Farm Progress

Biodiesel in precarious Senate spot 247952

David Bennett 1, Associate Editor

February 18, 2010

6 Min Read

It upset many legislators when Nevada Sen. Harry Reid, Senate Majority leader, recently scuttled the Baucus/Grassley jobs bill by introducing a scaled-down bill of his own. If Reid’s version passes in Baucus Grassley’s stead, agriculture would lose a $1.5 billion disaster aid package.

It would also mean the loss of biodiesel tax incentives — something the struggling industry desperately needs to survive. “People are scratching their heads wondering” why Reid took such action, says Michael Frohlich, National Biodiesel Board director of federal communications who spoke with Farm Press on Feb. 16.

“It’s been shown that a tax incentive would make the biodiesel industry profitable and grow. We had around 25 million gallons of production in 2004 and went up to around 700 million in 2008. So the success (of the incentives) can’t be argued.”

Among Frohlich’s other comments:

• Can you talk about where the biodiesel industry was prior to the competing jobs bills being introduced?

“The biodiesel industry was in a pretty dire situation with the last of the tax credit. We were starting to see layoffs. Companies that weren’t laying people off were cutting back on hours and payroll just to stay afloat, tread water.”

The biodiesel component of the Baucus/Grassley jobs bill “was welcome news. It was a broad bipartisan agreement with Sen. Baucus (chairman of the Senate Finance Committee) and ranking member Sen. Grassley and had been in negotiations for about 10 days. About five hours after the bill was introduced, Senate Majority Leader (Harry) Reid and the Senate leadership decided to pull the tax extension out of the legislation” and introduced their own, smaller jobs bill.

“There are economic studies that show if the tax credit isn’t put back in place, there’s an immediate threat to 23,000 jobs. Sen. Reid has said he’s moving on a jobs agenda so we’re all perplexed why he’d strip out an incentive that would save 23,000 green jobs. At this point, it’s not just about creating jobs but also saving them in this difficult economy.”

• How does this fit with the EPA’s final ruling on the Renewable Fuels Standard (RFS)? Won’t production need to be ramped up to hit the production target?

The RFS “was supposed to be implemented on Jan. 1, 2009. But there was a significant delay. The proposed rule came out (last) May and then went through an extended comment period.

“The final rule, which just came out, combines the volume goals from 2009 — which was 500 million gallons — with the volume goals of 2010 for a total of 1.15 billion gallons by the end of 2010. What was sold and used already in 2009 will count towards that final goal.

“Obviously, the release and positive nature of the (final) ruling was a strong shot in the arm for a limping industry. But we needed the one-two punch: The RFS and the tax incentive. Without the tax incentive it will be difficult for folks to sell outside certain markets when (biodiesel) simply isn’t price competitive with petroleum diesel.”

• What was the reaction of people on Capitol Hill that you deal with to Sen. Reid’s proposed budget?

“They were very surprised (by Reid’s move). I think there’s some disappointment and, in some circles, outrage. This was a bipartisan bill and we’d just come off some difficult partisanship with the special election in Massachusetts and the health care debate. It’s been very rancorous in Washington.

“At the end of January, President Obama gave his State of the Union address. He called for bipartisanship moving forward. Obviously, because of the ailing economy, jobs became a priority. With this bipartisan bill … there was consensus and people were ready to vote for it. Now, that has been pulled out from under us. So, the first hint of bipartisanship that appeared would work and help industries across the board — the biodiesel tax incentive wasn’t the only tax incentive included — and it’s stripped away. People are now asking, ‘Well, if the Senate leadership is committed to bipartisanship and creating jobs, why do this?’”

• Nothing will be done until Congress gets back the week of Feb. 22?

“That’s correct. Sometimes we hear whispers here and there. But the NBB Federal Affairs team is very plugged in and they’ve not heard a peep. Everything is very much up in the air.

“We’re working with our members, trying to get a grassroots going to call elected officials and ask Sen. Reid to put (the biodiesel) language back into the bill. At this point, though, it’s hard to tell what the next step will be.

“They’re saying they’ll address the tax incentives later, in another package. That’s the legislative equivalent of saying ‘the checks in the mail — don’t worry.’ Well, when you have people losing jobs in an industry that’s pretty much at zero production that isn’t good enough.

“Congress has continually touted ‘green jobs’ and a path towards energy security. Well, biodiesel provides both of those. The fact that they’ve cut (incentives) out is perplexing because job creation, job growth and the tax incentive are inextricably linked.

“Once we get the tax incentive through, people will hire new employees. One plant in Washington said as soon as the tax credit passes, they’ll hire 10 new employees. So, it isn’t just saving those 23,000 jobs but is about creating more. Put the tax incentive and RFS together and you’ll see the best potential year for biodiesel yet.”

• Any differences in how well biodiesel is doing around the country? Are some regions doing better?

“It’s pretty dire across the board. Some businesses collect waste restaurant grease. So, if they’re not buying feedstock they’re capable of producing fuel at a lower cost. But feedstock prices are relatively high in a volatile commodity market. Combine that with the loss of a tax incentive and the current, severe recession and this is almost a perfect storm to put the biodiesel industry at serious risk for surviving.”

• Sen. Reid’s supposed reason for putting out his own jobs bill was to placate progressive concerns. What are their concerns with biodiesel if it’s green?

“That’s an interesting question. There are a number of things that were pulled out of the (Baucus/Grassley) bill. I don’t think there was a contention with the biodiesel incentive like there are with others.

“Reid, at his press conference, said he wanted to simplify the jobs bill and that the tax extenders didn’t make sense in this initial jobs package. Obviously, the NBB and trade industry completely disagree.

“But we’ve heard nothing definitive from the more liberal members of the Senate saying, ‘this gets in the way of our progressive agenda.’ No one has stood up and spoken against the tax incentive for biodiesel. It’s very hard to because it goes with the country’s energy policy and moving the nation forward. … It’s a win/win all the way around. It’s hard to understand why that isn’t recognized immediately.”

• Anything else?

“It’s critical for stakeholders and your readers to contact their elected officials and let them know they want this tax incentive in the first legislative vehicle — not the second or third — that passes Congress this year. As I said, some 23,000 jobs are in immediate jeopardy. And without it, growth in the industry will be stifled which means jobs won’t be created.”

For more on the NBB, see

e-mail: [email protected]

About the Author(s)

David Bennett 1

Associate Editor, Delta Farm Press

David Bennett, associate editor for Delta Farm Press, is an Arkansan. He worked with a daily newspaper before joining Farm Press in 1994. Bennett writes about legislative and crop related issues in the Mid-South states.

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