Biodiesel industry wants EPA to raise production levels to 1.7 billion gallons per year

While the biodiesel $1-per-gallon tax credit—which has expired three times in the last three years, including on Dec. 31, 2013—will likely be extended through 2014, "a longer-term extension remains in doubt as the lame duck Congress is wrangling with the White House over a package which includes the biodiesel incentive along with dozens of other tax breaks," reports Agri-Pulse, a Washington newsletter.

The biodiesel tax credit and the Renewable Fuel Standard (RFS) are policies that President George W. Bush promoted and signed into law, and some of the biggest vocal supporters are Republicans, Agri-Pulse writes.

"Yet the RFS remains a huge question mark," Agri-Pulse writes. Last year the Environmental Protection Agency "worried about ethanol hitting the so-called 'blend wall'—10 percent of U.S. transportation fuel usage. So in November 2013, EPA proposed to reduce the RFS volume requirement well below the level set by law. That way, Big Oil wouldn’t have to surrender any more than 10 percent of its market to ethanol."

"One major problem with EPA’s reasoning was that the blend wall exists because the oil industry resists installing the blender pumps needed to let drivers choose E15 (15 percent ethanol/gasoline blend) rather than the standard E10–or to let flex fuel vehicles fill up with E85," Agri-Pulse writes.

Another problem is "that biodiesel has become collateral damage in the oil industry’s battle to limit competition from ethanol," Agri-Pulse writes. EPA proposed levels of 1.28 billion gallons, well below the 1.7 billion gallons suggested by the National Biodiesel Board. Biodiesel production was 1.8 billion gallons in 2013 and is on pace to produce 1.6 billion gallons in 2014.

With no way to forecast what volume levels the EPA will set or when, National Biodiesel Board CEO Joe Jobe sees more trouble ahead, Agri-Pulse writes. Jobe warns that “If the EPA doesn’t significantly increase the volumes from the proposed rule, as they indicated many times they intended to do, the additional volumes will be carried forward into 2015, effectively creating an even further cut.” Agri-Pulse is subscription only, but a free trial is available by clicking here.