ABFA Opposes Biodiesel Tax Credit Restructure

John Davis

ABFAlargeA move that extends the federal biodiesel and renewable diesel tax credit for two years, but changes its structure, is finding opposition from at least one biofuels group. The Advanced Biofuels Producers Association opposes an amendment by Sens. Charles Grassley and Maria Cantwell, which would extend the $1-per-gallon federal credit, but would convert the credit from one for blenders (those who make biodiesel mixtures) to one for those who produce biodiesel and renewable diesel.

Converting the tax credit to a producer’s tax credit and limiting its availability fails to capture the global market essence of fuels. It increases profits for a limited number of producers; while reducing the overall availability of fuels. Any limits in the supply chain are likely to increase costs for consumers. This amendment also places an unnecessary burden on fuel retailers who have incurred significant costs to purchase and maintain the equipment to dispense blended fuels, another cost likely to be passed on to consumers.

There is also significant concern that the provision will limit the supply of biofuel heating oil into the Northeast this winter. This change, in combination with the poorly designed excise tax system, could lead to consumers paying as much as an additional 24 cents per gallon for their biofuel heating oil this winter. Converting to a production credit will also likely result in a trade violation, a concern acknowledged by Senator Grassley.

With the potential for rising costs to consumers both at the pumps and at home, Michael McAdams, President of the Advanced Biofuels Association, released the following statement in response:

The current blenders’ credit for biofuels creates a competitive market for biodiesel and renewable diesel, which benefits the American consumer. Continuing and extending the original policy allows truckers and consumers to share in the value, it encourages consumer acceptance, and it benefits blenders and those who provide the feedstocks that make these cleaner, better fuels. This amendment destroys these positives, by syphoning the benefits to a small group of producers and punishing everyone else along the supply chain, including consumers. ABFA and its partners believe the current blenders’ credit should be extended in its longstanding form as originally intended.

You can read the group’s letter here.

Biodiesel, Legislation