U.S. Senators Maria Cantwell (D-WA) and Chuck Grassley (R-IA) have introduced bipartisan legislation to reinstate a tax incentive for the production of domestic biodiesel that they say 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.
"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 produced 1.8 billion gallons in that year," according to the press release on the matter.
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 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% 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.