Gordon — The gentleman from Ghana showed up in Wayne Johnson's office one recent morning with a tantalizing offer: Buy my palm oil and your biodiesel woes will disappear. Johnson, CEO of Alterra Bioenergy, was intrigued.

A year ago, alternative fuels promised an economic, environmental and energy revolution — a homegrown solution to dependence on Middle Eastern oil. But today the biodiesel industry is in the dumps.

Pouya Dianat/AJC (ENLARGE)

This is the Alterra production plant in Gordon. It's one of the nation's 171 biodiesel facilities, but according to an industry group, most have halted or curtailed production – or never started up.

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The price of soybeans, Johnson's raw material, has more than doubled. U.S. markets haven't materialized. Distribution systems flounder. Only federal subsidies keep the industry afloat.

The biodiesel plants that bloomed like wildflowers across rural America now slash production, struggle for financing or go bankrupt. Johnson's shiny new factory here in Middle Georgia runs at half-speed. Another in Plains sits empty.

"We've had all the fun we can handle with this industry," Johnson said. "I'm ready to have it become profitable."

Biodistillers nationwide now realize that their industry's survival depends on the vagaries of world trade. Cheaper soy and palm oil from Asia, Africa and Latin America increasingly replace domestically grown soy oil. Environmentally conscious Europe takes most of the U.S.-produced fuel.

Globalization of the American biodiesel industry, though, wouldn't be possible without lucrative assistance — a $1-per-gallon tax break — from Washington. Alterra and other biodiesel producers receive the excise tax credit for each gallon of alternative fuel that is mixed with regular diesel.

And, since most of the biodiesel is shipped overseas, Congress essentially subsidizes the price European drivers pay for fuel.

"And we're not really lessening our dependence on foreign fuel supplies," said Mark Ash, an economist with the U.S. Department of Agriculture.

Biodiesel and ethanol producers fight over raw materials. Ethanol — the sexier of the two fuels and one that is blended with gasoline for use in cars — requires copious amounts of corn. One-time soybean fields now grow corn, further driving up the cost of beans and, consequently, the production of biodiesel.

"You can make a profit in ethanol in every step of the production chain," said Greg Hopkins, a biodiesel maker in Rome. "In biodiesel, we don't seem to have worked that out."

Empty buildings

In February 2007, Johnson broke ground on a biodiesel factory in former President Jimmy Carter's hometown of Plains. Johnson expected to produce 30 million gallons of fuel annually and hire 20 people to run the factory.

Today?

"I've got some beautiful buildings in Plains," Johnson said.

But they're empty. The blame falls mainly on the skyrocketing price of soybean oil used in 80 percent of the nation's biodiesel production. Soy oil cost 22 cents per pound when Johnson broke ground in Plains. Wednesday, a pound cost 56.4 cents.

It takes 7.7 pounds of soy oil — or $4.34 — to produce a gallon of biodiesel, according to the Food and Agricultural Policy Research Institute. Add overhead and other processing costs (about 70 cents per gallon), federal and state taxes (54 cents) and subtract the dollar tax credit and a gallon of biodiesel could sell for $4.58 at the pump.

Regular diesel sold for $3.86 a gallon Wednesday in Atlanta.

"How're you going to sell it at that price?" asked Davis Cosey, who owns an idled biodiesel factory in Perry. "The industry's horrible. It's in the ditch."

Farmers aren't doing producers any favors. In 2006, more than 75 million acres of soybeans were planted in the United States. Last year, only 64 million acres were planted, according to the USDA. Congress' ethanol mandate — 37 billion gallons annually by 2022 — fueled the switch from beans to corn. In addition, rapidly developing China and India boosted soybean demand, and prices.

Consequently, biodiesel factories run at one-fifth of their 2.2 billion-gallon annual capacity. Unable to afford raw materials — or win Wall Street financing — producers nationwide shut down.

In January, Imperium Renewables, the nation's largest biodiesel plant near Seattle, canceled a $345 million initial public offering of stock because of "unfavorable market conditions." Within the last year, companies in New Jersey, Oklahoma and Arkansas have declared bankruptcy.

Although Georgia counts seven of the nation's 171 biodiesel factories, according to the National Biodiesel Board, most have halted, curtailed or never started production.

Johnson believed his $15 million plant in Gordon had a great future. He targeted neighboring kaolin and timber industries, as well as municipalities and schools, as customers for his blended fuel, which kicks less carbon dioxide than regular diesel into the air. Yet only a handful of public agencies purchase his product.

"The American public, with rare exception, is 100 percent price-sensitive," Johnson said. "They will not pay a penny more to go green."

Looking for help

Both ethanol and biodiesel producers look to Washington and state legislatures for help. President Bush signed the latest energy bill in December mandating that 1 billion gallons of biodiesel be blended into regular diesel by 2022.

States, too, consider requirements, but only Minnesota demands that all diesel sold at the pump include at least 2 percent biodiesel. Georgia Rep. Allen Freeman (R-Macon) introduced legislation (House Bill 1146) last month mimicking Minnesota's mandate.

Freeman's bill, though, died in the House.

Congress is considering extending the $1-per-gallon tax credit for producers like Johnson. Set to expire at the end of this year, the subsidy could be extended until 2012. Also to be resolved: whether producers who sell biodiesel overseas could continue to tap the subsidy.

The tax break, approved in 2004, largely created the biodiesel industry in this country. But to survive, producers must send their product overseas.

Between January and November 2006, U.S. factories churned out 1.63 billion pounds of biodiesel, according to the USDA. Less than one-seventh of that amount was exported. Producers exported two-thirds of the 2.8 billion pounds produced during a similar period last year, most heading to European Union countries where diesel used in cars and trucks must include at least a 5.75 percent blend of biodiesel.

Hopkins, chief executive of Rome-based U.S. Biofuels Inc., sells all his biodiesel to a British company. He'd likely be out of business if Congress took away the tax break for overseas shipments.

Johnson's fuel stays stateside.

"The blender's credit is now being used to subsidize diesel prices in Europe," he said. "But if the raw material is produced in the U.S. and exported as biofuel, then the dollar per gallon makes sense because the refinery is here and jobs are created here."

With Europe expected to up its biodiesel mandate to 10 percent by 2020, and with Brazil aiming for a 5 percent mandate by 2013, Johnson is tempted to play the global game.

For now, though, foreign trade is a one-way street: palm oil and soybean dealers from Ghana, Colombia, Brazil and Costa Rica beat a path to Johnson's door.

He'll soon begin sharing 3 million gallons monthly of Brazilian soy oil with biodiesel competitors in Georgia and South Carolina. The shipper will shoulder the 17 percent import tariff. Johnson will pay roughly 40 cents a pound for the Brazilian oil, compared with the 56.4 cents per pound quoted Wednesday on the Chicago Board of Trade.

"Never in my wildest dreams did I think I'd be dealing with international issues like these to make my business run," said Johnson, a banking, credit card and health care entrepreneur who owns a dove-hunting lodge in Argentina.

"You have to play the international game."

'Twists and turns'

It helps to play the diversification game, too. Johnson is considering transforming his two factories into free-trade zones where he could import raw materials without paying taxes. He's upgrading the Gordon factory to be able to distill palm oil.

Johnson also is researching other feedstocks — poultry fat, in particular, the raw material used by Hopkins in Rome — to wean Alterra from high-priced soy oil. And he's developing a biodiesel fuel additive that truckers can use to lubricate engines.

"There have been a whole lot of twists and turns this past year," Johnson said. "We joke about how many businesses we have to be in to make this work."