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U.S. senators to take up biodiesel credit next year

Credit extension has been delayed by the health care debate and because it has been linked with other tax incentives. A so-called extenders bill passed in the House earlier this month.

WASHINTON--Two U.S. senators pledged on Tuesday to take up legislation early next year to extend the biodiesel tax credit as it looks likely action will not be taken on it this year.

An industry group complained that if a bill was passed by Congress early next year to extend the credit, it would not be enough to stop plants from closing after the credit expires on December 31.

Sen. Max Baucus, a Democrat from Montana who is chairman of the Senate Finance Committee, and the panel's top Republican, Sen. Charles Grassley of Iowa, said they would take up legislation to extend the $1-per-gallon tax credit and an array of other tax breaks as soon as possible after Congress convenes next year.

The credit extension has been delayed by the health care debate and because it has been linked with other tax incentives.

The renewable fuels industry was angry that legislation has not yet passed in the Senate. A so-called extenders bill passed in the House of Representatives earlier this month that would keep the credit going to the end of 2010. But industry had wanted five-year extensions to be passed before the end of the year.

"Very frustrating," said Monte Shaw, director of the Iowa Renewable Fuels Association. "Congress has really dropped the ball on this."

He said he appreciated that Baucus and Grassley hope to move on it early next year. But he said biodiesel plants are already losing contracts to make the fuel because of the credit not yet being renewed and oil refiners are afraid they will not get the credit for blending the fuel.

Plants will shut after December 31 and thousands of people could lose their jobs until the credit is renewed, Shaw said.

The White House has said the extension of the tax credit for biodiesel would provide "clean energy companies with the certainty they need to make critical investments in the nation's energy future."

Soybean oil is a primary feedstock for making biodiesel. Eleven percent of this year's soybean crop will be used for biodiesel, according to a U.S. Department of Agriculture estimate.

The American Soybean Association has said failure to renew the incentive could reduce prices paid to farmers for their soybeans by 25 cents or more per bushel.