Biodiesel Tax Credit Fate Uncertain

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By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- Proposed legislation introduced in the U.S. Senate on Wednesday to convert the $1 blenders biodiesel tax credit to a producers tax credit may not see the light of day this year.

Ahead of the presidential election, the chances of Congress taking up tax extenders measures is slim.

Ben Evans, director of public affairs for the National Biodiesel Board, told DTN Thursday there are a lot of unanswered questions.

"It's unclear right now how Congress will handle extenders, particularly with elections looming and a short legislative calendar," he said.

"But we believe the economic implications of not doing an extenders package will create strong motivation for Congress to act either in the fall or in the lame duck. And this particular incentive has broad, bipartisan support."

Sen. Charles Grassley, R-Iowa, along with 13 other co-sponsors introduced a bill to not only change the tax credit to directly benefit biodiesel producers, but to pass a three-year extension to provide certainty for an industry that has faced uncertainty for the better part of a decade.

The bill follows similar legislation Grassley and Maria Cantwell, D-Wash., introduced last year after it cleared the Senate Finance Committee without objection. It also mirrors House legislation introduced by Reps. Kristi Noem, R-S.D., and Bill Pascrell, D-N.J.

The biodiesel tax credit expired on Dec. 31, 2014, and was reinstated in late 2015. It is set to expire again on Dec. 31, 2016. With the current tax credit structure, foreign biodiesel imported to the U.S. and blended with petroleum diesel in the U.S. is eligible for the credit. In 2015 some 670 million gallons of biodiesel and renewable diesel was imported to the U.S., according to the NBB, accounting for about one-third of the U.S. market.

The National Biodiesel Board was among a number of biofuels groups submitting comments to the U.S. Environmental Protection Agency on the proposed 2017 renewable volume obligations in the Renewable Fuel Standard. The NBB made a case for expanding the RVO for biodiesel to 2.5 billion gallons, instead of 2.1 billion in the proposal.

In a floor statement on Wednesday, Grassley said changing the tax credit would support domestic biodiesel producers and stop subsidizing foreign biodiesel producers.

"There's no reason for foreign producers to reap the benefit of a U.S. tax incentive when so many foreign governments heavily subsidize their own biodiesel industries. The reforms emphasizing support for domestic producers would have the added benefit of saving U.S. taxpayers money over the current tax credit. Policies ought to continue encouraging the production of domestic biodiesel to meet consumer demand and support jobs nationwide."

The co-sponsors include Joni Ernst, R-Iowa; Cantwell, D-Wash.; Roy Blunt, R-Mo.; Joe Donnelly, D-Ind.; Al Franken, D-Minn.; Martin Heinrich, D-N.M.; Heidi Heitkamp, D-N.D.; Mazie Hirono, D-Hawaii; Mark Kirk, R-Ill.; Patty Murray, D-Wash.; Pat Roberts, R-Kan.; John Thune, R-S.D.; and Sheldon Whitehouse, D-R.I.

NBB's Anne Steckel, vice president of federal affairs, said in a news release that the industry is in need of an extension of some kind.

"Biodiesel and renewable diesel producers around the country are yet again facing what effectively amounts to a tax increase in less than six months," she said.

"Congress can keep that from happening by passing this bill. It will give producers the certainty they need to hire and grow in the coming years... It also will appropriately reform this incentive by applying it only to domestic biodiesel production, ending a growing practice where foreign producers are taking advantage of our tax system."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(CC/AG)