Alternative Fuel and Transportation

Published on November 25th, 2009 | by Jennifer Lance


US Biodiesel Production Reaches Commercial Scale Thanks to Tax Incentives

Enacted in 2004, the current biodiesel tax incentive program helps make the fuel competitive with petroleum based diesel. Unfortunately, the current incentive program will expire on December 31, 2009 at a time when “U.S. biodiesel production has reached commercial scale, and the nation has realized the job creation, environmental and energy security benefits that come with the expanded production and use of biodiesel,” according to the National Biodiesel Board (NBB) Vice President of Federal Affairs Manning Feraci.  Without such a stimulus, biodiesel advocates fear “these benefits will simply be lost.”

Photo by clearly ambiguousBiodiesel tax incentive to expire December 31, 2009

Biodiesel tax incentive to expire December 31, 2009

Recently published research conducted by the University of Idaho and the US. Department of Agriculture shows that fuel made from soybean oil is “returning more than four times the energy that it takes to make biodiesel”.  Given this new information, which contradicts earlier research that showed soybeans require “27% more fossil energy than the fuel produced”, renewing and revising the biodiesel incentive program is a top priority for some lawmakers.  Introduced by Senators Cantwell (D-WA) and Grassley (R-IA), the bipartisan Biodiesel Tax Incentive Reform and Extension of Act (S 1589) and its House of Representatives companion legislation HR 4070, would extend the credit five more years.  HR 4070/S 1589 would also “reform the biodiesel tax incentive by changing the current blenders excise tax credit to a production excise tax credit”.

The summary of S 1589, which was introduced on August 6, 2009 and has been referred to Senate Finance Committee, is as follows:

Biodiesel Tax Incentive Reform and Extension Act of 2009 – Amends the Internal Revenue Code to revise the income and excise tax credits for biodiesel used as fuel to: (1) allow a $1.00 tax credit for each gallon of biodiesel produced; (2) provide for an increased income tax credit for small biodiesel producers; (3) revise the definitions of “biodiesel” and “small biodiesel producer”; (4) treat renewable diesel in the same manner as biodiesel for income tax purposes; and (5) treat biodiesel as a taxable fuel for excise tax purposes. Extends the biodiesel income and excise tax credits through December 31, 2014.

Biodiesel advocates and farmers applaud the introduction of both bills as providing the necessary stability the industry needs “to make long-term planning decisions about biodiesel production“.  Not only are biodiesel trade organizations, such as NBB, supporting this legislation, but the American Soybean Association (ASA) is urging members to write their representatives in support of HR 4070.  Tax incentives aside, critics still fear biodiesel cannot meet US energy demands.

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