Biofuel Tax Credits to Expire

Biofuel Groups Ask Congress to Extend Tax Credits

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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A number of tax incentives for cellulosic and advanced biofuels are set to expire at the end of December. (DTN file photo)

OMAHA (DTN) -- At some point before Dec. 9, Congress will need to vote on a budget bill to continue to fund the government, and one ethanol interest group is asking House and Senate leaders to take that opportunity to extend a number of biofuels tax incentives as well.

While the upcoming expiration of the biodiesel blenders credit has received most of the attention in recent months, the Renewable Fuels Association is pressing Congress to extend the second-generation biofuel producer tax credit, the special depreciation allowance for second-generation biofuel plant property, and the alternative fuel vehicle refueling property credit.

Most of these credits are aimed at developing advanced biofuel technologies including cellulosic ethanol. A number of companies have launched commercial production at a handful of plants across the country.

In a letter to lawmakers Wednesday, the RFA asked for a multi-year extension of the credits. The biodiesel industry has done the same when it comes to the biodiesel tax credit. Multi-year extensions are considered important to continue to develop new technologies.

"The U.S. biofuel industry is at a critical stage in its development," RFA President and Chief Executive Officer Bob Dinneen said in the letter.

"The U.S. has made significant progress over the last several years in advanced and second-generation biofuel production technologies because of the success of the Energy Independence and Security Act of 2007. However, inconsistent and uncertain biofuel and tax policies threaten to undermine that progress and run the risk of jeopardizing our role as an industry leader by discouraging further second generation biofuel development in the U.S."

Dinneen said the ethanol industry continues to "suffer significant infrastructure challenges" in expanding availability of higher ethanol blends such as E15 and E85.

The credits in question, he said, are important to continue seeing growth in the industry. The tax incentives have been a driving force behind the launch of commercial-scale cellulosic ethanol plants, he said.

"These facilities have made the U.S. the world leader in second-generation biofuel development," he wrote in the letter.

"However, due to the uncertainty and inconsistency surrounding the future of biofuel and biofuel tax policy in the U.S., many future plans for cellulosic ethanol production facilities have been shelved, or moved to overseas locales including competitor countries like Brazil and Spain."

Dinneen said the expiration of the credits comes at a time when cellulosic ethanol plants are launching production.

In addition, the expiration of the alternative fuel vehicle refueling property, or infrastructure, credit would hurt smaller convenience store owners who wish to provide higher ethanol blends.

"The infrastructure credit provides these fuel retailers with a tax credit for investments made to upgrade their fuel delivery systems," Dinneen wrote, "allowing for the sale of such alternative fuels."

Although there is a case to be made for updating the energy tax code as a whole, Dinneen said, Congress should extend the credits in the interim.

"While we continue to recognize the need for reforming the entire energy tax code to provide more parity for renewables like biofuel, it is equally important that we do not cause undue harm to the industry by letting important industry incentives expire while we wait for reform efforts to materialize in Congress," Dinneen wrote.

Todd Neeley can be reached at todd.neeley@dtn.com

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(BM/AG)

Todd Neeley