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Source of Biodiesel Under Scrutiny

February 1, 2006 | 11 Comments

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New York [RenewableEnergyAccess.com] Biodiesel companies are angry about an apparent decision to allow tax credits on fuel made with imported biodiesel.

Ten US congressmen wrote the Treasury secretary in November to complain about an apparent IRS decision to allow blenders who use biodiesel from palm oil to claim the $1-a-gallon incentive. The congressmen complained that palm oil is not produced in the United States.

Biodiesel is processed oil from plants like soybeans, sunflowers and rapeseed. It is then mixed with gasoline or diesel fuel to make a biodiesel mixture that can be used in motor vehicles. The US government rewards fuel blenders who mix biodiesel with vehicle fuel. It allows a tax credit of 50? or $1 a gallon to such blenders. The higher credit applies to biodiesel made from agricultural sources.

Ten US congressmen wrote the Treasury secretary in November to complain about an apparent IRS decision to allow blenders who use biodiesel from palm oil to claim the $1-a-gallon incentive. The congressmen complained that palm oil is not produced in the United States, and that the decision only benefits farmers in Ecuador, which is preparing to export three millions gallons of palm oil-based biodiesel a month to the United States.

US biodiesel production was 30 million gallons in 2005. It is expected to grow exponentially in the next few years.

by Keith Martin, reprinted with permission, Chadbourne & Parke LLP

Additional Information

Chadbourne & Parke LLP

Bioenergy

11 Reader Comments

Comment
1 of 11

charles-butterfield-36244

February 1, 2006

Another reason to be concerned about the source of oils used in biodiesel is harm to the ecosystem caused by the farming practices used in producing some of the oils.

For example, palm oil, which is one of the oils that can be used on biodoesel, is the most significan cause of rainforest loss in Maylaysia and Indonesia.

Palm oil plantations destroy biodiversity and are associated with human rights violations and worker exploitation.

Also, Palm oil plantations threaten species with extinction, including the Orang-utan and the Sumatran Tiger. The palm oil industry could drive the Orang-utan to extinction in 12 years. This information is from the Friends of the Earth.

Thank you,
Charles Butterfield

Comment
2 of 11

roy-bauer-40438

February 2, 2006

It should not be used for imported oils . I thought it was a tax incentive. Which ment it would give farmers and plant opperatores a tax break for the year. And only if used in a means for more renewable porducts.
Lets take for example a farmer grows a crop for biodiesel. He then has it delivered to a refinery who crushes for oil. Who then delivers to a biodiesel plant to refine. Wich then is used for farming for more biodiesel and ethanol.
I got to go look at my papers.

Comment
3 of 11

charles-butterfield-36244

February 3, 2006

Reply to Jon Reese continued:

You indicate that you are concerned with the farmer trying to make a living. There we have something in common. I am also concerned about the farmer trying to make a living.

Palm oil competes with oils grown in the United States, such as soybean oil.

The producers of Palm oil undercut farmers in the United States.

The producers of Palm oil also do an extroardinary amount of damage to the environment.

This is in contrast to farmers in the United States who do very little, if any harm to the environment, compared with the Palm oil producers in Maylaysia and Indonesia.

Thank you,
Charles Butterfield

Comment
4 of 11

charles-butterfield-36244

February 3, 2006

Reply to Jon Reese:

I am quite surprised that in your response to my point about palm oil plantations in Indonesia and Maylasia, you indicated that you thought that I was talking about Ecuador. I never mentioned Ecuador at all. Did you even read my response very closely before replying to it? I doubt it.

Also, your response accusing me of Marxist rhetoric is completely inappropriate and false, and defamatory. You merely used the Marxist epithet because you did not like my respose.

I recommend that you refrain from false and defamatory responses in the future.

It is pointless to to use renewable energy sources that do more damage to the environment than the fossil fuels they replace.

Palm oil is one of those renewable energy sources that the growing of the crop does more damage to the environment than the fossil fuel it replaces.

Marx has nothing to do with it.

Charles Butterfield

Comment
5 of 11

subir-das-42524

February 3, 2006

I do not see why the tax credit should not be given even if the fuel is imported into the US.Any increased use of clean, renewable fuels like biodiesel should be encouraged until it becomes mainstream.US farmers should take advantage of it.

Comment
6 of 11

jon-reese-36798

February 3, 2006

That'll teach me to use a stat..which is it, the above mentioned 30 mgy, or this from an article in this same edition of this email?
Quote: American Biofuels (ABF) expects to increase its biodiesel production to 40 million gallons per year (mgy) in 2006 on the East and West Coasts, largely in response to major commitments by legislators including Governor Schwarzenegger (CA), Senator Ashburn (CA) and Governor Pataki (NY). In 2005, the entire biodiesel production in the United States was 66 mgy. End Quote. 30..66..that's quite a bit o' difference, eh?
Promise, last note :P

Comment
7 of 11

jon-reese-36798

February 3, 2006

I do have to ask, however, why Ecuador, which last time I checked, didn't have that much in the way of resources, no pun intended..is able to supply more biodiesel in a year than the US produced for itself in all of 2005. Where the hell were our people?

Comment
8 of 11

jon-reese-36798

February 3, 2006

I'm sure the people of Ecuador would be quite suprised they're running out of Tigers, since they didn't have any to begin with. Sorry, Charles, but when we can quote from the Friends of the Farmer Trying to Make a Living, lemme know. I do agree, however with Mr. Bauer. A US tax credit that was intended to support US production of biofuels, should not be a loophole for foreign production. IF, say, Brazil's well developed system can take cane sugar, avoid sugar tariffs by turning it into a fuel and shipping it here, cheaper than we can make it, fine. We'll have to figure out another way to reduce dependance on imported fuels. I fail to see how grown fuel is more damaging to the environment than oil with spills/water contamination as well as air pollution. Save the Marxist rhetoric for our OPEC buddies in say..Venezuela.

Comment
9 of 11

charles-butterfield-36244

February 4, 2006

The title of the document is:

Indonesia: An Environmetal Security assessment. The study was performed by Elizabeth B. Borelli, Major, United States Air Force. The study was performed in partial fulfillment of the graduation requirements for the Air Command and Staff College, Air University at Maxwell Air Force Base, Alabama.

In the study, Major Borelli also points out the environmental damage done by the palm oil plantations and the threat of extinction of the Sumatran Tiger and the Orang-utan because of the environmental damage to the rain forests in those countries.

The study is 87 pages long, and I cannot do it justice at merely 1,000 characters at a time. However, if you will give me your mailing address, I will mail you a copy.

All 87 pages.

Thank you,
Charles Butterfield

Comment
10 of 11

charles-butterfield-36244

February 4, 2006

Thank you, Louis:

When I present a statement of fact I always have multiple sources although for purposes of brevity I generally only cite one of those sources.

There does seem to be some objection to my citation of the Friends of The Earth for environmental damage and threat of extinction of the Sumatran Tiger and the Orang-utan, done by palm oil plantations in Indonesia and Maylasia.

The other source that I have for the points that I made is from a study done at the Air Command and Staff College, Air University at Maxwell Air Force Base, Alabama. The document is Distribution A: Approved for public release; distribution is unlimited, so I can share that document with you.

(continued)

Comment
11 of 11

louise-paul-43879

February 4, 2006

I think it would be useful to check out the following link regarding the environment damage claims by FOE.(www.mpob.gov.my/html/issue/issue06.htm). Obviously there must be compelling reasons for US traders to import palm based biodiesel, cost being the primary factor I believe. As the world's biggest free-market proponent shouldn't supply-demand & price factors be allowed to determine market access? As for deforestation in Malaysia it is interesting to note (www.globalchange.umich.edu/globalchange2/ current/lectures/deforest/deforest.html) that "90% of the virgin forests that once covered much of the lower 48 states in the US have been cleared away"-to faciltate soybean farming perhaps? Viewed in this light it appears that Malaysia might not be doing that bad after all with more than 53% of the country still covered by forests!
rgds
Louis

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