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ISA urges biodiesel tax credit extension

Article cover photo
The Iowa Soybean Association urges Congress to approve an extension of the biodiesel tax credit to provide some certainty for Iowa’s farmers and blenders. (Photo: Joseph L. Murphy/Iowa Soybean Association)

By Bethany Baratta, ISA senior writer

Iowa’s booming biodiesel industry not only supports the soybean industry, but also the state’s economy and Iowa’s livestock sector. However, an expired tax credit hinders growth in production of the homegrown fuel and threatens those other ancillary benefits.

The biodiesel tax credit has been issued previously to provide a $1-per-gallon credit to blenders in the state which blend biodiesel with petroleum. But the tax credit has expired and was not included in the House’s government funding bill.  Iowa Soybean Association (ISA)farmer leaders and staff have been visiting with senators and members of Congress to urge an extension of the biodiesel tax credit, which they say provides some certainty for Iowa’s farmers and blenders.

“The biodiesel tax credit is essential for industry growth and prosperity,” says Michael Dolch, director of public affairs for ISA. “Without action on the expired tax credit, biodiesel producers are forced to shelve capital investment and long-term planning — some are purchasing less feedstock because of the uncertainty. As a primary supplier, this puts soybean farmers at a disadvantage.”

The biodiesel tax credit extension would ideally include a one-year retroactive extension and a 7-year prospective extension, says Grant Kimberley, executive director of the Iowa Biodiesel Board and director of market development for ISA.

“We want a multi-year extension because that’s really the only way as an industry you can make a long-term business investment and decision,” Kimberley says.

Previous biodiesel tax credits have shown to help grow the biofuels industry, especially in Iowa. An extension of the tax credits would ensure some certainty for the 11 blenders in the state which produced 365 million gallons of the biofuel last year, Kimberley says.

“The certainty of the tax credits provides an incentive for biodiesel plants, marketers, petroleum distributors — to invest in infrastructure so long-term the industry can be very, very price competitive against petroleum no matter what kind of incentives are out there,” Kimberley says.

An Informa study shows that biodiesel adds 63 cents a bushel to the price of soybeans. Soybean oil is a main ingredient in biodiesel making up over 50 percent of the total feedstock mix, but other agricultural byproducts and co-products like recycled cooking grease, inedible corn oil, canola oil, beef tallow, choice white grease (pork fat), and poultry fat are also used.

Dean Coleman, an ISA member in Humboldt, says the price support the biodiesel tax credit provides help during time of soybean price uncertainty.

“With the ongoing trade dispute with China and the impact that’s had on soybean prices, we can’t afford to lose another 63 cents a bushel,” Coleman says.

He serves on the board for the American Soybean Association and is also a part of the ASA’s transportation, infrastructure and biodiesel task force.

Because of the soybeans crushed as a result of the biodiesel production process, the price of soybean meal is reduced for livestock farmers who use it as a feed ingredient, Coleman points out. An Informa study shows this reduces the price of soybean meal by an average $21 per metric ton.

Iowa’s Congresspeople and Senators have previously said they were supportive of the tax credit, but with no extension in sight, Iowa soybean farmers continue to stress the importance of the issue.

Visiting Washington, D.C., recently, Coleman reiterated the importance of the tax credit extension.

“The tax credits help make biodiesel competitive with diesel, and without them, biodiesel plants are not going to be financially viable,” he says.

Kimberley says ISA members are invited to participate in the Iowa Biodiesel Board Day on the Hill, taking place in Des Moines on Thursday, March 7.

Contact Bethany Baratta at bbaratta@iasoybeans.com.

For media inquiries, please contact Katie Johnson, ISA Public Relations Manager at kjohnson@iasoybeans.com or Aaron Putze, ISA Communications Director at aputze@iasoybeans.com

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