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October 11, 2007

Biodiesel needs Uncle Sam to thrive

Posted by Angel Gonzalez at 11:35 AM

PORTLAND, Ore. - Biodiesel production has expanded ten-fold in two years to 250 million gallons a year, but that figure is still a drop in the water compared to the 60 billion gallons of diesel consumed annually in the U.S.

Only a government mandate -- like the one that currently exists for ethanol -- could take it to the next level, said Larry Schafer, a political advisor to the National Biodiesel Board, at a biofuels workshop organized here by BBI Biofuels.

Tax credits for sellers are in place, Schafer said, but there is nothing requiring oil companies -- who control the massive distribution network for transportation fuel -- to add biodiesel to their mix. Congress is currently discussing some biodiesel-related legislation that Schafer hopes will be part of the next Energy Bill.

"If you're a petroleum company and there's no requirement to use a renewable, you probably wouldn't do it," Schafer said. Ethanol, which gained a big market share after a law pushed it as the replacement for a gasoline additive known as MTBE, now represents 4.5 percent of U.S. gasoline consumption.

Biodiesel's relative weakness underscores government's role in transforming the energy marketplace. But too much government attention can also result in confusion.

The current craze over biofuels has translated into 62 bills in Congress addressing the issue, said Larry Russo, who heads the Biomass Program at the Department of Energy.

Because there are so many bills, "chances of one of these becoming legislation this year are slim," he told conference attendants.

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