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Published on September 24th, 2008 | by Nick Chambers

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U.S. Government Axes “Renewable Diesel” Tax Credit

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Yesterday the U.S. Senate voted to renew a one year extension for renewable energy tax credits worth $18 billion dollars. Absent from the package was a tax credit aimed at helping food giant Tyson and oil giant ConocoPhillips turn a profit by converting fats leftover from Tyson’s processing of beef to the so-called “renewable diesel” that ConocoPhillips blends with regular diesel (for a look at what renewable diesel is, check out Jason Burroughs comment below).

The legislation enacts a $1 per gallon credit for biodiesel production, but the “renewable diesel” made from waste fat, or tallow, would only be eligible for a 50 cent per gallon credit. According to Tyson and ConocoPhillips, without the $1 per gallon credit for making “renewable diesel” from tallow, their proposed project is a no go.

Apparently, the major opposition to the Tyson-ConocoPhillips provision was from soap and detergent makers who depend on the tallow to make their products. They claim that the price for tallow has already risen so dramatically in the last year from demand due to biodiesel production that their products risk becoming unprofitable.

Other arguments presented against the Tyson-ConocoPhillips credit came from biodiesel producers who say that the purpose of the credit was to help develop biodiesel projects that face significant start-up costs — costs which they say Tyson and ConocoPhillips don’t have.

On the other hand, Tyson and ConocoPhillips say that their “renewable diesel” is better than biodiesel from crops because it doesn’t drive up food prices — although the claim that biodiesel from oilseed drives up food prices is highly debatable.

Personally I don’t think that biodiesel from crops drives up the cost food by much, but I do think that it’s silly to kill a project like this because soap and detergent makers are upset about the price of tallow — certainly there are better ways to deal with that issue.

What do you think? Should we be promoting production of all types of domestically renewable biofuels? Do giants like Tyson and ConocoPhillips deserve this type of government subsidy? Do things like this create unfair competition?

Posts Related to Biodiesel and Manufacturing Biodiesel:

Image Credit: Michael (mx5tx)‘s Flickr photostream under a Creative Commons license.

Source: CNNMoney (via Biofuels Digest)




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About the Author

Not your traditional car guy.



  • Emily

    The material that Conoco Phillips produces IS NOT biodiesel. It is called “renewable diesel” and is a totally diffrerent product, though it is made from biomass. The tax credit does include biodiesel made from waste sources like tallow and recycled grease, bringing parity between these feedstocks and plant-based feedstocks.

  • Emily

    The material that Conoco Phillips produces IS NOT biodiesel. It is called “renewable diesel” and is a totally diffrerent product, though it is made from biomass. The tax credit does include biodiesel made from waste sources like tallow and recycled grease, bringing parity between these feedstocks and plant-based feedstocks.

  • http://litb.org Chuchundra

    The solution is to implement a broad-based carbon tax. Then all bio-fuels alternative energy sources will have a de facto subsidy to the extent that they are truly carbon neutral and renewable.

  • http://litb.org Chuchundra

    The solution is to implement a broad-based carbon tax. Then all bio-fuels alternative energy sources will have a de facto subsidy to the extent that they are truly carbon neutral and renewable.

  • http://www.dieselgreenfuels.com Jason Burroughs

    Nick – ConocoPhillips does NOT make biodiesel. They make so-called “renewable diesel”! This is an enormously different product from biodiesel.

    Renewable diesel is basically cracking a vegetable oil molecule and turning it into a hydrocarbon, and thus creating a product that is 100% compatible with diesel – and meets the D975 diesel standard. The problem is that renewable diesel has basically the same emissions profile as diesel – plus, when used like CP in an existing diesel refinery, it does not add to America’s refining capacity. Because of this, biodiesel enthusiasts are against renewable diesel. Also, they/we feel that biodiesel is a better use of those fats. And by the way, beef tallow is eligible for a $1 per gallon subsidy when used for biodiesel production.

    Please rewrite this article removing all references to biodiesel from CP and change it so “co-processed renewable diesel”. I’d recommend doing more research on the subject before republishing. These kinds of inaccuracies have a real affect on our industry as the consumer becomes confused about what is what.

    Also, the link to the Money CNN is dead.

    One last point – the Senate just approved changing the credit from waste vegetable oil biodiesel from 50 cents to $1 per gallon – the opposite of your article title.

    Thanks in advance for taking the article down and rewriting it, and please let me know if I can be of assistance.

  • http://www.dieselgreenfuels.com Jason Burroughs

    Nick – ConocoPhillips does NOT make biodiesel. They make so-called “renewable diesel”! This is an enormously different product from biodiesel.

    Renewable diesel is basically cracking a vegetable oil molecule and turning it into a hydrocarbon, and thus creating a product that is 100% compatible with diesel – and meets the D975 diesel standard. The problem is that renewable diesel has basically the same emissions profile as diesel – plus, when used like CP in an existing diesel refinery, it does not add to America’s refining capacity. Because of this, biodiesel enthusiasts are against renewable diesel. Also, they/we feel that biodiesel is a better use of those fats. And by the way, beef tallow is eligible for a $1 per gallon subsidy when used for biodiesel production.

    Please rewrite this article removing all references to biodiesel from CP and change it so “co-processed renewable diesel”. I’d recommend doing more research on the subject before republishing. These kinds of inaccuracies have a real affect on our industry as the consumer becomes confused about what is what.

    Also, the link to the Money CNN is dead.

    One last point – the Senate just approved changing the credit from waste vegetable oil biodiesel from 50 cents to $1 per gallon – the opposite of your article title.

    Thanks in advance for taking the article down and rewriting it, and please let me know if I can be of assistance.

  • Nick Chambers

    Jason,

    Thank you. Corrections made.

    This is what I love about the world of blogging — errors are self-corrected nearly instantaneously. Your comments are very valuable and I’m sorry for any inaccuracies.

    You mentioned that these kinds of inaccuracies have a real affect on the industry because the consumer gets confused about what’s what. I’m embarrassed to admit that I succumbed to this confusion as well, but I think it does point out the need for the industry to clear up the mess that has become biofuels marketing, labeling, and definition.

    PS the link for CNN money was working for me…

  • http://www.dieselgreenfuels.com Jason Burroughs

    You nailed it! Thanks for fixing it.

    A couple of comments:

    1. If you google for “biodiesel ConocoPhillips” you will find all sorts of references to them making biodiesel, so most of the news media got this wrong early on as well (most articles with this error were in 2006-2007).

    2. The article does work for me now, can’t explain why it didn’t before. In that article, they say that the proponents of the renewable diesel credit claim that it is a “second generation biofuel without the same issues as crop-based biodiesel”. This is a manipulation of the truth – biodiesel can be made from that same tallow, which is not “second generation” at all as a feedstock (in my opinion, not as a finished product either). Biodiesel has been made from tallow as long as it’s been made from virgin oil. So making biodiesel from used cooking oil or animal fats would be preferable to making renewable diesel from them – and better than making biodiesel or renewable diesel from virgin oils.

    3. It’s important to note that Congress has recognized a very unfair disparity between “agri-biodiesel” and “non-agri-biodiesel”. For some reason, they defined tallow as agri-biodiesel and allowed $1 per gallon, which is the same credit you get for making biodiesel from virgin oils. However, used cooking oil has only been getting 50 cents per gallon – but it’s the most renewable kind of biodiesel! So with this bill, they are leveling the playing field and offering $1 for all feedstocks for biodiesel.

    Thanks again!

  • http://www.dieselgreenfuels.com Jason Burroughs

    You nailed it! Thanks for fixing it.

    A couple of comments:

    1. If you google for “biodiesel ConocoPhillips” you will find all sorts of references to them making biodiesel, so most of the news media got this wrong early on as well (most articles with this error were in 2006-2007).

    2. The article does work for me now, can’t explain why it didn’t before. In that article, they say that the proponents of the renewable diesel credit claim that it is a “second generation biofuel without the same issues as crop-based biodiesel”. This is a manipulation of the truth – biodiesel can be made from that same tallow, which is not “second generation” at all as a feedstock (in my opinion, not as a finished product either). Biodiesel has been made from tallow as long as it’s been made from virgin oil. So making biodiesel from used cooking oil or animal fats would be preferable to making renewable diesel from them – and better than making biodiesel or renewable diesel from virgin oils.

    3. It’s important to note that Congress has recognized a very unfair disparity between “agri-biodiesel” and “non-agri-biodiesel”. For some reason, they defined tallow as agri-biodiesel and allowed $1 per gallon, which is the same credit you get for making biodiesel from virgin oils. However, used cooking oil has only been getting 50 cents per gallon – but it’s the most renewable kind of biodiesel! So with this bill, they are leveling the playing field and offering $1 for all feedstocks for biodiesel.

    Thanks again!

  • simplicator

    I can understand that small biodiesel makers would be afraid of big business stepping on them, but to say new forms of producing fuel are bad is a bit closed minded. Biodiesel today is made through “transesterification,” a 150 year old process for making soap behind your barn. Its only advantage is that it scales down to where you can make it in your bathtub and you can get into business with little up-front capital.

    This process does not make very good fuel and uses a lot of methanol — a fossil fuel. When a water wash is employed to clean contaminants from the fuel an oily waste water stream is created that must go somewhere. It also produces a lot of glycerol that has little value and many plants don’t know what to do with it. I currently use transesterification but hope to dump it as soon as I can afford it.

    A much better way of making biofuel from oil (vegetable and/or animal) is through hydro-treatment. This is the same process used to remove sulfur from petrodiesel and yes, the big bad petroleum guys use it a lot. The resultant fuel does pass ASTM D975 and has much better properties than biodiesel or petrodiesel. It does not use methanol or a caustic catalyst and produces no glycerol. The resultant fuel produces less emissions than the old fashioned biodiesel, not more.

    Now who’s using a crappy process to make dirty fuel?

  • simplicator

    I can understand that small biodiesel makers would be afraid of big business stepping on them, but to say new forms of producing fuel are bad is a bit closed minded. Biodiesel today is made through “transesterification,” a 150 year old process for making soap behind your barn. Its only advantage is that it scales down to where you can make it in your bathtub and you can get into business with little up-front capital.

    This process does not make very good fuel and uses a lot of methanol — a fossil fuel. When a water wash is employed to clean contaminants from the fuel an oily waste water stream is created that must go somewhere. It also produces a lot of glycerol that has little value and many plants don’t know what to do with it. I currently use transesterification but hope to dump it as soon as I can afford it.

    A much better way of making biofuel from oil (vegetable and/or animal) is through hydro-treatment. This is the same process used to remove sulfur from petrodiesel and yes, the big bad petroleum guys use it a lot. The resultant fuel does pass ASTM D975 and has much better properties than biodiesel or petrodiesel. It does not use methanol or a caustic catalyst and produces no glycerol. The resultant fuel produces less emissions than the old fashioned biodiesel, not more.

    Now who’s using a crappy process to make dirty fuel?

  • Larry

    The problem is that biodiesel is to make farmer coops add value to soybean oil and get more money for farmers, not ConocoPhillips and Tyson. It is unfair for powerful oil companies to push their program against powerful farmer lobby groups like NBB.

  • Larry

    The problem is that biodiesel is to make farmer coops add value to soybean oil and get more money for farmers, not ConocoPhillips and Tyson. It is unfair for powerful oil companies to push their program against powerful farmer lobby groups like NBB.

  • Dr. Kenneth Noisewater

    Waitasec… Isn’t glycerine a waste byproduct of creating biodiesel from waste oil? Wouldn’t they be happy just getting the damn glycerine?

  • Dr. Kenneth Noisewater

    Waitasec… Isn’t glycerine a waste byproduct of creating biodiesel from waste oil? Wouldn’t they be happy just getting the damn glycerine?

  • Jim Jinkins

    If a product cannot be manufactured and sold at a profit it will not be produced in a free market.

    If a product is subsidized, the citizenry will pay for subsidies that go to politically connected manufacturers.

  • Jim Jinkins

    If a product cannot be manufactured and sold at a profit it will not be produced in a free market.

    If a product is subsidized, the citizenry will pay for subsidies that go to politically connected manufacturers.

  • Tyler Durden

    If beef tallow is becoming too expensive for soap manufacturers, perhaps they should look at using fat removed in liposuction as a feed stock.

  • Tyler Durden

    If beef tallow is becoming too expensive for soap manufacturers, perhaps they should look at using fat removed in liposuction as a feed stock.

  • Knothedreadpirate Roberts

    I think the soap & detergent makers have a valid point. The government is paying private businesses to remove feedstock from the marketplace and use it in a way that would not be profitable otherwise. It diverts taxpayer $$ to private companies (Tyson & Conoco) while increasing the cost of feedstock for other private companies not on the take (Soap & detergent). Both competing industries are in a commodity market, making their revenue in the vast volumes sold, not the margin per item.

    The government should not favor one industry over another. If the startup costs are too high for a private venture. . . don’t pursue it. Yet.

  • Knothedreadpirate Roberts

    I think the soap & detergent makers have a valid point. The government is paying private businesses to remove feedstock from the marketplace and use it in a way that would not be profitable otherwise. It diverts taxpayer $$ to private companies (Tyson & Conoco) while increasing the cost of feedstock for other private companies not on the take (Soap & detergent). Both competing industries are in a commodity market, making their revenue in the vast volumes sold, not the margin per item.

    The government should not favor one industry over another. If the startup costs are too high for a private venture. . . don’t pursue it. Yet.

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