- Associated Press - Saturday, February 14, 2015

PITTSBURGH (AP) - Last fall, Ed Vescovi planned to restart a dormant biodiesel plant in Beaver County.

The market for biofuel was shaky. But a new owner, Weavertown Environmental, pledged to get the plant going after purchasing it in 2013. Vescovi was hoping to begin production before the end of last year.

Then, oil prices plummeted, pushing down the price of regular diesel.

“You wouldn’t get anybody to really buy (biodiesel) if you’re still selling it for $4 a gallon,” said Ed Vescovi, who Weavertown hired to run the plant. “You can buy diesel fuel for $3 a gallon. How do you compete?”

Weavertown put the project on hold rather than suffer along with other producers who have seen their profits plummet in a challenging environment for biofuels, the petroleum alternatives made from corn, soybean oil and other crops.

Cheap oil has squeezed the industry’s profits even as it encounters larger questions about its impact on food prices and environmental benefits. Government mandates have supported its growth - production of biodiesel has increased from 112 million gallons in 2005 to 1.8 billion in 2013 - but inexpensive oil could increase pressure to reduce mandates.

Those mandates have been questioned amid criticism that biofuels drive up food prices. Besides being a common side-dish for many Americans’ meals, corn is used as a sweetener in packaged foods and beverages and as feed grain for livestock. And competition from ethanol producers forces prices up when growers can’t keep up with demand.

Ethanol demand

Corn-based ethanol is a more widely used alternative fuel than biodiesel, which is made from recycled vegetable oil and animal fat, and is coming off of a record year for production.

Ethanol makers enjoyed fattened margins amid low corn prices, but they are feeling pinched now.

“Prices have come down sharply,” said Robert Wisner, a biofuels economist at Iowa State University. “The trend has been down along with gasoline and crude oil.”

Wholesale prices for ethanol have fallen 37 percent since July, to $1.31 in January, Wisner said.

Government mandates for production have propped up the industry. But some environmental groups have called for abolishing those supports amid concerns about the effects on the nation’s food supply.

Last month, a prominent environmental think tank called on Western governments to reconsider their support for biofuels. In the United States, refiners are required to blend biofuels with gasoline and diesel fuel to help reduce the nation’s reliance on imported oil and to address environmental pollution concerns because biofuels are believed to be cleaner sources of energy.

Turning corn and other crops into energy is inefficient and takes up land that could be better used to produce food, according to the Washington-based World Resources Institute. The push for ethanol production has driven up global food prices without lowering carbon emissions, the report said. The Institute said that “the quest for bioenergy at a meaningful scale is both unrealistic and unsustainable.”

Sen. Pat Toomey, R-Pa., wants to remove the mandate requiring refiners and blenders to mix biofuel with petroleum.

“It drives up gas prices, increases food costs, damages car engines and is harmful to the environment,” he said.

Last month, Toomey co-sponsored an amendment to the Keystone pipeline bill to remove the ethanol mandate. The amendment was never voted on, but a Toomey spokeswoman Friday said he would keep pushing the issue regardless of gas prices.

Biofuel efficiency is still being debated. Scott Irwin, an agricultural economist at University of Illinois, said the fundamental theories appear sound but that the actual impact that growing plants for fuel has on food prices needs more research.

There is no doubting, however, the impact that crude oil prices have on consumer thirst for biofuels, he said.

“When consumers are pinched by $145 crude oil, they’re looking around for any relief they can find,” he said. “And biofuels generally look a lot better in that environment.”

Feeling the squeeze

The fortunes of biodiesel manufacturers have been bad, too. Two years ago, there was a brisk business in turning used cooking oil into diesel fuel. HeroBX, an Erie-based biodiesel company, had its best year in 2013 and produced 50 million gallons of fuel.

But uncertainty over federal production mandates and the collapse in crude oil prices have changed matters.

“Our business is off significantly,” said Chris Peterson, vice president of HeroBX.

HeroBX is privately held, and Peterson declined to give profit or revenue figures. Iowa-based Renewable Energy Group, a large biodiesel company, had a 16.2 percent decrease in revenue in the third quarter and 94 percent drop in profit.

Margins have been squeezed because the price for vegetable oil didn’t drop as much as crude. Biodiesel makers were pressured to compete with regular diesel on price, without concurrently lower costs.

Average diesel prices nationwide have fallen 28 percent in the past year, to $2.80 per gallon according to AAA, as crude oil plummeted to $50 per barrel. Biofuel prices have tried to keep pace, falling 30 percent from February 2014 to $2.95 a gallon in December, according to the National Biodiesel Board. The industry can’t sustain those prices, said Scott Irwin, agricultural economist at University of Illinois.

“The cost of production of biodiesel, even for the most efficient plants, far exceeds normally the price of petroleum diesel,” Irwin said. “And that problem has only been exacerbated by the substantial drop in crude oil, diesel and gasoline prices.”

Dan Robinson has seen the slackening interest first-hand. Two years ago, he was approached by a company willing to pay him for the used cooking grease from his restaurant in Lawrenceville, Kaleidoscope Cafe.

It seemed too good to be true.

“I didn’t have to deal with (the grease) anymore. I didn’t have to load up my Explorer and haul stinky grease away,” he said.

The relationship fizzled last year.

The company has since stopped picking up his grease, and he is back to hauling it to a recycling center.

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Online:

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Information from: Pittsburgh Tribune-Review, https://pghtrib.com


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