $4.00 per gallon it was hard to be in the biodiesel business. It took a ton of cash to just operate, much less make a profit.

Fast forward to 2019. The Trump administration has been devaluing the EPA RFS RIN value, and undermining some of the need for biodiesel and renewable fuels in general. California has implement the Low Carbon Fuel Standard, which essentially sucks all of the biodiesel and used cooking oil westward (poor Californians, paying $3.75 for gasoline when it’s $2.35 in NC). Then we have the federal $1 per gallon biodiesel tax credit, which once again has lapsed and Congress is taking their sweet time to renew. This tax credit is supposed to keep biodiesel price competitive to diesel fuel, which already gets subsidies permanently built into the tax code.

Still reading? Good. Here’s the sweet part: The biodiesel tax is coming back. It ALWAYS comes back, and I’m highly confident it will be renewed again, and since they’ve waited so long to renew it this time, it will almost certainly be a multi-year program. As soon as it does, the biodiesel industry starts booming again. So for every gallon of biodiesel made, the producer/blender gets $1.00 from the federal government. But that’s not the best part.

What is?

The federal biodiesel tax credit is NON-TAXABLE income.  It isn’t counted as income for the sale of the fuel. This means the tax credit is worth $1.10 plus your corporate tax rate, or $1.485 per gallon if you’re in the 35% tax bracket. 

So if you own a shipping company, pavement company, or other entity that has a high diesel fuel expense, not only can you get cheaper fuel to blend with diesel, it can also significantly offset other gains from your businesses. Heck, if you own ANY business and the biodiesel plant is a subsidiary, you can offset other gains from that business. Better yet, you may show losses on the tax return from that plant and use carryforwards for the next year(s). Now, nobody here is a CPA and this isn’t tax advice, but from our own experiences we believe this might be a good strategy for some business to offset their tax burden AND get renewable energy at the same time.

S.944-“The American Renewable Fuel and Job Creation Act of 2017” and Why You Should Care

So what’s the big deal about the latest version of the biodiesel tax credit bill submitted by Senators Grassley and Cantwell last week?

The bill is available in full text for your review here, but here are some highlights that make it important for domestic producers here in the USA:

  1. Producer’s Credit – The credit has been changed from a blender’s credit to a producer’s credit, meaning the actual entity making the biodiesel is the one eligible for claiming the credit.  This is important because currently most biodiesel producers are pressured to split the tax credit with blenders as B100 since the tax savings are actually worth more than the $1.00 credit.   It still will likely mean that feedstock prices go up for biodiesel producers, and there still may be pressure on the sell side for indexing biodiesel at a discount to heating oil, but the credit would be solely for the producer.  The bill does not indicate if the credits would be transferable.
  2. Multi-Year Credit – The extension would be from December 31, 2016 (retroactive) to December 31, 2020.  This would be the longest extension of the biodiesel tax credit on record, and would finally offer some stability to the biodiesel market.  This is a big deal.
  3. Domestic Production – A critical component of this bill is that it limits the credit to domestically produced biodiesel only.  Imported biodiesel from other countries would not be eligible for the tax credit.  This is a huge win for domestic biodiesel as it places them on a fair footing with imported biodiesel, and it means that US taxpayers are no longer subsidizing foreign produced biodiesel.
  4. Small Producer Credit – Small biodiesel plants under 15 million gallons per year are able to claim an extra .10 per gallon credit.
  5. Agri-biodiesel Definition Removed –  This changes indicates that the small producer credit is available for all feedstocks used in producing biodiesel.

In short, this is a big win for biodiesel if it’s passed as currently written.  Biodiesel NEEDS this tax credit bill to pass in order to gain some stability in the marketplace.

Want to help?  Call your senators today and tell them to support Senate Bill 944.  Ask for the “Energy Desk” and tell them “you want them to support S.944 for the biodiesel tax credit”.  Seriously, that’s it.  No long speeches or explanations needed, you don’t even have to tell them why.  Just call (email is not as good) and tell them you want them to support S.944.