Vegetable oil fuels cars -- and tax bills

[Pat McCotter]

Vegetable oil fuels cars -- and tax bills

Diesel owners who switch to cooking grease can run afoul of the law. Just ask the governor.
By Evan Halper, Los Angeles Times Staff Writer
May 6, 2008

Dave Eck, a Half Moon Bay mechanic, had attracted a media spotlight with his fleet of vehicles fueled by used fryer grease from a local chowder house. So when Sacramento called, he figured officials wanted advice on promoting alternative fuels.

Not at all. The government rang to notify Eck that he was a tax cheat. He was scolded for failing to get a "diesel fuel supplier's license," reporting quarterly how many gallons of grease he burns, and paying a tax on each gallon.

"All of a sudden they nailed me for a road tax," said Eck, who drives a Hummer converted to run on vegetable oil. "I said, 'Not a problem. I'll do my part. But what do I get? At least let me into the carpool lane.' "

No such luck. The state offered Eck only a potentially large fine -- and not just for failing to pay taxes. He can also get in trouble for carting kitchen grease away from eateries without a license from the state Meat and Poultry Inspection Branch.

Or for not having at least $1 million in liability insurance, in case he spills some of the stuff. Or for not getting permission from the state Air Resources Board to burn fat in the first place.

The regulations are so burdensome that even Gov. Arnold Schwarzenegger, trying to set an example for Californians by driving a Hummer that burns cooking oil he buys at Costco, had not complied. Schwarzenegger, who has said that the exhaust from his Hummer smells so much like French fries that his passengers get hunger pangs, was unaware that he was required to send Sacramento an 18-cent road tax for every gallon of kitchen oil he burned, according to spokesman Aaron McLear. After The Times raised the issue, McLear said the governor would pay the taxes he owed.

The governor's staff says it is working on making it easier to drive using vegetable oil without being an outlaw.

"We are very interested in making sure people who have these kinds of vehicles are able to comply as easily as possible," McLear said.

But environmentalists are frustrated. "It is ridiculous that we live in what is presumed to be one of the greenest states in the nation, yet we have the most antiquated laws to deal with green energy," said Josh Tickell, an alternative-fuels advocate and filmmaker whose documentary "Fields of Fuel" recently won the audience award at the Sundance Film Festival.

"Everyone I know wants to do the right thing by the law," he said. "But the state is not set up to even clearly provide information to folks."

The veggie oil crowd is hardly on the radical fringe anymore. Garages report being overwhelmed with conversion business, and restaurants throughout the Southland are contending with raids on their used-grease tanks.

Advocates say more than 250,000 Americans are running their vehicles on cooking oil, with the biggest concentration in California. Drivers do it for different reasons: to protect the environment, to reduce dependence on foreign oil or to save money. Those using vegetable oil say they do so for as little as $1 a gallon, even though grease yields better mileage than gasoline and about the same as diesel fuel.

Almost all of them are doing it underground. The state tax board has processed fewer than 70 of the required "fuel supplier" licenses, according to a spokeswoman. Most of those are for businesses selling commercial biodiesel, a more mainstream fuel that is typically mixed with as much as 80% petroleum.

State agencies say they have reasons for doing things the way they do. Tax authorities say biofuel drivers need to pay for using California's roads, just like everyone else, and there is no simple way to collect from those who don't go to the gas pumps, where road taxes are normally levied.

The meat and poultry agency is worried about toxic spills. Officials with the air board are troubled by kitchen-grease emissions, especially when spewed by vintage diesel Mercedes-Benzes, the make of choice for many vegetable oil converts.

Matthew Tiffany, a 26-year-old student and environmentalist in Monrovia, tried to help some 20 veggie oil drivers go legal and found the task nearly impossible.

Tiffany, who fills his 1981 diesel Mercedes with fryer grease from a neighborhood Japanese restaurant, launched a cooperative called Good Earth Grease Haulers. His mission was to bring veggie oil drivers into the mainstream.

But Good Earth Grease Haulers quickly collapsed, after Tiffany got tangled in red tape trying to help members comply with license requirements.

"They want us to follow all these rules that were set up to regulate people who transport hundreds of gallons a day," Tiffany said.

He recently appeared before a legislative committee to urge lawmakers to exempt veggie oil users from having to pay for a license after the Meat and Poultry Inspection Branch raised the cost from $75 to $300.

Assemblyman Doug LaMalfa (R-Richvale), a rice farmer who is handy with car engines, expressed bewilderment at the hoops Tiffany had to jump through to get permission to transport a few gallons of used fryer grease.

"Why do you even tell anyone you are taking it?" he asked.

Tiffany reminded the assemblyman that it was required by law.

Although most drivers burning kitchen oil have managed to evade enforcement -- government agencies say they have handed out few citations -- those who attract attention to themselves by promoting the alternative fuel tend to hear from regulators.

Craig Reece, owner of PlantDrive in Berkeley, which sells kits to convert diesel engines to run on vegetable oil, said he got a call from state officials about paying the road tax. He has since been sending the tax forms to all his customers, but he figures only a few are actually registering with the state and keeping logs of how much oil they burn.

"A lot of my customers think this fuel should be exempt from taxes," he said. "They feel they ought to get something for the climate-change-neutral aspect of it."

Illinois, North Carolina, Texas, Rhode Island and Indiana have exempted drivers burning kitchen grease from paying such a tax. In North Carolina, the move came at the behest of a state senator who motors around in a small car powered by soybean oil. The legislator said it wasn't paying the taxes that bothered him so much as the hours required to do the paperwork.

Terry Tamminen, an advisor to Schwarzenegger on energy and environmental policy, acknowledged that California has been slow to adapt.

"When you go through a period of change, there is always a clunkiness to the bureaucracy," he said.

But he said the state should not overlook the value of alternative-fuel pioneers.

"Our mentality is to look for the next silver bullet" to replace petroleum, Tamminen said by telephone while driving a car fueled by compressed natural gas. "But there is no silver bullet, only buckshot. We are going to need every one of these silver buckshots to be developed as best it can."

evan.halper@latimes.com

[dalebert]

How much do you want to bet that this will become an operation that only becomes practical for big companies to do? The little guy won't be able to do this for himself or for customers in a small business operation, helping the environment(maybe?), reducing demand on oil production, and saving money for himself and others due to all the regulations that will be much easier for a huge corporation with a large infrastructure to follow- a monopoly where competition is stifled by government force. It would be interesting to watch where the lobbying and media campaigning comes from, kind of like with net neutrality.

[KBCraig]

I want to know how they intend to pursue drivers of electrics or plug-in hybrids. The hybrids might burn a small amount of road-taxed fuel if they exceed their battery range, but straight electrics use none at all.

[Pat McCotter]

States Mull Taxing Drivers By Mile
Look To Recoup Gas Tax Losses As Cars Become More Fuel-Efficient

CORVALLIS, Ore., Feb. 14, 2005

(CBS) College student Jayson Just commutes an odometer-spinning 2,000 miles a month. As CBS News Correspondent Sandra Hughes reports, his monthly gas bill once topped his car payment.

"I was paying about $500 a month," says Just.

So Just bought a fuel efficient hybrid and said goodbye to his gas-guzzling BMW.

And what kind of mileage does he get?

"The EPA estimate is 60 in the city, 51 on the highway," says Just.

And that saves him almost $300 a month in gas. It's great for Just but bad for the roads he's driving on, because he also pays a lot less in gasoline taxes which fund highway projects and road repairs. As more and more hybrids hit the road, cash-strapped states are warning of rough roads ahead.

Officials in car-clogged California are so worried they may be considering a replacement for the gas tax altogether, replacing it with something called "tax by the mile."

Seeing tax dollars dwindling, neighboring Oregon has already started road testing the idea.

"Drivers will get charged for how many miles they use the roads, and it's as simple as that," says engineer David Kim.

Kim and fellow researcher David Porter at Oregon State University equipped a test car with a global positioning device to keep track of its mileage. Eventually, every car would need one.

"So, if you drive 10 miles you will pay a certain fee which will be, let's say, one tenth of what someone pays if they drive 100 miles," says Kim.

The new tax would be charged each time you fill up. A computer inside the gas pump would communicate with your car's odometer to calculate how much you owe.

The system could also track how often you drive during rush hour and charge higher fees to discourage peak use. That's an idea that could break the bottleneck on California's freeways.

"We're getting a lot of interest from other states," says Jim Whitty of the Oregon Department of Transportation. "They're watching what we're doing.

"Transportation officials across the country are concerned about what's going to happen with the gas tax revenues."

Privacy advocates say it's more like big brother riding on your bumper, not to mention a disincentive to buy fuel-efficient cars.

"It's not fair for people like me who have to commute, and we don't have any choice but take the freeways," says Just. "We shouldn't have to be taxed."

But tax-by-mile advocates say it may be the only way to ensure that fuel efficiency doesn't prevent smooth sailing down the road.

[John Edward Mercier]

Saw that one coming.

[dalebert]

I'd heard about that but you beat me to it, Pat.

[alohamonkey]

Isn't it funny how their first instinct is to figure out how to try to recoup the lost taxes?  Shrinking the size of their gubment never even crosses their mind.  Sad.

Here's another one:

http://www.herald-review.com/articles/2007/03/01/news/local_news/1021491.txt

State makes big fuss over local couple's vegetable oil car fuel

By HUEY FREEMAN - H&R Staff Writer   

DECATUR - David and Eileen Wetzel don't get going in the morning quite as early as they used to.

So David Wetzel, 79, was surprised to hear a knock on the door at their eastside home while he was still getting dressed.

Two men in suits were standing on his porch.

"They showed me their badges and said they were from the Illinois Department of Revenue," Wetzel said. "I said, 'Come in.' Maybe I shouldn't have."

Gary May introduced himself as a special agent. The other man, John Egan, was introduced as his colleague. May gave the Wetzels his card, stating that he is the senior agent in the bureau of criminal investigations.

"I was afraid," Eileen Wetzel said. "I came out of the bathroom. I thought: Good God, we paid our taxes. The check didn't bounce."

The agents informed the Wetzels that they were interested in their car, a 1986 Volkswagen Golf, that David Wetzel converted to run primarily from vegetable oil but also partly on diesel.

Wetzel uses recycled vegetable oil, which he picks up weekly from an organization that uses it for frying food at its dining facility.

"They told me I am required to have a license and am obligated to pay a motor fuel tax," David Wetzel recalled. "Mr. May also told me the tax would be retroactive."

Since the initial visit by the agents on Jan. 4, the Wetzels have been involved in a struggle with the Illinois Department of Revenue. The couple, who live on a fixed budget, have been asked to post a $2,500 bond and threatened with felony charges.

State legislators have rallied to help the Wetzels.

State Sen. Frank Watson, R-Greenville, introduced Senate Bill 267, which would curtail government interference regarding alternative fuels, such as vegetable oil. A public hearing on the bill will be at 1 p.m. today in Room 400 of the state Capitol.

"I would agree that the bond is not acceptable, $2,500 bond," Watson said, adding that David Wetzel should be commended for his innovative efforts. "(His car) gets 46 miles per gallon running on vegetable oil. We all should be thinking about doing without gasoline if we're trying to end foreign dependency.

"I think it's inappropriate of state dollars to send two people to Mr. Wetzel's home to do this. They could have done with a more friendly approach. It could have been done on the phone. To use an intimidation factor on this - who is he harming? Two revenue agents. You'd think there's a better use of their time," Watson said.

The Wetzels, who plan to speak at a Senate hearing in Springfield today, recalled how their struggle with the revenue department unfolded.

According to the Wetzels, May told them during his Jan. 4 visit that they would have to pay taxes at either the gasoline rate of 19½ cents per gallon or the diesel rate of 21½ cents per gallon.

A retired research chemist and food plant manager, Wetzel produced records showing he has used 1,134.6 gallons of vegetable oil from 2002 to 2006. At the higher rate, the tax bill would come to $244.24.

"That averages out to $4.07 a month," Wetzel noted, adding he is willing to pay that bill.

But the Wetzels would discover that the state had more complicated and costly requirements for them to continue to use their "veggie mobile."

David Wetzel was told to contact a revenue official and apply for a license as a "special fuel supplier" and "receiver." After completing a complicated application form designed for businesses, David Wetzel was sent a letter directing him to send in a $2,500 bond.

Eileen Wetzel, a former teaching assistant, calculated that the bond, designed to ensure that their "business" pays its taxes, would cover the next 51 years at their present usage rate.

A couple of weeks later, David Wetzel received another letter from the revenue department, stating that he "must immediately stop operating as a special fuel supplier and receiver until you receive special fuel supplier and receiver licenses."

This threatening letter stated that acting as a supplier and receiver without a license is a Class 3 felony. This class of felonies carries a penalty of up to five years in prison.

On the department of revenue's Web site, David Wetzel discovered that the definition of special fuel supplier includes someone who operates a plant with an "active bulk storage capacity of not less than 30,000 gallons." Wetzel also did not fit the definition of a receiver, described as a person who produces, distributes or transports fuel into the state. So Wetzel withdrew his application to become a supplier and receiver.

Mike Klemens, spokesman for the department of revenue, explained that Wetzel has to register as a supplier because the law states that is the only way he can pay motor fuel tax.

But what if he is not, in fact, a supplier? Then would he instead be exempt from paying the tax?

"We are in the process of creating a way to simplify the registration process and self-assess the tax," Klemens said, adding that a rule change may be in place by spring.

David Wetzel wonders why hybrid cars, which rely on electricity and gasoline, are not taxed for the portion of travel when they are running on electrical power. He said he wants to be treated equally by the law.

David Wetzel, who has been exhibiting his car at energy fairs and universities, views state policies as contradicting stated government aims.

"You hear the president saying we need to reduce our dependence on foreign oil," Wetzel said. "You hear the governor saying that."

State Rep. Bob Flider, D-Mount Zion, also plans to support legislation favoring alternative fuels.

"I'm disappointed that the Illinois Department of Revenue would go after Mr. Wetzel," Flider said. "I don't think it is a situation that merits him being licensed and paying fees.

"The people at the department of revenue apparently feel they need to regulate him in some way. We want to make sure that he is as free as he can be to use vegetable oil. He's an example of ingenuity. Instead of being whacked on the head, he should be encouraged."

Huey Freeman can be reached at hfreeman@herald-review.com or 421-6985.

[David]

Quotes taken from the first post on this thread.
Quote<Assemblyman Doug LaMalfa (R-Richvale), a rice farmer who is handy with car engines, expressed bewilderment at the hoops Tiffany had to jump through to get permission to transport a few gallons of used fryer grease.

"Why do you even tell anyone you are taking it?" he asked.

Tiffany reminded the assemblyman that it was required by law.>

Quote<Illinois, North Carolina, Texas, Rhode Island and Indiana have exempted drivers burning kitchen grease from paying such a tax. In North Carolina, the move came at the behest of a state senator who motors around in a small car powered by soybean oil. The legislator said it wasn't paying the taxes that bothered him so much as the hours required to do the paperwork.>

[John Edward Mercier]

As I explained the charge on gas and registrations was to pay for the service of roads.

If it were truly a private business all users would pay based on use rather than an indirect tax that effects some more than others.
The end result will either be finding another revenue source, increasing the rates on the current one, or allowing the roads to revert to an earlier state of development.

[Pat McCotter]

That is only if you use a user fee model to pay for the roads.

A model I heard was to make it like the internet. Someone - say the trucking companies - own the interstates and charge the secondary highway owners a "connection charge." These secondary road owners charge the local road owners a connection charge. The local road owners charge the developers/homeowners a driveway connection charge.

Another model I've heard of is the insurance companies and auto industries along with trucking companies and organizations such as AAA get together and decide on the best and safest way to set up this private road ownership. These entities have the financial incentives to do this and do it right and quickly.

There is no "one size fits all" model of road financing.

[John Edward Mercier]

NH originally used this model in that all roads were paid for through property tax. You paid to be connected regardless of level of use. It then evolved into the present mixed revenue format.

Private road ownership (which still exists in NH) currently either has restricted use, tolls, or association-based fees.

[Pat McCotter]

Folsom [CA] Police Officer Arrested

Folsom Police arrested Police Department Sergeant John Landahl today on misdemeanor charges of California Vehicle Code Sections 2474 and 2470 (theft/transportation of inedible cooking grease). The arrest is the result of an on-going investigation into the theft of used cooking oil from the Sacramento Rendering Company (SRC). The value of the cooking oil was estimated at approximately $350.

The theft was reported by SRC, a company contracted to collect used cooking oil from local restaurants for recycling. The oil is commonly used to convert to bio-diesel and other consumer products. Although the theft occurred in March, it was not reported to the Police Department until June.

Sergeant Landahl is a 22 year veteran of the Police Department and has served as a sergeant for the past three years. He was released on his own recognizance after turning himself into investigators at the Folsom Police Department on September 30th. Landahl has been placed on paid administrative leave pending the outcome of an internal affairs investigation.

Folsom Police Chief Sam Spiegel said, "The police department has a duty to investigate all crimes regardless of who may be involved. Our investigation revealed a member of the department as a suspect. While I'm very saddened by this, the investigation was reviewed by the Sacramento County District Attorney's Office and probable cause existed for a criminal filing. As a result, an arrest warrant was issued."