NATSO, Biodiesel Supply Chain Urge Tax-Writing Committees to Extend, Phase Out Biodiesel Tax Credit

NATSO and a diverse group of biodiesel producers, fuel retailers and trucking interests representing every segment of the biodiesel supply chain sent a letter the Senate Finance Committee and House Ways and Means Committee on Oct. 31 in support of extending and phasing out the biodiesel blenders’ tax credit, and outlining their opposition to efforts to shift the credit to a producers’ credit as the tax-writing committees consider tax reform legislation.

In the letter, the organizations said that the blenders’ credit has worked successfully to build a robust biodiesel and renewable diesel industry and that shifting to a producer credit would limit supply and raise the price of both diesel fuel and heating oil.

“Phasing out the blenders’ credit over five years makes sense in the context of comprehensive tax reform where Congress is looking to lower rates, simplify the tax code, and foster economic growth,” NATSO Vice President of Government Affairs David Fialkov said in a statement. “Shifting to a producers’ credit, on the other hand, is excessively complicated, would create a brand new tax expenditure and would result in higher fuel prices.

“What’s more, it divides the stakeholder community. Fuel retailers do not support a producer credit. You don’t have to be Nostradamus to see that a divided stakeholder community makes it less likely that the biodiesel tax credit will be extended in any form. That would be undesirable for everyone. The companies that would be hurt the most, however, are not retailers, who will continue to sell fuel that their customers want to buy. It will be the small biodiesel producers who are unwittingly beholden to a flawed advocacy strategy."

NATSO supports the viable off-ramp for the biodiesel tax credit introduced earlier this year by Representatives Diane Black (R-Tenn.) and Ron Kind (D-Wisc.). Under the phaseout proposed by Representatives Black and Kind, the tax credit amount for all biodiesel blenders would be $1.00 per gallon in 2017 and 2018, $0.75 per gallon in 2019, $0.50 per gallon in 2020 and 2021, and zero in 2022 and later.

Since 2005, the biodiesel blenders’ tax credit has helped build a robust diesel and renewable diesel industry by allowing industry to sell biodiesel to consumers at a price that is comparable to a gallon of regular diesel. In the last two years, the United States has enjoyed more than 2 billion gallons of diesel replacement fuels that reduce greenhouse gas emissions by greater than 50 percent relative to traditional diesel. Fuel retailers have struggled, however, amid market uncertainty created by the on and off again nature of the tax credit, which expired at the end of 2016.

The Commerce Department also recently announced a preliminary decision to require importers to pay cash deposits to the U.S. government on biodiesel imports from Argentina and Indonesia, which obviates the need for a producer credit, further exacerbates existing market uncertainty and upends the biofuels market by impeding access to cleaner-burning biodiesel produced abroad. It also will disrupt the Renewable Fuel Standard and threaten industry ability to satisfy advanced biofuel mandates established by the Environmental Protection Agency every year.

The cash deposits required on biodiesel imports from Argentina and Indonesia will generate a surge in domestic biodiesel prices that cannot be offset by a tax credit and which in turn will result in higher prices for diesel fuel. When this occurs, it will cost more to ship products across the country, which will result in higher prices for consumer goods moved by truck.