US Congress introduces 5-yr biodiesel tax credit extension

17 November 2009 22:09  [Source: ICIS news]

HOUSTON (ICIS news)--US House representatives have introduced a bill that would extend for five years a biodiesel tax incentive that the industry considers crucial, sources said on Tuesday.

Representatives Earl Pomeroy (Democrat-North Dakota) and John Shimkus (Republican-Illinois) co-sponsored the House bill, which would extend the $1/gal biodiesel blending credit through the end of 2014. The bill is a companion to an earlier one introduced in the Senate on 6 November.

The current tax credit is set to end on 31 December. Congress has traditionally extended the credit for one-year increments, a practice that the biodiesel industry says causes uncertainty for investors. The five-year extension would lend stability to the market, according to the National Biodiesel Board (NBB).

NBB vice president of federal affairs Manning Feraci called the legislation “critical” for biodiesel producers, who have had difficulty competing with traditional fuels while crude oil prices hover below $80/bbl.

"Expiration of the biodiesel tax incentive at the end of the year would cause domestic biodiesel production to cease,” Feraci said in a prepared statement.

While the tax credit helped the industry to compete with traditional fuels, it also led the industry to lose its single most important market earlier this year. The EU cited the credit as an unfair government subsidy in its July decision to place duties on imports of US biodiesel.

The US had been shipping about 75% of its biodiesel to Europe, trade that stopped after the EU levied duties.

With domestic demand in 2009 stagnant, the majority of biodiesel producers in the US have idled their plants or shut down completely.

Sales of the renewable fuel have plummeted during the year. US Energy Information Administration (EIA) statistics put production at 262m gal, down 40% from 436m gal in the same period of 2008.

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By: Ben Lefebvre
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