By KEVIN WALKER
Michigan Correspondent

WASHINGTON, D.C. — Last week the U.S. House of Representatives passed a bill that includes a one-year extension of a tax credit the biodiesel industry considers essential. H.B. 4213, the Tax Extenders Act of 2009, passed by a vote of 241-181.

If passed by the full Congress, it would extend the credit another year to Dec. 31, 2010. Both the House and Senate have been considering legislation that would extend the credit for five years and make some changes to the current tax break.

According to the National Biodiesel Board (NBB), H.R. 4070, introduced by Rep. Earl Pomeroy (D-N.D.) and Rep. John Shimkus (R-Ill.), would help provide stability and reliability in the marketplace through a longer-term extension of the credit and would change the incentive from a blenders excise tax credit to a production excise tax credit.

Companion legislation in the Senate, S. 1589, the Biodiesel Tax Incentive Reform and Extension Act, was introduced by Sen. Maria Cantwell (D-Wash.) and Sen. Charles Grassley (R-Iowa).
“If we go to a producer’s credit, the biodiesel would have to be produced in the United States,” said Rob Joslin, president of the American Soybean Assoc. (ASA).

Mike Frohlich, a spokesman for the NBB, said these changes will also provide for better tax administration and improve compliance. He added it’s too late to pass the legislation this year, though, and that it’s not a sure thing the one-year extension will pass, either.
“It’s clear that the Senate and House bills will not be taken up before the end of the year,” Frohlich said. “Given that, the NBB supports the tax extenders package. We’re going to continue to make sure the tax credit doesn’t expire. Without that tax credit, there just is no profitability to the biodiesel industry.”

The tax incentive amounts to $1 per gallon of pure biodiesel. According to the NBB, the tax incentive – which was started in 2004 – helped grow a tiny industry with 25 million gallons of yearly production in 2004 to a commercial-sized industry with 690 million gallons of fuel produced in 2008.

The NBB and ASA say that without the tax credit, the industry will come to a screeching halt.

“I’m very concerned,” Joslin said. “We’re past the 11th hour. The Senate shows every sign of being bogged down in health care. It’s very important for our soybean producers to call up their senators.
“Right now, the biodiesel profit margin is very tight. I don’t know if the biodiesel production facilities will keep their doors open. Once they close their doors – well, let’s not even go there.”

Frohlich agreed federal health care legislation is “sucking all of the oxygen out of the room.” Besides that, he said, there are other pieces of legislation that are a “must do,” but which are not finished.

“It’s hard to say how this will actually flush out,” he said.
More lost jobs

Last week, the NBB released a study conducted by economic analyst John M. Urbanchuk that examined the economic impact of the biodiesel industry and the negative consequences of allowing the credit to lapse.

“Since it was enacted in 2004, the biodiesel tax incentive has allowed the nation to reap the economic, energy security and environmental benefits associated with commercial scale production and use of biodiesel,” stated Manning Feraci, NBB vice president of Federal Affairs. “Allowing the credit to lapse will compound the already daunting challenges facing the industry and will cost the nation another 23,000 jobs, in addition to the 29,000 jobs that were shed in 2009.”

According to the NBB, the biodiesel tax incentive is designed in a manner that makes biodiesel price competitive with diesel fuel. The incentive is structured so that the value of the incentive is reflected in the market price of the fuel.

Urbanchuk’s analysis concludes that without the biodiesel tax incentive, there will be a loss of jobs and income, increased demand for petroleum diesel, a degradation of energy security, decreased demand for soybean oil and lower soybean prices, leading to a negative impact on farm income, and stranded investment as biodiesel capacity is idled and lost tax revenue for state and local governments.