Legislation Introduced to Move Biodiesel Blenders Credit to Producer Level

On July 13th Senators Chuck Grassley (R-IA) and Maria Cantwell (D-WA) introduced legislation that would repeal the biodiesel blenders' tax credit and replace it with a producers' credit beginning in 2017, keeping the credit in place for three years through 2019. The credit would only be available to domestically produced biodiesel.

NATSO strongly opposes the legislation, as it would result in fuel retailers paying a higher price for biodiesel blends. This higher price would inevitably be passed down to consumers in the form of higher prices at the pump. As a practical matter, the credit would simply amount to an additional subsidy for biodiesel producers, which already enjoy a guaranteed demand for their product in the form of the Renewable Fuel Standard. 

Senator Grassley and other proponents of the legislation argue that it is designed to prevent blenders from receiving a tax credit for blending biodiesel that is produced overseas. "These reforms would support domestic biodiesel producers and stop subsidizing foreign biodiesel producers," Grassley said.

In fact, however, the legislation is simply a giveaway to domestic producers -- many of whom are large multinational corporations -- at the expensive of retailers and consumers. "When the tax credit is at the blender level, it is closer to the consumer and thus its value is far more likely to make its way into the consumer's pockets through savings at the pump," said David Fialkov, NATSO's Vice President of Government Relations. "By moving it to the producer level, Senator Grassley is simply trying to allow the biodiesel plants in his home state of Iowa to pocket as much taxpayer money as possible."

The argument that the legislation is designed to prevent foreign biodiesel from receiving the tax credit is also flawed, Fialkov said. "A very small percentage of biodiesel consumed in the United States is imported from overseas. In those areas where imports are coming in -- generally coastal regions -- it simply isn't economical to ship domestic biodiesel from the middle part of the country to say California or the Northeast. That won't change if Grassley's flawed legislation becomes law."

Additionally, under Grassley's legislation, domestically produced biodiesel could be exported to other countries and still receive the credit. "So American taxpayers would be subsidizing Canada's efforts to consume cleaner-burning fuels. That doesn't make sense. Clean energy incentives have always been and should continue to be about domestic consumption of clean energy alternatives," Fialkov said.

The biodiesel blenders' credit is scheduled to expire at the end of 2016. NATSO will continue leading the way to urge Congress for a clean extension of the biodiesel tax credit, leaving it at the blender level.