January 05, 2010

Biodiesel Industry Suffers as Tax Credit Ends

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CANCEL

OKLAHOMA CITY - With the expiration of a federal tax credit that provided makers of biodiesel $1 for every gallon, some U.S. biodiesel producers say they will shut down without the government subsidy, reported the Associated Press.

Biodiesel, which is usually blended with traditional fuel, had over the past few years been the fastest growing fuel among fleet vehicles like buses, snow plows and garbage trucks, reported AP. However, those fleets can shift to traditional fuel, as some have, when the price of diesel drops.

With an estimated 180 biodiesel plants in about 40 states, the biodiesel industry is now operating at only 15 percent of its potential capacity, according to the National Biodiesel Board, largely because the price of traditional diesel has collapsed, reported AP.

The country's largest biodiesel refinery, in Houston, sits idle. Another major refinery in Hoquiam, Wash., that was restarted recently to meet alternative fuel mandates in Oregon and British Columbia was shut down after an explosion in December, according to AP.

The loss of the tax credit, which helps pay salaries, buy new equipment, and in good times to turn a profit, will hit small producers particularly hard.

A one-year extension of the biodiesel tax credit was included in a bill that was approved by the U.S. House recently, but it never made it through the Senate. Lawmakers say the tax credit will be retroactive if approved, said AP.