OAKHURST, N.J. (DTN) -- U.S. Senators Chuck Grassley, R-Iowa, and Maria Cantwell, D-Wash., who is ranking member on the Senate Energy and Natural Resources Committee, and 14 other senators on Wednesday introduced bipartisan legislation to reform the biodiesel tax credit and extend the new policy for three years.
The bill, the American Renewable Fuel and Job Creation Act of 2017, reforms the incentive by transferring the $1 gallon credit from blenders to producers of biofuels to ensure the tax credit encourages domestic production and taxpayers aren't subsidizing imported fuel. The bill provides an additional $0.10 gallon credit for small biodiesel producers in the United States.
Since 2014, biofuels imports have increased from 510 million gallons to about 1 billion gallons in 2016. Already in the first quarter, imports are 10% higher than they were at the same time in 2016.
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The joint news release said that, in many cases, foreign biodiesel benefits both from the existing tax credit and from additional foreign subsidies, which make it difficult for domestic biofuel facilities to compete. In 2015, the U.S. Treasury spent more than $600 million on tax credits for imported biodiesel and renewable diesel.
The Senators said switching from a blenders credit to a producers credit would offer numerous additional benefits. The blender's credit can be difficult to administer because the blending of the fuel can occur at many different stages of the fuel distribution. This can make it difficult to ensure that only fuel that qualifies for the credit claims the incentive, making the program susceptible to abuse.
"U.S. tax policy should support U.S. products and U.S. jobs," said Grassley. "This bipartisan bill would end a system that gives many foreign producers a leg up over U.S. producers and give certainty to the biodiesel industry, which is responsible for employing thousands of Americans."
Joining Grassley and Cantwell to cosponsor the measure are U.S. Sens. Pat Roberts, R-Kansas; Mazie Hirono, D-Hawaii; Roy Blunt, R-Mo.; Sheldon Whitehouse, D-R.I.; Joni Ernst, R-Iowa; Heidi Heitkamp, D-N.D.; John Thune, R-S.D.; Tom Udall, D-N.M.; Martin Heinrich, D-N.M.; Jeanne Shaheen, D-N.H.; Amy Klobuchar, D-Minn.; Al Franken, D-Minn.; Joe Donnelly, D-Ind.; and Patty Murray, R-Wash.
Modifying the credit is estimated to have little to no impact on the consumer. Much of the credit would continue to be passed on to the blender and ultimately, the consumer. Additionally, the U.S. biodiesel industry is currently operating at approximately 65% of capacity. The domestic biodiesel industry has the capacity and access to affordable feedstocks to meet the demand of U.S. consumers, the senators said.
"Well-crafted and efficient tax incentives can be powerful policy mechanisms to achieve the nation's energy objectives and to create jobs," said Anne Steckel, vice president of federal affairs at the National Biodiesel Board. "But subsidizing foreign manufacturing and hurting U.S. workers were not Congress' intent. We applaud the senators' bill to close this loophole by reforming the credit as a domestic production credit. Updating this tax credit is necessary to create a level playing field for U.S. biodiesel producers -- and it has the added benefit of saving millions of taxpayer dollars."
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