December 18, 2009

Will the nation’s fledgling biodiesel industry be forced to shut down when most of the country is returning to work from the holidays on Jan. 4?

That’s a real possibility if Congress doesn’t act to extend the biodiesel tax incentive before its scheduled expiration date of Dec. 31, according to biodiesel industry supporters such as the National Biodiesel Board and the American Soybean Association.

The NBB and ASA have been urging their members and supporters of biofuels to contact their senators and representatives to ask them to extend the biodiesel tax credit beyond the current expiration date.

“It is imperative that Congress extend the incentive before adjourning for the year,” the American Soybean Association said in an Action Alert distributed to members Dec. 16. ASA asked members to support legislation introduced by Sens. Charles Grassley, R-Iowa, and Marian Cantwell, D-Wash., to renew the $1 per gallon credit.

ASA and National Biodiesel Board leaders had asked congressional supporters to include the legislation in the Department of Defense Appropriations bill. But the latter was passed by Congress without such an amendment.

Grassley accused the Obama administration and Democratic congressional leaders of failing to back up their rhetoric in support of “green” jobs.

“It seems like nearly everyone in the administration is touting the benefits of green jobs and a clean energy economy,” he said. “It’s astonishing, then, that this Congress will head home for the holidays while thousands of green energy workers receive pink slips and furloughs.”

The biodiesel tax credit is essential in maintaining the competitiveness of this clean-burning, domestically produced green fuel, supporters say. The tax credit exists to offset the higher cost of producing biodiesel compared to petroleum diesel. Without the tax credit, petroleum marketers will be unwilling to purchase the more expensive biodiesel, and demand will vanish.

“In 2008, the biodiesel industry supported more than 51,000 green jobs,” Grassley said in a speech on the Senate floor. “Because of the downturn in the economy and the credit crisis, the biodiesel industry has already shed 29,000 green jobs.”

ASA and NBB officials said the loss in revenue from extending the tax incentive will have little impact on the federal budget deficit or tax revenues since many biodiesel facilities will be shuttered if the credit expires.

“Since it was enacted in 2004, the biodiesel tax incentive has allowed the nation to reap the economic, energy security and environmental benefits associated with commercial scale production and use of biodiesel,” said Manning Feraci, an NBB vice president. “Allowing the credit to lapse will compound the already daunting challenges facing the industry.”

On the farmer side, failure to renew the biodiesel tax incentive could reduce prices paid for soybeans by 25 cents or more per bushel.

Cantwell and Grassley’s bill is S. 1589, the Biodiesel Tax Incentive Reform and Extension Act of 2009. The bill would extend the credit for five years and restructure it as a production excise tax credit. Congressmen Earl Pomeroy, D-N.D., and John Shimkus, R-Ill., have also introduced H.R. 4070 in the House.

“As time is running out on the Congressional calendar, Congress is also considering legislation that would provide a one-year extension of the existing biodiesel tax incentive,” the ASA said. “Either way, a strong show of support is necessary if we are going to successfully extend the biodiesel tax incentive beyond the end of this year.”

Proponents say there’s little doubt about what will happen in the industry if the credit goes away.

“Without an extension of the tax credit, all U.S. biodiesel production will grind to a halt,” said Grassley. “No one should be surprised by the upcoming expiration of this tax credit. It was extended most recently in October of 2008. So, we’ve known for 14 months that it would need to be extended by the end of 2009.”

Democratic leaders of Congress apparently believe they can extend the tax provisions retroactively sometime early next year. “But retroactivity doesn’t help the U.S. biodiesel market from grinding to a halt on Jan. 1, because without the incentive, biodiesel will cost much more than petroleum diesel.”