Grainnet

National Biodiesel Board Shows Congress How The Biodiesel Industry Delivers

Washington, DC -- Members of Congress called on the National Biodiesel Board (NBB) May 3 to hear about how the government’s investment in biodiesel has returned exponential benefits to America.

NBB Chief Executive Officer Joe Jobe testified before the U.S. House of Representatives Committee on Small Business in a hearing entitled “The Impact of Renewable Energy Production in Rural America.”

In addition, Jobe highlighted results of a new survey that confirms America’s approval of government investment in cleaner burning biodiesel.

“If you take one thing away from my testimony today, I hope it is that biodiesel delivers,” Jobe said. “The biodiesel tax credit is a shining star in the universe of public policy.”

The federal biodiesel tax credit passed in 2004.

Jobe told committee members that everything the biodiesel industry said the biodiesel tax incentive would accomplish is happening.

That includes new fuel refining capacity for the country, job creation, increased farm prices and economic development.

“It has stimulated this industry in every way we imagined,” Jobe said of the credit.

He noted that the industry produced 25 million gallons in 2004. Production has grown by a factor of 10, to about 250 million gallons in 2006.

Today, there are 105 plants capable of producing 864 million gallons of biodiesel, four times the number of plants before the incentive took effect.

Economic analysis shows that biodiesel production will create at least 40,000 new jobs and will add $24 billion to the U.S. economy.

The average price received by soybean farmers has risen by $.42 a bushel since the incentive took effect.

This has also helped to minimize farm program payments, saving taxpayer money.

In his testimony, Jobe also said that the additional tax revenues from biodiesel production will more than pay for the federal tax incentives, generating twice the revenue that the program costs.

“This tax credit is set to expire in 2008, and it is vital to our young industry that it be extended or made permanent,” Jobe said during his testimony.

“We want to see its benefits continue to multiply, and I hope you do, too.”

Jobe urged the Members to sign on to HR 196, introduced by Representatives Earl Pomeroy (D-ND) and Kenny Hulshof (R-MO), to make the excise tax credit for biodiesel permanent.

But amidst all of the positive news and investment, there is a potential threat that could undermine the economic and energy security benefits from a growing biodiesel industry, Jobe said.

The Internal Revenue Service has issued its interpretation of the Energy Policy Act’s Renewable Diesel Tax Credit provision, which has expanded the definition of “renewable diesel.”

This ruling, which comes as the result of intense lobbying of the Administration by some oil companies, allows conventional petroleum refineries to take advantage of the same dollar-per-gallon tax incentive by co-processing raw vegetable oils and animal fats in the conventional refining process.

“The result is bad policy on many levels,” Jobe said.

He pointed out that unlike the biodiesel industry, the oil industry has not built a new refinery in the U.S. in more than 30 years.

The renewable diesel ruling will make large payments for existing refining capacity, and therefore will not add to our fuel capacity or supply. It will likely not add significant investment to the economy, jobs, or rural development.

“In fact, the renewable diesel ruling is likely to result in a reduction of refinery capacity, because it will bid up the price of feedstocks for the biodiesel industry to economically operate,” he said.

“And despite all of these public disservices that were never debated by Congress, it is likely to cost the federal government billions of dollars.”

During his testimony, Jobe released the results of a survey conducted by Moore Information asking taxpayers whether oil companies should benefit from the same level of government support for renewable diesel as for biodiesel.

By a margin of 3 to 1, Americans said that of the two fuels, only biodiesel should receive that level of government support. Almost 8 out of 10 Americans also said the Congress’s decision to provide a tax incentive for biodiesel was a good one.

“I want to be clear that we support new fuels, and we support the oil companies’ engagement in renewable fuel,” Jobe said.

Jobe pointed out that the oil companies were already eligible for 50 cents a gallon to co-process biomass in their existing refineries under the 2005 Transportation Bill.

He said if the loophole allowing them to claim a dollar per gallon isn’t closed, it will have serious, unintended consequences to the biodiesel industry.

“Some have argued that anything that displaces some imported crude oil is a good thing, and that Congress should not pick winners and losers,” said Jobe.

“But, subsidizing large integrated oil companies for their existing refinery capacity by exploiting an ambiguity in the tax code will indeed pick winners and losers.

"The winners will be the oil companies who will receive windfall profits in a way that will not add significant refinery capacity or economic benefits to the country.

"The losers will be small businesses who have invested in their communities to build new biodiesel refinery capacity. The other losers will be the U.S. taxpayers who will foot the bill for this flawed policy.”

Jobe concluded by thanking Members of Congress for their wisdom in encouraging the biodiesel industry.

“We urge you to help keep this momentum going by extending the biodiesel tax credit and by closing the renewable diesel tax loophole.

"I’ve shown you how biodiesel delivers: now we look to Congress to deliver solutions for what threatens to unravel the progress this young biodiesel industry has made in building homegrown energy.

"Since energy security and national security are inextricably linked, to keep the biodiesel industry strong is to keep America strong.”

For more information, call 800-841-5849

www.biodiesel.org.