U.S. Congress extends biodiesel tax credit

By Erin Voegele | September 16, 2008
Web exclusive posted Oct. 8, 2008 at 11:05 a.m. CST

U.S. President George W. Bush signed the Emergency Economic Stabilization Act of 2008 into law Oct. 3 shortly after the U.S. House of Representatives passed the legislation with a 263 to 171 vote. The U.S. Senate approved the bill Oct. 1 by a vote of 74 to 25. The legislation, most widely known for bailing out the U.S. financial industry, also has important implications for the biodiesel industry.

The legislation extends the biodiesel tax credits through Dec. 31, 2009 and qualifies all biodiesel for a $1.00 per gallon tax credit, including biodiesel made from non-virgin feedstocks, such as yellow grease. Prior legislation limited the tax credit for biodiesel manufactured from non-virgin feedstocks to $0.50 per gallon. The act modified the definition of renewable diesel eliminating the requirement that the fuel had to be produced using a thermal depolymerization process, including biomass fuel that qualifies as a renewable jet fuel under U.S. Department of Defense military specifications and excluding fuel derived from co-processing biomass with a non-biomass feedstock.

In addition, the law closes the splash and dash loophole, which allowed foreign produced biodiesel to enter the United States, be splash blended to claim tax incentives, and then shipped to a third country for use.

"We're very pleased with the passage, and the almost immediate signing, of the legislation into law by the president," said Michael Frohlich, the National Biodiesel Board's Washington D.C. director of communications. "This clearly is going to help continue to make the biodiesel industry in America competitive with petroleum diesel, as well as create new jobs and put money into the economy. And, it will bring us one step closer to energy security." According to Frohlich, allowing biodiesel manufactured from non-virgin feedstocks to claim the tax incentives will allow for more robust growth within the industry. The NBB is pleased that the splash and dash loophole has been closed, he added.

Various members of the biodiesel industry have released statements in support of the legislation. Kenneth Hern, Nova BioSource Fuels Inc.'s chief executive officer, said the tax incentives will positively impact fuel blenders, feedstock providers and biodiesel producers. "The extension provides the needed stability to the market place, and more importantly, the act establishes parity amongst feedstock supplies, both virgin and non-virgin in genesis," Hern said. "By removing the economic bias against certain feedstocks, Nova is better positioned to employ the full potential of our unique process technology."

Rentech Inc. praised congress for supporting the efforts of alternative energy producers. "[The legislation] demonstrates Washington's commitment to reducing our nation's reliance upon foreign oil through advancing technologies and processes for converting diverse domestic resources into clean fuels," said D. Hunt Ramsbottom, chief executive officer of Rentech.
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