Renewable fuel standard (RFS) volumes are about to be released, and a lot of people are hoping the $1 per gallon biodiesel blenders tax credit is renewed. This includes many groups in the trucking, fuel and biofuel industry. The tax credit has been in an erratic cycle over recent years. Todd Neely of DTNPF shares the details about likely outcomes.
Unreliable Tax Credits
Congress has allowed biodiesel tax credits to expire repeatedly over the years, causing uncertainty in the industry. The most recent tax credit expired December 31, 2016. Congress retroactively passed an extension of the biodiesel tax credit in February of 2018 to cover the gap, but that has now expired. And here we are again.
Biofuel industry leaders want stability, with tax credits they can count on. A large group including the Advanced Biofuels Association, American Trucking Associations, National Association of Convenience Stores, National Biodiesel Board, National Renderers Association, National Association Representing America’s Travel Centers and Truckstops (NATSO), New England Fuels Institute, Petroleum Marketers Association of America and the Society of Independent Gasoline Marketers of America, all joined together and delivered a letter to Congress asking for just that. Certainty.
Letter to Congress about Biodiesel Tax Credit
They want a permanent tax incentive for biodiesel to encourage more investment, and the tax credit to be retroactively extended through 2018. Expiration of the $1 tax credit has caused biodiesel plants to shut down production and to lay off employees. Part of the letter read:
“On behalf of a diverse community of biodiesel producers, feedstock providers, blenders, fuel marketers and consumers, we are pleased to announce that we have united around a single position — to maintain and extend the biodiesel tax credit at the blender level.”
“The blenders credit has worked successfully to build a robust biodiesel and renewable diesel industry. As a result, the U.S. biodiesel and renewable diesel market has grown from roughly 100 million gallons in 2005 to nearly 2.6 billion gallons in 2017. The tax credit is an important demand stimulus, which improves plant efficiencies, encourages investment in U.S. distribution infrastructure, and supports high-paying jobs throughout the country, while providing fuels that significantly reduce greenhouse gas emissions. On top of this, it has afforded customers such as the trucking industry and heating oil users fuels that are more economic and environmentally competitive. Extending the biodiesel blenders credit will allow us to continue to provide the economic and environmental benefits associated with the program.”
The biodiesel tax credit has been allowed to expire five times since its initial enactment in 2005. Many in the industry feel that the degree of uncertainty over the credit has prevented proper investment over the years. Mark Dorenkamp of Brownfield Ad News spoke with Mike Youngerberg of Minnesota Soybean Growers Association. Youngerberg was in Washington D.C. last week, pushing for an extension of the biodiesel tax credit and a long term solution.
RFS Volume Likely to Increase
The industry as a whole is hoping that the EPA follows through, and raises the biomass-based diesel number from 2.1 billion gallons last year. They want the RFS volume to be higher- around 2.5 billion gallons. The numbers are expected to be finalized this coming November.
The industry appears poised to make more biodiesel, and the EPA and other states are responding to the call. This spring the state of Minnesota implemented new biodiesel standards. Blends moved to B20- which means that all Number 2 diesel fuel sold for combustion engines must contain a minimum of 20% biodiesel. According to Youngerberg, the switchover had a few “hiccups,” but is operating smoothly now.
Most signs are pointing toward the EPA and the Trump Administration providing the tax credit. We’ll see how soon how it will all shake out.