WASHINGTON, March 13, 2017-“We see a growing demand for biodiesel and renewable diesel moving forward, regardless of what happens with domestic petroleum production.” That’s according to National Biodiesel Board CEO Donnell Rehagen. And that’s despite the Trump administration’s climate skepticism, its commitments to promote fossil fuels, and its oil-country Cabinet appointments.
In Washington for meetings to solidify congressional and administration support for biodiesel and for biofuels overall, Rehagen told Agri-Pulse he’s optimistic because “we heard from candidate Trump a very high level of support for renewable fuels and for biodiesel specifically, for delivering a lot of value not just from the environmental standpoint of cleaner air, but also from the jobs creation standpoint.”
Rehagen urges patience because he says Congress is now fixated on passing healthcare reform legislation. But he says Congress’s next priority is tax reform. He’s optimistic that tax legislation will include reauthorizing the biodiesel tax credit that expired in December, making this tax credit multiyear to provide more stability, and replacing the previous $1-per-gallon blender’s tax credit with a producer’s tax credit.
Rehagen says that unfortunately, as it has operated since its launch in 2005, the blender’s tax credit has been “incentivizing the importation of biodiesel, because of the nature of that blender’s credit.” He says switching to a producer’s credit would provide an immediate boost for U.S. biodiesel.
In his March 1 farmdoc daily article on The Profitability of Biodiesel Production in 2016, University of Illinois agricultural economist Scott Irwin presented a strong case for shifting the tax credit from blenders to biodiesel producers. Irwin highlights the persistent problems of biodiesel plants losing money and operating with capacity utilization rates that “have rarely exceeded 75 percent and have been closer to 60 percent much of the time.” He sees the tax credit for blenders as a major problem since it has led to a surge in biodiesel imports. He concludes that “the most positive scenario entails conversion of the biodiesel tax credit from a blender to a producer credit, which would effectively limit biodiesel imports to the U.S.”
Rehagen is confident that biofuels will continue to gain market share, particularly if the tax credit is reauthorized and redirected, thanks to “emerging markets and growing markets” not only along the coasts but across the country. He pointed to Minnesota, Iowa, and Illinois as examples of states pursuing policies aimed at achieving “higher volumes of renewable fuels” through new state standards, mandates and taxes.
Rehagen said the good news is that “biodiesel continues to receive bipartisan support in Congress for the value that it brings to the economy and the value it brings to the environment.” He adds that with a bipartisan bench of key supporters led by “our strongest advocate,” Sen. Chuck Grassley, R-Iowa, “We have some very strong champions in very good positions to make sure that our message is well heard.” But he says it’s up to the biofuels industry to make the biodiesel case loudly, clearly, and persistently.
To help drive the message home, Rehagen asks the public to visit NBB’s Fueling Action Center on the web for information about the importance of increasing the federal Renewable Fuel Standard (RFS) volume mandates and fixing the expired biodiesel tax credit. The NBB site includes sample letters for supporters to send to their members of Congress. One letter calls on members to support legislation as proposed by Sens. Grassley and Maria Cantwell, D-Wash., and Reps. Kristi Noem, R-S.D., and Bill Pascrell, D-N.J., “to extend the biodiesel tax credit and take this opportunity to make a simple, common-sense reform by focusing the credit on U.S. production.”
Pointing to Grassley and Cantwell as key supporters, Rehagen nonetheless warns that “it will take a very concerted and coordinated effort on behalf of our industry to reach out to all the members of Congress.” He says, “We could have 15 champions in the House and Senate and it’s not going to be enough to make anything happen. We need majority votes when our issues come up. So we’re talking about hundreds of supporters in Congress. That’s our task.”
Echoing Grassley’s long history of backing biofuels, the senator’s office tells us that as EPA heads toward its November deadline for setting new volume requirements, “Sen. Grassley would fight for strong levels” and that “he’s encouraged by (EPA Administrator Scott Pruitt’s) commitment to comply with the law, including getting things done on time, which President Obama’s EPA didn’t.”
On the biodiesel tax credit, Grassley said in January that he will “strongly support reinstating and modifying the biodiesel tax credit,” promising to “advance these provisions through the best vehicle available, either through an extenders bill or comprehensive tax reform.”
Pointing to the need to support domestic biodiesel producers, stop subsidizing already-subsidized foreign biodiesel, and save U.S. taxpayers money, Grassley says, “These goals are right in line with (Trump’s) interest in creating domestic jobs and supporting domestic products.” He concludes that he expects the Trump administration to “support these reforms.”
Confirming Cantwell’s support, her office told Agri-Pulse that the senator “is optimistic that EPA will continue to follow the legislative requirements, including the volumes, like they did last year. We hope to reintroduce our bipartisan legislation to extend and convert the biodiesel tax credit to a production tax credit in the near future.”
There’s also strong support for biofuels at state level, as shown by last week’s Governors’ Biofuels Coalition letter to President Trump, with copies to Energy Secretary Rick Perry, EPA Administrator Scott Pruitt, Agriculture Secretary-designate Sonny Perdue, and OMB Director Mick Mulvaney. The letter, signed by Nebraska Gov. Pete Ricketts, Iowa Gov. Terry Branstad, and South Dakota Gov. Dennis Daugaard, points out that the three states “are the home to over 200 biorefineries that are producing tens of thousands of jobs, sequestering tons of carbon, saving millions of barrels of foreign oil, and making enormous financial contributions to our states’ and the nation’s economies.”
The governors support a renewed “state-federal partnership” designed to “further advance the development of the nation’s renewable energy resources by removing bureaucratic administrative barriers.”
Iowa soybean grower Ron Heck, a member of the National Biodiesel Board’s governing board and a former Iowa Soybean Association Board president, tells Agri-Pulse that in his NBB congressional meetings last week he met with lots of members and staff eager to introduce biodiesel legislation “at the appropriate moment.” He noted that “some support biodiesel for agriculture, some for rural jobs, some for the environment, or to make the U.S. economy strong rather than foreign countries.”
Heck says that whatever their specific reasons, “It’s really a pleasant assignment to talk about biodiesel with senators and congressmen. They’re very supportive.” But he also pointed out that “at the moment, there’s no time on the calendar” for new biodiesel legislation because “Congress is busy with things like healthcare, confirmations, the Supreme Court nominee.” He said that along with his visits that confirmed solid support from Sen. Debbie Stabenow, D-Mich., and Pat Roberts, R-Kan., “We have the support of President Trump.”
Heck, who served on Trump’s agriculture advisory committee during the campaign, says that when biodiesel legislation finds time on the congressional calendar, “We should be fine, because President Trump has said that he will be pushing for it” and because “we have assurances from President Trump that his appointees will be supportive of biofuels.” He expects that support even from oil-country Cabinet members like Pruitt, Perry, and Secretary of State Rex Tillerson because while their past includes strong ties to fossil fuels, “Now their job is to represent the United States and biofuels makes a positive contribution to the United States through jobs, economics, cleaner air.”
As for passing biofuels legislation in a Congress still stuck dealing with healthcare and confirmations, Heck says that “both our Democrat and our Republican supporters are frustrated by not being able to move ahead with a fix for biodiesel that they know is urgently needed.” He notes that a quick tax-credit fix would catapult biodiesel jobs from the current 64,000 to over 81,000 and tap 1.5 billion gallons of unused biodiesel production capacity.