Talking Point

Biodiesel policy fueling a buzz on Capitol Hill
By Mark Palmer | May 01, 2006
Following Congressional passage of the Energy Policy Act of 2005, which included a much-coveted extension of the biodiesel tax incentive through 2008, soybean farmers and the U.S. biodiesel industry face more challenges than ever. However, together we're poised to tackle a myriad of issues, such as biodiesel imports, implementing-and extending-the biodiesel excise tax incentive and the federal renewable fuels standard (RFS), Farm Bill Energy Title programs like the Commodity Credit Corporation's (CCC) Bioenergy Program, and appropriations projects like the Biodiesel Education Grant Program.

All of these items have made biodiesel a hot issue on Capitol Hill, setting the tone for the second session of the 109th Congress. To sort through these issues and develop consensus on 2006 policy priorities, a group of soy biodiesel stakeholders met in Washington, D.C., on Feb. 16. Here's a look at just some of the legislative priorities identified at that gathering.

Extending the biodiesel tax incentive
Extension of the biodiesel tax incentive by at least two years beyond its scheduled expiration at the end of 2008 is a top priority. On March 14, Sens. Chuck Grassley, R-Iowa, and Max Baucus, D-Mont., introduced the Alternative Energy Extender Act (S. 2401). This legislation extends renewable tax incentives-including the biodiesel tax incentive in the Volumetric Ethanol Excise Tax Credit (VEETC). Specifically, the bill includes:
-A "biodiesel and alternative fuel excise tax credit" that extends the biodiesel excise and income tax credit for biodiesel, biodiesel mixtures and renewable diesel through 2010
-A "refueling property credit" that extends a 30 percent tax credit (enacted in the Energy Policy Act of 2005) on the cost of installing clean-fuel vehicle refueling property, such as biodiesel blends of B20 or greater. It would also expire at the end of 2010
-A revision and extension of the "small agri-biodiesel producer credit" would make the 10-cents-per-gallon credit, now only applicable to 15 MMgy of production or less, available to as much as 60 MMgy of production. It would also expire at the end of 2010.
These incentives would harmonize other important tax credits through 2010, which will help deliver subsequent extensions beyond that date.

CCC Bioenergy Program funding
Funding for the CCC Bioenergy Program has fallen from the authorized level of $150 million to $100 million in fiscal year 2005 and $60 million in fiscal year 2006. Farmers and stakeholders will continue working with the USDA to ensure biodiesel receives no less than the $25 million allocated in fiscal year 2005 and 2006. Further, the 2002 Farm Bill eliminates funding authority for the CCC Bioenergy Program in fiscal year 2007. Key players must work with the USDA and members of Congress to ensure CCC funds continue to be provided for biodiesel production in fiscal year 2007.

Biodiesel and feedstock imports
There are concerns that increasing the biodiesel tariff to offset the value of the tax incentive or restricting agri-biodiesel feedstocks to the list included in the JOBS bill could violate U.S. World Trade Organization (WTO) obligations. The American Soybean Association is exploring these concerns and examining other ways to address imported biodiesel and feedstocks. These approaches include tightening industry standards for biodiesel, exploring other tax code provisions and restructuring CCC support for domestic biodiesel production as described earlier.

Finding an appropriate RFS value for biodiesel
The U.S. EPA is working on a ruling that will establish an appropriate value for biodiesel under the RFS credit-trading program. The biodiesel industry is urging for biodiesel to be given at least a 1.5 to 1 value based on its Btu content. The industry is working with renewable fuel stakeholders to reach an agreement on a mutually acceptable approach that could be adopted by the EPA.

Looking forward
In addition to these priorities, the biodiesel industry will look toward the 2007 Farm Bill by analyzing the potential pros, cons and likely impacts of establishing a program to provide payments or other incentives to producers of "energy crops." The European Union already has a similar program in place, considered "Green Box" for WTO purposes. Some key legislators have expressed interest in this approach.

Furthermore, the 2007 Farm Bill should have a robust Energy Title. The one in the 2002 Farm Bill included several programs that benefit biodiesel, such as the Biodiesel Education Grant Program. It has been a major success in helping educate consumers and major constituent groups (i.e., original equipment manufacturers, truckers) about the benefits of biodiesel. This program needs to be reauthorized as part of a strong Energy Title. With farmer and industry support built on success, the biodiesel industry is well on its way to healthy growth.

Mark Palmer is a Washington, D.C., representative of the American Soybean Association. Reach him by e-mail at mpalmer@gordley.com.
 
 
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