Tax Credit Loss Idles Conoco/Tyson Biodiesel Plant

John Davis

conoco-phillipstysonA joint venture by ConocoPhillips and Tyson that would have the fuel giant turning the meat giant’s animal fat waste into biodiesel has folded because of the halving of a key federal tax credit.

This story from
says the Borger, Texas refinery was idled last fall during changing economic conditions and government policies:

A spokesman for Tyson Foods Inc. (TSN), Conoco’s partner in the project, said production could resume if government incentives are reinstated.

Speaking to reporters after the company’s shareholder meeting in Houston, ConocoPhillips Chief Operating Officer John Carrig said the project became idle after subsidies for the project were cut in a half.

Carrig said the company stopped the biofuels production “as result of some actions taken last fall by Congress that reduced some incentives for biofuels that applies to us, particularly the removal of subsidies.”

In a statement, Tyson Foods said the bailout bill approved by Congress and signed by President Bush in late 2008 reduced the tax credit for renewable diesel “co-processing” from $1 per gallon to $0.50 per gallon.

“As a result, the project was no longer economically feasible and was put on hold last fall,” said Tyson spokesman Gary Mickelson. “Tyson and ConocoPhillips continue to discuss ways to resume the project. However, until the full tax credit is reinstated, production will likely remain suspended.”

When the refinery was first opened, the hope was that it would make 175 million gallons of biodiesel a year… coming at a critical time when the push for renewable energy sources was gaining strength in the face of skyrocketing petroleum prices. Now, there are concerns that this will be a sign that other major oil won’t hesitate to halt their renewable fuel efforts if they turn unprofitable… especially if they don’t have government help.