Biofuel Maker Rallies on Possible US Tax Credit Extension

Renewable Energy Group Inc., a U.S.-based biodiesel producer, surged with the advance of federal legislation that would retroactively reinstate a tax credit for the fuel.

The Ames, Iowa-based company rose 42 cents, or 5 percent, to $8.88 a share after the House and Senate on Tuesday reached a deal on tax and spending plans. The legislation would extend a $1-per-gallon tax credit for biodiesel from Dec. 31, 2014, to Dec. 31, 2016.

Biodiesel industry supporters argue that the lapse of the tax credit stymied growth and investment and prompted companies to operate below capacity. Meanwhile, imports of the fuel, which is derived from soybean oil or animal fats, swelled 87 percent from a year earlier to about 28,000 barrels a day, government estimates show.

“I’m sure they’re quite happy to have the tax credit back,” said Wallace Tyner, an agricultural economist at Purdue University in West Lafayette, Indiana. “This will certainly help.”

Fuel Costs

The U.S. mandates refiners use escalating amounts of biodiesel, which is more expensive than pure diesel amid the rout in crude oil. Biodiesel in the Midwest, for example, cost $2.62 a gallon on Tuesday. That compares with the $1.0567 cost of a gallon of regular diesel in Chicago, data compiled by Bloomberg show.

The tax credit, which goes to the party that blends biodiesel with diesel, is designed to help make it attractive for use.

Biodiesel producers had been lobbying Congress to shift the incentive to makers of the renewable fuel instead of to the blenders.

“Under the current ‘blender’s’ tax credit, biodiesel produced overseas that is blended with diesel in the U.S. qualifies for the $1-per-gallon tax credit,” said the National Biodiesel Board, a Washington-based trade group.

Imports are expected to increase 68 percent in 2016 as the U.S. mandates higher consumption targets for the fuel, the Energy Information Administration forecast in its Dec. 8 Short- Term Energy Outlook.

“We’re supposed to be exporters, not importers,” said Tom Brooks, general manager of Western Dubuque Biodiesel in Farley, Iowa. “We’re trading petroleum for foreign biodiesel.”

©2015 Bloomberg News

Lead image: Fuel pump. Credit: Shutterstock.

Previous articleUK Reduces Solar Subsidies Less Than Proposed After Appeal
Next articleGenForum Speakers Address DOE Loans, Energy Storage
Copyright 2018 Bloomberg

No posts to display