Bitter-sweet holiday gift for biodiesel industry

The reinstatement of the biodiesel tax credit for 2014 is a welcomed gift but one that leaves much to be desired
By Ron Kotrba | December 17, 2014

The holiday season is upon us full swing and the biodiesel industry, which has been holding out all year for EPA to finalize the renewable fuel standard volumes for 2014-’15 and Congress to reinstate the $1 per gallon blenders tax credit, just received a bitter-sweet gift from the federal government.

The Senate passed the tax extenders package that the House passed earlier this month, and the president is expected to it sign soon.

It’s sweet because it means a payout for many in the industry who have been making margins work this year without the incentive. It’s bitter because it’s only good through the end of this year, and the same fight will continue into the New Year to reinstate it. Hopefully the new Congress will listen to the pleas from the various stakeholders across many industries who are benefited by the short-term tax fix and simultaneously adversely effected from the investment uncertainty such after-the-fact solutions create.  

As one person tells me, “The tax credit is there to encourage investment in biodiesel production, but they won't fund it long-term enough to accomplish that goal. They still spend the money though, just a year after the fact. As a producer, it certainly helps to get money—but this is not the intent of this program.”

Another person, a biodiesel producer, tells me, “That doesn't really help us at all, other than serve as an indication that the policy is still worthy of a congressional act. Reinstating the credit for 2015 is what really matters to our business.”

Anecdotally, the biodiesel industry’s more challenging years have been even-numbered ones: 2010, 2012 and 2014 were all years without the tax credit. The odd-numbered years of 2011 and 2013 were, on the contrary, monumental for the industry. They also happened to be years in which the tax credit was in effect and had been extended forward and retroactively to the date of expiry. Provided Congress can come together early in 2015 to revisit the soon-to-be-reinstated-and-soon-to-be-expired-again tax provisions, and EPA issues its final RFS rule to boost biomass-based diesel volumes under the program, we are sure to see another record-breaking year for biodiesel. Even just one of those actions would provide much-welcomed stimulus for the industry as we move into 2015.