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Jobe exposes oil subsidies, Obama retreat at nat'l biodiesel show

By The National Biodiesel Board | January 22, 2014

National Biodiesel Board CEO Joe Jobe told hundreds of attendees at the Biodiesel Conference & Expo that the petroleum industry is misleading Americans about fuel policy and called on President Barack Obama to stand firm behind his previous commitments to supporting alternative energy industries.

In his annual address at the Biodiesel Conference & Expo, Jobe shed light on current industry challenges and exposed cracks in how we think about energy.

He pointed out that biodiesel’s story is not unique, “Biodiesel’s story is an example of how effective government policy can be to jump start a fledgling industry. That is the same story of nearly every new industry that involves technological development.  Strong government policy support along with a unique spirit of innovation, entrepreneurship, and risk-taking are the primary reasons that so many major modern industries had their start in America.”

One of the most influential policies in the energy sector is the renewable fuel standard (RFS). Jobe explains, “The renewable fuel standard is effective policy that is working. It is fulfilling its intention to establish diversity, competition, and choice in the transportation fuel sector, which is why the incumbent industry is trying to kill it.”

The “incumbent” is Big Oil, a term Jobe defined as those working around the clock to erase the RFS and all it has accomplished. He pointed out that the idea of a free energy market is false and that nothing about the global or domestic petroleum market is free, despite what the petroleum industry’s propaganda machine would have us believe. First, the petroleum sector has, since its start, enjoyed tax and policy support. They began at the birth of the industry and continue today. “How do they justify their own subsidies and 100 years of government policy support? Easy, they flat out deny they exist. Big Oil is counting on the public and our elected leaders to forget history and to be completely confused by complicated tax policy. And guess what, it’s working for them,” Jobe said.

According to multiple reports from the Congressional Research Service, Office of Management and Budget, Joint Committee on Taxation—under different administrations and Congressional majorities—petroleum has had the most government support and for longer than any other industry. Jobe, who is a CPA, meticulously outlined a few of the subsidies and other policy support. He also reminded the audience the government’s definition of a subsidy: any targeted tax code preference. Some of the tax code preferences enjoyed by big oil and discussed today include:


1.    Percentage depletion deduction – a deduction where companies can write off more than their actual cost, in some cases significantly more.  

2.    Nonconventional petroleum tax credit – when this decades-long program ended in 2007 credits had grown to $4.5 billion annually. 

3.    Immediate write-off of Intangible Drilling Costs.

4.    Some companies are allowed to take an enhanced oil recovery credit when oil drops below a certain amount. Specific to the oil and gas industry.

5.    Some companies are allowed to set up as Master Limited Partnerships, which means they pay no corporate income tax. This is specific to oil and gas companies and is about as big of a corporate tax break as you can get. 

Jobe pointed out that these subsidies layer on top of the incentives and support for shale development. Examples include billions of research dollars to develop these technologies, and significant tax benefits to incentivize their expansion.  

Further, the petroleum lobby purports that more domestic petroleum will translate to lower prices, but the facts prove otherwise. Despite record U.S. production, fuel prices have stayed high. There are two reasons for this reality. Oil is a global commodity where prices are controlled by an international cartel that fixes supply to ensure high profits. And the fracking of shale oil is costly. If the price drops, it will no longer be economical to maintain production. These realities mean the energy market is anything but free. 

“To say that the RFS skews the free market is nonsense. The RFS is a necessary policy to create and protect a modest level of diversity. It is working and needs to be allowed to continue to work and grow as intended. It is the pathway to a free-er market. It is a procompetitive policy that stimulates investment and innovation,” Jobe said. 

Interestingly President Obama was at the forefront early on in the policy’s history. In 2006, then-Senator Obama joined with former Senator Richard Lugar to propose the establishment of what eventually came to be known as the Alternative Diesel Standard.  It proposed blending biofuel into the diesel fuel pool. It ramped up to 2 billion gallons of biodiesel in the diesel pool by 2015, a number that was forward-thinking when proposed and today is well within reach. The policy evolved and was ultimately passed as RFS2.

Senator Obama saw his vision enacted into law in December 2007. He ran for president including biodiesel as part of his campaign specifically, and won. He campaigned again in 2012 supporting renewable energy and biodiesel, and he won again. Jobe said, “What ultimately became the RFS2 was first proposed by then Senator Obama, but members of Obama’s own administration have forgotten this history.”

In its draft rule defining annual renewable fuel volumes under for the RFS, the EPA has now proposed a biodiesel target of only 1.28 billion gallons, down sharply from estimated 2013 production of 1.7 billion gallons and the industry’s annualized production rate of about 2 billion gallons since July. Because of biodiesel’s success the RFS program has also been a success. Total advanced biofuel requirements, one fuel segment the RFS now tracks, have been met or exceeded every single year of the program. Still the EPA proposal reduces this target for 2014. The draft EPA proposal is under a 60-day comment period that ends Jan. 28, and Jobe called on the industry to stand up against a future reminiscent of that George Orwell outlined in 1984.  

“Senator Obama’s policy vision is now President Obama’s law to implement. The law that was his vision as senator and that he campaigned and won on twice. It is mission critical that we remind President Obama and his administration of his history with this law. We will have to do so loudly and with such volume that the president himself hears it. We have to be strong, and unified, and loud, and make our voices heard. History gives us glimpses of game-changing pivotal moments in time. 2014 represents one of those pivotal moments. It is up to us to make sure that 2014 does not become 1984. That Big Oil is not allowed to become Big Brother.” 

Biodiesel is the first and only commercial-scale fuel produced across the U.S. to meet the EPA’s definition as an advanced biofuel—cutting carbon emissions by as much as 86 percent. Produced nationwide, the U.S. industry supports some 62,000 jobs.

 

4 Responses

  1. James Rust

    2014-01-22

    1

    Is biodiesel competitive in price with diesel fuel from petroleum? If it is, would their be a need for a mandate to use the product? The public would buy biodiesel if its performance is equivalent to conventional diesel fuel and its cost was competitive. Mandates are poor policies for governments. Has their been instances in the past where a government forced its citizens to use a product that was more expensive than its competitor products? James Rust

  2. Keith Jacobs

    2014-01-22

    2

    I would like to mention that the resources belong to the people, the shale producers pay very little royalties which are basically renting the resource areas from the government. Maybe the government could pay for land rent so farmers could produce bio diesel. James as a farmer in Western Canada we can produce bio diesel as cheap as petroleum diesel based on $9.00/bu canola and marked diesel (no road tax). We are building the facilities but it takes time. In Canada only the oil sands are subsidized so we get no subsidy.

  3. Keith Jacobs

    2014-01-22

    3

    Now I will comment as a 40 year oil veteran. The perception that oil companies make money is a media lie. A few examples, check out Legacy oil & Gas, during heavy drilling in the last 2 years in the Balken its share price went from 12 to 6 dollars, it has a P/E ratio of 88!! A bunch of suckers think it has a great future, but its wells go dry faster than it can drill them. Royal Dutch Shell, drills and produces all over the world, doing poorly compared to the stock market. Chinese National Oil Company (CNOC), production is dropping. Rig count in OPEC going up quickly, state owned oil companies only drill if there is not enough production!! Costs are rising quickly. I wish the media did a small amount of homework before claiming a oil boom, there is 4 times as many rigs drilling for oil with a increase in production of 1.4 times, and those new wells go dry in 3 years. If America does not invest in bio-fuels it is very short sighted.

  4. Peter Brown

    2014-01-22

    4

    Keith, give me a break. Even better give my industry a break because when it comes to playing on a level playing field the only level surface is what they are doing to the boreal forests of Alberta. All the rest is smoke (CO2) and mirrors the slick surfaces that remain after oil spills. From wars started for oil and maintained for profits to the incredible research grants that try to stem the flood of corruption and filth to the nonexistent taxes that big oil does not pay listening to a BP Pr guy lamenting his sad fate is worthy of SNL. When I see our industry at the same level as yours in access to capital, feedstock or even on parity with the clean technology we embrace, then I may consider cutting you a break. From BP buying Berkeley after the Platzek Pimentel hit piece ($50 million) to the sad saga of food or fuel, big oils unrelenting campaign against what is essentially a very small business has been frightening. RFS and the EPA's shameful retreat are two levers used to keep our industry in check and in debt. It is all across the board, it is shameful and it must stop. I applaud Joe's timid opening salvo and hope that there will be more of the same sooner rather than later. We are not a novelty fuel, we are diesel's URFUEL and we should be proud of it.

  5.  

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