After record year, biodiesel industry rallying support for tax credit extension

Source: Jason Plautz • E&E  • Posted: Wednesday, December 7, 2011

With production on pace for a record year, the biodiesel industry is urging legislators to extend a tax incentive set to expire at the end of the year, saying an expiration would set the industry back significantly.

In a letter to members of Congress, a group of biodiesel and agriculture groups said the $1-per-gallon tax credit has “achieved its desired goal of increasing the domestic production of a clean-burning, renewable fuel while generating jobs, reducing America’s reliance on foreign oil and improving the environment.”The groups also credit the incentive with helping them produce a record 800 million gallons of biodiesel in 2011, up from 315 million gallons last year and the previous record of 690 million gallons in 2008. That production has generated some $628 million in revenue while supporting some 31,000 jobs, according to an economic study conducted by Cardno-Entrix, a natural resource management consulting firm.

Industry supporters say Congress needs to avoid a repeat of 2010, when the tax credit — first instituted in 2005 — was allowed to lapse and production dropped by more than half. Some 52 plants closed nationwide and many observers left the industry for dead.

“The growth is to be applauded, but it should not cloud the fact that biodiesel remains a young and vulnerable industry,” write the groups. “In fact, we know all too well what could happen if Congress allows the tax incentive to lapse.”

Among the groups signing onto the letter were the National Biodiesel Board, the American Farm Bureau Federation and the Petroleum Marketers Association of America.

A pair of bills in the House and Senate have sought to extend the tax credits for three years but have gained little traction (E&ENews PM, June 24). However, the prospects of renewing the credit are dimming because of their cost, especially after ethanol supporters have allowed their own production tax credit to lapse at the end of the year.

Click here to read the letter.