Biofuels Tax Credits Extended, Now Include Algae

By Tina Caparella

As part of a larger fiscal package passed by the United States (US) Congress at the end of 2012 to avoid what was dubbed the “fiscal cliff,” biodiesel tax incentives that had expired December 31, 2011, were reinstated for 2012 and 2013. Retroactive to January 1, 2012, for two years – meaning they expire again at the end of this year – is a one dollar per gallon biodiesel and renewable diesel blender’s tax credit that now, for the first time, includes algae-based fuel. However, not included in the package was a 50 cent per gallon alternative fuel mixture tax credit that was previously in place.

According to the National Biodiesel Board (NBB), a recent study by Cardno ENTRIX, an international economics consulting firm, found that the biodiesel industry would have produced an additional 300 million gallons in 2012 with the tax incentive in place. That would have provided about 19,000 additional jobs, for a total of just over 83,000 jobs supported by the industry nationwide, according to the study. Looking to 2013, the study found that the industry would support some 112,000 jobs nationally with the tax credit in place, versus about 82,000 without it. Additionally, the return of the incentive is projected to increase household income by approximately $1.6 million this year while providing an additional $3.1 billion in gross domestic product.

Along with the economic benefits, Anne Steckel, vice president of federal affairs at NBB, emphasized that biodiesel is helping reduce America’s dependence on imported petroleum and making the country less vulnerable to global petroleum markets, while significantly reducing tailpipe pollution and greenhouse gas emissions.

The Algae Biomass Organization is particularly pleased now that algae is included as a “qualified feedstock” in the tax incentives, but not everyone is happy with the tax credits being extended at a total cost of $2 billion to US taxpayers.

The International Institute for Sustainable Development (IISD) believes it is an “irresponsible move at the best of times, but is scandalous when Americans are preoccupied with a ballooning budget deficit,” according to Marc Halle, vice president, International, of IISD, a public policy think-tank based in Switzerland. The organization went on to state that applying the tax credit retroactively creates no additional biodiesel production.

In October 2011, the National Renderers Association took a neutral stand on the tax credit incentives, but vowed to actively support the continuation of mandates for biomass-based fuels using rendered products.

Australia Biodiesel Plant Back Up and Running

Australian Renewable (AR) Fuels, the country’s largest biodiesel producer, has recommissioned its Largs North processing and storage facility in South Australia, which was destroyed by a major fire on Christmas Eve 2011. The plant, rebuilt at a cost of $6.5 million, now includes a fuel blending facility and employs about 12 staff. The biodiesel is made from tallow and used cooking oil and is stored onsite. AR Fuels is exploring options to develop supply channels of recycled mill oils and other waste vegetable oils from the Asia Pacific region.

According to AR Fuels, the reopening of the 11.8 million gallon (45 million liter) plant comes amid renewed interest in biodiesel in Australia, with more transport and fuel companies looking to reduce carbon emissions under the new carbon tax regime. The company’s national business development manager Anthony Guy has been attending meetings with fuel and mining companies for potential supply talks.

“The stars and planets are beginning to align,” Guy said. “Our major customers are now seeing their clients asking for our product. The carbon tax regime is in place. We are now marketing not only to fuel retailers, but also directly to customers like transport companies and miners. The business is only going to grow.”

Currently fuel tax rebates are only available for five and 20 percent blends of biodiesel. However, AR Fuels does supply 100 percent biodiesel to customers who are willing to forgo the rebate or are using it for power generators on remote sites. The company also owns Biodiesel Producers, Ltd. at Barnawartha, VIC, along with the plants at Largs North and Picton, WA, giving it a total manufacturing volume of nearly 40 million gallons (150 million liters) of biodiesel.

Biox Terminates New York Harbor Land Lease

Canadian biodiesel producer BIOX Corporation has exercised an option that allows it to terminate the land lease agreement with International-Matex Tank Terminals (IMTT) to construct a 26.4 million gallon (100 million liter) per year biodiesel production facility in New York Harbor.

“We remain confident in the growth opportunities available to us in the market,” said Kevin Norton, chief executive officer of Biox. “However, given the significant change in the biodiesel market dynamics since we announced the IMTT agreement in June 2012, terminating the land lease agreement is the responsible decision.

“We also remain confident in the value of our Hamilton [ON, Canada] production facility, especially as we anticipate the market conditions in the US biodiesel market will return to a rational balance between supply and demand,” he continued. “We believe the challenges the biodiesel market has endured in 2012 are short-term issues that reflect the maturing of a relatively nascent sector. As the market evolves, we will be in a better position to move quickly at that time to pursue our growth strategies.”

Based on Biox’s decision to terminate the land lease agreement, IMTT has agreed to return, in full, the $4.1 million letter of credit related to the proposed tank modifications. Biox will also be reimbursed $1.4 million of the $2.1 million upfront payment it made to IMTT. The net difference of $700,000 will be expensed as a termination charge recorded in the first quarter of fiscal 2013.

Exercising the option reduces the term of the tank services agreement from 20 years to five years, with 53 months remaining. Biox is able to utilize the tanks or sub-lease the tank services during the remaining term of the agreement.

McDonald’s Emirates Marks Biodiesel Milestone

Following the launch of its biodiesel initiative in July 2011, McDonald’s United Arab Emirates (UAE) fleet of trucks has now travelled a combined 808,411 miles (1.3 million kilometers) running on used cooking oil from McDonald’s restaurants. The achievement highlights the benefits of biodiesel as an alternative energy source and has resulted in major reductions in the company’s carbon footprint.

McDonald’s UAE’s biodiesel campaign was launched with the support of Dubai FDI, the foreign investment promotion arm of the Department of Economic Development. Under this initiative, used cooking oil is collected from McDonald’s restaurants across the UAE and converted into biodiesel by McDonald’s clean technology partner, Neutral Fuels. The biodiesel is then used to fuel the company’s truck fleet.

The biodiesel campaign has received international acclaim and recognition from the UAE government, media, and stakeholders around the world. As part of the campaign, McDonald’s UAE has also organized university and community lectures, along with leaflets distributed throughout restaurants to educate customers on the environmental benefits of biodiesel. In February 2012, the Dubai Road and Transport Authority recognized McDonald’s and Neutral Fuels for their commitment to sustainable transport when the Crown Prince of Dubai awarded them with the Dubai Award for Sustainable Transport in the Environmental Protection Category. 

Following this success, Neutral Fuels announced plans to build its first biodiesel facility in Dandenong, VIC, Australia, just outside of Melbourne, converting used cooking oil into biodiesel for use by McDonald’s truck fleet in Victoria. The plant will have an initial capacity of nearly 400,000 gallons (1.5 million liters) per year, and will be upgraded to 1.5 million gallons (six million liters) as more restaurants are tapped.

The company currently has waste collection sites at 106 McDonald’s restaurants across Victoria and plans to service the fast food company’s remaining 105 outlets by early this year. According to Neutral Fuels, McDonald’s wants all of the estimated 1,000 restaurants in Australia to be integrated into the program by the end of 2013.

After the needs of the McDonald’s truck fleet are met, Neutral Fuels is free to sell surplus biodiesel to other buyers, which it has already begun doing in UAE. Neutral Fuels plans to roll out 16 additional biodiesel production facilities worldwide over the next three years.

Pacific Biodiesel to Fuel Airport

The Hawaii Public Utilities Commission has approved a three-year contract for Pacific Biodiesel Technologies to supply biodiesel to Hawaiian Electric Company (HEC) for its new $20 million backup electricity generation plant being built at the Honolulu International Airport. Pacific Biodiesel will annually provide 250,000 gallons of biodiesel made locally from used cooking oil. Under the contract, HEC can buy up to an additional one million gallons annually.

Pacific Biodiesel’s Maui facility will handle pre-processing of the used cooking oil before sending it to the company’s new Big Island refinery for production. The Big Island facility uses a new technology developed with grant money from the Hawaii Renewable Energy Development Venture that, according to the company, “removes virtually all trace impurities and results in biodiesel that is clear instead of amber.”

According to Pacific Biodiesel, the demand for biodiesel in Hawaii continues to grow because of the state’s aggressive renewal energy goals, which include achieving 70 percent clean energy by the year 2030.

HEC’s airport plant will use four diesel generators to supply up to 10 megawatts of electrical power and is expected to come online later this year. The utility has a deal with the state Department of Transportation’s Airports Division to be able to use electricity from the facility for up to 1,500 hours per year to supply the Oahu grid. However, in the event of an emergency or natural disaster, the plant will be able to separate itself automatically from the grid to supply emergency power directly to the airport.

Texas Man Guilty in Fraud Case

Jeffrey David Gunselman pleaded guilty in mid-December to 51 counts of wire fraud, 24 counts of money laundering, and four counts of making false statements in violation of the Clean Air Act. Thirty-year-old Gunselman was the owner of Absolute Fuels, LLC that he formed in April 2009.

Each wire fraud count is punishable by up to 20 years in federal prison, while each money laundering count carries a maximum penalty of 10 years in prison. Each false statement count is punishable by up to two years in prison. In addition, each of the 79 counts carries a maximum fine of $250,000.

Gunselman admitted that from September 2010 to October 2011, he devised a scheme to defraud the Environmental Protection Agency (EPA) by falsely representing that he was in the business of producing biodiesel, yet Gunselman did not have a fuel producing facility. Instead, his business operation consisted of falsely generating renewable fuel credits and selling them to oil companies and brokers. He instructed purchasers to wire payments to a bank account he solely controlled, and as a result, approximately $41.7 million was deposited into that account.

Regarding the money laundering convictions, during the same period, Gunselman engaged in monetary transactions in criminally derived property by purchasing real and personal property valued at $12 million with the funds derived from the wire fraud. Included in that property are several luxury vehicles; a Patton military tank; a Gulfstream airplane, professional basketball season tickets and corporate sponsorship; and agricultural, business, and residential real estate.

Gunselman forfeited all property obtained through his criminal activities and is in custody awaiting sentencing.

February 2013 RENDER | back