Biodiesel Seller Warns Against Mandate

John Davis

jcampbell.jpg“Here’s the rub with a mandate. We can mandate that people have to buy biodiesel. It doesn’t create vegetable oil” Those are the words of John Campbell, vice president of Omaha-based Ag Processing, Inc.

It might seem a bit strange coming from a guy who works for a biodiesel-producing and selling company. But this article from the Des Moines (IA) Register says Campbell questions whether the mandate makes sense, given the soaring price of biodiesel’s major feedstock, soybean oil:

With farmers increasing corn acreage to make more ethanol, the price of soybean oil has been in the stratosphere this year, reaching as high as 45 cents a pound, an increase of more than 10 cents since this spring. And, of course, the energy bill requires more usage of corn ethanol each year at the same time it mandates the increased biodiesel consumption.

Given that it takes 7.5 pounds of soybean oil to make a gallon of biodiesel, it’s not hard to figure out why the nation’s biodiesel plants are producing nowhere near their capacity despite the $1 a gallon federal subsidy. The industry is capable of producing 1.8 billion gallons a year, but is expected to produce as little as 300 million gallons this year.

The bill would allow the mandate to be reduced if feedstock costs make the fuel too expensive.

The article goes on to say that subsidies will get progressively more expensive as the biofuels mandate, or renewable fuel standard, continues to grow. But Matt Hartwig, a spokesman for the Renewable Fuels Association, is quick to say let’s get the RFS passed, and then we can talk about tax incentives. Biodiesel advocates also point out that the mandate will help promote the development of new biodiesel feedstocks.