Biodiesel prices skyrocket as wait for tax credit continues

Santa Cruz Sentinel

SANTA CRUZ — Customers of The Green Station, the only biodiesel station in Santa Cruz, Monterey and San Benito counties, saw prices spike 86 cents, or more than 22 percent last week, due to a months-long congressional failure to renew a tax credit that has helped keep biodiesel producers in business.

For a few days, customers were promised conditional rebates based on whether Congress renewed a 5-year-old tax incentive program but, when record-keeping proved too cumbersome, the company dropped prices partway, deciding to float losses for now in the hope they would be recouped eventually by a tax credit extension.

Prices jumped from $3.89 last week to $4.75 this week and back down to $4.29 on Wednesday.

“We’re just a tiny company that barely makes it,” said Ray Newkirk, Green Station co-owner. “We’re doing everything we can to keep our doors open.”

The small, locally owned company on Ocean Street, which relies on producers who make fuel from recycled restaurant grease, is having a hard time keeping enough fuel in stock for existing customers, according to Newkirk. He blames Congress, which has not renewed a $1 per gallon tax break that has been in effect for five years. Currently, bills to renew the credit that were passed by both the House and Senate are now rolled into a larger clean energy bill that is under consideration in the Senate.

In the interim, biodiesel producers that have been floating the cost in expectation of a retroactive alternative fuel credit are running out of cash and boosting prices or going out of business. Newkirk says one of his producers has closed down production and it’s “put a crimp on our supply.” Other producers have increased prices dramatically. “When you jump your price by a dollar a gallon, that’s substantial.”

The Green Station opened about two years ago out of the ashes of Pacific Bio Fuel, which had just filed bankruptcy. The company also sells and repairs electric vehicles and supplies a small fueling station in Campbell.

“There’s not much money in it,” said Newkirk, who drives a bio-fueled 1983 Mercedes with more than 360,000 miles on it. “That dollar credit gave people incentive so it could be produced at a cost that was semi-competitive with petroleum diesel. Now with that tax incentive not being passed this year at all it’s making it really hard. We’re all just doing it because it’s the right thing to do.”

The Biodiesel Tax Credit has been one of the most effective energy policy initiatives ever enacted by the U.S. government, said Joe Jobe, chief executive officer of the National Biodiesel Board. More than 150 manufacturing plants have been constructed in the last five years since it was enacted.

As a result of the expiration on Dec. 31, much of the industry has just shut down and almost half its employees have been laid off, leaving the industry on the verge of collapse, according to the National Biodiesel Board.

Retroactively reinstating the biodiesel tax incentive was incorporated into H.R. 4213, the American Jobs and Closing Tax Loopholes Act of 2010. It passed the House last month and is now under consideration in the Senate.

“Further inaction by Congress to complete this common-sense policy is causing the loss of jobs every day, derailing investment in its first successful advanced biofuel and it’s simply unacceptable,” Jobe said in a prepared statement.

Research earlier this month by Stanford University’s Woods Institute for the Environment shows widespread support for federal tax breaks to encourage alternative energy, including water, wind and solar.

Even if the bill passes, it’s going to be a tough summer for biodiesel, said Bill LeBon, co-owner of The Green Station. “The plants that shut down have to rehire workers. It’s not like they can just turn it back on.”

# #

The Green Station Biodiesel

Price History
May 2008: More than $5
May 2009: $3.29 (lowest ever)
May 2010: $3.74
June 10: $3.89
June 11: $4.75 (with promise of rebate if tax credit bill passed)
June 16: $4.29

This article is published here.

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