U.S. biodiesel producers thanked a bipartisan group of lawmakers in the U.S. House and Senate for introducing legislation in late June to extend the federal biodiesel tax incentive for three years, a move that would support thousands of new U.S. jobs and spur economic growth across the country.
Sponsors of the Senate bill introduced June 23, 2011 are Sens. Maria Cantwell, D-Wash.; Charles Grassley, R-Iowa; Roy Blunt, R-Mo.; Al Franken, D-Minn.; Tom Harkin, D-Iowa; Amy Klobuchar, D-Minn.; and Patty Murray, D-Wash. Representatives Aaron Schock, R-Ill., and Collin Peterson, D-Minn., introduced the bill in the House.
"These lawmakers should be applauded for recognizing the value of this incentive. It is critical for the continued growth of our industry, which is producing the first and only EPA-designated advanced biofuel being used today on a commercial scale across the United States," says Gary Haer, chairman of the National Biodiesel Board, the industry's trade association.
Bill seeks to extend $1 per gallon tax credit from 2012 through 2014
"If Congress is serious about digging our way out of this recession and creating good-paying jobs, this bill is a no-brainer," Haer says. "It will help us create thousands of new jobs while improving the environment and displacing foreign oil with a renewable, low-carbon fuel that's produced in virtually every state in the country." Haer is vice president of Renewable Energy Group, a company that produces and markets biodiesel and is headquartered at Ames, Iowa.
The legislation, known as the Biodiesel Tax Incentive Reform and Extension Act, would extend the $1 per gallon tax credit from 2012 through 2014, giving producers and investors critical market certainty to move forward with expansion plans. In addition, the bill would reform the biodiesel tax incentive from a blenders excise tax credit to a production excise tax credit.
This common-sense change will focus the incentive on domestic biodiesel producers, make the tax program easier to administer, and help protect against waste, fraud and abuse.
Would also change incentive from blenders credit to production credit
A new economic study commissioned by NBB released earlier in June found that renewing the tax credit--along with the regulatory framework established last year by the EPA's Renewable Fuel Standard program--would spur the industry into supporting more than 74,000 jobs by 2015, generating some $4 billion in household income circulating throughout the economy and $7.3 billion in GDP.
Already this year, with the tax credit renewed in December after lapsing in 2010, the industry is on pace for record production, supporting more than 31,000 jobs, with income of nearly $1.7 billion and more than $3 billion in GDP, according to the study, conducted by Cardno ENTRIX, an international consulting firm that specializes in environment and natural resources economics.
That's an extraordinary turnaround from 2010, when the tax credit's expiration resulted in a steep 42% drop in production, causing nearly 8,900 job losses, a $485 million drop in household income, and an $879 million reduction in GDP.
Current biodiesel tax credit incentive is set to expire at end of 2011
"Unfortunately, we don't have to speculate about what would happen to our industry if this tax incentive goes away. We saw the fallout last year when the incentive temporarily expired. Biodiesel plants closed and thousands of people were laid off. It would be a terrible mistake if Congress allowed that to happen again," Haer says. "We are poised for a record year of biodiesel production this year, and this bill would provide the market and investor certainty that the industry needs to continue building on that progress."
Biodiesel is America's first advanced biofuel--a renewable, clean-burning diesel replacement that can be used in existing diesel engines and meets strict specifications of ASTM D6751, says Haer. Made from an increasingly diverse mix of resources such as agricultural oils, recycled cooking oil and animal fats, it is produced in nearly every state in the country and is the only commercial-scale U.S. fuel to meet the Environmental Protection Agency's definition as an advanced biofuel. The NBB is the national trade association of the biodiesel industry and is the coordinating body for biodiesel research and development in the United States.
Iowa Senator Chuck Grassley, who supports this proposed legislation, sent out the following question and answer press release in early July. He write it in response to questions he's receiving from people in Iowa as well as fellow senators in Washington, D.C.
Q & A: Looking Forward with Biodiesel
Q. Why do you support the production of biodiesel?
A. Too much of America's energy comes from fossil fuels imported from countries that don't like us. We can reduce dependence on foreign oil, and be better off economically, environmentally, and geopolitically, by encouraging domestic production of renewable, clean-burning biodiesel. In 2004, Congress passed the biodiesel tax incentive that I sponsored as Chairman of the Senate Finance Committee to encourage the production and use of biodiesel. Biodiesel production in the United States increased from 25 million gallons in 2004, to 700 million gallons in 2008. When Congress allowed the tax credit to lapse in 2009, nearly 8,900 jobs were wiped out, many in Iowa. Thankfully, in December 2010, the credit was restored retroactively through December 2011.
Q. What can be done to encourage the production of biodiesel?
A. I've introduced legislation with Senator Maria Cantwell of Washington that would extend through 2014 the $1 per gallon tax for biodiesel. And, the bill would help small producers by maintaining the additional 10 cent credit for the first 15 million gallons of biodiesel created by producers with an annual production capacity of less than 60 million gallons. Fourteen of Iowa's 15 biodiesel plants fall into that category.
Q. Can abuse of the credit be prevented?
A. The bill would eliminate potential abuses by changing the incentive from a blender credit to a production tax credit. This change would gear the credit toward producers who create clean biodiesel, rather than for the blending of biodiesel with petroleum diesel. By focusing the credit on production, we'll further reduce potential abuses of foreign fuel passing through the U.S. to claim the blender's credit.
Q. What affect will extension of the biodiesel tax credit have on jobs and the economy?
A. A study by an international consulting firm found that if Congress does not extend the tax credit, consumers would be forced to spend an additional $6.6 billion for diesel fuel between 2012 and 2015. But, with the right incentives, by 2015, biodiesel production could replace 1.9 billion gallons of imported diesel fuel, support more than 74,000 jobs, and generate $4 billion in income and approximately $7.3 billion in gross domestic product.