Governors' Biofuels Coalition

A push to keep biodiesel importers from receiving a federal tax credit may be losing momentum, thanks to the U.S. biodiesel industry’s recent wins on trade policy.

Biodiesel advocates didn’t push congressional tax writers very hard to tweak the biodiesel tax credit as last year drew to a close, meaning the most biodiesel producers may be able to hope for is to keep sharing the tax benefit with competitors that import foreign fuel, industry analysts said.

“A credit is better than no credit,” said Rosemarie Calabro Tully, a spokeswoman for the National Biodiesel Board.

Legislation introduced by Senate Finance Chairman Orrin Hatch (R-Utah) would reinstate the tax credit — which expired in 2016 — for 2017 and extend it for 2018. The $1-per-gallon benefit would continue to apply to fuel blenders, meaning biodiesel that’s imported and put into fuel in the United States would qualify.

Surging imports from Argentina and Indonesia helped spur biodiesel advocates to fight for a redesigned credit aimed only at domestic producers.

However, victories in trade cases aimed at those countries are taking some of the fight out of the issue, said Calabro Tully, whose association brought the cases and has called for a revamped tax credit.

The campaign for a producer credit isn’t over, Calabro Tully added, and its champion in the Senate, Republican Chuck Grassley of Iowa, continues to support it, according to a spokesman.

But the latest tax extender measure, which could end up in a bill to keep the government running past Jan. 19, isn’t the likely battlefield.

“The goal was never to stop imports from coming in,” Calabro Tully said. “We want a fair chance to compete.”

The Biodiesel Board has had more success fighting foreign trade practices, recently winning cases at the International Trade Commission and Department of Commerce.

The NBB complained last March that Argentina, for instance, allows its biodiesel producers to buy soybeans as a feedstock at depressed prices. That makes exports cheap and helps boost business in the United States, where fuel blenders have to mix biofuels into gasoline to meet the renewable fuel standard.

Essentially, Calabro Tully said, subsidies have allowed Argentina to sell biodiesel to the United States for less than the cost of the material to make it — and the imports then qualify for the tax credit.

The group late last year won its case against the subsidies, which will allow the United States to impose duties on those countries’ imports. It’s awaiting word on a separate complaint that Argentina and Indonesia dump biodiesel on the U.S. market.

Groups opposed to a producers tax credit aren’t convinced the issue will go away.

“As a general matter, it’ll come back every year,” said David Fialkov, vice president of government affairs for NATSO, an industry group representing truck stop operators.

Fialkov’s organization supports continuing the credit as is and believes a producers-only credit would lead to higher biodiesel costs.

A producer credit doesn’t have political support outside of states where it’s produced, Fialkov said, which explains why Finance Committee leaders have spurned Grassley — a senior member and former chairman of the committee — on the issue.

Lawmakers do so despite indications that a producers credit could save the government money. The Joint Committee on Taxation hasn’t issued a revenue estimate for Hatch’s latest bill but in the past has said a producers credit could save taxpayers about $90 million.

The government spent more than $600 million on tax credits for imported biodiesel in 2015, according to the JCT.

Among other objections, Fialkov said, domestically produced biodiesel cannot be economically sent by rail or truck to states such as Texas and California. Those places rely on the ability of the U.S. to import biodiesel inexpensively, he said.

Grassley continues to push his legislation for a producers credit, called the “American Renewable Fuel and Job Creation Act,” S. 944, saying in a news release last year, “Policies ought to encourage the production of domestic renewable fuels to meet consumer demand and support the creation of American jobs.” He has 16 co-sponsors.

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