Congress in No Hurry to Renew Biodiesel Tax Credit

us-capitol-fiscal-cliff-voteCongress seems to be in no hurry to renew the $1-a-gallon federal biodiesel tax credit. And this analysis from Bloomberg BNA indicates that the biodiesel credit, as well as some other renewable energy credits, won’t come until later this year but at least will be applied retroactively.

“I think Congress has gotten over the idea that the world will stop spinning if they don’t rush back and do extenders,” said [John Gimigliano, principal in charge of the energy sustainability group in KPMG's Washington national tax practice], who previously served as senior tax counsel for the House Ways and Means Committee.

While Gimigliano said quickly passing legislation on tax extenders will be “very difficult,” he said Congress would be likely to approve a legislative package in 2014 that extends the expiring provisions retroactively.

Any interest in moving quickly on tax extenders is likely to come from the Senate, where Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, has said committee staff from both parties have started the process of developing extenders legislation.

One legislative vehicle probably would be a bill needed possibly in March to extend the debt ceiling, although Congress may wait until after the November elections to act, analysts said.

Another thing bogging down the renewal of the credit is the nomination of Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, to become U.S. ambassador to China. Some analysts believe it might not be until the November elections before the biodiesel credit is renewed.

One thought on “Congress in No Hurry to Renew Biodiesel Tax Credit

  1. While a lot of US (aka “us”) is busy trying to persuade the EPA to preserve the RFS, it seems unlikely that any significant number of farmers (big agra, or small farms) will be planting any less corn this year.
    By contrast, biofuel makers, or rather biodiesel makers have to process the oil deliveries for which they already contracted, and few if any have the storage capacity to wait for the reinstatement of the tax credit. Whatever doubt there may be isn’t going to depress production a great deal, but could, and likely will, mitigate the market for biodiesel, depressing the price. It is going to be hard for some biodiesel manufacturers to stay in business if the best price they can get (without subsidy) is below their costs, and the price for most oils is not on a downward slope.
    Government assistance in birthing a nascent industry is desirable and often even necessary, but aggregate costs of feedstock plus processing have not come down enough to meet the market half way. I think the obvious solutions are either to add to the mandatory quotas (not necessarily federal) while creating a staged withdrawal of the subsidies, or to find a new source of inexpensive oil. The first is essentially purely regulator, and can be embared upon with little or no delay (except for the political will, and the trepidations about appearances in an election year).
    The second, however, is going to require more development of improved methods of algae cultivation. More rapid growth of the crops and less expensive production methods would be a good start, and for a small fraction of the costs of tax credits for biodiesel as a whole. And I am not even talking about just funding additional research. I know of several significant contributions to these goals that are sitting on shelves, ignored by entrepreneurs and capital sources.
    Perhaps we need an “X Prize” for algae economic viability, perhaps some better government incentives (not merely subsidies), but something needs to be done to get these solutions (both known and unknown) off the shelves and into production. It seems that almost everyone agrees that “algae is the future” of biofuels, yet the majority are turning a blind eye to this road less traveled by. We need an algae superhighway, and we need it soon. I know I’d like to help, if I can.
    Sincerely,
    Stafford “Doc” Williamson