Will D.C. renew biofuel incentive?
By PAUL COMSTOCK
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.