Biodiesel blending credit gets budget reprieve from House

Biodiesel in test tubes

Blenders of biodiesel are closer to a federal tax break included in a $1.37 trillion spending package approved by the House of Representatives on Dec. 17.

The measure, if passed by the Senate and signed by President Donald Trump, would be retroactive to 2018 and expire at the end of 2022. 

Blenders would be allowed to claim $1 per blended gallon of the fuel, which adds soy oil and animal fats to petroleum-based diesel. The result is a cleaner-burning fuel that reduces particulate and planet-warming greenhouse gas (GHG) emissions.

Biodiesel blending ranges from 5-20% per gallon of diesel depending on location and season. It can be used with no engine modifications.

The tax credit is worth about $3 billion a year to the biodiesel industry, which makes 2.6 billion gallons of the fuel annually, according to Paul Winters, a spokesman for the National Biodiesel Board, a trade association representing producers, feedstock suppliers and fuel distributors.

“It has always been a temporary tax provision,” said David Fialkov, vice president of government affairs, legislative and regulatory counsel for NATSO, the association of truck stop and service plaza operators. “It expires and at a certain point, as with many temporary tax provisions, they get extended for a small period of time.”

Service plaza operators, including Travel Centers of America (NASDAQ: TA), Pilot Flying J, and Love’s Travel Stops and Country Stores make the more expensive fuel and sell it at a price competitive with regular diesel. The credit expired at the end of 2017, leaving the blenders to shoulder the additional cost.

Blenders hoped the credit would be reinstated retroactively. TA, the only public company among travel plaza operators, estimated the blending credit was worth $35 million in 2018 and about $29 million to its financials through the first three quarters of 2019.

The lapse in the credit led to 10 biodiesel plants in nine states being idled this year, resulting in the loss of 265 jobs, Winters said.

“Today’s announced deal provides the policy certainty that the biodiesel industry has been seeking to support investments and continued growth of production,” said Kurt Kovarik, the biodiesel board’s vice president of federal affairs.

Support for the reinstatement and extension of the tax credit came from more than agricultural districts that typically supported the credit. Forty House Democrats signed a Nov. 6 letter to House Speaker Nancy Pelosi and House Ways and Means Chairman Richard Neal urging inclusion of the tax credit in spending legislation.

“If you look back over the decade at all the letters that have been written, everybody signing them represented a farm or a biodiesel plant,” Fialkov said. “It gave people the impression that the only people who cared about this had a parochial interest in getting an ag subsidy.”

Democrats elected in 2018 in districts that Trump carried in 2016 have been seeking to demonstrate to voters that they were doing more than leading the impeachment proceedings against the president.