Big chicken fat loses to big soap

Timothy Carney:

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It began in 2005, when President George W. Bush signed an energy bill including a $1-per-gallon tax credit for “renewable diesel” fuel created through “thermal depolymerization.” Writer Rina Palta reported in the liberal American Prospect that Rep. Roy Blunt, R-Mo., wrote the measure “to benefit a floundering company in his home district that produces boiler fuel from turkey offal, which did not qualify chemically as ‘biodiesel.’ ”

At the time, Congress was eagerly providing subsidies to turn plants and animals into fuel, so it didn’t seem farfetched to boost the cause of fowl entrails. But unintended consequences soon arrived, proving once again that the biggest companies usually find a way to profit from government intervention.

In April 2007, the Internal Revenue Service ruled that Blunt’s tax credit had broader applications. Within two weeks, ConocoPhillips and Tyson Foods saw that the IRS had opened the door for a joint venture to melt chicken, cow, and pig fat into diesel fuel. Conoco Chief Executive Officer James Mulva was honest about his unusual undertaking: “It’s not profitable without the $1 per gallon tax credit,” he said at a news conference.

But this renewable fuel had enemies. First, Democrats didn’t like any subsidy that helped an oil company like Conoco. (Blunt, for his part, said he never wanted to help oil companies, and that the law should be changed.)

Second, business lobbyists were also working to kill the subsidy for chicken fat. The obvious opponents were chicken fat’s competitors — the companies that turn vegetables into diesel fuel. The National Biodiesel Board, which spends nearly $1 million a year on lobbying, pushed hard to ensure the $1-per-gallon subsidy for clean diesel didn’t also apply to the Conoco-Tyson operation.

But the issue of “renewable biodiesel” also turned up on the lobbying filings of the Dial Corporation and the Soap and Detergent Association. Just as ethanol subsidies have driven up the price of food, it turned out that fat-to-fuel subsidies boosted the cost of manufacturing soap, which is also made of animal fat. So Dial and the Soap and Detergent Association, displeased that Tyson now had somewhere else to peddle its fat, also lobbied to kill the chicken-fat diesel subsidy.

While their own interests were obvious, the soap and biodiesel lobbies argued that chicken-fat diesel was not good for the environment. But the Environmental Protection Agency ruled this month that “biodiesel or renewable diesel made from animal fat or used cooking oil results in an 80 percent reduction from carbon emissions versus petroleum diesel,” according to Darling International, a company that deals in animal-fat diesel. Darling added in its first-quarter 2009 report, “That is the highest level of carbon reduction available from any commercially ready fuel.”

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They lost their tax credit, which probably means cheaper soap. It is an interesting story about how our government works or doesn't these days.