Cantwell Reintroduces Bipartisan Biodiesel Bill to Boost Job Growth in Key Emerging Industry

Legislation supports nascent industry helping get America off imported oil

WASHINGTON, D.C. – Today, U.S. Senators Maria Cantwell (D-WA) and Chuck Grassley (R-IA) introduced bipartisan legislation to reform and extend through 2014 the tax incentive for domestic biodiesel production that will help spur job creation and continue to displace imported fossil fuels with renewable biodiesel. The measure, the Biodiesel Tax Incentive Reform and Extension Act of 2011 (S.1277), is also cosponsored by Senators Amy Klobuchar (D-MN), Roy Blunt (R-MO), Tom Harkin (D-IA), Patty Murray (D-WA), and Al Franken (D-MN). 

A study by Cardno ENTRIX, an international consulting firm that specializes in environment and natural resources economics, estimates that this year, domestic biodiesel production is expected to support more than 31,000 jobs and replace 800 million gallons of imported diesel fuel. The same study estimates that with the appropriate federal framework, by 2015 biodiesel production will replace 1.9 billion gallons of imported diesel fuel, support more than 74,000 jobs, and generate $4 billion in income and approximately $7.3 billion in Gross Domestic Product (GDP). The study also found that if Congress does not enact the Cantwell-Grassley Biodiesel Tax Incentive Reform and Extension Act of 2011 and the biodiesel tax credit is allowed to expire at the end of 2011, consumers would be forced to spend an additional $6.6 billion for diesel fuel between 2012 and 2015.

“Today’s high gas and diesel prices are slowing our economic recovery and burdening families,” said Senator Cantwell. “For economic reasons, national security reasons, and environmental reasons, we must continue to invest in America’s clean energy economy. Biodiesel is America’s first advanced biofuel, it can be made from a variety of feedstocks, and is less polluting than today’s petroleum-based diesel fuel. This bipartisan bill is smart federal policy because it is helping launch a nascent, domestically-based industry, reforms an existing credit to make sure it supports American biodiesel producers, and provides the industry the certainty it needs to continue to grow.”

Washington state is home to a significant biodiesel industry. In addition to supporting rural economic development, there are a number of biodiesel plants contributing to the local economy in Washington state including General Biodiesel, Seattle, WA (5 million gallons); Gen-X Energy, Burbank, WA (15 million gallons); Imperium Renewables, Hoquiam, WA (100 million gallons); Inland Empire Oilseeds, Odessa, WA (8 million gallons); and Whole Energy, Anacortes, WA (2 million gallons).

Biodiesel production dropped 42 percent last year due to the expiration of the tax incentive at the end of 2009, causing the industry to shed nearly 9,000 jobs, the majority of which were in the services sector of biodiesel production. Cantwell has led several successful bipartisan efforts to extend the biodiesel credit since it was first established in 2005, a quarter century 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. This year,the biodiesel industry is estimated to generate income of nearly $1.7 billion to be circulated throughout the economy and create more than $3 billion in GDP.

The bipartisan Biodiesel Tax Incentive Reform and Extension Act of 2011 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. According to the Environmental Protection Agency (EPA), biodiesel reduces greenhouse gas emissions by as much as 86 percent when compared with petroleum diesel, and it 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 the ethanol production process; secondary use oils from crushing soybeans into protein meal (80 percent protein and 20 percent oils); and secondary use oils from crushing canola seeds into protein meal.

Specifically, the Cantwell-Grassley measure:

  • Eliminates potential abuses and simplifies 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.
  • Provides 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.
  • Increases, for small producerswith an annual production capacity of less than 60 million gallons, the credit from $1 to $1.10 for the first 15 million gallons of biodiesel produced.
  • 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 industry is still working to establish itself in the competitive marketplace with the entrenched petroleum diesel industry, which enjoys the benefit of decades of infrastructure and market development. 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, chair of the Energy Subcommittee of the Senate Energy and Natural Resources Committee and member of the Senate 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. Starting in 2004, Cantwell has brought together Washington businesses, farmers, investors, and fuel consumers to help create a Washington biofuels industry. In 2005, Cantwell brokered a landmark agreement for the Port of Seattle and its clients to buy one million gallons of biodiesel per year. In addition, Senator Cantwell helped facilitate the construction of one of the biggest biodiesel facilities in the United States in Grays Harbor, as well as secured funding to help Washington state ferries figure out if they could use locally-produced biofuels. In 2007, she helped author the Renewable Fuels Standard, which, along with increasing vehicle fuel economy standards, are the only two policies proven to reduce our nation’s dangerous overdependence on foreign oil.