US Biodiesel Production Dries Up On Loss Of Tax Incentive

Soybean-based biodiesel production in the U.S. has come to a halt after Congress allowed a $1-per-gallon government tax incentive for the industry to expire on Dec.31, National Biodiesel Board spokesman Michael Frohlich said Tuesday.

“Production right now is really at zero,” according to Frohlich, who said 180 biodiesel plants in the U.S. produced about 450 million gallons of fuel in 2009. Biodiesel plants have gone idle, though, while companies cut hours for employees and hope Congress will help
out soon, Frohlich said.

Sen. Chuck Grassley, R-Iowa, had predicted a halt in biodiesel production during a public conversation on the Senate floor in December. Without the tax incentive, Grassley had said on Dec. 22, “the price of biodiesel will be $1 higher on Jan. 1, 2010” and “people will simply buy petroleum diesel, rather than biodiesel, come Jan. 1, 2010.”

Congress failed to extend the incentive despite the efforts of Grassley and others, but lawmakers have already said they plan
to reinstate the incentive “retroactively” to Jan. 1 as soon as possible.

Grassley and Sen. Max Baucus, DMont., wrote a letter in December to Senate Majority Leader Harry Reid, DNev., and Republican leader Mitch McConnell, R-Ky., telling them that early in 2010 they intended to “address the extension of various tax provisions expiring on or before Dec. 31, 2009,” including the biodiesel tax incentive.

CME Group