31 July 2008 23:00 [Source: ICIS news]
By Ben Lefebvre
HOUSTON (ICIS news)--US biodiesel producers are anxiously watching a stalled Congressional bill that could decide the fate of $18bn (€11.5bn) in tax credits that the industry needs to survive, sources said on Thursday.
The tax credits would go to biodiesel producers as well as wind-energy companies and others that produce renewable energy.
The tax credits were initially included in House Bill 6049, known as the Renewable Energy and Job Creation Act. Democrats have since spun off the tax credits into a separate proposal in an attempt to make passage easier.
However, the tax-credit bill has stalled in the Senate. Republicans led by Senate Minority Leader Mitch McConnell (Republican-Kentucky) said paying for the credits would entail raising taxes on other entities.
The issue could remain unresolved when Congress takes its August recess. If that happens, the current credits could expire at the end of 2008 without being replaced.
Biodiesel sources could not estimate how much the credits were worth to their specific market. However, Gregory Wetstone, director of governmental and public affairs at the American Wind Energy Association, said 116,000 jobs and nearly $19bn in investment are at risk in the general renewable-energy industry if the bill did not pass.
Renewable energy and fuel suppliers in general, and biodiesel producers in particular, depend on the subsidies to keep their businesses afloat until the industry matures. US biodiesel producers need the $1/gal blending credit to stay competitive in European markets, where up to 70% of their material is sold.
“It’s crucial to the industry, to say the least. We’re hopeful that it could get passed by the end of the year,” one buyer said.
On Tuesday, a group of 43 investors representing $1.5 trillion in assets sent a letter to McConnell and Senate Majority Leader Harry Reid (Democratic-Nevada),urging them to extend the credits for at least five years.
“Anything short of this time frame continues to contribute to the ‘boom and bust’ cycles these industries have been facing over the past several years," the letter said. "In fact, the lack of certainty surrounding the [credits] is consistently pointed to as the most significant barrier to entry and as negatively affecting industry growth.”
Senate sources said they were confident lawmakers would reach a compromise sometime this fall, as logistical problems ensued when they did not pass the 2007 energy bill until 13 December.
At least one biodiesel market analyst was pessimistic, however, saying the best hope for the credits to reach legislative life would be if they were incorporated as amendments to other bills.
“It’s gone three times around already, and there’s a lot more pressing issue in Congress. If it happens, it will be because it sneaks into other bills,” the analyst said.
($1 = €0.64)
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