Closing the “Splash and Dash” Loophole

John Davis

Lawmakers on the U.S. Senate’s Finance Committee will take up a bill that’s supposed to close a loophole that has allowed importers to get millions of dollars in biodiesel subsidies designed to help U.S producers but for biodiesel that doesn’t end up helping American drivers.

This article from has more:

Known as “splash and dash,” the loophole allows 100 percent biodiesel made from soybeans and other commodities and imported from a third country, such as Brazil or Malaysia, to be carried to a U.S. port, where a “splash” of petroleum diesel is added. This allows the importer to qualify for tax credits intended to promote the production and use of U.S. biodiesel.

The ship then quickly leaves the U.S. port to “dash” to another port, usually in Europe, where the subsidized biofuel is unloaded and sold. Tax incentives have created a hugely profitable market for biofuels in Europe, so the companies pocketing the U.S. tax breaks are again rewarded in Europe.

Estimates are that the practice is costing U.S. taxpayers $30 million a year… and that’s supposed to get even worse as it becomes more widespread.

The Europeans aren’t too happy about the loophole, either, and they have even lobbied to change the law as well.

The loophole closure is in the Energy Advancement and Investment Act of 2007, which made its debut in the Finance Committee last week.

Biodiesel, Government, Legislation