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Biodiesel Producers Could Halt Operations if $1 a Gallon Tax Credit Is Not Extended
Monday, 21 December 2009 00:00

Biodiesel producers are threatening to shut down their operations if the Senate does not approve a bill that would extend the $1 per gallon biodiesel tax credit due to expire on Dec. 31.

The bill to extend the tax credit passed the House on Dec. 11, and has been referred to the Senate Finance Committee.

However, Holly Alfano, vice president of government affairs for NATSO, a trade association representing travel plaza and truck-stop owners and operators, is concerned that the "Senate is caught up in health care, and they are not really moving a lot of legislation."

"The biodiesel industry, as we know it, will come to halt until it‘s renewed," Alfano told Transport Topics. "People are really concerned about it."

Over the past few years, the tax credit has enabled the industry to compete with cheaper and more efficient conventional diesel fuels, according to a study released earlier this month by the National Biodiesel Board.

"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 sale production and use of biodiesel," Manning Feraci, vice president of federal affairs for NBB, said in a recent statement. "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."

The NBB study, conducted by economic analyst John Urbanchuk of the international consulting firm LECG, Emeryville, Calif., concluded that without the tax incentive, there also would be a major loss of income, increased demand for petroleum diesel, a degradation of energy security, decreased demand for soybean oil that would hurt farmers, tax revenue losses for states and local governments, and decreased investment in the industry.

Richard Moskowitz, vice president and regulatory affairs counsel for American Trucking Associations, said allowing the tax credit to expire would increase the cost of fuel for motor carriers.

The federal renewable fuels standard requires refiners to make increasing amounts of biofuels, and although the tax credit goes to biodiesel producers, truckers would have to buy fuel blended with biodiesel, he said.

"Without that dollar-per-gallon tax credit, the [renewable fuels standard] amounts to essentially a billondollar hidden tax on our industry, because we are being forced to use biodiesel. And if it‘s not subsidized, without the existing federal tax credit we will have to pay a higher price," Moskowitz said.

Alfano said that NATSO members buy large quantities of biodiesel, but they would be reluctant to purchase the alternative fuel because the tax credit is what makes it competitive with conventional diesel fuel.

"Our members have found that if it‘s priced competitively with conventional diesel, then it‘s a viable product," Alfano said. "But if there‘s no dollar credit, it‘s not a viable product."

Charles 'Shorty' Whittington, immediate past chairman of ATA and the owner of an Indiana-based biodiesel production facility, said if the Senate does not pass the tax credit by the end of the year, he would probably shut down his plant, at least temporarily.

"Everybody‘s on a wing and a prayer right now," Whittington said. "About 80% of the bioproducers are already shut down. And nobody is making any purchases of raw products after the first of the year."

Transport Topics, 12/21/2009