NBB In Sight

Call to action: Support the Responsible Renewable Energy Tax Credit Act of 2007
By Joe Jobe | June 21, 2007
The National Biodiesel Board has been working to protect the integrity of the biodiesel tax incentive and has opposed an effort by certain large, integrated petroleum refiners to exploit an ambiguity in the tax code. Our Washington, D.C., office is leading this effort, but as the saying goes, all politics is local. If anyone is going to close this loophole that threatens our industry, it's you.

The Energy Policy Act of 2005 extended the $1 per gallon biodiesel tax incentive through 2008. It also attached a $1 credit for "renewable diesel" to the same section of the Internal Revenue Service code that provides for the biodiesel tax incentive. Renewable diesel was defined as diesel fuel produced using a thermal depolymerization process.

On April 2, the U.S. Department of the Treasury made an extraordinary ruling on what qualifies as renewable diesel. Specifically, the Treasury expanded the definition of "thermal depolymerization" to include conventional refinery processes. Petroleum refiners could qualify for the renewable diesel credit by co-processing small amounts of biomass in very low percentages with petroleum. By doing this, a petroleum refiner could get a credit to subsidize decades' old refinery capacity in a way that does not add new investment, capacity or fuel. Not to mention, by co-processing biomass with petroleum, petroleum refiners can already receive a 50-cent-per-gallon alternative fuels tax credit, which was enacted under the 2005 transportation bill. In fact, in a Sept. 7, 2006, letter to Treasury Secretary Henry Paulson, the author of the original renewable diesel provision stated it was not his intention for "traditional processes" to qualify as renewable diesel.

To remedy this problem, Congressman Lloyd Doggett, D.Texas, along with 50 original cosponsors, introduced the Responsible Renewable Energy Tax Credit Act of 2007 (HR 2361). This bipartisan compromise would not repeal the $1 per gallon tax credit for free-standing renewable diesel production. Instead, it would clarify that co-processing biomass with petroleum in existing oil refineries would not qualify for the $1 per gallon credit. Petroleum refiners could receive it if they process pure renewable diesel fuel that meets a stand-alone specification and registration requirements before blending. This approach represents a common-sense, bipartisan compromise that is both technology-and feedstock-neutral.

Here's where you come in. You can help Doggett's bill gain traction by letting your congressional representative know how important this issue is to you. Ask your representative to cosponsor HR 2361 to show support for renewable fuels that will return benefits to society. Not supporting this fix will lead to further subsidization of large oil companies, whose product does not provide many of the benefits that biodiesel does.

In a recent response to an interview question about rising fuel prices, ConocoPhillips CEO James Mulva said, "We fully are utilizing our refining capacity, and a result of that is we need more refining capacity, so as to take the oil, manufacture the gasoline and diesel that the consumers want."

Mr. Mulva makes a valid point-America needs more refining capacity to meet consumer demand. Twisting the meaning of the renewable diesel tax incentive to subsidize existing refining operations does not address this situation.

By contrast, limiting the $1 per gallon tax incentive for biodiesel and renewable diesel to free-standing production facilities-the position taken by the National Biodiesel Board-will provide the additional refining capacity Mr. Mulva indicated is necessary to meet growing fuel demand. We hope that petroleum refiners and Congress will join us in supporting this reasonable approach.

Thank you.
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