By Eric Miller, Staff Reporter
This story appears in the Jan. 11 print edition of Transport Topics.
The biodiesel industry was at a virtual standstill last week, despite an assurance by two Senate leaders they will introduce legislation “as soon as possible” to reinstate the tax credit that expired on Dec. 31.
Because the $1-a-gallon biodiesel blending credit is needed to keep the alternative fuel competitive with the price of traditional diesel fuels, producers are cutting back on their budgets, number of employees and hours of operation, said Michael Frohlich, a spokesman for the National Biodiesel Board.
“Right now, production has dropped to nearly 0%,” Frohlich told Transport Topics. “Most, if not all, of our plants are really not producing much, if any fuel.”
“The best way to describe the industry right now is in a holding pattern to wait and see when, and if, the tax credit will be reinstated,” Frohlich said.
Frohlich added that all signs point to a one-year retroactive extension of the tax credit, but the Senate will likely not approve the measure until the end of January at the earliest, and possibly not until February or March.
“The timing of it is probably the most important factor, and that’s the unknown,” Frohlich said.
The House passed a similar bill in December, but the Senate has been focused in recent months with health-care reform.
However, Bob Callanan, a spokesman for the American Soybean Association, said growers are en-couraged by a letter sent last month to the Senate leadership by Senate Finance Committee Chairman Max Baucus (D-Mont.) and the committee’s ranking member, Sen. Charles Grassley (R-Iowa), signaling the committee’s intention to extend the credit retroactively.
Baucus and Grassley said they “understand that the expiration of these provisions creates uncertainty and complexity in the tax law.”
But Frohlich said some biofuel producers soon could run out of money, let go employees, and even close down entirely.
He said just how long biodiesel plants can avoid shutting down is uncertain.
“Producers are dusting off their business plans and looking at their accounts receivable and still trying to figure that out,” Frohlich said.
A study released last month by the NBB said that if the tax credit, first enacted in 2004, is not renewed, it would cause the loss of 23,000 jobs, increase demand for petroleum diesel, and decrease tax revenue and demand for soybean oil.
Allowing the tax credit to expire also would increase the cost of fuel for motor carriers, which are increasingly being forced to purchase biodiesel because of federal renewable fuel standard mandates, said Rich Moskowitz, vice president and regulatory affairs counsel for American Trucking Associations.
Without the tax credit, which lowers the cost of biodiesel at the pump, truckers would be forced to pay what amounts to a “billion-dollar hidden tax on our industry,” he said.
