I’m sitting here, listening to the talking heads discuss the Supreme Court decision about Obamacare. No- that’s NOT the subject of this blog. But, it is emblematic of the issue- that our official “small government” party is the part of the “big government” when it helps Big Business and against all government that works for any other issue- except for the Defense Department (which is also provided by Big Business).
Case in point: Biodiesel. I’ve written about this before- specifically the ridiculous state of credits issued for biodiesel and the deforestation of various countries to provide biodiesel. Most of you think that biodiesel comes from waste oil- it does, to a very small degree. And, now, many biodiesel purveyors are going to shut their doors. Cutting capacity by 1/3 and destroying even more jobs, in the process. Not because of too much federal regulation- but way too little. You see, new markets (and most markets, I might add- consider JPMorgan and its now $9- not $2- billion dollar loss in contravention of logic and good business sense) need government regulation to insure “efficiency”. (You know, the buzzword of the “small government” folks.)
Biodiesel is one of those new markets that needs more regulation. This industry sector has more than doubled its production since 2007 (450 million to 1 billion gallons), with 20% recycled stocks comprising part of that total (up from 4.5% in 2007). Diesel-based CO2 production is the second leading source of the greenhouse gasses (in the transportation sector, itself second to electricity production as the overall contributor), primarily as a result of trucking uses. (Biodiesel cuts CO2 emissions by 80%, compared to conventional diesel, plus a plethora of other pollutants like smog, acid rain, etc.)
And, as discussed in the previous blog (mentioned above), the EPA renewable fuel system uses “RINs” [renewable identification numbers], which provides cash incentives to use biodiesel (it’s a volume based rebate). RIN prices move up and down with the demand for diesel fuel and the targeted amount of renewable fuels (as stipulated by the EPA). If the mandated level of renewables is not meeting the target, the RIN price goes up; if the mandated level is being met, the value of the RIN drops, along with its price. As a comparison, RIN’s for ethanol are about a penny per gallon, while biodiesel RIN’s are about $ 1.75.
Except “Clean Green Fuel” of Maryland has been selling fraudulent biodiesel RIN’s. So that the owner (Rodney Hailey) has been convicted of some 40 charges- as he amassed a personal fortune (jewelry, luxury automobiles, etc.). Absolute Fuels, LLC of Texas is about to be tried for the same sort of scam. You see, the EPA is not funding any inspection services to insure the RIN’s are not fraudulent. (The cost for such a program would be about $ 10 million a year.)
Instead, the current process is based upon the principle of “caveat emptor”. Because if they (typically, the large petroleum firms, who blend the bio-diesel fuels with conventional diesel stocks) purchase a fraudulent RIN, the fuel can’t be sold. Just due to Clean Green Fuel and its scams, about a dozen firms (ExxonMobil and Shell among them) are stuck with oil with invalid RINs- to the tune of 18 million to 32 million gallons of biodiesel. And, since the big firms had no real desire to purchase biodiesel in the first place, they are now avoiding future biodiesel purchases.
Most of the bio-diesel producing firms affected are small- you know, the ones a certain party claims is critical for America to succeed. ¾ of the biodiesel producers have the capacity to produce about 50K gallons a day or less, with 90% of those firms using some waste/recycled feedstocks; about 30% use only waste or recycled feedstocks. (The largest 20 producers have no such reuse levels- not even close.)
So, maybe someone can convince the political parties- and the EPA- to spend $ 10 million to save the small companies. I bet a tax on the RIN’s would pay for it (admittedly cutting the total value of the RIN from $ 1.75 by a dime or so), thereby cutting our CO2 emissions AND helping small business. I’m not holding my breath, though, until it does happen. I have no suicidal tendencies.
I now know why you don’t run for office, Roy. You are way too smart to do so. I like your solution at the bottom! I also agree things like this NEED to be regulated, it is after all our future and the health of our planet we are talking about, it is about us all! Unfortunately, this kind of information get’s buried under the “obese child gets taken away from parents” and “New York to outlaw big gulp sodas” kind of information, which keeps people thinking about the wrong kind of regulations. (my opinion obviously) Great post as ALWAYS!
Lisa Brandel recently posted..The Painted Lady by Lisa Brandel
Oh, there are many reasons, Lisa…
Yes, there are many regulations… (Like the condo rule- you can have curtain you want as long as it’s white. Where’s the railing about this- and the fact that they “tax” you for their regulation?) And, most have good reason. Some are nutso (I have a post on that coming out at the end of this month or the start of the next). And, was New York going to outlaw “big gulps” or just “big gulps” of Coke, Pepsi, and Mountain Dew (but let the diet versions go unfettered)?
Thanks for the approbation.
Roy
First we need to clean out Washington D.C. – all of them, both sides of the isle in all branches of government. We need to replace them with non politician folks who just want an easier, less expensive life. Then we’ll see some changes.
I agree that regulation is important. We are always stable and safer when regulations are in place.
Julia Neiman recently posted..The Four Types of Support People Needed to Succeed Lesson 12 in the Empowering Young Entrepreneur Series
I fear that knee-jerk response, Julia… There just was a revelation that our regulators reassigned a slew of investigators, fearing they were getting too friendly with their assigned companies. As such, the new investigators had no clue as to the normal workings of the firms they were checking out- and that is EXACTLY why no one pulled Dimon’s chain at JPMorganChase – and that $ 2 billion fiasco (which now is approaching $ 9 billion) was not caught!
I also believe we need to remove the political influences (and lobbyists) from our regulators- which is why some firms skate and others get skewered.
Roy