Tax break for biodiesel could be extended until 2017

| 3/16/2007

Producers of biodiesel could continue to get tax breaks until 2017, and federal officials say that will help ensure a competitive price at the pump for renewable fuels.

A bill introduced Wednesday, March 14, in the U.S. Senate would extend the existing $1-per-gallon federal excise tax credit and income tax credit on pure biodiesel by 10 years.

The intent of the law, which dates back to 2004, has been to entice producers to build more plants and add capacity, National Biodiesel Board spokeswoman Amber Pearson told Land Line.

She said lower production costs help the producers pass savings on to retailers.

"Retailers can then pass that down to consumers," Pearson said.

Sen. Blanche Lincoln, D-AR, and Sen. Norm Coleman, R-MN, filed the bill to extend the program, hoping the tax credit will not end. If it were to end, it would leave biodiesel producers struggling to compete in a market dominated by petroleum diesel.

"Our American agricultural producers and domestic companies have demonstrated their commitment to energy independence through the production of renewable fuels like biodiesel," Lincoln stated in a press release.

Biodiesel refers to fuel made from vegetable oils, animal fats or recycled restaurant grease. It can be blended with petroleum diesel up to 20 percent with no significant modifications needed to a truck engine or fuel system.

The tax incentive leads to a credit of up to $1 per gallon of pure biodiesel above the rack. For bio and petroleum blends, it translates to a penny per percentage point of biodiesel in a gallon.

"It's a dollar per gallon of pure biodiesel," Pearson said. "At a 20-percent level, that would be 20 cents (per gallon of B20)."

- By David Tanner, staff writer