Why Biorefining Loan Guarantees Give Back

Think money, jobs and military might
| November 21, 2011

Advanced biofuel companies such as ZeaChem, Primus Green Energy, Terrabon, Coskata, Chemtex, Imperium Renewables and Bluefire Renewables all believe the national debt reduction efforts should not lead to massive cuts in the 2012 Farm Bill Energy Title. In a letter written by Westar Trade Resources, which represents all of those advanced biofuel companies, to a few U.S. senators and representatives, the companies spoke as expected in their requests to avoid drastic Energy Title cuts, but more importantly they provided actual evidence that any such cuts would be detrimental not only on the job front, but also to the pocketbook of the U.S. government.

In the letter, the group pointed out the need for programs like the 9003 Biorefinery Loan Guarantee Program offered through USDA. “Loan guarantees are the most cost-effective way to develop new jobs and create these new fuels that are needed for our national security and long-term price stability.” But all general assertions aside, look at what those loan guarantees actually provide the government. To achieve the goals of the 9003 program, Westar points out, it would take only $293 million in actual appropriations to meet the goal of $1.17 billion in loan guarantee authority by the government. And, in addition to this instance of getting a lot for a little, fees (of up to 2 percent) charged to loan recipients generate $23.37 million in addition to a 0.5 percent annual fee charged for up to 20 years that will generate roughly $116.84 million. So, if there were no loan defaults, “the government would actually receive an income of $140.21 million,” Westar says.

But given the recent events involving the high-profile loan default by the solar company Solyndra, it might be easy to dismiss the monetary gains such loan guarantee programs can create. Westar, however, and the rest of the advanced biofuels community would disagree—especially those who’ve received the benefit of the USDA’s loan programs.

In addition to helping the country reach a number of key national goals (think energy security, fossil-fuel reduction, etc.), Westar points out the importance advanced biofuels play in maintaining and growing the rural economy. Look at the link between advanced biofuels, the military and rural economies. According to Westar, although rural residents account for only 17 percent of the population, they make up 44 percent of the military, and since July, post 9/11 veterans have reached an unemployment rate of 12.4 percent. All of that shows the need for advanced biofuels production in rural areas to provide jobs to the same veterans living in those rural communities who can resupply their community members who also joined the military, and, however small, give the government back a few bucks. 

—Luke Geiver