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Biodiesel industry finally gets good news

The Biodiesel industry is breathing a sigh of relief
today as the compromise tax bill passed by Congress heads to the White House
for President Barack Obama’ signature. 
The law restores the $1-a-gallon biodiesel tax credit, which expired at
the end of 2009, and extends it through the end of 2011.

“The industry is ecstatic at the news, where we’ve gotten
the tax credit reinstated and extended for one year,” Gary Haer, chairman of
the National Biodiesel Board, told Agriculture.com Friday. “It’s been a very
challenging year for the industry.”

After the credit expired, the industry struggled to say
afloat, idling plant capacity and laying off or furloughing employees. Some
plants had to file for bankruptcy.

The Energy Independence and Security Act of 2007, which
expanded the renewable fuel standard mandate for corn ethanol also established
mandates for biodiesel use, but that alone wasn’t enough to keep an industry
with 1.4 billion gallons of capacity going during 2010.

Haer said the law manadated use of 500 million gallons of
biodiesel in 2009 and another 650 million in 2010, but because the
Environmental Protection Agency gave fuel blenders credit for biodiesel already
used in 2008 and 2009, it required only 345 million gallons to be blended this
year.

Without the tax credit, biodiesel wasn’t competitive with
petroleum-based diesel and most other markets dried up.

“The biodiesel industry was running at well-reduced rates
this year,” said Haer, who is vice president of sales and marketing for the
Renewable Energy Group based in Ames, Iowa—one of the largest players in the
industry. “Our estimates are that the industry was running at 15% to 20% of
capacity.”

For the companies that are still in business with idled
plant capacity things are looking up. The RFS mandate for biodiesel blending
this year is 800 million gallons, and biodiesel also qualifies as an advanced
biofuel, putting the total potential market at 1.35 billion gallons.

“People are going to be employed and helping our country
on the road to greater energy independence,” Haer said.

He expects the industry’s revival to be a boost to the
markets for soybean oil, animal fats, cottonseed oil, corn oil and canola oil.
All are used as  feedstocks in the
industry, although not all biodiesel plants have the capacity to use animal
fats. Many REG plants are able to make the fuel from both animal and vegetable
feedstocks and the share is roughly 50/50, Haer said.

And, although soybean oil at times may be more costly
than some other feedstocks, Haer expects it to be an important feedstock.since
it’s the must abundant vegetable oil.

“We would expect the crop sector of agriculture as well
as the livestock sector to see some benefits,” Haer said.

The new tax laws gives the IRS just 30 days to come up
with rules for getting tax credits paid retroactively for biodiesel blended
this year when the credit wasn’t in effect. And blenders will have six months
to claim the credit.

“It was very good that Congress put that in place so that
claims could be made on an expedited basis,” Haer said.

Haer said the industry will be lobbying to get the tax
credit extended past the end of 2011.

“We need that support at the same level for just a little
while longer to be on a more financially firm footing than we are today,” he
said.

 

 

 

 

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