By KEVIN WALKER
Michigan Correspondent

ST. LOUIS, Mo. — Now that biodiesel has finally received an extension of the blender’s tax credit, things may finally be looking up for the industry.
The biodiesel tax credit amounts to $1 per gallon of pure biodiesel. According to the American Soybean Assoc. (ASA), the credit makes biodiesel more competitive with petroleum diesel; without it, biodiesel becomes more expensive than regular diesel.

According to the ASA, since the loss of the credit biodiesel production in the United States decreased over 35 percent compared with 2009. The credit was lapsed for 349 days last year. Because of the lapse, biodiesel production dropped to 345 million gallons in 2010; that’s compared to 545 million in 2009. The ASA said the bill also provides for an expedited process so biodiesel producers can claim retroactive credits more quickly.

Mike Cunningham, soybean producer from Bismarck, Ill. is also a member of the ASA board of directors.

“It helps every farmer, let me tell you,” Cunningham said of the blender’s credit. “I think it’s instantaneous,” he said of the effect on farmers of the credit’s extension. “It helps to create stability in the marketplace, but it’s still important to get a long-term commitment with it. It’s time consuming having to go back to our representatives every year” to get another extension.

Cunningham referred to a 2009 study prepared by the Centrec Consulting Group for United Soybean Board, which considered what would have happened from 2005 through 2008 had the blender’s credit for biodiesel not been in place. The credit was actually started in 2005. According to the study, without the credit a reduction of 24 to 25 cents per bushel would have been realized by the end of 2008. That reduction applies to all U.S. soybeans, not just those used for biodiesel production. Also, because of decreased soybean oil demand, and resulting decrease in soybean price, fewer soybean acres would have been planted.

During this four year period, soybean producers would have seen their net returns reduced by about $2.5 billion. Also according to the study, the price of soybean oil would have dropped 11.6 cents per pound by 2008; also, the price of soybean meal would have increased because of a lower domestic crush supply.

Biodiesel is also important to some other parts of the agricultural sector. In 2009, the U.S. biodiesel industry supported 23,000 jobs, added $4.1 billion to the nation’s gross domestic product and generated $828 million in tax revenue for federal, state and local governments.

According to the Environmental Protection Agency (EPA), in the United States most biodiesel is made from soybean oil, although it’s sometimes made from canola oil, sunflower oil, recycled cooking oils and animal fats.

According to the EPA, 1.9 billion gallons of the cleaner burning fuel have been produced in the United States since 2005 and have displaced an equivalent amount of regular diesel. From an environmental standpoint, that is a big positive.

According to the EPA, biodiesel “has a number of important benefits. As an alternative to diesel, it can help reduce U.S. dependence on foreign oil. Biodiesel also provides significant greenhouse gas (GHG) emission reductions. B100 (pure biodiesel) reduces lifecycle greenhouse gas emissions by more than 50 percent, while B20 reduces GHG emissions by at least 10 percent.

“In addition, biodiesel offers several criteria emissions benefits for the existing vehicle fleet. It reduces emissions of carbon monoxide, particulate matter (PM), and sulfates, as well as hydrocarbon and air toxics emissions.”
The tax bill that re-started the credit was signed into law Dec. 17, 2010 and lasts until the end of the year.