Bi-Partisan Bill to Reinstate the Biodiesel Tax Credit

On February 13, Senators Maria Cantwell (D-WA) and Chuck Grassley (R-IA) introduced legislation to reinstate the biodiesel tax credit, which expired in December of 2013. The Biodiesel Tax Incentive Reform and Extension Act (S. 2021) would extend the $1 per gallon tax credit to biodiesel producers through 2017. Since its inception, the tax credit has spurred the growth of biodiesel from 25 million gallons in 2004 to 690 million gallons in 2008. The credit has expired three times since it was launched in 2005, and each time, production remained flat until it was reinstated. After the credit was re-instated in 2013, the biodiesel industry grew to 1.8 billion gallons by the end of the year, much higher than the proposed mandate of 1.28 billion gallons in the Environmental Protection Agency’s pending Renewable Fuel Standard (RFS). Biodiesel is categorized as an advanced biofuel by the EPA, and reduces greenhouse gas by as much as 86 percent compared to petroleum diesel. In a press release, Senator Cantwell remarked, “biodiesel is America’s first advanced biofuel, which can be made from a variety of feedstocks such as cooking grease and soybeans. This legislation gives businesses the certainty they need to invest in biodiesel and the development of affordable, domestic alternatives to fossil fuels.”

The Cantwell-Grassley tax credit would extend the credit for biodiesel, renewable diesel and aviation jet fuel that meets fuel standards and Clean Air Act obligations. It would also simplify the tax code and broaden the definition of biodiesel, to include more biomass-based feedstocks, recycled oils and fats. Under the proposed law, an additional credit would be extended to small producers, increasing the credit to $1.10 for the first 15 million gallons of biodiesel produced at plants with a yearly production of less than 60 million gallons. Going forward, the tax credit would not apply to blenders, only to domestic producers, in order to reduce potential abuse of the tax credit, often referred to as “splash and dash.” Several industry groups have lauded the bill, including the National Biodiesel Board, which affirmed that a three-year extension would provide the regulatory certainty needed in a still young industry. Senator Grassley commented that the bill is a win-win-win, stating, “Continuing incentives for biodiesel and other green energy sources supports jobs, helps the environment and increases energy independence. There’s every reason to support biodiesel production.”

The legislation is currently before the Senate Committee on Finance, chaired by Senator Ron Wyden (D-Ore).