Midwest Biodiesel Advocates Hail Credits for Farmer-driven Fuels

The passage of federal legislation originally meant to deal with a trade dispute led to a package of incentives for farmer-driven fuels.

Oct. 12—The passage of federal legislation originally meant to deal with a trade dispute led to a package of incentives for farmer-driven fuels.

Biodiesel advocates Monday hailed the American JOBS Creation Act of 2004 as a "defining moment" for the future of the fuel created from soybeans.

"This legislation is expected to create hundreds of million of gallons of demand over the next few years," said South Dakota farmer Bob Metz, chairman of the National Soybean Board.

For a fuel product that has gone from 250,000 gallons in 1998 to an estimated 30 million gallons now, the tax incentives could boost production to more than 150 million gallons in the next few years, Metz said.

Even at 150 million gallons, biodiesel would use only about 100 million bushels of soybeans annually, a fraction of the nation's soybean production, which annually tops more than 2.3 billion bushels.

Under the legislation, biodiesel producers will receive a tax credit of 1 cent for every percent of biodiesel blend in a fuel. For instance, the biodiesel blend called B-20 for its 20 percent blend would have a 20-cent credit on the national fuel excise tax.

The credits, expected to cost about $3 billion annually, will not reduce the federal highway trust fund because money from the fund used for the credit will be reimbursed through general tax dollars.

There currently are 20 biodiesel plants in the country and another 20 expected to be built, including three existing plants in Iowa and another proposed one. There are no plants in Nebraska.

U.S. Sen. Charles Grassley, R-Iowa, pushed for the biodiesel tax incentive that had languished in energy legislation. Besides the tax incentives, Grassley said he believes improvements to the Clean Air Act in the next few years also would create more biodiesel demand.

"I don't think it's going to take very long before biodiesel is on par with ethanol as far as its use," Grassley said.

With ethanol, the legislation passed also extends current ethanol production credits to 2010. The credit is 52 cents per gallon of ethanol, though it amounts to 5.2 cents a gallon on the 10-percent blend, the most common form of ethanol sold nationally.

The legislation also expands production credits for small producers to cooperatives, which have missed out on the incentives in the past. To qualify, a plant must produce less than 30 million gallons of ethanol annually.

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