Will D.C. renew biofuel incentive?

By PAUL COMSTOCK

pcomstock@delgazette.com

Ele­ments of the agri­cul­ture and energy indus­tries are watch­ing the U.S. Con­gress to see if and when the biodiesel tax incen­tive is renewed.

The incen­tive was in effect from 2005 to 2009, and again in 2011.

Dur­ing that time, reports the National Biodiesel Board, the incen­tive spurred biodiesel pro­duc­tion to a level exceed­ing one bil­lion gal­lons a year and helped increase to 39,000 the num­ber of jobs in affil­i­ated industries.

That pro­duc­tion con­sumed large amounts of soy­bean oil and ani­mal fat. Even french fry grease could be used.

The incen­tive was a $1 a gal­lon credit tax exemp­tion, said Ben Evans of the NBB. It was such a boon to the biodiesel indus­try, he said, that the pro­duc­tion and rev­enue it gen­er­ated came close to pay­ing for the incen­tive in terms of increased taxes to the fed­eral government.

The incen­tive “clearly works,” he said, and “we want to try to con­tinue that momentum.”

One prob­lem, Evans said, is such tax incen­tives usu­ally are tem­po­rary, par­tic­u­larly in the begin­ning. Now, he said, the incen­tive has been caught up in “a broader polit­i­cal dis­pute” over fed­eral spend­ing, includ­ing the antic­i­pated fis­cal cliff crisis.

This has occurred despite con­sid­er­able bipar­ti­san sup­port for the incen­tive in the House and Sen­ate, he said.

The incen­tive cre­ated “a lot of plants in rural areas with spin­off jobs. Now we are hear­ing reports many of the plants are lay­ing peo­ple off,” Evan said.

Forbes Mag­a­zine has pre­dicted as many as 75 per­cent of those pro­duc­ers might have to shut down.

The loss of the incen­tive “is really catch­ing up to the indus­try and really hurt­ing,” Evans said.

The NBB sup­ports efforts to deal with the fed­eral bud­get, he said, but “it will take a long time to deal with those issues.” The NBB would like to see Con­gress take imme­di­ate steps to renew the incentive.

“We think if it came up for a stand­alone vote, it would pass with fly­ing col­ors,” he said.

Andrew Con­ley, pro­gram direc­tor for Clean­Fu­el­sO­hio, agreed, “There is strong bipar­ti­san sup­port for this (but) Con­gress gets dis­tracted. … Tax incen­tives are some­thing that are on the chop­ping block. … My per­sonal sense is nobody’s going to move on this until they set­tle the whole fis­cal cliff discussion.”

The soy­bean mar­ket faces uncer­tainty but is unlikely to be affected in the short term, said Adam Ward of the Ohio Soy­bean Coun­cil and Association.

One rea­son, he said, is an increased demand for U.S. soy­beans in China.

Another, he said, is the fed­eral gov­ern­ment is requir­ing large oil com­pa­nies to con­tinue biodiesel use at a rate that will match the record 1 bil­lion gal­lons pro­duced in 2011.

That’s not the same, the BDD web­site says, as let­ting the biodiesel indus­try “con­tinue to com­pet­i­tively pro­duce” its prod­ucts, which the incen­tive would allow.

Evans said the oil com­pa­nies are not happy, but they are able to pur­chase “Renew­able Iden­ti­fi­ca­tion Num­bers,” which reduces the amount of biodiesel they must pro­duce. Those num­bers, or RINs, rep­re­sent biodiesel pro­duced else­where. Buy­ing the RINs lets the oil com­pa­nies pro­duce less biodiesel them­selves and the RIN sell­ers make money.

The Envi­ron­men­tal Pro­tec­tion Agency has accused some com­pa­nies of sell­ing fraud­u­lent RINs that don’t rep­re­sent actual biodiesel production.

Evans said those “iso­lated cases where a cou­ple of bad actors came in and took advan­tage of the sys­tem … don’t impli­cate the entire pro­gram. … We are work­ing very closely with the EPA to make sure those cases of fraud don’t hap­pen again.”

Ward said extend­ing the incen­tive would be a “win-win for the agri­cul­ture indus­try … cre­at­ing invest­ment in new tech­nol­ogy and growth in cur­rent businesses.”

Because biodiesel is not carbon-based, Con­ley said, it is a renew­able resource that pro­duces cleaner emis­sions than 100-percent petro­leum diesel.

For more on NBB’s efforts to extend the incen­tive, visit biodiesel.org/policy/fueling-action-center.

Posted by Tina Murdock on Dec 30 2012. You can follow any responses to this entry through the RSS Feed. Both comments and pings are currently closed.