US biodiesel tax credit fails to clear major Senate hurdle

24 June 2010 23:05  [Source: ICIS news]

Biodiesel credit stallsHOUSTON (ICIS news)--A bill containing the US biodiesel blending tax credit failed to clear a key procedural vote in the Senate on Thursday, leaving the industry as unclear as ever on price ideas.

The Senate voted 57-41 against ending debate on the bill, which included changes to unemployment benefits and contained the reinstatement of the $1/gal biodiesel blending tax credit that expired at the end of 2009.

The vote sends the bill back for reworking despite weeks of lawmakers debating the overall cost of the package.

Biodiesel brokers said the move would result in more gridlock in a biodiesel market already frozen by confusion over price ideas. The industry is currently running at 10% or less of capacity.

“It never seems quite dead,” one biofuels broker said. “Everyone still assumes there is life to this bill, and we'll be frozen until the next time around.”

The bill’s cost was estimated at $33bn (€26.7bn), sources said, down from $190bn when first introduced. That still was not low enough for conservative lawmakers trying to avoid adding to the US budget deficit, sources said.

With the fate of the credit still in play, biodiesel price ideas were still separated by a wide gulf. Offers for pure soy methyl ester (SME) were assessed at up to $2.96/gal on 24 June, but potential buyers were still hoping the passage of the tax credit would bring the price down by another $1/gal.

Although the market for physical biodiesel would remained stalled, prices were expected to skyrocket for renewable fuel credits (RINs), which blenders could use to satisfy biofuels requirements, brokers said.

“Biodiesel RINs will move up,” a second broker said. “Not sure how many buyers are out there; now it’s the same guys buying and selling and not many obligated parties in the market.”

Biodiesel RINs for 2010 were traded at 35.00-35.50 cents/RIN during the past week, brokers said, up from 28-32 cents/RIN at the beginning of June.  

The US House passed a version of the bill in May after cutting its price tag to $112bn from $174bn.

($1 = €0.81)

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