I have just returned from giving an invited talk at the sixth ICIS World Oleochemicals Conference at Brussels. This conference was the most impressive and exclusive industrial representation of major world players in biodiesel and chemicals from fats and oils that has met to date. I am inspired to write this editorial because the stupidity of U.S. policy has risen to new levels that even amazes my hardened soul on this topic. The people of Missouri need to know the results of our government policies.
Biodiesel is a direct diesel substitute that can be made from soybean oil (in U.S and South America), rapeseed oil (Europe) and palm oil (Malaysia and Indonesia). Production of biodiesel in Europe has led the global industry, but in recent months production had declined. You see, it is difficult for European producers to compete when the United States taxpayer is subsidizing Brazilian soybean production to supply fuel to Europe at the rate of $1 per gallon.
It is true, in 2005 our federal government created a $1 per gallon biodiesel Blender’s Tax credit to promote biodiesel production. For the mere act of blending at least one part diesel to 1,000 parts biodiesel, a blender can receive a government tax credit of $1 per gallon of biodiesel produced. At least some blenders have figured out that the law is written in such a manner that they can import biodiesel from South America (receiving producers credit from countries like Argentina), add a little diesel in the U.S. (receiving the $1/gallon blender credit), and sell the biodiesel in Europe (receiving additional subsidy in Europe).
In the U.S., biodiesel production capacity has increased from 290 million gallons per year in 2005 to 1,850 million gallons per year by September 2007. Another 1.37 billion gallons of production capacity are under construction. This represents 3,220 million gallons of production capacity, while actual production in 2007 is estimated at 400 million gallons. We have idle production capacity in the U.S. while our government representatives have created policies that divert our tax money to promote production in South America.
But that is only part of this living-day soap opera. The major oil companies are also beginning to play this field. And the leader of this movement are our Missouri neighbors — Conoco-Phillips and Tyson. Through a different “interpretation of our policies,” oil corporations are able to claim what is referred to as “coproduced renewable diesel” tax credit of $1 per gallon of soybean oil (or chicken fat) for mixing these fat/oils with the crude oil going into their refineries. These fats/oils are close enough to crude oil so as to allow them to be processed to diesel and gasoline with the petroleum feed stock. This move by major oil is particularly ingenious. In the midst of record-breaking profits, the major oil corporations are managing to “steal” the taxpayers’ money from its intended use of developing a U.S.-based (Midwest) biodiesel industry. Hold your hats, this is the league of majors and they really know how to play hardball. There is more to this story. Dennis Griesing of the Soap and Detergents Association is taking the lead in fighting this “misuse of U.S. taxpayers money.” He reports that the law firm (along with a half dozen other firms in Washington, D.C.) that has to date represented him in these type of struggles has dropped him because of a “conflict of interest” (big oil customers are more important to these law firms).
Of course, there is more to this story, and it hits home. Remember the 3,220 million gallons of U.S. biodiesel production capacity with only 400 million gallons of actual capacity? Well, they are beginning to have trouble getting soybean oil for producing biodiesel — this is while big oil is only beginning to buy that feed stock for use in petroleum refineries. It was projected (with some authority) that about half of the biodiesel production plants in the U.S. will go bankrupt shortly. These will not be the big facilities of ADM and Cargill — they will be the farmer-owned facilities. Yes, U.S. tax dollars are subsidizing soybean production in South America and the use of fats and oil by big oil — and the farmer’s investments are going belly-up.
U.S. taxpayers are paying a big price for the inexcusable acts of our representation in Washington. I fear the price is much higher than we realize, and the worst is yet to come. The pending loss of these U.S. farmer-investments, diversion of U.S. tax dollars to South America, and the lack of any real solutions to the energy crisis have far-reaching implications. The Senate is reported to support ethanol and biodiesel to replace petroleum. The House is reported to support ethanol and biodiesel to reduce greenhouse gases. The very foundation of their beliefs is in great ignorance because ethanol and biodiesel will not solve the energy problem and will not solve the global warming problem. The saddest aspect of all is that good solutions are not being pursued because of this ignorance.
While the solution in Washington is in the hands of voters, another solution to these problems is more broadly available to organized groups. U.S. corporations are provided the benefit of incorporation (which protects the executives of these organizations from lawsuits) when the corporations’ business is consistent with the good of the country. In the case of diverting taxpayers’ money to support foreign agriculture, reducing fuel prices in Europe, and ultimately bankrupting farmer-owned biodiesel facilities in the U.S., the actions of the executives of these blenders (and even big oil) are clearly not for the good of the U.S. Organized legal action should be taken against these executives (the decision makers) and precedents should be set that will forever make this a better and stronger country. It will not take many such lawsuits to convince the executives of these companies that they “really should” start to look after the good of the citizens of the United States of America.
Professor Galen J. Suppes is the J.C. Dowell Professorship, professor of chemical engineering at MU. He is a national and international authority on energy technology and alternative fuels with vitae honors including two books on energy technology, 18 invited (three international) lectures in 2006-07 on energy technology and green chemistry, and national conference programming responsibilities on alternative fuels for the past decade for the American Institute of Chemical Engineers (Fuels and Petrochemicals Division). Professor Suppes is the 2006 recipient of the 2006 Presidential Green Chemistry Challenge Award. Click here for his personal Web site.