With one plant shutting down and others in danger of doing so, the biodiesel industry is sounding the alarm that an expired tax credit has moved from a lobbying issue to an imminent threat to business.
The National Biodiesel Board flew in about 50 members to climb Capitol Hill this week, urging congressional offices to reinstate the dollar-per-gallon biodiesel and renewable diesel tax credit in an upcoming government funding bill.
“Our industry is being challenged by the lack of this tax credit. It’s been absent from our industry since January 1, 2018,” NBB CEO Donnell Rehagen said.
The tax credit, which is no stranger to temporary year-end extensions, expired at the end of 2017. The current goal is to add language extending the credit in a bill Congress would use to avoid a government shutdown. Government funding is set to expire Feb. 15.
Many biodiesel companies depend on the incentive, like American Green Fuels, based in Connecticut. Their parent company, Kolmar Americas, purchased a plant in Texas and now must stop production there.
“We’re going to run one batch of feedstock we already purchased and then we already made the decision to shut the plant down because the economics don’t work,” Paul Teta, vice president of public and government affairs at Kolmar Americas, said.
He added they’ve also stopped investments at their New Haven, Connecticut plant, because they no longer can justify getting a return on investment due to the current tax situation.
“We’re into our 14th month where the tax credit has not been available to our member-producers,” Rehagen said. At of the end of this week, it will be the longest time without the tax credit since January 2005.
“In my case, the tax credit has played a huge role as we have expanded production in California,” President and CEO Harry Simpson of Crimson Renewable Energy said. “We are in the middle of refinancing debt…when it comes to refinancing your debt, having the tax credit out as a question mark, really impacts the discussion with potential lenders.”
Simpson's company is refinancing an existing loan for a five-year term with a new lender. He noted if the lender can't count on the tax credit, they either won't lend the money or charge a higher interest rate due to increased credit risk.
“That dollar is not something that makes Harry and Paul rich,” Rehagen said, referring to Simpson and Teta. “It helps them, it helps terminal operators, helps the truck stops, and everyone down the entire supply chain … and the biodiesel tax credit is a key piece of that.”
NBB came close to getting a multiyear extension late last year. In November, a bill by then House Ways and Means Committee Chairman, Kevin Brady, R-Texas, proposed technical fixes to the 2017 Republican tax bill and included a multiyear extension phaseout of the credit, but time ran out to pass the bill.
Teta said a Brady-like bill would be ideal but at this point they just want an extension “so the industry can sustain itself”.
NBB hopes their biggest champion, Sen. Chuck Grassley, the Iowa Republican who now chairs the Senate Finance Committee, has something in the works, but Rehagen said “Grassley alone isn’t going to get this job done and needs some help.”
Mostly, biodiesel has been a bipartisan issue but continues to get put in the back seat due to other political issues. Rehagen said Congress must realize the industry is now at a point where it’s time to act or more plants like Teta's will close.
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