Posted: Thursday, December 23, 2010 9:00 AM
Matthew Weaver/Capital Press
University of Idaho Department of Biological and Agricultural Engineering technician Joe Thompson watches as an alcohol catalyst reacts with vegetable oil during a presentation during the Rapeseed, Canola and Mustard Field Day on July 7. Thompson says the recent passage of an act extending biodiesel tax credit incentives should increase demand for oilseeds.
Return of blender's credit helps biodiesel refiners
Federal tax credits included in a bill passed by Congress and signed by the president last week will enable ethanol and biodiesel producers to ramp up production, increasing demand for oilseeds and other crops used to produce biofuels.
Joe Thompson, engineering technician for University of Idaho's Department of Biological and Agricultural Engineering, said he expects more demand for oilseed crops. The push to make fuel from camelina and canola will give farmers higher prices for their crop, Thompson said.
"They need at least 15 cents a pound to plant it and harvest it," he said. "Having the tax credit back will definitely make it more of an incentive to grow oilseeds."
Rosalia, Wash., farmer Terry Morgan, chairman of the Washington Canola Commission, was glad to see the tax credit approved, noting it would be a boost for biodiesel operations to resume operation and turn a profit. Farmers would prefer to sell their product locally and not to Canada, he said.
"Hopefully it will reach a point where we can do these things and not need a tax credit to be profitable," he said.
The tax credits are part of the wide-ranging Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that President Barack Obama signed on Dec. 17.
The measure restores a $1 per gallon blender credit for biodiesel that had expired at the end of 2009.
Steve Starr, general manager of Inland Empire Oilseeds in Odessa, Wash., said the lack of a blender's credit in 2010 impacted his operation "pretty seriously."
"We thought the blender's credit was going to be passed, so we took the risk and priced our biodiesel assuming we would get our dollar per gallon from the government," he said.
When the credit did not pass, it was a blow to Inland Empire's cash flow, he said.
The Odessa company is running intermittently, and Starr hopes to be able to run it on a regular schedule shortly. The company is seeking short-term working capital and a long-term investment partner.
The blender's credit will give the company an immediate infusion of cash and help increase demand for biodiesel, stabilizing the market, Starr said.
Starr said the longer-term plan is to diversify into edible canola oil. Demand for canola will exist regardless of the biodiesel market, he said.
Renewable Fuels Association: www.ethanolrfa.org
National Biodiesel Board: www.biodiesel.org
University of Idaho: www.uidaho.edu
Inland Empire Oilseeds: www.inlandempireoilseeds.com