innovate arkansas

In Arkansas, the biodiesel business remains rather small, capable of producing just 73 million gallons. But what it does have - and the potential for growth - could come to a standstill as Congress winds down for the year without extending the current biodiesel tax credit.

The current tax credit, which provides a $1-a-gallon credit for biodiesel made from soybean oil or yellow grease and animal fats, expires Dec. 31. Without the incentive, biodiesel will cost much more than petroleum diesel, effectively shutting down the industry because petroleum marketers will be unwilling to buy the more expensive biodiesel and demand will vanish. Arkansas also offers a 20-cents-a-gallon tax credit to producers.

The industry is already suffering and currently operating at about 15 percent of capacity. In 2008, the biodiesel industry supported more than 51,000 green jobs nationwide, but with the recession and credit crisis, the industry has cut 29,000 of those jobs.

John Freeman of Dumas, president of the Arkansas Soybean Association and a member of the board of the American Soybean Association, said 2008 was good for biodiesel because soybeans prices were high and crude oil prices were high. This year, however, "crude oil prices have dropped, but soybean prices are relatively high and it has producers in a pinch," he said.

Freeman said there are three biodiesel plants still producing, he but did not know how many jobs could be affected if the plants shut down.

If biodiesel production is halted, it could, depending on the demand, affect the price of soybeans and other feedstocks used to produce biodiesel.

With the tax credit, producers earned about 26 cents a gallon over their production costs in November, according to a speech in the Senate by Sen. Charles Grassley, R-Iowa, who is trying to get a vote on extending the credit.

Arkansas SoyEnergy Group LLC at DeWitt, part of the Hornbeck family of operations,

Is one of the three biodiesel plants operating in the state and perhaps the one likely to be affected the most since it relies primarily on soybeans as feedstock. The biodiesel plant employs 20 to 25 people. With an annual production capacity of 7.5 million gallons a year, the plant is currently running about 15 percent of capacity, according to Tami Hornbeck, communications director for the Hornbeck enterprises.

FutureFuel Corp. at Batesville, the largest of the operations, relies mostly on beef tallow and Pinnacle Biofuels at Crossett uses mostly animal fats.

In August, Arkansas Business reported on the difficulties facing the biodiesel industry.