Political motivations for government action on renewable energy have roared into full view in the US. The sight isn’t pretty.
Protests have emerged in Washington, DC, against a plan announced last month by ConocoPhillips and Tyson Foods Inc. to use animal fat in the production of ultralow-sulfur diesel fuel. The companies earlier secured a ruling by the Internal Revenue Service that their process qualifies for a $1/gal tax credit that the Energy Policy Act of 2005 (EPACT) created for diesel made via thermal depolymerization of waste oils and fats. They plan to process about 1 billion lb/year of fat with hydrocarbon streams at ConocoPhillips refineries, eventually producing as much as 175 million gal/year of what the oil company calls “renewable diesel.”
The protest
Protesting lawmakers want to overturn the tax interpretation, which ConocoPhillips Chairman and Chief Executive Officer James Mulva says is essential to profitability of the venture with Tyson. According to the Houston Chronicle, Rep. Lloyd Doggett (D-Tex.) planned to introduce legislation correcting the “abuse.” The IRS interpretation came after Rep. Roy Blunt (R-Mo.), sponsor of the thermal-depolymerization tax break, warned the agency against broadening the provision’s scope. Changing World Technologies, West Hempstead, NY, uses thermal depolymerization and the tax break to make biodiesel from animal and other food wastes at a plant in Carthage, Mo., which is in Blunt’s district.
The early-April IRS ruling angered the National Biodiesel Board, a trade group in Jefferson, Mo. “If Congress lets this stand,” said Joe Jobe, the group’s chief executive, “our government will be handing over US taxpayer money to some of the richest companies in the world, and it will not provide many of the benefits that the biodiesel tax incentive has given back to America.” EPACT added the thermal-depolymerization credit while extending the $1/gal biodiesel incentive enacted in 2004. In a list of objections to the IRS ruling, the biodiesel group said, “The oil companies could put a stranglehold on materials used to make biodiesel, stunting the growth of the biodiesel industry.”
In a business with plenty of room to grow, worry about “strangleholds” seems ingenuous. Biodiesel capacity in place at the beginning of this year amounted to 56,000 b/d, less than 2% of the US diesel market. ConocoPhillips plans to make, at most, 11,400 b/d of its renewable diesel. Where’s the stranglehold? Or is this just a coddled industry wanting to avoid competition?
A larger question lurks in the dust-up. What does Congress really want from renewable energy?
The usual explanations-environmental benefits and displacement of foreign oil-are long past tiresome, usually exaggerated, and often wrong. To whatever extent they’re valid, Congress should welcome energy from untraditional sources in whatever amounts it comes, whatever its source.
For too many lawmakers, though, the real motive is much different from those advertised. The real motive is to dispense political favors, such as tax credits and market guarantees for suppliers of uneconomic energy. With prices elevated for gasoline and diesel fuel-thanks partly to laws and regulations making both fuels much costlier than ever to produce-voters dislike political favors to oil companies. So when an oil company avails itself of an incentive for an activity Congress supposedly wants to encourage, it has committed “abuse.”
Contradictions of purpose like this emerge whenever a government chooses fuels and decides who profits from the incentives it must concoct to bring costly energy to market. The inevitably political choices corrupt energy policy. They also cost too much.
Money machine
Another National Biodiesel Board objection to expansion of the thermal polymerization incentive is that it will become “an unanticipated drain on the US Treasury.” This is unvarnished hypocrisy. It should make lawmakers who saw fit to turn energy policy into a magic money machine cringe. Better yet, it should make them confine the governmental role in energy to research and let markets do the rest. Renewable energy should develop efficiently and sustainably, which means competitively.
Most of all, Congress should quit fleecing Americans. Its manipulations are corroding the economy and the credibility of energy policy.