03 December 2009 17:28 [Source: ICIS news]
HOUSTON (ICIS news)--US biodiesel producers might undergo another dramatic reduction in ranks if the federal government delays a vote on extending a tax credit the industry considers essential, sources said on Thursday.
The $1/gal blending credit that biodiesel producers depend on to make their renewable fuel price competitive with mineral diesel is set to expire on 31 December.
Blenders depend on receiving the $1/gal tax credit to make the renewable fuel viable in the marketplace. Without it, US biodiesel production will “cease,” according to the industry trade association National Biodiesel Board (NBB).
“We’re all in a wait-and-see mode with that tax credit,” one trader said. “It will affect everyone.”
There are bills in the House and Senate that would extend the credit until the end of 2014, and chatter that a bill that would extend the credit for one more year could be introduced and voted on at the last minute.
The problem is that other big-name legislation – health care and energy – is sucking all the air out of the room for other issues, NBB federal affairs spokesman Michael Frolich said.
“I’d like to be optimistic and say that the five-year package would get voted on between the big legislative packages, but I don’t see it happening,” Frolich said. “If cap-and-trade brings this issue up, it would be beneficial. But at that this point it’s hard to handicap whether they’ll pick it up and run with it.”
The US biodiesel industry is already experiencing hard times. After tariffs slammed the door on what it had been its main market, Europe, biodiesel production plummeted and many operators went out of business.
In what may be the biggest irony in the industry, the US Environmental Protection Agency (EPA) may be about to implement its updated renewable fuel standards, a regulation that would require 1bn gal/year of biodiesel enter the national fuel supply by 2012.
The biodiesel industry has long called for the new standards to boost demand for their product. But without the tax credit to go along with it, many may not be around to enjoy the rise in sales.
($1 = €0.66)
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