US biodiesel bodies welcome passage of Biodiesel Tax Credit extension
In the United States (US), the Senate adopted on December 20, 2019, appropriations legislation that includes a multiyear extension of the Biodiesel Tax Credit (BTC) through to 2022 and which was signed into law by President Trump on December 21, 2019. According to the National Biodiesel Board (NBB), the BTC will help to expand markets and support the expansion of biodiesel and renewable diesel production by providing much-needed certainty that the industry has been lacking.
On December 17, 2019, Congressional negotiators reached an agreement to extend the biodiesel tax incentive through 2022. On December 20, 2019, the Senate adopted the appropriations legislation package that included the multiyear extension of the biodiesel incentive and which was signed into law by President Trump on December 21, 2019. The agreement between the US Senate and House leadership followed negotiations led by Iowa Senator Chuck Grassley.
Tax extenders help businesses plan for the future and eventually be self-sustaining. Biodiesel and short line railroad tax extenders were part of year-end tax package I negotiated. These are critical for agriculture and ag economy and will help encourage investment and bring much-needed certainty to industry, commented Senator Chuck Grassley on Twitter.
The Biodiesel Tax Credit (BTC) at US$1 per gallon (≈ 3.78 litres) had expired two years earlier, in December 2017, but the passed legislation provides retroactively for 2018 and 2019 through to December 2022. The biodiesel industry and value chain stakeholders including the National Biodiesel Board (NBB) and American Soybean Association (ASA) have sought a multiyear extension of the credit for many years.
Soy growers have faced several obstacles over the past two years—a down farm economy, a trade war, lapsed tax credits and biodiesel plants closing across the country. ASA is grateful to Congress for its support of the tax credit—which will help expand markets for soybean growers during an unsteady time. And I appreciate each of the soy growers and biodiesel industry partners who took time out of their fields to advocate passing this incentive before the end of the year, said Rob Shaffer, ASA director and chair of the organization’s Biodiesel and Infrastructure Committee, who also serves on NBB.
BTC stimulates jobs
When the credit is stable and predictable, the industry can grow with confidence. In 2016, for instance – the last time the credit was in place at the beginning of a year – domestic production of biodiesel, renewable diesel and renewable jet fuel increased by more than 445 million (US) gallons (≈ 1.68 billion litres).
According to the NBB, every 100 million gallons (≈ 378.5 million litres) increase in production supports more than 3 200 jobs across many economic sectors.
Friday’s news represents a big win for the environment, for agriculture, and for US motorists. For too long the biomass-based diesel industry has been held back from showing its real potential due to the recurring uncertainty around the BTC. Now, thanks to the work of biodiesel champion lawmakers, we can accelerate our strategy and further deliver at scale the enormous benefits of biodiesel and renewable diesel. As we look to the future with this supportive policy, we are committed to delivering value to our stakeholders, including our customers and shareholders, through a balanced approach to capital allocation focusing on high quality, high returning investments, including share and bond repurchases that will strengthen the company and our ability to deliver high quality, low carbon fuels. The proceeds from the BTC provide tremendous, predictable resources to support the achievement of these goals, said Cynthia J Warner, President and CEO of Renewable Energy Group, Inc., the largest biodiesel producer in the US.
Biofuel blenders also benefit
For qualified biofuel blenders in the United States (US), the passed legislation also provides for a Blender’s Tax Credit at US$1.00 per gallon of biodiesel or renewable diesel used in the blending process retroactively 2018 and 2019, as well as for the years 2020–2022.
According to Finland-headed oil refiner and renewable fuel producer Neste Oyj, an active overseas player in the US renewable fuel markets, the retroactive reinstatement of the Blender’s Tax Credit for 2018 and 2019 will have a “positive impact” on the company’s comparable operating profit in the last quarter of 2019.
The retroactive reinstatement of the BTC is expected to improve Neste’s comparable operating profit by approximately EUR 140 million for 2018. The corresponding improvement for 2019 is still to be confirmed based on the actual 2019 blending volumes, but it is estimated to be in the magnitude of EUR 200 million. Cash flow relating to the BTC for 2018 and 2019 is expected to be mostly received during the first half of 2020, Neste said in a statement.