Posted by: davidgarnerconsulting | March 16, 2010

Biodiesel Tax Credits Extended in the U.S.

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The US biodiesel industry was celebrating this week after the Senate approved the extension of the controversial $1 (66p) a gallon tax credit that had been allowed to expire at the end of last year.

The one-year extension of the tax credit, which will retroactively cover biodiesel produce since the turn of the year, was passed as part of the new jobs bill.

The bill will still need to be reconciled with a similar bill passed by the House of Representatives and there is no set date for it to be formally approved by the president, but the vote looks to have brought to an end to months of uncertainty for the industry during which alternative drafts of the bill dropped the proposed extension of the tax break.

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The vote was welcomed by the biofuel industry, which had warned that the lapsed tax credit had resulted in a dramatic fall in production that was putting an estimated 23,000 green jobs at risk.

Gary Haer, vice president of sales and marketing at Renewable Energy Group (REG), one of the largest biodiesel producers in the US, issued a statement welcoming the move and urged legislators to ensure the extension is fully enacted as swiftly as possible.

“We urge our congressmen to move quickly to include the biodiesel tax credit in the first moving piece of legislation possible and get it to the president’s desk,” Haer said. “Since the 1 Jan lapse of the tax credit, our industry has seen significant reductions in biodiesel demand, leading to manufacturing slowdown and widespread job loss, including staff at REG network plants in Iowa. ”

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However, the extension of the tax break will anger many environmental groups, which have long warned that diverting crops to make biofuels can indirectly contribute to food shortages and deforestation. Meanwhile, some critics have noted that the tax break is being used to support an industry that is showing few signs that it can operate without generous subsidies.

In related news, POET, one of the largest US producers of ethanol, announced plans to cut water use in its production processes by 22 per cent to 2.33 gallons per gallon of ethanol over the next five years.

The pledge is the first part of a company-wide sustainability initiative, dubbed Ingreenuity, which will aim to reduce the environmental impact of its supply chain and operations.

The firm said it would realise the savings through the rollout of a new proprietary process designed to recycle cooling water used in the ethanol production process. It said the technology had already been installed at three plants where it had reduced water use from 2.5 to two gallons per gallon of ethanol. Suppliers of feed stocks will also be surveyed by the company to ensure their crop irrigation processes are water efficient.

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