Cantwell, Grassley Introduce Bipartisan Biodiesel Tax Credit Bill to Boost Clean Energy

Legislation would help lower the costs of biodiesel

WASHINGTON, D.C. – Today, U.S. Senators Maria Cantwell (D-WA) and Chuck Grassley (R-IA) introduced bipartisan legislation to reinstate a tax incentive for the production of domestic biodiesel that will help spur job creation and boost America’s supply of cleaner alternatives to imported fossil fuels.

The measure, the Biodiesel Tax Incentive Reform and Extension Act of 2014, or S. 2021, would reform and extend the $1-per-gallon tax credit for biodiesel producers through 2017 after Congress allowed the law to lapse at the end of 2013. Congress has allowed the credit to expire three times since the end of 2009.

“Investing in America’s clean energy economy is the smart thing to do for our environment and America’s energy security,” Cantwell said. “Biodiesel is America’s first advanced biofuel, which can be made from a variety of feedstocks such as cooking grease and soybeans. This legislation gives businesses the certainty they need to invest in biodiesel and the development of affordable, domestic alternatives to fossil fuels.”

“When investors suspend their funding of clean energy production, jobs fall by the wayside,” Grassley said. “Continuing incentives for biodiesel and other green energy sources supports jobs, helps the environment and increases energy independence. There's every reason to support biodiesel production.”

Industry growth stopped after Congress let the credit expire in 2012 and production remained flat at just under 1.1 billion gallons – the same level as 2011. When the credit was reinstated in 2013, the U.S. biodiesel industry produced1.8 billion gallons in that year.

The tax incentive helps biodiesel compete with petroleum diesel, stimulating production and ultimately lowering costs for consumers. Cantwell has led several successful bipartisan efforts to extend the biodiesel credit since it was first established in 2005, more than 25 years after the creation of a similar credit for ethanol. The biodiesel production tax credit helped encourage the production of biodiesel from 25 million gallons in 2004 to 690 million gallons in 2008. In 2011, the biodiesel industry was estimated to generate nearly $1.7 billion in income and create more than $3 billion in GDP. 

Biodiesel can be made from recycled cooking oil, soybean oil, and animal fats. It can be used in diesel engines with few or no modifications. Washington state is home to a significant biodiesel industry.

The bipartisan Biodiesel Tax Incentive Reform and Extension Act of 2014 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. Biodiesel reduces greenhouse gas emissions by as much as 86 percent when compared with petroleum diesel, according to the Environmental Protection Agency (EPA). Biodiesel is America’s first commercial-scale U.S. fuel to meet the EPA’s definition of an advanced biofuel. EPA approved feedstocks include waste oils (like restaurant grease); animal fats; algae; cover crops; inedible oils from ethanol production; and secondary oils from crushed soybeans and canola seeds.

Specifically, the Cantwell-Grassley measure:

  • Provides a $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.
  • Increases the credit from $1 to $1.10 for the first 15 million gallons of biodiesel produced by small producers with an annual production capacity of less than 60 million gallons.
  • Eliminates potential abuses and simplifies how the tax is administered by restricting the credit to fuel producers and excluding fuel blenders from eligibility. By focusing on production, this bill would eliminate any remaining opportunity for abuse known as “splash and dash” in which oil companies add a few drops of biodiesel to petroleum diesel to qualify for the tax credit. The change also ensures the credit benefits domestic producers – the old law allowed blenders to receive the credit for blends that included foreign-imported biodiesel.
  • Simplifies the definition of “biodiesel” to encourage production from any biomass-based feedstock or recycled oils and fats.
  • Tightens compliance and reduces administrative burdens on taxpayers by simplifying the coordination between the income tax credit and the excise tax liability.
  • Extends this tax credit for three years, giving needed financial predictability so that more facilities can be brought online in the United States.

The biodiesel tax credit continues to play an important role in supporting the development of this advanced biofuel that displaces foreign petroleum, provides environmental benefits, and promotes jobs and economic development, particularly in rural America. 

Cantwell, a member of the Senate Energy and Natural Resources Committee and Finance Committee, has long supported the development and commercialization of biofuel to help reduce our nation’s dependence on petroleum-based fuels and better protect the environment. In 2007, Cantwell helped author the Renewable Fuels Standard, which, along with increasing vehicle fuel economy standards, have helped reduce our nation’s dangerous overdependence on oil.