BIOMASS INTEL

Industry trade associations and NGOs renewed efforts this week to pressure Congress to extend biodiesel tax credits that expired December 31, 2009.

The tax credits, which at $1-per-gallon are the lifeblood of the burgeoning industry, are designed to encourage the domestic production and use of biodiesel by making the fuel price competitive with petroleum diesel fuel.  The subsidy is structured so that the value of the incentive is reflected in the market price of the fuel.

As a result of the tax credits’ expiration, many biodiesel plants are standing idle, and in some cases, have completely shut down.

The Tax Extenders Act of 2009 (H.R. 4213), which passed the House without amendment in December, has been delayed in the Senate in part by the health care debate and because the bill is tied to other tax incentives.  Senators Max Baucus (D-MT), chairman of the Senate Finance Committee, and Charles Grassley (R-IA), the panel’s highest ranking Republican, have indicated that they will take up legislation to extend the tax credit along with other tax breaks in the early part of 2010.

The House bill includes energy provisions which extend through 2010 “energy conservation and production provisions,” which include the tax credits for biodiesel and renewable diesel used as fuel.

In a letter to House Speaker Nancy Pelosi (D-CA), Minority Leader John Boehner (R-OH), Senate Majority Leader Harry Reid (D-NV), and Senate Minority Leader Mitch O’Connell (R-KY), 25×25′ National Steering Committee, an organization advocating for renewables to comprise 25 percent of US energy portfolio by 2025, call for the extension of the tax credits to ease the financial burden the lapse has placed on the agricultural community, state governments, and the biodiesel industry.  The organization also sites the importance of a robust U.S. biodiesel industry to cushion oil price instability and lesson dependence on foreign supplies.  In its letter, 25×25′ sites an Energy Information Agency (EIA) report projecting that the price of crude oil will hover around $80 per barrel or more over the next two years.

Many soybean and biodiesel trade groups argued in December that the lapse of the tax credits, which have been in effect since 2004, would result in the loss of hundreds of jobs in the industry.  This report by the National Biodiesel Board (NBB) estimates the figure to be around 23,000.

The US biodiesel market has lagged behind the EU where generous tax exemptions and reductions have contributed to the industry’s rapid growth.  The National Biodiesel Board estimates that only about 15 percent of the US’ 2.7 billion gallons of production capacity is currently in use.

Image: Flickr/-[j a n o s]-