Three key tax credits extended for cellulosic biofuels, biodiesel and renewable diesel; playing field leveled for algae; Farm Bill provisions extended
In Washington, the US House of Representatives passed, by a vote of 257-167, a bill to avert a set of automatic tax increases that would have, according to economist consensus, sent the US spiraling back into recession. The bill previously passed in the US Senate 89-8 and is expected to be quickly signed by President Obama, who praised the deal.
Four tax provisions were in the bill that directly impact biofuels.
Cellulosic biofuels producer tax credit. Under current law, facilities producing cellulosic biofuel can claim a $1.01 per gallon production tax credit on fuel produced before the end of 2012. This provision was created in the 2008 Farm Bill. The provision would extend this production tax credit for one additional year, for cellulosic biofuel produced through 2013. The proposal also expands the definition of qualified cellulosic biofuel production to include algae-based fuel. This provision is estimated to cost $59 million over ten years.
Incentives for biodiesel and renewable diesel. The bill extends for two years, through 2013, the $1.00 per gallon tax credit for biodiesel, as well as the small agri-biodiesel producer credit of 10 cents per gallon. The bill also extends through 2013 the $1.00 per gallon tax credit for diesel fuel created from biomass. This provision is estimated to cost $2.181 billion over ten years.
The biodiesel tax incentive expired on Dec. 31, 2011. A recent study found that the industry would have produced an additional 300 million gallons this year with the tax incentive in place. That would have supported some 19,213 additional jobs, for a total of 83,258 jobs supported by the industry nationwide, according to the study, conducted by Cardno ENTRIX, an international economics consulting firm.
Cellulosic biofuels bonus depreciation. Under current law, facilities producing cellulosic biofuel can expense 50 percent of their eligible capital costs in the first year for facilities placed-in-service by the end of 2012. This provision was created in the 2008 Farm Bill. The provision would extend this bonus depreciation for one additional year for facilities placed-in-service before the end of 2013. The proposal also expands the definition of qualified cellulosic biofuel production to include algae-based fuel. This provision is estimated to cost less than $500,000 over ten years.
Agricultural Programs. Section 701 of the Bill extended all provisions of the 2008 Farm Bill through September 30, 2012 – including funding levels for mandatory programs.
“It’s been a long year with a lot of missed opportunity and lost jobs in the biodiesel industry. But we’re pleased that Congress has finally approved an extension so that we can get production back on track,” said Anne Steckel, vice president of federal affairs at the National Biodiesel Board (NBB). “This is not an abstract issue. In the coming months, because of this decision, we’ll begin to see real economic impacts with companies expanding production and hiring new employees.”
Looking to next year, the study found that the industry would support some 112,078 jobs nationally with the tax credit in place versus 81,977 without it. Additionally, the return of the incentive is projected to increase household income by some $1.6 billion next year while supporting an additional $3.1 billion in GDP.
Renewable Energy Group, the largest US producer of biodiesel, released the following statement:
“We are thankful that Congress and the President support the growth of the biodiesel industry through the reinstatement of the credit and for recognizing biodiesel’s important role in energy and food security and job creation. This tax credit provides certainty for our petroleum distributor customers and, in turn, market stability for commercial biodiesel producers like us.”