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U.S. Senators Vow to Take Up Biodiesel Credit in 2010

posted on December 23, 2009

Despite challenges over the past few years, ethanol production grew dramatically in the 1990s. But expansion has been slower for its homegrown cousin, biodiesel.

About 700 MILLION gallons of biodiesel were consumed in the United States in 2008. While significant, the figure pales compared to the 64 BILLION gallons of petroleum-based fuel burned in diesel engines last year.

Nevertheless, Iowa State University Economists estimate about 200 million bushels of this year's soybean crop will be used to produce biodiesel.

But that prospect is threatened by an expiration of a key tax credit looming on the horizon.

U.S. Senators Vow to Take Up Biodiesel Credit in 2010

Two U.S. senators vowed Tuesday to take up legislation early next year to extend the biodiesel tax credit. Senator Max Baucus, a Democrat from Montana, and Republican Senator Charles Grassley of Iowa, said they would fight to extend the $1-per-gallon tax credit and other tax breaks as soon as possible after Congress convenes next year.

In a conference call with reporters on Wednesday, Senator Grassley said, "Jobs in biodiesel are green jobs; good for both the environment and the economy. The consequences of Congress not securing this extension before the House left for this year is likely to be very severe. The inaction means there's no certainty for investors and lenders."

The renewable fuels industry fears the delay in extending the incentive will cause some plants to close after the credit expires on December 31, and thousands could lose their jobs. A so-called extenders bill passed in the House earlier this month would keep the credit going to the end of 2010. But the renewable fuels industry wanted a five-year extension to be passed before the end of the year.

Supporters say the biodiesel tax credit is essential in maintaining the competiveness of the fuel. The tax credit exists to offset the higher cost of producing biodiesel production compared to petroleum diesel. Without the tax credit, proponents say petroleum marketers will be unwilling to purchase the more expensive biodiesel, and demand will vanish.

Soybean oil is a primary feedstock for making biodiesel. According to the Department of Agriculture, 11 percent of this year's soybean crop will be used for biodiesel. The American Soybean Association has said failure to renew the incentive could reduce prices paid to farmers for their soybeans by 25 cents or more per bushel.


Tags: biofuels Congress credit ethanol government news renewable fuels