Support, Opposition Grow Over Proposed Changes to Biodiesel Tax Credit

On October 21, the Advanced Biofuels Association, along with the Petroleum Marketers Association and other retail fuel groups, expressed opposition to changing the biodiesel and renewable diesel blenders' tax credit.  In July, the Senate Finance Committee passed an amendment to the tax extenders package, to change the blenders' credit to a producers' credit, in order to transfer the benefit to fuel producers instead of blenders. The amendment, offered by Senators Grassley (R-IA) and Cantwell (D-WA), is meant to provide support to the domestic biodiesel industry, which maintains that cheaper foreign biodiesel has been allowed to flood the market.  The tax credit, as it currently stands, provides $1.00 per gallon for the blending of qualified gallons of biodiesel, no matter what its origin. Therefore, foreign imports of biodiesel are also eligible for the tax credit – a sore point for the U.S. industry.

Biodiesel is sourced from waste fats, oils, greases as well as soybean and corn oil.  Biodiesel supports 60,000 jobs and is unique in the renewable fuels industry in that it is produced in every state in the country. It is a small industry when compared to corn ethanol and even cellulosic ethanol, but has managed to exceed volumes outlined by the Renewable Fuel Standard (RFS).  To qualify as an advanced renewable fuel, biodiesel must reduce greenhouse gas emissions by 50 percent compared to diesel. It is estimated that the actual carbon reduction resulting from the use of biodiesel ranges between 57 to 86 percent.  

In January of this year, the Environmental Protection Agency approved a streamlined process for imports of Argentinian biodiesel.  The move could bring in 600 million gallons of Argentinian biodiesel, approximately 34 percent of total U.S. biodiesel production for 2014. Unlike ethanol, U.S. biodiesel is largely blocked from export markets, due to foreign laws. While the U.S. biodiesel industry has been mollified by increased biodiesel targets in the proposed renewable fuel volumes, they still maintain that allowing foreign imports to qualify for the blender’s tax credit flouts the spirit of the Renewable Fuel Standard.  

The proposal to change the blenders' tax credit to a producers' tax credit has been supported by the National Biodiesel Board (NBB), which represents U.S. biodiesel producers. According to Anne Steckel, Vice President of Federal Affairs for NBB, the change would “simplify the tax code … but also save taxpayer dollars by ensuring that the tax credit supports only domestic production.”

The Advanced Biofuels Association (ABFA), along with several associations representing fuel marketers and convenience stores, support maintaining the blenders' credit. Unlike NBB, ABFA has international biodiesel producers as members. In a letter to the House Ways and Means Chair and Ranking Member, they urge the Committee to reject the Senate provision changing the blenders' tax credit to a producers' credit. According to the groups, the change will only “benefit a small group of biodiesel producers and come at the expense of fuel retailers who have incurred significant cost to purchase and maintain the equipment to dispense blended fuels.”  They also maintain that the change would potentially be a violation of trade regulations.

For more information see:

Advanced Biofuels Producers Oppose Grassley Tax Credit Change: Amendment Could Hurt Consumers, Advanced Biofuels Association 

Advanced biofuels, petro groups oppose Grassley provision, E&E News

Letter to House E&C