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Congress fails to renew biodiesel tax credit in ’09

Kentucky Correspondent

WASHINGTON, D.C. — The biodiesel industry was hoping for a Christmas present in the form of a one-year extension of the biodiesel tax credit from Congress before the end of the year. The credit gives producers a one-dollar per gallon subsidy.

Unfortunately, work on the health care bill took precedence in the Senate and the year ended with no extension.

The House had passed legislation earlier in December that included the credit, giving hope to the industry.

Upon hearing of the delay, Iowa Renewable Fuels Assoc. (IRFA) Executive Director Monte Shaw responded in a statement which noted that failure to pass the extension could result in production and job losses.

“I am profoundly disappointed with news reports that Congress will not extend the biodiesel blenders tax credit before it expires at the end of the year. Without the biodiesel tax credit most biodiesel refineries will be forced to shut down production and lay off employees,” said Shaw.

“We all like to enjoy some time off to celebrate the holidays, but Congress’ inaction may force biodiesel employees to take a much longer – and unpaid – Christmas break than anticipated. It is a painful irony that Congress is still talking about passing a ‘jobs bill,’ but apparently can’t pass this simple extension that would save hundreds of green collar jobs in Iowa alone. That will mean lost wages and lost jobs in a period of historically high unemployment.”
In a letter written to Rep. Charles B. Rangel (D-N.Y.), chairman of the U.S. House Committee on Ways and Means, Manning Feraci, vice-president of federal affairs for the National Biodiesel Board put into perspective the organization’s views on the economic impact the biodiesel industry has on this country.

“This year the U.S. biodiesel industry supported 23,000 jobs in all sectors of the economy. This added $4.1 billion to the nation’s Gross Domestic Product (GDP) and generated $828 million in tax revenue for federal, state and local governments,” wrote Feraci. “The 475 million gallons of biodiesel that will be produced in 2009 will displace 26.9 million barrels of petroleum with a clean-burning, efficient fuel that creates 4.56 units of energy for every unit of energy that is required to produce the fuel.”

Feraci went on to say that since it was enacted in 2004, the tax incentive has played a critical role in allowing the U.S. to reach commercial scale production of biodiesel.

“The tax incentive is designed to make biodiesel price competitive with conventional diesel fuel, and is structured in a manner that allows the value of the incentive to be recognized immediately in the market price of the biodiesel. Thus, the production and consumption of biodiesel in the U.S. will cease if the tax incentive is allowed to lapse on Dec. 31, 2009,” he wrote.

Soybean growers have a stake in the situation as well, since most biodiesel is made from soy. The American Soybean Assoc. (ASA) encouraged continued work on passage of the extension once the Senate reconvenes in 2010.

In a statement on its website, the organization noted, “While the lapse in the tax credit will deal a severe blow to the U.S. biodiesel industry, ASA will continue to work to reinstate the credit retroactively in 2010. We are encouraged by a letter that Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa.) sent to Senate leadership … informing them that the Finance Committee will take action early in the new year to extend retroactively the biodiesel tax incentive and other expiring tax provisions. ASA, state soybean associations and the biodiesel industry will press for quick action to extend the biodiesel tax incentive when Congress returns. The sooner that Congress returns and enacts the tax credit, the better chance that biodiesel producers will have to return to operation.”