Unfinished Tax Business for Congress is Causing American Companies to Shutter

May 27, 2019 |

By Hon. Kenny Hulshof, former Representative for Missouri’s 9th District, now vice chairman for Kit Bond Strategies in DC

Special to The Digest

 The 116th Congress is already in its fifth month, but there’s still some unfinished business lingering from the prior Congress—tax extenders. The new Democratic majority points the finger at Republicans and blames them for inaction. GOP tax-writers had been nearing a final deal in 2018 when the government shut down. Washington insiders are adept at the blame game. Meanwhile, domestic biodiesel producers are the ones suffering the brunt of congressional dysfunction and it’s the 11th hour.

In the interest of disclosure, I was the primary House author of the tax incentive in 2005 and I am actively engaged on behalf of the U.S. biodiesel industry. The incentive was designed to kick-start a nascent industry and it has been an overwhelming success—notwithstanding the array of forces in opposition.

The domestic biodiesel industry has been producing on a commercial scale for approximately fifteen years and has grown from a capacity of about 25 million gallons in the early 2000’s to a projected record exceeding 2.6 billion gallons in 2018. Biodiesel is made from an increasingly diverse mix of resources such as recycled cooking oil, animal fats, and agricultural oils and is the only EPA-designated Advanced Biofuel with commercial-scale production nationwide. This success is in spite of the on-again/off-again saga of the tax credit. There is still room for growth, and stable, forward-looking tax policy is needed for the biodiesel industry to continue growing.

Last February 2018, Congress retroactively renewed the tax incentive for 2017, two months after the start of the new year. It was the eighth time the credit had lapsed since its enactment. The tax incentive provides a per gallon credit and the biodiesel industry includes that value in contracts for feedstock purchases as well as financing for operations. And why shouldn’t it? Congress has continued to affirm that a domestically-produced, environmentally-friendly transportation fuel is a good thing.

It’s urgent that Congress act now. The credit expired in December 2017—nearly eighteen months ago. Essentially, many biodiesel and renewable diesel producers have been operating at a loss since the start of 2018 based on the expectation that Congress would act as it has done in the past. Biodiesel producers have used the tax incentive to keep lines of credit open to build infrastructure, purchase feedstocks, and open new markets. Producers are now struggling mightily to keep plants open.

If biodiesel producers slow down production, thousands of jobs are put at risk. Across the United States, biodiesel production supports more than 60,000 jobs in multiple economic sectors, including transportation and agriculture. The loss of 100-million-gallons of production would undercut support for 3,200 jobs throughout the economy – trucking and shipping among them. The loss of demand for biodiesel would impact markets for other renewable resources, such as recycled cooking oil and reclaimed animal fats. Nationwide, recycled oils make up about a quarter of biodiesel raw materials. The value that biodiesel adds to vegetable oils – about 60 cents per bushel of crops like soybeans and canola – is crucial to farmers right now as trade has undercut crop prices.

The loss would impact national goals to address climate change, too. The Environmental Protection Agency recognizes biodiesel as an advanced biofuel that is at least half as carbon intensive as petroleum diesel. And the U.S. Department of Energy’s Argonne National Lab shows that biodiesel reduces carbon emissions by much more. Biodiesel use also significantly reduces particulate and hydrocarbon emissions that pollute the air, which causes serious human health problems.

The loss of momentum in the biodiesel industry would spread throughout the economy. Biofuels reduce our nation’s need to import oil. Reduced demand for oil eases pressure on fuel prices around the world. Overall, the price U.S. truckers and drivers pay for every gallon of diesel would be at least 17 cents higher without homegrown production of biodiesel and renewable diesel.

Everyone agrees that Congress must kick the addiction to short-term tax extensions. The biodiesel and renewable diesel industry cannot reach its full potential when the tax incentive is extended retroactively or only for one year at a time. With a predictable, long-term tax incentive in place, the biodiesel industry could plan for the future, make necessary investments, and grow with confidence. But advocating the abandonment of current tax policy, simply because Congress failed to address it last year, makes no sense.

The biodiesel industry needs Congress to act now on the two-year extension of the biodiesel tax incentive—legislation that has been introduced in both House and Senate and is awaiting congressional action. The industry needs this 11th hour fix while Congress considers a permanent resolution. Failure to do so will deal yet another blow to the industry and rural America.


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Category: Thought Leadership

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