Legislation Would Provide Predictability So U.S. Can Move Toward a Clean Energy Future

WASHINGTON, DC – Today, U.S. Senators Maria Cantwell (D-WA) and Chuck Grassley (R-IA) introduced legislation to simplify and extend the tax incentive for domestic biodiesel production.  The Biodiesel Tax Incentive Reform and Extension Act of 2009 would provide predictability to investors and producers so the United States can continue moving forward to displace imported fossil fuels with low carbon, renewable biodiesel.


“Last year, we all saw the devastating effects that $140 per barrel oil had on our economy and American families,” said Cantwell. “For economic reasons, national security reasons, and environmental reasons, we can not allow ourselves to remain dependent on foreign oil.  Biodiesel is an extremely efficient fuel that helps reduce America’s dependence on foreign oil and can play a constructive role in addressing the issue of climate change. In order to provide this important industry with certainty and predictability, Congress must act quickly to extend and reform this valuable tax credit.”


“America is trying to kick its addiction to foreign oil, and biodiesel is part of the cure,” Grassley said.  “The more we can encourage domestic production and meet demand, the better off we’ll be economically, environmentally, and geopolitically.  This legislation simplifies the tax credit for producers.  It also gives investors predictability so they’ll be more likely to put their money into biodiesel production.”   


The biodiesel tax incentive was first enacted in 2004, and since then, it has helped encourage the production and use of biodiesel.  U.S. production has increased from 25 million gallons in 2004 to 690 million gallons last year.  According to the National Biodiesel Board, there currently are 176 plants in operation with the capacity to produce more than 2.61 billion gallons of biodiesel and 39 new plants under construction or expansion.  In 2008, this industry supported 51,893 jobs in the United States.  Unfortunately, limited access to capital, uncertainty surrounding the federal commitment to biodiesel and the current state of the economy threaten to undermine the progress the U.S. biodiesel industry has made to build the production capacity and infrastructure needed to displace petroleum diesel fuel with renewable, low-carbon biodiesel. Right now, less than one-third of the industry’s facilities are currently producing fuel. 


The current law tax credit, which is a tax credit for blending biodiesel with petroleum diesel fuel, will expire at the end of this year.  The senators’ legislation would reform the credit and extend it for five years.  


Specifically, the Cantwell-Grassley measure:

  • Would eliminate potential abuses and simplify administration of the incentive for both taxpayers and the Internal Revenue Service (IRS).  The bill changes the incentive from a blender credit to a production tax credit so that incentives are given for building the domestic production industry.   The change would focus the benefits of the credit on the production capacity of these cleaner, greener fuels rather than on the activity of just blending them with petroleum diesel. By focusing on the production of the 100 percent bio-based fuel, this bill will shut down, once and for all, any remaining opportunity for the abuse known as “splash and dash,” in which oil companies add a few drops of biodiesel to their petroleum diesel just to qualify for the tax credit.   
  • Provide the $1 per gallon tax credit for the production of biodiesel, renewable diesel and aviation jet fuel that complies with fuel standards and Clean Air Act requirements that define qualified fuels under current law.


  • For small producers, those with an annual production capacity of less than 60 million gallons, the credit increases from $1 to $1.10 for the first 15 million gallons of biodiesel produced.


  • Simplify the definition of “biodiesel” to encourage production from any biomass-based feedstock or recycled oils and fats. 


  • Simplify the coordination between the income tax credit and the excise tax liability to tighten compliance and reduce administrative burdens on taxpayers.


  • Extend this tax credit for five years, giving needed financial predictability so that more facilities can be brought online in the United States.



# # #