No Summer Break for Biodiesel Policy: Industry Argues Time is Now to Expand

Posted: 6/9/2016

By Tom Hance

While many policy matters are on idle as we enter the heat of summer and this election year, biodiesel policy issues are not slowing down.

On May 27, the U.S. Environmental Protection Agency (EPA) released the proposed rule for the Renewable Fuel Standard (RFS) volume requirements, including the volume requirements for biomass-based diesel for 2018 and the total advanced biofuels volumes for 2017 and 2018. 

The proposed rule calls for 2.1 billion gallons of biomass-based diesel in 2018. As a point of reference, the biomass-based diesel requirements for 2016 and 2017 are 1.9 billion and 2.0 billion gallons, respectively. Biomass-based diesel use in the U.S. was approximately 2.1 billion gallons in 2015 and is expected to exceed that amount in 2016, which means we are already at the levels EPA is proposing for 2018.

As part of the process, the EPA is holding a public hearing on the proposed rule on June 9 in Kansas City, Mo., and there is a 60-day public comment period running through July 11. As a key stakeholder, the U.S. Canola Association will submit written comments to the EPA on the proposed rule. The biodiesel industry is urging an increase of the biomass-based diesel volumes to 2.5 billion gallons for 2018 to provide greater growth opportunity.

In addition to the RFS volume requirements, the biodiesel tax credit is also in need of attention this year. The current biodiesel blender's tax credit expires at the end of 2016 and industry efforts are underway to get Congress to extend and restructure the credit. Under the current blender's tax credit structure, biodiesel imported to the U.S. qualifies for a $1 per gallon incentive when it is blended in the U.S. - even when the imported fuel often already receives incentives in its country of origin. The U.S. biodiesel industry supports restructuring the tax incentive to a domestic producer's credit, as championed in the Senate by Sen. Charles Grassley (R-IA) and Sen. Maria Cantwell (D-WA), and proposed in the House by Rep. Kristi Noem (R-SD) and Rep. Bill Pascrell (D-NJ). 

Advocacy efforts are currently focused on securing more House members as cosponsors on H.R. 5240, the biodiesel tax credit extension bill introduced by Representatives Noem and Pascrell. H.R. 5240 would extend the credit for three years, putting it on the same schedule as other renewable energy credits, and restructuring the credit to further promote domestic production. This effort to garner cosponsors will continue throughout the summer in an attempt to demonstrate the broad support for the biodiesel tax credit and compel the relevant committees and congressional leaders to take action before the end of the year.  

Indeed it makes sense to act now as an expanding U.S. biodiesel industry yields numerous benefits to the country. It provides increasing volumes of a domestically produced, renewable energy source and it has expanded markets for farmers and livestock producers, creating new jobs and economic growth, particularly in rural America. Biodiesel also provides significant reductions in greenhouse gas emissions resulting in improved air quality. By the EPA's assessment, biodiesel achieves greenhouse gas emissions reductions ranging from 50-86 percent better than petroleum diesel.

This might sound like a hard sell, but during such an important time for biodiesel policy - and an election year as well - we're going to need all the selling points we can muster.

Tom Hance is a policy expert at Gordley Associates in Washington, D.C.

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