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Bipartisan Bill Introduced to Bolster Renewable Fuels with Biodiesel Tax Credit

Bill Would Improve Biodiesel Incentive to Benefit American Producers, Advance Energy Independence

WASHINGTON – United States Sens. Chuck Grassley and Joni Ernst of Iowa, along with a bipartisan group of 14 other senators led by Grassley and Sen. Maria Cantwell (D-Wash.), today introduced legislation to reform the biodiesel tax credit and extend the new policy for three years.

The Grassley and Cantwell-authored American Renewable Fuel and Job Creation Act of 2017 extends this important clean-fuel incentive for three years and reforms the incentive by transferring the credit from the blenders to the producers of biofuels. The switch ensures that the tax credit incentivizes domestic production and taxpayers aren’t subsidizing imported fuel 

Since 2014, biofuels imports have increased from 510 million gallons to about one billion gallons in 2016. Already in the first quarter of 2017, imports are 10 percent higher than they were at this time in 2016. In many cases, foreign biodiesel benefits both from the existing tax credit and from additional foreign subsidies, which makes it difficult for domestic biodiesel facilities to compete. In 2015 alone, the U.S. Treasury spent more than $600 million on tax credits for imported biodiesel and renewable diesel.

According to the Iowa Renewable Fuels Association, the biodiesel industry supports nearly 4,000 Iowa jobs, generates more than $300 million of income for Iowa households and accounts for $447 million of Iowa’s GDP.

“U.S. tax policy should support U.S. products and U.S. jobs,” Grassley said. “This bipartisan bill would end a system that gives many foreign producers a leg up over U.S. producers and give certainty to the biodiesel industry, which is responsible for employing thousands of Americans. Iowa producers shouldn’t be put at a disadvantage by foreign producers that in many cases are double dipping by benefiting from U.S. tax incentives on top of their own significant government subsidies. These reforms supporting domestic producers would also save taxpayers money. Policies ought to encourage the production of domestic renewable fuels to meet consumer demand and support the creation of American jobs.”

“Iowa leads the nation in biodiesel production, and it’s critical that we continue to support its growth here in the U.S.” Ernst said. “By investing in our domestic energy production, we can promote job creation and stability for the many Iowans who work in the industry and the surrounding farming communities. I’m proud to support this bipartisan legislation with Senator Grassley, which will ensure that we are not inadvertently supporting foreign-produced biodiesel.”

Switching from a blenders credit to a producers credit would offer numerous additional benefits. The blenders credit can be difficult to administer, because the blending of the fuel can occur at many different stages of the fuel distribution. This can make it difficult to ensure that only fuel that qualifies for the credit claims the incentive, making the program susceptible to abuse.

Joining Grassley and Ernst to co-sponsor the American Renewable Fuel and Job Creation Act of 2017 are Sens. Maria Cantwell (D-Wash.), Pat Roberts (R-Kan.), Mazie Hirono (D-Hawaii), Roy Blunt (R-Mo.), Sheldon Whitehouse (D-R.I.), Heidi Heitkamp (D-N.D.), John Thune (R-S.D.), Tom Udall (D-N.M.), Martin Heinrich (D-N.M.), Jeanne Shaheen (D-N.H.), Amy Klobuchar (D-Minn.), Al Franken (D-Minn.), Joe Donnelly (D-Ind.) and Patty Murray (D-Wash.).

Modifying the credit is estimated to have little to no impact on the consumer. Much of the credit would continue to be passed on to the blender and ultimately, the consumer. Additionally, the U.S. biodiesel industry is currently operating at approximately 65 percent of capacity. The domestic biodiesel industry has the capacity and access to affordable feedstocks to meet the demand of U.S. consumers, the senators said.

In 2005, Congress created the biodiesel tax incentive. As a result of this incentive, the Renewable Fuel Standard, and consumer interest, biodiesel is providing significant benefits to the nation. Domestic biodiesel production supports tens of thousands of jobs. Replacing traditional diesel with biodiesel reduces emissions and creates cleaner air. Homegrown biodiesel improves U.S. energy security by diversifying transportation fuels and reducing dependence on foreign oil. Biodiesel itself is a diverse fuel that can be produced from a wide array of resources such as recycled cooking oil, soybean and other plant oils and animal fats.

The text of the American Renewable Fuel and Job Creation Act of 2017 is available here.