How To Make Biodiesel

U.S. oil refiners won a big victory in a recent U.S. Internal Revenue Service (IRS) tax ruling, which declares that they can claim a $1/gallon tax credit for running vegetable oils or animal fats through a distillate hydrotreater, creating a pure-hydrocarbon renewable-fuel blendstock that’s far superior to conventional biodiesel fuel. The ruling, spelled out in a document titled “Part III - Administrative, Procedural and Miscellaneous, Renewable Diesel, Notice 2007-37,” is expected to be published officially later this month. Hart’s Diesel Fuel News obtained a copy of the ruling from David Lowman, Jr., an attorney for Hunton & Williams, in Richmond, Va.Richmond, Va.Richmond, Va.Richmond, Va., who was one of the petitioners asking for the interpretation. The new IRS notice points out that the U.S. Energy Policy Act (EPAct) didn’t specify whether the $1/gallon “thermal depolymerization” tax credit applies to biofeedstock processed with catalysts. Fearing “renewable fuel” competition from oil refiners, the soybean-lobby-dominated National Biodiesel Board (NBB) told IRS that such “thermal deploymerization” should only apply to waste turkey plants. NBB ripped the idea of a broader IRS definition including refinery hydrotreating or gasification-based processing as a sell-out to “oil and gas interests” that could use cheap palm oil or other imported feedstocks rather than U.S. soybean oil. However, the U.S. “Department of Energy has advised and the Department of Treasury and the Internal Revenue Service have concluded that based on that advice that thermal depolymerization should be defined generically and broadly to include processes that use heat and pressure, with or without the presence of catalysts,” the new IRS notice says. “The Department of Energy has also indicated that coproduced fuel attributable to biomass is likely to be virtually indistinguishable from the crude-oil derived products in the coproduced fuel, with only minor differences at the molecular level, and the rules in this notice relative to coproduced fuel follow from this view.” Asked to clarify the significance of the ruling for oil refiners, attorney Lowman confirmed to us that this allows refiners to claim the tax credit using either dedicated hydrotreaters (such as the UOP or Neste “NExBTL” schemes) or co-processing of both crude-based distillate streams along with bio-based feeds in the same hydrotreater. Accounting for the biofeed portion for tax credits is a relatively simple task via mass-balance calculations, he said. One gallon of biofeed will produce slightly less than a gallon of diesel fuel in a hydrotreater, plus some byproduct water, CO2 and propane. But those are easily accounted-for and well-understood by the process technology developers, he said. “Only the portion of the bio-based feed gets the credit, and it can be measured,” Lowman told us. According to the IRS notice, the ruling is retroactive to Jan. 1, 2006, although commercial “renewable diesel” refinery hydrotreating schemes have yet to be built anywhere in the U.S. - Jack Peckham

No Responses to “U.S. Refiners Win IRS Ruling Allowing $1/Gallon Tax Credit for Refinery Hydrotreated ‘Renewable Diesel’”

No comments yet

Leave a Reply

Name (required)

Mail (will not be published) (required)

Website

Comment :

Security Code: