Biofuel boondoggle: US subsidy aids Europe's drivers
A maneuver called 'splash and dash' cost US taxpayers perhaps $30 million last year, but the charges are rising fast.
from the June 8, 2007 edition
Page 3 of 3
"The US biodiesel producers talk out of one side of their mouth and then the other, because some of their members are clearly benefiting from this credit," says one veteran industry expert, who asked not to be named because such comments could harm his business prospects. "It's their own members importing a lot of that palm oil and biodiesel."
Indeed, congressional staffers say a legislative solution is snagged at present.
"There are trade issues involved in solving this problem," says a committee aide who asked not to be named because of the issue's political sensitivity. "The tax people want to go after it, but the trade people say you can't and I don't know precisely why that is."
Mr. Jobe, however, says his US biodiesel trade association remains committed to stopping abuse of the blenders credit loophole "to the extent that it is occurring."
So far, the amounts involved look relatively modest. Although there is no official IRS tally of how much US taxpayers have spent on this program, the US Department of Agriculture does track exports of US vegetable and animal oils, a category that is mostly biodiesel, experts say. In one year, those exports quadrupled – from about 9 million gallons in 2005 to 36 million gallons last year. If biodiesel accounted for 80 percent of the total, analysts calculate that taxpayers would have paid out about $30 million in 2006.
This increase is corroborated by the European Biodiesel Board, which has tracked 50-plus shipments from the US to Europe totaling about 60 million gallons in the first four months of this year. Most of those shipments originated in Houston; Savannah, Ga.; or New Orleans and arrived in the ports of Rotterdam, Netherlands; Bilbao, Spain; or Hamburg, Germany, Garofalo says.
Ultimately, this rise of US exports points to a larger American problem: a serious imbalance between domestic biodiesel production capacity and demand, some experts say.
Although biodiesel sales in the US soared to 250 million gallons last year – more than triple the level in 2005 – domestic biodiesel plants are still operating at just half their capacity, industry analysts say. That's because the industry, spurred in part by the blenders credit, has been on a tear building new plants. Another 1 billion gallons of capacity is expected to come on line this year.
Renewable-fuel standards that mandate biodiesel blending may one day boost US domestic demand. Until then, the US industry seems set to depend more on exports – and the blenders tax credit, industry experts say.
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