BIODIESEL BACKGROUNDER

ASA Position

Tax Incentive – ASA supports immediate enactment of a retroactive extension of the biodiesel tax incentive for 2010 and a multi-year extension and restructuring of the credit beyond 2010. The retroactive extension of the biodiesel credit must be included on the first jobs bill enacted in 2010.

Bioenergy Program – ASA supports effective and equitable implementation of the USDA Bioenergy Program for Advanced Biofuels, as enacted in the 2008 Farm Bill. 

ASA supports elimination of the arbitrary and unnecessary rural area and domestic ownership requirements that were imposed on FY2009 payments under a Notice of Contract Proposal (NOCP).  ASA is working with industry and USDA to develop a Final Rule for FY2010-12 which is equitable for all biodiesel producers on all gallons of production.

Renewable Fuel Standard (RFS) – ASA is pleased that EPA’s rulemaking process resulted in making soy biodiesel eligible under the RFS2. ASA appreciates EPA’s consideration of data that resulted in a significant revision of the life-cycle greenhouse gas emissions of soy biodiesel that had been included in EPA’s Proposed Rule in 2009. We will continue to monitor and work with EPA on implementation of RFS2, indirect land use issues, and proper life cycle analysis for soy biodiesel production.

Background

Tax Incentive - The biodiesel tax incentive has encouraged significant investment to expand the domestic biodiesel industry and help it become price competitive with petroleum diesel. Retroactive extension of the tax incentive is critical to the industry’s existence and growth.

Bioenergy Program – The purpose of this program is to provide payments to eligible producers to support production of advanced biofuels. Under the notice for the Bioenergy Program issued in June 2009, USDA will provide up to $30 million in FY2009 to producers of advanced biofuels, including biodiesel. 

The USDA Bioenergy Program, if implemented effectively, could provide much-needed assistance to U.S. biodiesel producers. The program could also enhance the competitiveness of U.S. biodiesel with potential imports. Unlike ethanol, biodiesel imports are not subject to tariffs that offset the benefit of the tax incentive. Some countries, notably Argentina, have created biodiesel export subsidy programs designed specifically to take advantage of production incentives in the U.S. and other markets. 

An issue of concern is the USDA rural area requirement that excludes biodiesel plants that are located in towns with population exceeding 50,000 from eligibility under the Bioenergy Program. This restriction was not included in the statute, had not been part of the CCC Bioenergy Program in previous years, and excluding such plants was not the intent of Congress. Biodiesel producers using eligible feedstocks provide significant rural economic development benefits and benefit U.S. soybean farmers and their communities.  The 50,000 population threshold excludes biodiesel plants in Owensboro, KY and St. Joe, MO. ASA supports elimination of the rural area requirement to ensure that all biodiesel plants using eligible feedstock have access to the Bioenergy Program. We are working with industry and USDA on development of a Final Rule for FY2010-12. 

Renewable Fuel Standard - The Energy Independence and Security Act (EISA) of 2007 created an expanded Renewable Fuels Standard (RFS-2) for biomass-based diesel starting in 2009. 

To be eligible under the RFS2, biodiesel must meet a 50% greenhouse gas (GHG) emissions reduction relative to petroleum diesel. The law allows EPA to lower this requirement to 40%. When calculating the life cycle impact of biofuels, the statute directs EPA to consider direct and indirect emissions (such as indirect land use) for all stages of both fuel and feedstock production.  

The approach adopted by EPA in its Proposed Rule issued in 2009 used significantly flawed data on soybean production and indirect land use that would have disqualified soy biodiesel from eligibility for the RFS2. During the rulemaking process ASA and the biodiesel industry provided comprehensive input on soy biodiesel production factors that resulted in EPA making significant changes to the GHG emissions score for soy biodiesel in the Final Rule. The Final Rule issued by EPA allows soy biodiesel to qualify for the RFS2. We will continue to monitor and work with EPA on implementation of the RFS2, indirect land use issues, and proper life cycle analysis for soy biodiesel production.