WASHINGTON, Jan. 27, 2016 - The National Biodiesel Board annual Conference & Expo is underway this week in Tampa, Florida, and one of the hottest topics is formulating a new game plan to get Congress to listen to the industry’s needs when it comes to tax credits.
Producers and industry representatives are grateful that lawmakers agreed in December to extend a $1-per gallon “blender’s” tax credit that helps keep the alternative fuel profitable, but they’re also dismayed because much of that subsidy continues to flow to foreign companies that ship their biodiesel to the U.S.
Since its inception in 2005, the blender’s credit has been available to any company in the U.S. that blends biodiesel into fuel, regardless of where the biodiesel was produced – the U.S., Argentina, South Korea or anywhere else around the world.
The idea behind the subsidy was a good one and still is, said Lisa Mortenson, CEO of Community Fuels in Stockton, California. But foreign companies know they can benefit from the credit, she said, and they are shipping so much biodiesel to the U.S. that the flood of fuel is driving down prices and stifling domestic production.
“Here’s the U.S. waving a welcome sign to all the product from Argentina: ‘Please come to the U.S. and we will give you $1 per gallon,’” said Anne Steckel, vice president of federal affairs for the National Biodiesel Board.
Steckel calls the effect of the blender’s credit a “double whammy” because the flood of imported biodiesel stays in the U.S., not only suppressing prices but also taking up demand that could otherwise be supplied by U.S.-origin product.
But the continued growth of imports doesn’t just hamper domestic growth, it also robs producers here of the ability to export, Steckel said.
“The biggest country we export to is Canada and that’s basically a reciprocal number,” she said. “We import about 80 or 90 million gallons (from Canada) and export about the same amount. It’s kind of a wash.”
“It’s not that our guys don’t want competition from imports,” said NBB spokesman Ben Evans. “It’s unfair competition. It’s competition that’s been subsidized in its home country and is shipped here to get another subsidy and then compete against domestic manufacturing. That is obviously not fair.”
The proof is in the numbers, said Evans. There were about 88 million gallons of imports in 2012, but that has exploded and continues to grow, according to EPA data announced by NBB on Sunday. The U.S. imported 510 million gallons in 2014 and about 650 million gallons in 2015.
Meanwhile, domestic production has remained relatively flat in recent years. U.S. companies produced about 1.42 billion gallons in 2015, down from about 1.47 billion gallons in 2014 and 1.50 billion gallons in 2013.
“This is exactly what we have been warning would happen, and it will continue until we take steps to level the playing field, including by reforming the biodiesel tax incentive as a domestic production credit,” said NBB CEO Joe Jobe.
It’s why NBB and the biodiesel producers it represents pushed hard in 2015 for Congress to ban the subsidies for imported product and it’s why the industry will be rallying around another legislative push this year.
What they want is relatively simple: change the blender’s credit into a “producer’s credit” that is paid only to U.S. biodiesel manufacturers.
The results of such a change in policy, said Mortenson, would be felt very quickly. Imports would not drop to zero, but they would drop significantly and U.S. producers would be able to make up the difference quickly because of currently unused capacity.
NBB’s Steckel said that, overall, U.S. production is running at 40 to 50 percent capacity and blenders would not be at a loss for available biodiesel.
Although some in the blending industry have accused biodiesel producers of seeking to get more of the subsidy for themselves, it’s just not true, said Brad Wilson, executive vice president and CEO of Western Iowa Energy LLC.
“The reason we want a producer’s credit is not so we can keep the whole dollar,” he said. “We know that’s not going to happen. “It’s to block imports. These imports are just killing us. They’re eating up a third of the (Renewable Fuel Standard).”
Company executives like Wilson and NBB officials were given hope that a producer’s credit might be possible last August when it was included in the Tax Relief Extension Act of 2015 and approved by the Senate. The producer’s credit, made possible because of an amendment offered by Sens. Chuck Grassley, R-Iowa, and Maria Cantwell, D-Wash., during the bill’s July markup, was approved unanimously by the Senate Finance Committee.
The House did not pass similar bill, and the final version of tax legislation did not include the producer’s credit despite a last minute effort by Grassley and Cantwell, who introduced a stand-alone bill, the Biodiesel Tax Incentive Reform and Extension Act of 2015, on Dec. 3.
“This provision should be included in the tax extenders package under discussion,” Grassley said at the time. “The goal is to meet the country’s biodiesel needs and support domestic producers at the same time.”
But there just wasn’t the support in the House – something Steckel said NBB hopes to change this year. “You have folks on Ways and Means that were a bit new to the process and it seems like they wanted more time to review it,” she said. “This year we have some time to continue educating lawmakers on Capitol Hill about the importance of U.S. tax dollars supporting domestic production and not sending (the money) overseas.”
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