Texas biodiesel policy change examined in light of collapse of Texas biodiesel industry

In Texas, the Dallas News ran an article on the impact of the cancellation of Texan biofuel incentives. The cancellation, a last minute budget-balancing change, has shuttered two Texas biodiesel plants in the face of rising soybean prices.

Soybean prices have increased more than 50% although indications are that soybean planting will increase in the US substantially in 2008.

The state became one of the top three biodiesel producing states this year as a result of the incentive program. Under the old program, producers received a 16.8 cent incentive per gallon from the state. The incentive was capped at $3.6 million over 10 years, but helped offset the production cost of the first 20 million gallons of biodiesel.

The average Texas biodiesel plant makes 9 million gallons of fuel. Texas is the second-leading state in biodiesel production, with a projected 180 million gallons in 2007 from 20 plants. Iowa leads the nation with 200 million gallons produced by 11 plants. With other costs added, biodiesel producers say they are now paying about $3.50 per gallon just to make the fuel.

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