Senate committee aims to close loopholes in biodiesel blending

| 6/21/2007

Members of the U.S. Senate Committee on Finance hope to close a loophole to stop foreign traders of fuel from taking advantage of subsidies earmarked for the biodiesel industry.

Committee members marked up tax policy legislation this week to add to a growing energy act to include protections for the biodiesel industry.

If passed, the legislation would cut certain tax breaks for oil or fuel leaving the U.S. for export or any foreign-produced fuel not intended to make it into U.S. supply.

Some off-shore companies are taking advantage of a current loophole in the law dubbed by business writers on Capitol Hill as the “splash and dash” loophole.

The companies fill their tanker ships with biodiesel produced in other countries and arrive at U.S. ports for a “splash” of petroleum diesel. They stay just long enough to receive a tax subsidy for renewable-fuel blending, which was enacted in 2004 to help grow the fledgling U.S. biodiesel industry.

Following a quick stop, the tanker ships “dash” off to Europe where the importers sell the fuel as blended “biodiesel” to the European Union, according to the publication The Hill.

The Finance Committee included the tax provisions in an effort to reduce fuel fraud, committee member Max Baucus, D-MT, said in a prepared statement.

The finance committee legislation, offered as a tax-policy amendment to the CLEAN U.S. Energy Act of 2007 soon to be up for debate, is titled the Energy Advancement and Investment Act of 2007.

Meanwhile, the House Ways and Means Committee is targeting another loophole being claimed by large, domestic integrated oil companies.

Companies like ConocoPhillips, which partnered recently with Tyson Foods to blend chicken fat into petroleum diesel, is claiming tax credits set aside for small or independent biodiesel producers.

Closing the loophole would protect the small producer and grow the market, according to the National Biodiesel Board.

The Ways and Means Committee recently approved a measure to close the so-called “co-processing” loophole in the Renewable Energy and Energy Conservation Act of 2007. Committee members were hoping to add the renewable energy act as an amendment to the U.S. Energy Act.

– By David Tanner, staff writer