Stakeholders in the biodiesel industry are rejoicing now that a bill has been introduced in the U.S. House of Representatives to protect biodiesel producers from losing out to big oil. But the battle over federal tax credits is not over yet.
Federal lawmakers – primarily on the Democrat side of the aisle – want to close loopholes in the Internal Revenue Code of 1986 that allow large oil companies to qualify for tax credits intended for small businesses in the biodiesel industry.
Rep. Lloyd Doggett, D-TX, introduced the Responsible Renewable Energy Tax Credit Act of 2007 on May 17, to protect the original intent of the tax credits, which was to promote growth in the production of renewable fuels.
Big oil companies wedged themselves into the program by blending biofuel into their petroleum supplies. That qualified them for tax credits intended for biodiesel producers.
“Unless the abuse of this tax credit is prohibited, it will have the exact opposite effect of what Congress intended – it will discourage the creation of real renewable diesel fuel – and all on the taxpayer’s dime,” Doggett, senior member of the House Ways and Means Committee said in a statement released by the National Biodiesel Board. “Green energy initiatives must not be converted into public boondoggles.”
With 58 co-sponsors consisting of 56 Democrats and two Republicans, the bill aims to disallow the tax credit for companies that practice “co-processing,” literally mixing bio material – not refined biodiesel – into petroleum diesel. Although the result of co-processing includes renewable fuel sources, the tax credit is intended for biodiesel producers to bring their products to market.
An example of what the bill aims to stop is a recent deal struck between ConocoPhillips and Tyson Foods to co-process chicken fat into petroleum diesel and call it biodiesel.
National Biodiesel Board CEO Joe Jobe said fixing the problem is sound energy policy.
The tax incentive for producers has already helped grow the industry, doubling production each year since 2004 from the starting point of 25 million gallons per year, according to the biodiesel board.
Biodiesel plants around the country grew from a handful to more than 80, with another 25 under construction. U.S. production of biodiesel will soon top 864 million gallons of fuel per year, Jobe said.
Doggett’s bill – HR2361 – has been referred to the House Committee on Ways and Means.