While a number
of projects involving the production of biofuels appear on the horizon in
Louisiana, one actually has gotten going. Diamond Green
Diesel in Norco by the end of the year will have a capacity of producing
150 million gallons a year. Starting
last June, it began operating near present capacity at 7,000 barrels a day
with a manufactured market in place: California government mandates already
provides a market the company believes will allow it to withstand the recent
elimination of a $1.01 per gallon federal government subsidy.
Unfortunately, this incident of
government regulation in one state will spawn its own mandate onto Louisiana,
courtesy of the former Gov. Kathleen
Blanco era – R.S.
3:4674. The law states that if biodiesel production, regardless of its
intended final destination, reaches an annualized 10 million gallons, then within
six months two percent of the total diesel sold by volume in the state must be
biodiesel. At the rate above, the firm would sell over 140 million gallons a
year, easily surpassing the mark and starting the clock. The law does allow for
the Louisiana
Commission of Weights and Measures to suspend the requirement if logistical
problems prevent fulfilling the law’s mandate, but also makes the commissioner
of agriculture and forestry issue regulations requiring the state to create
incentives, paid for out of state dollars, to compensate for costs to achieve
this sales standard.
Assuming no temporary waiver, this
means of the diesel market that at least 2.8 million gallons a year must come
from this source. At present, this represents only a fraction of the latest
known figure (2012)
of almost 43 million a year, which is of off-road sales only (for proprietary reasons,
other sales are not listed). The most recently-available market prices of pure
biodiesel in Gulf Coast states (last
quarter of 2013) show, converted to a diesel gallon equivalent, this diesel
costs 5 cents more per gallon than regular diesel (typically, they would be
blended). Obviously, the difference is subject to change given market conditions,
but at the present this means a very small increase foisted upon users, and, if
incentives get created, potentially in the future the siphoning of state
resources to those involved in the production and supply chain.
But even if presents costs are
relatively small, why must consumers pay any additionally for this? And if
capacity ramps up at the existing facility plus others get into production, it’s
possible that one day the mandate would exceed total state diesel consumption,
forcing more of it onto consumers. However, the most pressing question about
this law is, if it was passed to encourage this kind of production (assuming it
used less of fossil fuels and was cleaner) in order to lead to its consumption,
if the production is occurring independently of that consideration, why must
the guarantee of a state domestic market by the law exist?
Louisiana should not be in the
business of telling consumers what kind of gasoline blend (the law also covers
regular gasoline, and the use of ethanol from biomass of which none is being
produced currently) they can use purchased in state, allowing production not
even intended for the state to dictate prices and making consumers and
potentially citizens pay for it. The Commission should meet this month and
should waive the requirement. Then the Legislature needs to follow with repeal
of this law that only serves to transfer state resources to the fuel producers.
No comments:
Post a Comment