Biodiesel Tax Extension Letter

May 25, 2005

We (the undersigned) strongly support legislation extending the biodiesel tax incentive to 2010, S. 1076/H.R. 2498. Extension of the tax incentive will increase the nation’s energy independence and protect air and water quality. It will also provide increased flexibility for refiners, and stimulate rural economies through the increased production of domestic, renewable fuels.

The tax credit, created as part of the Volumetric Ethanol Excise Tax Credit (VEETC) was established as part of H.R. 4520, also known as the American JOBS Creation Act of 2004. President Bush signed the bill into law in October 2004; it passed as a two-year program expiring at the end of 2006.

Specifically, the biodiesel tax incentive is structured as a federal excise tax credit. The excise tax credit amounts to a penny per percent of biodiesel blended with petroleum diesel for "agri-biodiesel," made from feedstocks like soybean oil; and a half-penny per percentage for biodiesel made from other sources, like recycled cooking oil.

As a result of the VEETC, the ethanol and biodiesel industries have undergone unprecedented growth over the past several years. In fact, the U.S. currently has the capacity to produce more than 3.7 billion gallons of ethanol and biodiesel, and plants under construction will add an additional 700 million gallons of capacity by the end of the year. Most of this growth has been in farmer-owned plants, which taken as a whole, now represent the single largest producer in the country.

In short, we support this important bill and hope Congress moves it as part of comprehensive energy legislation. Extension of the biodiesel tax incentive is a vital and necessary component of any energy policy designed to reduce our nation’s dependence on foreign sources of petroleum.

Volkswagen

East Tennessee Clean Fuels Coalition

American Lung Association of Colorado

Denver Metro Clean Cities Coalition

Central Oklahoma Clean Cities