Posted: Thursday, June 10, 2010 10:00 AM
Lapse of $1 per gallon credit stirs uncertainty, proponent says
With the U.S. Senate back in session this week, biodiesel producers are hoping for the quick approval of a tax credit to get their industry running again.
The legislation includes a $1 per gallon tax credit that lapsed in January. The credit would be retroactive to Jan. 1.
The U.S. House of Representatives approved the tax credit in House Bill 4213 before adjourning May 28, said Michael Frohlich, director of federal communications for the National Biodiesel Board.
Alicia Clancy, manager of corporate affairs for Renewable Energy Group in Ames, Iowa, said uncertainty over the tax credit causes significant disruption in the marketplace and supply chain.
The tax credit goes to the company that blends biodiesel with petroleum diesel, Clancy said.
Without the credit, many petroleum distributors will not take on the financial risk of blending the biodiesel and petroleum diesel, Clancy said.
As a result, the industry has seen a reduction in demand, leading to the shutdown of many biodiesel plants.
The board estimates that of 173 biodiesel plants, 40 to 50 have either closed their doors permanently or gone idle. Frohlich said roughly 11,000 jobs have been lost, but as many as 12,000 new jobs could be created through the credit.
The standstill has negatively affected all aspects of the industry, including growers of oilseeds like soybeans and canola or camelina, Frohlich said.
"Soybeans aren't grown for biodiesel; (it's) a by-product," he said. "But (it's) a by-product that farmers make a substantial living off of."
The biodiesel industry has been assured by congressional leaders that there is bipartisan support, Clancy said.
However, the biodiesel tax credit is included in a Senate bill with several other tax credits, casting doubt over whether it will pass.
If the tax credit fails to go through, the uncertainty continues for the industry, Clancy said.
"The longer it goes, the harder it is for those facilities that are shut down to get back up and going," she said. "Which is basically counterintuitive to the work our nation has done over the last 10 years to progress us toward energy independence and renewable fuels."
The biodiesel industry is already looking at what happens after the one-year credit is back in place, working toward creating a long-term program.
The board has also been pursuing a five-year credit for production instead of a one-year credit for blenders.
Clancy said livestock and oilseed producers are urged to contact their senators to ask them to vote "yes" on House Resolution 4213 or access Renewable Energy Group's Facebook page by searching "Reinstate the Biodiesel Blenders tax credit."
National Biodiesel Board on the tax credit: www.biodiesel.org/news/taxcredit