Biodiesel group seeks state tax credit

BYLINE: DAN MILLER, Of The Patriot-News

Two midstate companies are among three founders of a statewide association of biodiesel producers that will try to get state tax breaks for the fuel and increase biodiesel production in Pennsylvania.

Keystone BioFuels of Shiremanstown and United Biofuels of York helped start the Pennsylvania Biodiesel Producers Group, whose formation was officially announced yesterday. The third founder is United BioDiesel of Pittsburgh.

Ben Wootton, president of Keystone BioFuels, said one objective is getting state approval for a tax credit of $1 on every gallon of biodiesel produced in Pennsylvania.

Other states, such as Ohio and Indiana, have a biodiesel incentive and, as a result, biodiesel made in other states can be sold in Pennsylvania at a discount of 85 cents to $1.20 a gallon, Wootton said. The proposed tax credit would enable Pennsylvania biodiesel producers to better compete with out-of-state producers, the association claims.

Of about 30,000 to 100,000 gallons of biodiesel sold in Pennsylvania each week, about 10 percent is bought from biodiesel producers in the state, Wootton said.

The proposed $1-per-gallon state credit would augment a federal tax credit that supports biodiesel nationwide.

The federal credit took effect in 2005 and expires in 2008. Legislation that would extend the credit to 2017 has been introduced and is pending, said Amber Pearson, spokeswoman for the National Biodiesel Board, a trade group.

Nationwide, 250 million gallons of biodiesel fuel were produced in 2006, up from 75 million gallons in 2005, said Jenna Higgins, another spokeswoman with the board. Sales are expected to continue increasing this year.

The amount of biodiesel produced is still very small when compared with gasoline consumption. In 2004, about 140 billion gallons of gasoline was consumed in the U.S.

Nick Kukrika, chief financial officer at United Biofuels, said 100 percent of the federal tax credit is passed on to consumers, meaning they would pay more for biodiesel without the credit.

"We would anticipate the same" with a state tax credit, said Kukrika, whose company provides wholesale biodiesel for use mostly in vehicle fleets.

Pennsylvania has 19 retail outlets where biodiesel is sold to consumers, according to the board. Eight are in the south-central part of the state -- five in Perry County.

Nevertheless, direct retailing is a small part of the statewide biodiesel market, Kukrika said.

He said the tax credit, besides growing the industry overall, would "dramatically" increase the availability of biodiesel.

"Price is probably the greatest barrier to more filling stations," Kukrika said.

Biodiesel at the pump costs 30 cents to 50 cents per gallon more than conventional diesel fuel. "This tax credit would allow us to be cheaper than conventional diesel," he said.

Wootton said the group hopes to get the state tax credit included in the 2008 budget, which state officials are debating now. He believes Gov. Ed Rendell would support the credit.

Charles Young, a spokesman for the state Department of Environmental Protection, said, "We really haven't had time to evaluate their proposal," referring to a state tax credit.

The group also wants the state to adopt a quality standard for biodiesel made in Pennsylvania that would be in line with existing national specifications.

Wootton said the three founders are among about six biodiesel producers in the statewide association. He expects the association to eventually widen membership to other companies in Pennsylvania that are involved in biodiesel processing, such as producers of soybean oil.

DAN MILLER: 255-8440 or danmiller@patriot-news.com

INFOBOX:

WHAT IS BIODIESEL?

* An alternative fuel made in a chemical process where glycerin is separated from fat or vegetable oil.

* Does not contain petroleum, but is combined with petroleum diesel to create a biodiesel blend.

* Emissions are lower than petroleum diesel when burned, based on studies reviewed by the U.S. Environmental Protection Agency.

* Can be used in diesel engines with few or no modifications.

Said Elnashaie, professor of sustainable engineering at Penn State Harrisburg, said technology is advancing toward a type of biodiesel made from waste biomass.

Biomass refers to plant materials and animal waste that can be used as a source of fuel. Elnashaie said a type of biodiesel being developed from biomass known as Fisher-Tropsch Biodiesel would have lower emissions than biodiesel now produced.

Elnashaie said the new product would be more sustainable in the long run, because it won't depend on availability of vegetable oil or alcohol.

FIND A BIODIESEL RETAIL OUTLET

Go to: www.biodiesel.org/buyingbiodiesel/retailfuelingsites/showstate.asp?st=PA

SOURCES: National Biodiesel Board; Said Elnashaie