Senate to biodiesel industry: Help is on the way

Draft Senate jobs legislation would provide a one-year extension of lapsed tax credits that are vital to the battered biodiesel industry.

The draft bill follows House tax legislation approved last year by extending the $1-per-gallon credit until the end of 2010. The Senate will vote on the jobs package as soon as this week.

The industry has been pressing hard for extension of the credits.

The National Biodiesel Board, the industry’s main trade group, issued a report in December that said killing the incentive would be disastrous for an industry hit hard by volatile commodity prices and weakened fuel demand caused by the economic downturn.

"Elimination of the tax credit will essentially erase all profitability in the biodiesel industry leading to a complete decline in output, expenditures, and jobs,” the report states.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and Sen. Charles Grassley (R-Iowa), the panel’s top Republican, jointly pledged fast action on the expiring tax credit late last year.

Update: The bill also includes a host of other energy tax provisions, some of which overlap with the House tax extenders package approved in December.

The Senate bill includes a one-year extension through 2010 of credits for purchasing heavy-duty hybrid vehicles, producing low-sulfur diesel fuel, and building energy efficient homes, among other provisions.

The bill also closes a loophole that had allowed the paper industry to claim alternative fuel tax credits for blending small amounts of diesel with “black liquor,” which is a byproduct of turning wood into pulp.