Pa. Biodiesel Producers Struggle To Stay Alive
Submitted by Editor on Fri, 07/20/2007 - 12:02pm.
CHRIS TORRES
Staff Writer
It wasn’t too long ago that biodiesel producers such as Ben Wootton were making money in an industry once touted as the future of Pennsylvania energy production.
But what a difference one year has made.
Skyrocketing feedstock prices and stiff competition from neighboring states has biodiesel producers across Pennsylvania struggling to stay alive. Wootton has cut production, drastically, to deal with high overhead costs. His company, Keystone Biofuels, is producing less than 10 percent of its six million gallon-a-year capacity.
Wootton is not alone. Across the state, biodiesel producers are on the verge of shutting their doors. Many feel the state can step in by enacting an incentive to help producers grow the biodiesel industry. If not, there may not be an industry left to save in the state by the end of the year.
Last August was a great month for Wootton. He was making a profit with biodiesel as a result of lower feedstock costs, which makes up 75 percent of his total costs, and higher oil prices.
Safe to say, things have turned for the worst since then. He has not made a single penny on his business since August, losing an average of between $50,000 and $100,000 per month, largely because of rising feedstock costs and lower oil prices. Not only that, out-of-state biodiesel producers are able to sell their biodiesel for cheaper prices in the state because of cheaper soybean oil prices in the Midwest.
Wootton, along with the state’s six other biodiesel producers, recently formed the Pennsylvania Biodiesel Producers Group (PABPG), of which Wootton is president, to address the industry’s struggles.
He said without some help, Pennsylvania’s existing biodiesel plants could close by the end of the year. “If we don’t get something by the end of this year, we’ll have to shut our doors,” Wootton said.
What the group wants is a $1 per gallon tax credit to help them deal with expensive overhead costs, boost production, compete with other states, and expand the biodiesel business in Pennsylvania. They also want to make sure their biodiesel, B100, which is considered true biodiesel because it is produced from 100 percent renewable sources, is the biodiesel of choice in the state.
Wootton said the tax credit would last three years after which the state would mandate biodiesel use after 30 million gallons is produced. He said it would be easy to produce 30 million gallons, considering his own plant has the capacity to produce 6 million gallons and many other plants are in the works.
Wootton said the plan would do two things. First, it would build a market for biodiesel because it would mandate use by the time production reaches 30 million gallons, thus making it sustainable. Second, it would allow producers to lock in future feed prices. Wootton hopes the plan will be included with Gov. Ed Rendell’s proposed $850 million Energy Independence Strategy, which provides grants and loans for startup alternative energy companies.
“We can possibly capture a lot of consumption with this plan,” he said.
However, the state legislature tabled the plan for more debate in the fall during the recent budget negotiations.
Along with the tax credit, Wootton said the group is going after big oil companies which he claims are trying to manipulate the true definition of biodiesel to get control of the market. He said the group is trying to convince lawmakers to define biodiesel as something that comes from 100 percent renewable products. That would prevent big oil companies, he said, from selling blended products which he claims are made with a low volume of biodiesel mixed with petroleum.
Demand for biodiesel in the state is already here. Wootton estimates Pennsylvanians consume between six and eight million gallons of the fuel, which is made primarily from crushed soybean oil. But Pennsylvania producers, as a whole, only produce a small percentage of it — about 1 million gallons. “We are just not able to compete with neighboring states,” he said.
Many other states, 24 to be exact, provide incentives to biodiesel producers to make their own product. In the Midwest, Wootton said producers are able to get their soybean oil for cheaper prices, lowering their production costs. Some companies are even aligned with larger soybean producers through vertical integration, meaning they grow and crush soybeans as well as develop it into biodiesel all on one site. It’s the main reason some companies, Wootton said, are able to sell their biodiesel at $3.29 a gallon while he sells his at $4.35 a gallon.
Couple that with state incentives—Indiana, for example, provides a $1 per gallon tax credit for its producers—and it gets hard to compete. “We are not able to compete with that,” he said.
Maryland is the closest state that provides their producers with an incentive — 20 cents per gallon of biodiesel produced.
Along with growing the biodiesel industry, Wootton said it would create a potentially lucrative market for soybean farmers here.
Pennsylvania farmers produced 17 million bushels of soybean in 2006. Much of that is already shipped out of state to be crushed and used as animal feed since Pennsylvania is a soybean surplus state. To ship it out can cost a lot of money. Mike Gerhart, president of the Pennsylvania Soybean Board, said it can cost as low as 30 cents or as high as $1 per bushel to ship soybeans, depending on where they are shipped.
Wootton claims the state’s soybean farmers will be able to supply the industry with enough soybean oil and keep the money they spend on shipping costs in the state.
But Gerhart is not convinced. His main worry is what happens to the excess soybean meal that would come from a bean, since only 18 percent of a soybean can be used for oil.
He said it is not economically feasible to think all soybeans can be crushed for oil, considering Pennsylvania is already a soybean surplus state and there is a limited market for the meal. “Anything that brings value, can help the farmer. Biodiesel will help the farmer,” he said. “But it remains to be seen just how much.”
CHRIS TORRES
Staff Writer
It wasn’t too long ago that biodiesel producers such as Ben Wootton were making money in an industry once touted as the future of Pennsylvania energy production.
But what a difference one year has made.
Skyrocketing feedstock prices and stiff competition from neighboring states has biodiesel producers across Pennsylvania struggling to stay alive. Wootton has cut production, drastically, to deal with high overhead costs. His company, Keystone Biofuels, is producing less than 10 percent of its six million gallon-a-year capacity.
Wootton is not alone. Across the state, biodiesel producers are on the verge of shutting their doors. Many feel the state can step in by enacting an incentive to help producers grow the biodiesel industry. If not, there may not be an industry left to save in the state by the end of the year.
Last August was a great month for Wootton. He was making a profit with biodiesel as a result of lower feedstock costs, which makes up 75 percent of his total costs, and higher oil prices.
Safe to say, things have turned for the worst since then. He has not made a single penny on his business since August, losing an average of between $50,000 and $100,000 per month, largely because of rising feedstock costs and lower oil prices. Not only that, out-of-state biodiesel producers are able to sell their biodiesel for cheaper prices in the state because of cheaper soybean oil prices in the Midwest.
Wootton, along with the state’s six other biodiesel producers, recently formed the Pennsylvania Biodiesel Producers Group (PABPG), of which Wootton is president, to address the industry’s struggles.
He said without some help, Pennsylvania’s existing biodiesel plants could close by the end of the year. “If we don’t get something by the end of this year, we’ll have to shut our doors,” Wootton said.
What the group wants is a $1 per gallon tax credit to help them deal with expensive overhead costs, boost production, compete with other states, and expand the biodiesel business in Pennsylvania. They also want to make sure their biodiesel, B100, which is considered true biodiesel because it is produced from 100 percent renewable sources, is the biodiesel of choice in the state.
Wootton said the tax credit would last three years after which the state would mandate biodiesel use after 30 million gallons is produced. He said it would be easy to produce 30 million gallons, considering his own plant has the capacity to produce 6 million gallons and many other plants are in the works.
Wootton said the plan would do two things. First, it would build a market for biodiesel because it would mandate use by the time production reaches 30 million gallons, thus making it sustainable. Second, it would allow producers to lock in future feed prices. Wootton hopes the plan will be included with Gov. Ed Rendell’s proposed $850 million Energy Independence Strategy, which provides grants and loans for startup alternative energy companies.
“We can possibly capture a lot of consumption with this plan,” he said.
However, the state legislature tabled the plan for more debate in the fall during the recent budget negotiations.
Along with the tax credit, Wootton said the group is going after big oil companies which he claims are trying to manipulate the true definition of biodiesel to get control of the market. He said the group is trying to convince lawmakers to define biodiesel as something that comes from 100 percent renewable products. That would prevent big oil companies, he said, from selling blended products which he claims are made with a low volume of biodiesel mixed with petroleum.
Demand for biodiesel in the state is already here. Wootton estimates Pennsylvanians consume between six and eight million gallons of the fuel, which is made primarily from crushed soybean oil. But Pennsylvania producers, as a whole, only produce a small percentage of it — about 1 million gallons. “We are just not able to compete with neighboring states,” he said.
Many other states, 24 to be exact, provide incentives to biodiesel producers to make their own product. In the Midwest, Wootton said producers are able to get their soybean oil for cheaper prices, lowering their production costs. Some companies are even aligned with larger soybean producers through vertical integration, meaning they grow and crush soybeans as well as develop it into biodiesel all on one site. It’s the main reason some companies, Wootton said, are able to sell their biodiesel at $3.29 a gallon while he sells his at $4.35 a gallon.
Couple that with state incentives—Indiana, for example, provides a $1 per gallon tax credit for its producers—and it gets hard to compete. “We are not able to compete with that,” he said.
Maryland is the closest state that provides their producers with an incentive — 20 cents per gallon of biodiesel produced.
Along with growing the biodiesel industry, Wootton said it would create a potentially lucrative market for soybean farmers here.
Pennsylvania farmers produced 17 million bushels of soybean in 2006. Much of that is already shipped out of state to be crushed and used as animal feed since Pennsylvania is a soybean surplus state. To ship it out can cost a lot of money. Mike Gerhart, president of the Pennsylvania Soybean Board, said it can cost as low as 30 cents or as high as $1 per bushel to ship soybeans, depending on where they are shipped.
Wootton claims the state’s soybean farmers will be able to supply the industry with enough soybean oil and keep the money they spend on shipping costs in the state.
But Gerhart is not convinced. His main worry is what happens to the excess soybean meal that would come from a bean, since only 18 percent of a soybean can be used for oil.
He said it is not economically feasible to think all soybeans can be crushed for oil, considering Pennsylvania is already a soybean surplus state and there is a limited market for the meal. “Anything that brings value, can help the farmer. Biodiesel will help the farmer,” he said. “But it remains to be seen just how much.”
