New law extends biofuel tax credits

Dec 23, 2013

—Ag reaction mixed regarding Renewable Fuel Standard, related issues

The Renewable Fuels Association is commending Rep. Scott Peters (D-CA) for introducing legislation that would extend credits and incentives for the biofuels industry by a year.

Its introduction coincides with the U.S. Environmental Protection Agency’s (EPA’s) controversial decision to revise the Renewable Fuel Standard (RFS) to include lower ethanol targets.

The RFS was initiated in 2005. Ethanol production absorbs more than 40 percent of the annual U.S. corn harvest. Corn used for ethanol rose 300 percent from 2005 to 2011, increasing from 1.6 billion bushels to 5 billion bushels.

The RFS required 13.8 billion gallons of corn-based ethanol to be blended into gasoline in 2013, an amount that would use about 4.5 billion bushels of the nation’s corn crop, according to USDA.

U.S. livestock and dairy organizations have urged Congress to either sharply curtail or eliminate the RFS that requires 10 percent of the nation’s gasoline supply come from ethanol, which has driven up corn feed prices and overhead costs for farmers and ranchers in recent years.

The “Second Generation Biofuels Extension Act of 2013” introduced by Peters, extends the Second Generation Biofuel Producer Tax Credit (PTC), the Second Generation Biofuel Plant Depreciation Allowance and the Alternative Fuel Vehicle Refueling Property Credit or infrastructure credit.

It would amend the Internal Revenue Service Code of 1986 to extend the second generation biofuel producer credit and the special allowance for second generation biofuel plant property.

Renewable Fuels Association President and CEO Bob Dineen praised Peters’ support of second generation biofuels.

“Rep. Peters understands the need for Americans to have access to a renewable, low cost alternative to gasoline and should be commended for taking a stand and fighting for the future of next generation biofuels,” Dineen said.

Ethanol, he said, has decreased gas prices an average of $1 a gallon in 2012/2013, sustained more than 383,000 jobs and created a more energy independent America.

“Investors need certainty and extending the tax credits for second generation biofuels will boost investment and innovation in cellulosic and advanced biofuels,” Dineen said.

On Dec. 16, the RFA president addressed a letter to the chairmen and ranking members of the U.S. Senate Finance Committee and House Ways and Means Committee urging Congress to move quickly to extend the key tax incentives “that are extremely critical to the growth and development of the U.S. biofuel industry… The U.S. advanced biofuel and cellulosic ethanol industry is at a critical stage.”

Many commercial-scale second generation plants and dozens of projects in final stages of development were financed with the expectation the producer tax credit would be available, Dineen said. “For these companies, losing the PTC now would be a devastating blow.”

Extending the infrastructure credit would provide fuel retailers with an incentive for investments made to upgrade their fuel delivery systems to allow for the sale of alternative fuels.

“EPA’s recent proposed rulemaking to reduce the RFS is based in large part on the need for expanded infrastructure to support growing supplies of renewable fuel,” Dinneen said, adding the RFS revitalizes the rural economy without threatening the environment and food supply.

National Farmers Union President Roger Johnson responded to the EPA’s Dec. 5 public hearing regarding the EPA’s 2014 RFS program: “While we are pleased that EPA held this hearing to gain feedback, NFU members are incensed with EPA’s initial proposal. At a time when the price of corn is below the breakeven point for farmers, EPA’s proposal slashes the corn ethanol requirement to a level below current production. This will have a devastating impact on farmers and the rural economy.”

Several Iowa livestock producers and a representative from the Iowa Renewable Fuels Association testified in defense of restoring a strong and robust federal Renewable Fuel Standard.

In June, the National Cattlemen’s Beef Association, National Chicken Council and the National Turkey Federation urged Congress to repeal the Renewable Fuel Standard. Livestock and poultry groups called on the administration in the fall of 2012 to waive the RFS for the second time since 2008, but the EPA refused.

“Cattlemen and women are self-reliant, but in order to maintain that we cannot be asked to compete with federal mandates like the Renewable Fuel Standard for the limited supply of feed grains,” said NCBA Policy Vice Chairman Craig Uden, a Nebraska cattle feeder. “When EPA is unable to provide even a temporary waiver of the RFS during the worst drought in 50 years, it is apparent the RFS is broken.” — Mark Mendiola, WLJ Correspondent