US Congress approves extension of biodiesel, cellulosic tax credits

Washington (Platts)--18 Dec 2015 543 pm EST/2243 GMT

The US Senate on Friday passed a tax and spending package that includes a retroactive extension through next year of a $1/gal blenders tax credit for biodiesel and a $1.01/gal production tax credit for cellulosic biofuels.

The credits had expired at the end of 2014.

The legislation now goes to President Barack Obama, who is expected to sign it into law shortly.

The biodiesel industry has warned of layoffs and plant closures if the tax incentives were not extended, while the cellulosic biofuels industry has said its tax credits would help attract investment as it scales up.

Notably, however, the package does not change the biodiesel blenders credit to a producers credit, as the US biodiesel industry had urged, arguing such a move would protect the US industry against imports from Argentina, Asia and Europe.

The National Biodiesel Board has said the blenders credit would continue to encourage imports at the expense of domestic production.

According to data compiled by Platts agricultural analytics unit Kingsman, US biodiesel imports are forecast to reach 330 million gallons this year, compared with 61 million gallons in 2012.

Domestic biodiesel production, meanwhile, is on pace to total 1.45 billion gallons, according to Kingsman.

Analysts with ClearView Energy Partners said in a note Thursday the tax credit will lower the compliance cost of the Renewable Fuel Standard biofuels mandate for refiners from 10 cents/gal of gasoline or diesel to 6 cents/gal.

The RFS finalized in November by the Obama administration requires 1.90 billion gallons of biodiesel in 2016. Because of how the RFS is structured, the ClearView analysts said they expect the cost of biodiesel RINs to serve as a ceiling for ethanol RINs.

RINs are tradable credits that are generated for every gallon of biofuel produced, which refiners must acquire to demonstrate compliance with the RFS.

--Herman Wang, herman.wang@platts.com
--Beatriz Pupo, beatriz.pupo@platts.com
--Edited by Keiron Greenhalgh, keiron.greenhalgh@platts.com

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