NBB pleas with Congress to renew biodiesel tax credit: “The industry is in the midst of an economic crisis”.

In Washington, Manning Feraci, Vice President of Federal Affairs for the National Biodiesel Board (NBB), testified before the U.S. House Committee on Small Business regarding the pressing need to extend and reform the biodiesel tax incentive. The incentive is currently set to expire on December 31, 2009.

“It is difficult for entrepreneurs and investors to make long-term business decisions based on year to year extensions of the biodiesel tax incentive. Thus, a multiple year extension of the incentive is needed to provide certainty and stability in the marketplace. In addition, the U.S. biodiesel industry supports reforming the biodiesel tax incentive by changing the current blenders excise tax credit to a production excise tax credit. This will preserve the elements of the existing tax credit that have effectively incentivized the production and use of biodiesel, with the additional benefit of improving administration, eliminating potential abuses and simplifying tax compliance,” stated Feraci.

Feraci went on to explain that the biodiesel tax incentive, first enacted in 2004, helped grow a then nascent industry with 25 million gallons of annual production in 2004 to a commercial scale industry that produced 690 million gallons of fuel in 2008. Additionally, Feraci’s testimony pointed out the environmental, economic and energy security benefits of producing a low carbon diesel replacement fuel that is renewable and made right here in America.

“Yet, despite recent growth, the industry is in the midst of an economic crisis. Plants are having difficulty accessing operating capital. Volatility in commodity markets and reduced demand for biodiesel in both domestic and global markets are making it difficult for producers to sell fuel. Lastly, uncertainty relating to federal policy that is vital to the industry’s survival is sending inconsistent signals to the marketplace and undermining investor confidence in the industry.”

After a year of reversals featuring the imposition of a European tariff – which just about killed the market for US biodiesel exports – oil prices continuing to hover at around 55 percent, and the EPA not quite getting around to setting a biodiesel mandate under RFS2 – the tax credit is an industry lifeline, although privately, producers fume about the effect on investor confidence that the tax credit has to be renewed each year, amidst considerable uncertainty over whether the Congress will, in fact, renew.

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