U.S. Biofuel Boom Running on Empty

The biofuels revolution that promised to reduce America’s dependence on foreign oil is fizzling out.

Two-thirds of U.S. biodiesel production capacity now sits unused, reports the National Biodiesel Board. Biodiesel, a crucial part of government efforts to develop alternative fuels for trucks and factories, has been hit hard by the recession and falling oil prices.
The global credit crisis, a glut of capacity, lower oil prices and delayed government rules changes on fuel mixes are threatening the viability of two of the three main biofuel sectors — biodiesel and next-generation fuels derived from feedstocks other than food. Ethanol, the largest biofuel sector, is also in financial trouble, although longstanding government support will likely protect it.

Earlier this year, GreenHunter Energy Inc., operator of the nation’s largest biodiesel refinery, stopped production and in June said it may have to sell its Houston plant, only a year after politicians presided over its opening. Dozens of other new biodiesel plants, which make a diesel substitute from vegetable oils and animal fats, have stopped operating because biodiesel production is no longer economical.

Producers of next-generation biofuels — those using nonfood renewable materials such as grasses, cornstalks and sugarcane stalks — are finding it tough to attract investment and ramp up production to an industrial scale.

Wall Street Journal (through Google News)