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Biodiesel industry finally gets good news

DANIEL LOOKER Updated: 12/17/2010 @ 9:17pm Business Editor

The Biodiesel industry is breathing a sigh of relief today as the compromise tax bill passed by Congress heads to the White House for President Barack Obama’ signature.  The law restores the $1-a-gallon biodiesel tax credit, which expired at the end of 2009, and extends it through the end of 2011.

“The industry is ecstatic at the news, where we’ve gotten the tax credit reinstated and extended for one year,” Gary Haer, chairman of the National Biodiesel Board, told Agriculture.com Friday. “It’s been a very challenging year for the industry.”

After the credit expired, the industry struggled to say afloat, idling plant capacity and laying off or furloughing employees. Some plants had to file for bankruptcy.

The Energy Independence and Security Act of 2007, which expanded the renewable fuel standard mandate for corn ethanol also established mandates for biodiesel use, but that alone wasn’t enough to keep an industry with 1.4 billion gallons of capacity going during 2010.

Haer said the law manadated use of 500 million gallons of biodiesel in 2009 and another 650 million in 2010, but because the Environmental Protection Agency gave fuel blenders credit for biodiesel already used in 2008 and 2009, it required only 345 million gallons to be blended this year.

Without the tax credit, biodiesel wasn’t competitive with petroleum-based diesel and most other markets dried up.

“The biodiesel industry was running at well-reduced rates this year,” said Haer, who is vice president of sales and marketing for the Renewable Energy Group based in Ames, Iowa—one of the largest players in the industry. “Our estimates are that the industry was running at 15% to 20% of capacity.”

For the companies that are still in business with idled plant capacity things are looking up. The RFS mandate for biodiesel blending this year is 800 million gallons, and biodiesel also qualifies as an advanced biofuel, putting the total potential market at 1.35 billion gallons.

“People are going to be employed and helping our country on the road to greater energy independence,” Haer said.

He expects the industry’s revival to be a boost to the markets for soybean oil, animal fats, cottonseed oil, corn oil and canola oil. All are used as  feedstocks in the industry, although not all biodiesel plants have the capacity to use animal fats. Many REG plants are able to make the fuel from both animal and vegetable feedstocks and the share is roughly 50/50, Haer said.

And, although soybean oil at times may be more costly than some other feedstocks, Haer expects it to be an important feedstock.since it’s the must abundant vegetable oil.

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