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Biodiesel tax incentive extension expected this week

Article cover photo
Iowa soybean farmers received an early Christmas present today when Congress introduced a five-year extension of the federal biodiesel tax incentive. (Photo: Joseph L. Murphy/Iowa Soybean Association)

By Bethany Baratta

Farmers and biodiesel industry representatives are breathing a sigh of relief today as Congress introduced a five-year extension of the federal biodiesel tax incentive. Hours later, the House signed off on the bill. The bill now moves to the Senate, where it is expected to be passed and moved to President Trump’s desk for a signature.

Iowa Soybean Association (ISA) President Tim Bardole is hopeful for swift passage of the bill.

“This gives soybean farmers hope for an expansion of biodiesel production, thereby increasing demand for our product,” Bardole, a farmer near Rippey, said.

The federal biodiesel tax credit has been issued previously to provide a $1-per-gallon credit to blenders which blend biodiesel with petroleum. But the tax credit expired nearly two(?) years ago, leaving blenders, petroleum marketers and farmers without incentives to blend the homegrown fuel or demand soybeans.

The extension proposed today includes a two-year retroactive component for 2018 and 2019, and also a $1-per-gallon credit for 2020, 2021 and 2022.

“That dollar-per-gallon credit means a whole lot to the entire supply chain, not just our producers,” said Donnell Rehagen, CEO of the National Biodiesel Board (NBB). “It means investments in infrastructure to blend, build retail sites, and a market for our farmers.”

It’s a welcome sign for Iowa’s biodiesel industry, which produced 365 million gallons of biodiesel in 2018.

“This is exactly what we need to foster steady, predictable growth of biodiesel,” said Grant Kimberley, senior director of market development for ISA and executive director of the Iowa Biodiesel Board.

 The past two years have been difficult for the biodiesel industry, Kimberley explained.

“Market dynamics have assumed the government would live up to its commitment, which put producers in the position of selling biodiesel at a loss,” he said.

The proposed extension of the biodiesel tax incentive was welcome news for Roy Strom, president and CEO of W2 Fuel, LLC.

Uncertainty surrounding the biodiesel tax credit forced the company to close two of its biodiesel plants in Crawfordsville, Iowa, and in Adrian, Michigan, in September.

The extension of the incentive could change things, he said.

“It means everything,” Strom said. “While there is no guarantee we can start back right away with a tax credit in place, it does give us a chance.  There is still the depressed RIN demand created by the small refinery exemptions that will put downward pressure on pricing, but at least we will have certainty of the margins and no 'betting' on the tax credit.”

Strom said the retroactive and prospective aspects to the proposal provide more certainty than a one-year extension.

“I am hopeful and optimistic this bill will make it through, and we will be back up and running.”

Contact Bethany Baratta at bbaratta@iasoybeans.com.

 

For media inquiries, permission to republish articles or to request high-res photos, please contact Katie James, ISA Public Relations Manager at kjames@iasoybeans.com. © 2020 Iowa Soybean Association. All rights reserved.