Northwest producers unite, tell Congress to reinstate tax credit

By Ron Kotrba | February 15, 2012

Last week as the National Biodiesel Conference took place in Orlando, a group of biodiesel producers and stakeholders in the Northwest U.S. came together in a joint statement to support the reinstatement of the $1 per gallon federal biodiesel blenders credit, which expired again on Dec. 31. The credit was absent for most of 2010 until Congress passed a retroactive extension later in the year. Starting in 2005, domestically produced biodiesel has benefited from a biodiesel tax credit that has reduced the cost of biodiesel and encouraged the development of the clean energy industry. 

On the expiration, the group—comprised of SeQuential Pacific Biodiesel, General Biodiesel, Inland Empire Oilseeds and Central Washington Biodiesel—stated, “This expiration effectively puts the brakes on growth of one of the most effective, efficient and successful fuel alternatives to petroleum diesel. Biodiesel producers and consumers are bracing for price increases.”

At the national show in Orlando, however, several sources told Biodiesel Magazine that they believed the industry would move along successfully without the credit, and stressed that imbuing newfound confidence in the recently tarnished renewable identification number (RIN) credit market—the mechanism the U.S. EPA created to help enforce the renewable fuel standard (RFS2)—and defending RFS2, are paramount. Small- and medium-sized plants are having difficulty monetizing their RINs in a timely fashion, constraining their productivity. Also, the industry is desperately working to convince EPA to expand the biomass-based diesel standard beyond a billion gallons in 2013. Ann Steckel, vice president of federal affairs for the National Biodiesel Board, said the organization has “mobilized all its resources and tapped into its reserves” in its effort to increase next year’s biodiesel mandate from 1 billion gallons to 1.28 billion gallons, as it had originally proposed last year. Steckel said the tax credit comes into play at this particular juncture because EPA looks at the tax credit status when looking at yearly volumes.

The group of Northwest biodiesel producers noted in their statement that the biodiesel tax credit, though only a fraction of what the petroleum industry receives in incentives and tax breaks, has been critical for the biodiesel industry and has helped to achieve massive gains in environmental improvement and displacement of imported foreign oils.

Tyson Keever of SeQuential Pacific Biodiesel said, “The biodiesel tax credit is needed to help build demand and eventually replace a globally finite and polluting supply of crude oil.”

The biodiesel tax credit first expired on Jan. 1, 2010, and was not renewed until December 2010. The group of Northwest producers notes that there were price increases resulting in less demand for biodiesel, which caused a 42 percent reduction in biodiesel production. In 2010, many biodiesel producers were forced to shut down their plants, causing nearly 9,000 workers to lose their jobs, according to a study by the National Biodiesel Board.

“The lack of certainty around when the government might renew the blenders credit was very damaging in 2010, and we are concerned about potential price increases for our customers,” said Joel Edmonds, Inland Empire Oilseed.

Other factors, such as the delayed implementation of RFS2 and vastly narrowed export markets after Europe placed tariffs on subsidized U.S. biodiesel, also shaped 2010 as the worst year in the U.S. industry’s history. 

The credit was renewed in 2011, which was an exceptional year for the U.S. biodiesel industry, supporting nearly 40,000 jobs and production of more 1 billion gallons of biodiesel.

Zach Shelton, vice president of General Biodiesel, said, “The tax credit helps promote research and development and build a market for a clean, renewable energy source.”

The group stated that, to date, Congress has failed to take the actions necessary to extend this important legislation in the U.S. Senate (Senate Bill s.1277) and the U.S. House of representatives (HR 2238). On Jan. 1 the domestic biodiesel industry entered a more challenging market competing against heavily subsidized, nonrenewable and greenhouse gas emitting petroleum products.   

U.S. Sen. Maria Cantwell sponsored the biodiesel tax credit extension in the Senate, and Sen. Patty Murray was one of eight cosponsors. However, the Northwest producer group noted that the bill has not moved beyond committee.  Rep. Aaron Schock of Illinois introduced the House version, which is also stuck in committee. “Biodiesel prices are expected to rise as result of this inaction from Congress,” the group stated. “Your leading Pacific Northwest biodiesel producers urge you to support your local fuels and contact your congressperson asking for the passage of Senate Bill S.1277 and House bill HR 2238.”

Steven Verheys, Central Washington Biodiesel, said, “To see the growth our industry has experienced in the last year—from production gains to creating local jobs—to see that growth potential slow is very frustrating.” 


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