Renderers are in an enviable position to move in several directions with their fats and oils production. Last fall, we learned that if renderers produced and burned their own fats they would be eligible for an “alternative fuel mixture credit” of 50 cents per gallon. Renderers have, for many years, opted to burn their own products in place of commercial fuels and natural gas depending on prices and market conditions. It is nice to be recognized with other makers and users of alternative fuels.
Some renderers have been involved in the biodiesel industry or are getting involved. This industry continues to grow rapidly, and with this growth comes additional challenges. Biodiesel producers must be assured a bountiful and reliable flow of feedstocks. Soybean supplies and prices will not fill the need for the biodiesel industry. Renderers will supply some of the void, but other and possibly better options are available. The biodiesel industry must also address the need for a consistent high quality product to keep customers happy.
A recent ruling by the Internal Revenue Service (IRS) allows refiners to collect a $1 per gallon federal tax credit for producing renewable diesel fuel in existing refineries. This ruling allows what had been envisioned as a narrowly crafted provision inserted during final House-Senate negotiations of the Energy Policy Act of 2005 to benefit a small thermodepolymerization plant that uses turkey offal as a feedstock. The “broad” IRS interpretation allows oil refineries and possibly chemical plants to use vegetable and animal oils and greases as feedstocks, allowing them to collect the same $1 federal tax credit. This provides yet another option for renderers.
Of course there are also the traditional markets for rendered products that will continue to be competitive with energy-related uses, giving renderers many options on how to market their fats.
With the different competing interests, there are political battles being, or about to be, waged. Some biodiesel interests are campaigning hard to overturn the IRS ruling on the renewable diesel incentive. There are rumors that legislation is being considered to limit certain feedstocks to be eligible for biodiesel incentives.
If too many dollars get spent on federal incentives for alternative fuels, how will the government determine how to allocate future funding?
The NRA Board of Directors recently passed a resolution that states it is feedstock, technology, and application neutral on biofuels production, recognizing individual renderers’ prerogative to market their production as they choose. This does not mean the NRA will be sitting on the sidelines. We will be active in getting our message to the legislators and regulators that the rendering industry is an important player in any program or activity that enhances alternative fuels. We will make sure the industry is included in any program where plant and animal feedstocks are used. We will seek equity with all other feedstocks for any federal incentive.
The current incentive programs are all slated to expire within the next two to three years, but efforts are underway to extend them. NRA will work with other industries and organizations to support the extension of these programs.
For many years, the NRA was alone in seeking equity in the alternative fuels area for rendered products. However, we are now being joined by the various livestock, poultry, and meat producing organizations as well as the National Restaurant Association in our efforts. It is nice to have company.
From the Association - June 2007 Render