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US Biodiesel and Ag Groups Try to Block Palm Oil

The Des Moines Register reports that the American Soybean Association and the National Biodiesel Board are attempting to have the IRS explicitly exclude palm oil from the list of virgin oils to which the new biodiesel tax credit applies.

The two groups are concerned about the potential for lower-cost palm oil, imported from Malaysia and Indonesia, to encroach into the US market. Fediol, the EU’s vegetable oil federation, recently speculated that palm oil could supply up to 20% of the EU’s biodiesel needs by 2010. (Earlier post.)

There’s little indication that palm oil is headed here for fuel use anytime soon, and there are questions about how well it would work in fuel. Still, palm oil now costs several cents a pound less than soybean oil, and that has farmers worried.

The language in the law applies the tax credit to “virgin oils, including . . . oils from corn, soybeans, sunflower seeds, cottonseeds.”

Palm oil isn’t in the list, but that pesky word “including” suggests that the oils named in the law are examples of what products qualify for the tax credit, not the only ones that qualify.

The two groups wrote the U.S. Internal Revenue Service in June asking for a ruling that palm oil does not qualify for the tax credit. The groups said that Congress clearly intended to exclude any oils not listed in the law.

Allowing palm oil to qualify for the tax credit would put soybean farmers at a “severe competitive disadvantage,” the groups said in their letter.

Comments

Edward teague

It is to be hoped this policy isn't retrofitted for that black sticky stuff from Saudi.

Jason

And so the mask drops again. Ethanol and biodiesel are nothing more than clever subsidies for midwestern farmers and the ag conglomerates. Should anything threaten to actually make biofuels sustainable from an economic or carbon perspective it will be vigorously fought by the farm state senators. Every. D_mn. Time.

tom

Does anyone know if fuel derived from thermal depolymerisation gets the tax credit?

Lamar Johnson

Once again, American Farmers have been able to appear as greedy capitalists, trying to feather their nests at the taxpayer's expense.

I think most Diesel consumers would have much preferred to see the American Soybean Association invest money into the science of producing Bio-Diesel instead of hiring more lawyers and lobbyists to argue over what the meaning of "is" is.

It is not like tropical palm oil is going to reduce their market share for Bio-Diesel fuel stocks.

Greed, lobbiests, lawyers, corrupt politicians, profiteering, and the American Soybean Association are giving themselves a bad rap here. I don't know why I expected better from them.

David Brannon

National Biodiesel Board and Soybean Association are shooting themselves in the foot. How do they expect this grassroots movement to catch if it isn't more affordable than gas? That infuriates me to the point of buying a hybrid instead of a diesel.

David Brannon

I just emailed NBB and let them know what I think...I suggest everyone else do the same.

Engineer-Poet

Don't bother writing the NBB.  Write your representative, your senators, and the editor of the local newspaper.

Paulo Nery

While this looks like protectionism for US Farmers there IS a positive environmental benefit. Palm oil plantations in Malaysia are spreading fast and destroying precious rain forests. This unsustainable practice has been condemned by Friends of the Earth and other organisations.
So I'm in favour of any action to discourage Palm oil imports at the moment.

Frédéric Bastiat

The law perverted! And the police powers of the state perverted along with it! The law, I say, not only turned from its proper purpose but made to follow an entirely contrary purpose! The law become the weapon of every kind of greed! Instead of checking crime, the law itself guilty of the evils it is supposed to punish! If this is true, it is a serious fact, and moral duty requires me to call the attention of my fellow-citizens to it.

Greedy capitalists? More like greedy mercantilists. Capitalism is the name given to the economic order that spontainiously occures when property rights are respected. Although pervasive throughout man's history and especially the modern world, and very much a part of the modern American political tradition, protectionism is not capitalistic, it is socialistic, it's socialism for the politically influential and connected business classes, in this case for the likes of ADM. So call the supporters of this protectionism greedy for sure, for they are willing to pervert the law and to use it for plundering their neighbors for their own profit, to deny their neighbor's right to freedom of contract, but don't call them capitalists.

Lorenzo

No problem! We will sell our cheap palm oil to China, India and Europe.

Americans are protectionist bastards who promote free trade by bombing people. But when these people then become competitive, the Americans bomb us again, to block the free trade.

No problem. We will beat Americans soon.

Optimist

The fuel produced by thermal depolymerization (TDP) is currently excluded from the tax credit. (Another example of anything useful getting excluded?) This is a large part of TDP's financial problems as it adds about $40/barrel to the production cost. Thanks to that and the fact that they actually have to pay for the feedstock (inspite of mad cow disease you can still feed offal to farm animals) the cost increased from the estimated $15/barrel to ~$80/barrel.

At least the senate version of the energy bill includes a tax credit for TDP. Let's hope it can slip past the all-powerful farm lobby.

Michael Briggs

The biodiesel and ethanol tax credits are specifically meant to help grow DOMESTIC alternative fuels production (after all, it was part of the AMERICAN Jobs Creation Act, not the MALAYSIAN Jobs Creation Act). Why SHOULD this tax credit apply to fuels (or vegetable oils that can be turned into fuel) produced in OTHER countries?

The tax credit isn't only for biodiesel made from corn, soy, sunflower, and cottonseed - it's for biodiesel made from any DOMESTICALLY produced oil. The NBB is not trying to block palm oil biodiesel from getting the credit - they're trying to block FOREIGN palm oil biodiesel from getting the credit.

Can any of you who are all up in arms over this explain why our tax dollars should be used to subsidize FOREIGN production of fuel? A key benefit of fuels like biodiesel and ethanol is that they can wean us off of our foreign energy dependence - in that regards, replacing foreign petro with foreign palm oil is no better.

Lamar Johnson

The simple economic fact of the matter is this: At its most basic level, prices reflect supply and demand. When a lobby forces the taxpayers to subsidize a product so that it can be competitive with foreign production, there is an imbalance in the force.

In this case, the soybean lobby is riding on the backs of the taxpayers, and the taxpayer is again gouged at the Diesel pump.

Optimist is right: There should be no subsidies, and the oils should be freely traded on the international commodities board where the demands of the international market place determine the price.

The only fair alternative to no subsidies would be to subsidize all domestic products that face foreign competition.

That should make everyone happy, except for the taxpayer who is paying for the subsidies.

ahous

The simple economic fact is that in the energy business, there ain't no such thing as "free market". The US spends billions or even trillions of taxpayer dollars a year to "secure" cheap gas. Just google "true cost of gasoline" if you're so in the dark about the REAL subsidies we pay in the US.

Presumably replacing gasoline with biodiesel would be a good thing. But it won't happen as long as we foolish Americans would have to pay a nickel higher at the pump. Is it really that much of a problem for US ag to get a fraction of the help that the oil cartels have received for decades?

My question is, why is the author so concerned about palm oil? There are dozens of feedstocks that are far more important to and viable in the US and most of the world than the geographically limited oil palm. (Only one poster mentioned any concern for this regarding TDP.) Yes, ASA might have an agenda (which is far from exposed here), but it seems the author might as well.

Engineer-Poet

I'd happily pay a DOLLAR more at the pump if it meant that we weren't importing any oil (and contributing to demand for ME oil and thus supporting terrorism).  Heck, even two dollars.  (My car goes 650+ miles on an 18-gallon tank.)

The idiots who bought Excursions and Hummers and Durangos wouldn't like it much, though.  Which is the point, isn't it?

Lamar Johnson

So what?

I hardly think that the BioDiesel feedstock market is so awash in oils that we need to violate WTO anti-protection regulations to exclude palm oil.

If the tropical palm oils are converted to ASTM Diesel fuel and then sold, it would trade on the international commodities market as Diesel fuel and sell at the international market price.

Aside from the rhetoric of the shrill voices of socialism, the true price of these feedstocks is reflected in the international commodities market.

It's the international price everybody pays, French, German, American, Russian or Chinese. It trades for what a willing seller will agree with a willing purchaser that the fair price is. It's called a "free market". A novel concept to some.

Lorenzo

Reply to Mike Briggs:

"Can any of you who are all up in arms over this explain why our tax dollars should be used to subsidize FOREIGN production of fuel?"

This is a bizarre way of reasoning: biodiesel derived from palm oil is ALREADY CHEAPER than ordinary dinodiesel. So it DOESN'T NEED SUBSIDIES.

And that's why the American soy lobby is so worried: because you can produce biodiesel without subsidies, provided you use the best feedstock, which is palm oil.

The soylobby fears for its subsidies. It's pretty obvious, don't you think? The SOY LOBBY is TRYING TO GRAB AMERICANS' TAX MONEY TO FILL ITS OWN POCKETS, while Americans are denied palmdiesel which they should be allowed to buy without being ripped off.

Lamar Johnson

I would expect that the rose petal oil lobby, the lemon oil lobby, the patchouli oil lobby, hash oil lobby, amber oil, carnation oil, peppermint oil, lavender oil, musk oil, wysteria oil and other domestic oil producers to leap on the subsidies bandwagon.

These are all expensive oils to produce, much more than palm oil, but the benefits of aroma therapy outweigh the costs to the taxpayer.

And who wants their Suburban exhaust to smell like french-fries when it could smell like roses?

Look, the same agument for subsidies of soybean oil can be made for any of these other oils. Expensive? The taxpayers have plenty of money. Just ask a liberal.

ahous

Yep, leave it to us liberals to ask the RIGHT questions, and not get lost in the wrong ones.

Lamar Johnson

ahous: Look at the two questions you asked.

US Agriculture enjoys huge subsidies already.

Palm oil is a threat to some of those subsidies.

Your two questions are answered. I amazed that you were so easily "lost" in my measured response.

Do you want to see every domestic oil producer subsidized? Heheheh It is ridiculous, as I was attempting to point out to you.

"Socialists are well educated, but what they know is wrong."

ahous

Still stuck on the subsidies?

1. US taxpayers subsidize the petroleum industry with $100's of billions each year so that we can enjoy cheap gas at the pump. If not (ie, the oil companies paid their own way), the pump price would be as much as $15 per gallon.

2. Even if American consumers knew what biodiesel is (and they don't - if they've even heard of it they think it means hippies collecting WVO all day to pour directly into in an old painted-up school bus), they wouldn't buy it if it were a nickel more at the pump.

3. Since the pump will never reflect the true cost of gasoline (especially with government run by oil men), then why should biodiesel? Do you like petroleum (and all its baggage) so much that you want biodiesel to fail? B100 is already available at at least 10% of all gas stations in Germany, even selling for slightly less than petrodiesel. But their petrodiesel is $5/gal, and taxed much more heavily than the bio (gee, a (reverse) subsidy!). If you want any alternative fuel to succeed in the US, you have to get realistic about just how much the deck has been stacked in favor of the traditional energy industries they're competing against. Crying "fair market" is retarded.

Why palm oil?

1. Yes, palm oil has long been the cheapest on the market. Just like Walmart has been the cheapest place to buy your socks. Informed people try to avoid them both.

2. In some countries (Indonesia for one) rain forests are being destroyed at 1% a year to make way for oil palm plantations. And at a benefit for very few. The careless rush to industrialization is causing much more harm than good for the indegenous peoples. Not to mention the obvious loss of plant & animal species and climate change issues.

3. Oil palms can't make that much of a dent in any large-scale demand anyway. Unless you think the rainforests are simply a waste of space and couldn't be burned away fast enough to make way for palm plantations.

4. Biodiesel from palm oil has a relatively high cloud point (> 57F), severely limiting is usability.

The right questions?

1. How about, will high-yield and alternative feedstocks that can be grown domestically with low impact (algaes, mustards, switch grasses, jatropha, TDP) enjoy the same support or more, as the "Big 4"?

2. Or, what kind of gov support can biodiesel be given that would otherwise go to its competitor petroleum?

3. Are you doing everything you can personally to promote the use of biodiesel and reduction for demand of petroleum (through creating greater public awareness, pushing for increased availability of more & better diesel vehicles, demanding better support from our gov, etc)?

Lamar Johnson

ahous:
I am in favour of using domestic energy resources.
I am in favour of free markets.
The marketplace will determine the viability of traditional petroleum fuels vs. domestic alternatives.

If you are concerned about bio-Diesel being associated with the lunatic fringe, go no further than a look at biodiesel.org and the wackos that post there. Hippies with painted busses, rainforest people, Bush haters, Walmart haters, and the usual affiliate 'haters' are all well represented there, spewing venom and hatred while they beg the government they hate for more subsidies. If we could only fuel a painted hippy bus on self-hatred and self-loathing, that segment of the energy consumers would be driving for free.

ahous

Lamar, I'm in favor of being given all the money in the world so that I can distribute it as I see fit. Does that have anything to do with reality?

Again, back to something that has nothing to do with anything. Seems to me you'd make a lot better use of oxygen by figuring out how to make this an important issue for the folks on your side of the fence, rather than worrying about the side that's at least trying to be part of the solution rather than the problem.

Engineer-Poet

Before you get too self-congratulatory here, I've seen plenty of liberals asking the wrong questions.  The terms "idiotarian" and "moonbat" exist to describe real people.

us

Good. We need to block this and the US needs to start promoting self sufficiency and less free trade. Like we owe something to these other countries. If you agree to cheaper palm oil prices than u are no better than the right wingers that promote cheap labor practices and send our jobs overseas

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