WASHINGTON, Feb. 19 - Sens. Maria Cantwell, D-Wash., and Charles Grassley, R-Iowa, late last week introduced legislation that would extend the expired biodiesel tax incentive for three years – a move that likely marks the beginnings of a resurgence in calls for extending a wide array of renewable energy tax credits, congressional observers say.

The $1-per-gallon incentive sought by Cantwell and Grassley covers biodiesel, renewable diesel (a diesel alternative similar to biodiesel but made with a different technology) and renewable aviation fuel. First implemented in 2005, the biodiesel tax credit expired at the end of 2013. It also was allowed to lapse in 2012 and 2010.

“The biodiesel tax incentive has expired three times over the past five years, and each time it has severely disrupted production,” said National Biodiesel Board (NBB) Vice President of Federal Affairs Anne Steckel. “This incentive clearly stimulates production and creates jobs at biodiesel plants across the country,” where, the NBB says, 62,000 were employed last year.

“We urge the leadership of both parties to quickly take up this bill to ensure that we can continue the momentum that the biodiesel industry built last year with record production of almost 1.8 billion gallons,” Steckel said.

The bill (S. 2021) was referred to the Senate Finance Committee, where new Chairman Ron Wyden, D-Ore., has yet to indicate what action his panel may take on several tax incentives that expired Dec. 31. Those measures include Production Tax Credits for wind energy (2.3 cents per kilowatt hour) and cellulosic ethanol ($1.01 per gallon). Wyden took over the committee’s chairmanship when Max Baucus, D-Mont., left to become U.S. ambassador to China.

Wind energy and cellulosic biofuel projects that began construction before the credits expired are eligible for many of the credits through the end of 2015. However, any new projects would not be eligible without extender legislation.

The Advanced Ethanol Council, Advanced Biofuel Association, Algae Biomass Organization and Biotechnology Industry Organization sent a letter in mid-December to House Ways and Means Committee Chairman Dave Camp, R-Mich., ranking minority member Sander Levin, D-Mich., Baucus and the ranking member on the Senate Finance Committee, Sen. Orrin Hatch, R-Utah, in an unsuccessful request that Congress renew the PTC before it expired Dec. 31.

The letter came after renewable energy industry groups had been warned not to pursue the tax credit extensions too vigorously so as not to hinder the path to a bigger tax reform effort. In December, Baucus released discussion drafts of legislation that would establish new, broader, technology-neutral tax credits for production of clean electricity and transportation fuels.

However, despite a push from Baucus when he told colleagues before leaving for his new post that “ultimately, we can’t let politics get in the way of much needed” tax reform, little movement is expected soon (the House Ways and Means Committee has scheduled no action on the issue). That has prompted trade groups to ratchet up their appeals for tax credit extensions.

Hatch has said he is putting together a tax credits extension bill. And while Wyden has offered no hint of his position on the credits since taking the committee’s chairmanship, in 2012, he penned an op-ed in Politico, a Capitol Hill newspaper, in which he supported extending tax credits for wind, biomass and waste-to-energy, among other renewable energy sectors.

“We’ve gotten to the point where we can’t expect tax reform to carry our water,” said one renewable energy trade group lobbyist. “There are a lot of jobs at stake and we need the policy certainty to insure continued investment in what are still relatively new industries.”

In reinforcing the biodiesel industry’s support for the Cantrell-Grassley bill, NBB’s Steckel said that, by comparison, “We know that at least $4 billion in incentives encouraging domestic petroleum production are built into the tax code. We need that same kind of stability for younger, cleaner industries like biodiesel and renewable diesel to compete.”

For the biodiesel industry, circumstances are more dire. Research analyst Robert Wagner said that with the expiration of the tax credit at the end of 2013, “margins in the biodiesel and renewable diesel industry collapsed. To this day, biodiesel made with soybean oil is still showing a negative margin.”

If passed, the biodiesel legislation would change the tax credit’s structure, directing the $1-per-gallon credit go the producer, not the blender as in previous versions.

“By focusing on production, the bill would eliminate any remaining opportunity for abuse known as ‘splash and dash,’ in which oil companies add a few drops of biodiesel to petroleum diesel to qualify for the tax credit,” says a statement from Grassley’s office. The change also ensures the credit benefits domestic producers – the old law allowed blenders to receive the credit for blends that included foreign-imported biodiesel. The bill would also increase the tax credit from $1 to $1.10 for the first 15 million gallons of biodiesel produced by small producers with an annual production capacity of less than 60 million gallons.


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