Industry responds to biodiesel tax reform proposition

By Nicholas Zeman | July 15, 2009
Posted August 11, 2009

The National Biodiesel Board said last week that the Biodiesel Tax Incentive Reform and Extension Act, a piece of legislation introduced to the U.S. Senate last week by Sens. Charles Grassley (R-IA) and Maria Cantwell (D-WA), is a "common sense" proposal that will bring stability and reliability to the marketplace by extending the tax incentive for five years.

As industry leaders responded to Biodiesel Magazine's questions about the proposed changes, some positively disagreed with NBB's applause of the measure in Washington to not only extend benefits but convert from the blenders excise tax credit to a producer's excise tax credit. "I don't understand their wanting to change that," said one NBB member who asked to remain anonymous. "I don't see the sense or the advantage in it."

Producers who sell B100 are able to keep their books clean because they don't file any claims with the IRS. This allows them to bill the $1 per gallon credit into their sale price and let distributors, which blend the fuel, deal with the paperwork. "It usually takes about 10 days for us to get paid by our customers," said the source. "When you're dealing with the federal government, 45 days is good."

The longer a producer has to wait to get paid, the more of its own capital it has to invest to maintain its inventory and procure feedstocks, which could be a problem imposed by a conversion of the credit.

Griffin Industries in Cold Spring, Ky., said that they receive payments from the federal government about once a month in regard to their excise tax credit benefit for selling B99. "Once you're in the system the payments come in pretty regularly," said Griffin Industries' Jim Conway. "So, I don't see that as a problem."

Aaron Parrish of OceanConnect, a trading company based in White Plains, N.Y., said converting the credit will lessen the paper work for blenders and encourage sales. "We'll still get benefits because we'll pay less for biodiesel on the front end, and producers won't be able to bill the dollar into their sale price," he said. "So if we were buying biodiesel at $3 per gallon before and having to file a claim to get reimbursed, [but if the measure passes] we'll be buying biodiesel for $2 per gallon and we're done."

On the West Coast, Joe Gershen of Tellurian Biodiesel also expressed his support for the new measure. "The way we see it, this would basically eliminate B99, and a lot of extra work that producers are currently doing," he said. "So we're all for it. Grassley and Cantwell introduced this last week…good for them."
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