Congress fails to extend US biodiesel tax credit

17 December 2009 22:25  [Source: ICIS news]

Congress fails to act on tax extensionHOUSTON (ICIS news)--The US Senate has declined to vote on a bill that would extend a blending tax credit the biodiesel industry considers crucial for its survival, the National Biodiesel Board (NBB) said on Thursday.

The Senate would not be able take up the tax-extenders bill before the end of the year, sources said. The one dollar per gallon tax credit expires on 31 December.

NBB spokesman Michael Frohlich said the Senate is occupied by health care reform legislation, which precludes it from acting on tax credit legislation before year’s end.

Also, the House and Senate would need time to work out the differences between different versions of the tax credit bill, he said.

The NBB was working to make the issue a top legislative item when Congress meets again in January, Frohlich said. The tax credit extension would be made retroactive to 1 January to ensure continuity of the credit, he said.

“If they act swiftly they can minimise the damage to the industry,” Frohlich said.

However, even making the credit retroactive may fail to save some smaller biodiesel producers who have thin cash cushions, Frohlich said. Even if the Senate passes the bill in the first few months of 2010, many producers will go out of business as they will be unable to produce the renewable fuel at a cost competitive with petroleum diesel, according to the NBB.

“The smaller biodiesel plants don’t really have the operating capital to continue to produce fuel that no one will buy,” he said. “There is no doubt this is going to sting - there are going to be layoffs.”

The US biodiesel industry, racked by poor sales, is currently running at 15% of its 2.9bn gal/year capacity.

The House of Representatives passed a version of the bill on 9 December and referred it to the Senate on the following day, said Steve Tomaszewski, press secretary for the measure’s co-sponsor, author, Rep. John Shimkus (Republican-Illinois).

The bill would modify the biodiesel tax credit, making it a production tax credit instead of a blender tax credit, and biodiesel tax credit, which will end on 31, and extend the credit five years.

The House of Representatives plans to start up again on 11 January. The Senate would come back to work in Washington on 19 January, Frohlich said.

Additional reporting by Brian Ford

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