US biodiesel federal tax credit reinstated after lapse

02 January 2013 19:53  [Source: ICIS news]

MEDELLIN, Colombia (ICIS)--The US biodiesel industry lauded on Wednesday a year-end fiscal package that reinstated the biofuel's tax incentive for 2012 and 2013.

"We're pleased that Congress has finally approved an extension so that we can get production back on track," said Anne Steckel, vice president of federal affairs at the National Biodiesel Board (NBB), an industry trade group. "In the coming months, because of this decision, we'll begin to see real economic impacts with companies expanding production and hiring new employees."

Under the legislation approved by the House on 1 January and first passed by the US Senate on 31 December, the incentive will be reinstated retroactively to 1 January 2012 and through the end of 2013.

President Barack Obama is expected to quickly sign the bill into law.  

The $1/gal (€0.20/litre) biodiesel tax incentive was first implemented in 2005. Congress has allowed it to lapse twice, in 2010 and again in 2012. The biodiesel tax incentive expired on 31 December 2011.

When the credit lapsed in 2010, dozens of plants shut down and thousands of jobs were lost as production plummeted to the lowest level since 2006.

"We are thankful that congress and the president support the growth of the biodiesel industry through the reinstatement of the credit and for recognising biodiesel’s important role in energy and food security and job creation," said Daniel Oh, chief executive of Renewable Energy Group (REG), a large biodiesel producer. "This tax credit provides certainty for our petroleum distributor customers and, in turn, market stability for commercial biodiesel producers like us."

The US biodiesel industry has been hopeful for 2013, following mandates by the US Environmental Protection Agency (EPA) calling for increasing production and use of renewable fuels.

The fate of the RFS standard and the $1/gal federal tax incentive is considered to be critical by most biodiesel producers.

While 2012’s US biodiesel production likely met Renewable Fuel Standard (RFS2) levels of 1bn gal (3.8bn litres) for the year, federally mandated production levels looking to 2013 are higher.

The US Environmental Protection Agency (EPA) said in September that gasoline refiners must use 1.28bn gal of biodiesel in 2013.

The mandate under the RFS programme, which is meant to boost production of renewable fuels, is a 28% increase from the 1bn gal requirement in 2012.

Refiners must produce biodiesel each year, with their contribution determined by their share of the fuel market, according to the federal law. Under rules set by the EPA, instead of producing fuel themselves, those refiners can buy credits from other producers to fulfil their obligations.

Biodiesel is an alternative fuel, produced from renewable resources. The most commonly used feedstocks are rapeseed, soy and palm oil.

($1 = €0.76)

By: Leela Landress
+1 713 525 2653

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