Uncertainty Surrounds Biodiesel Tax Credit Renewal for 2010

The biofuels sector is becoming increasingly skittish about the status of alternative fuels tax credit extensions for 2010. For the biodiesel and ethanol sectors, these credit offsets currently equate to $1.00 per gallon (U.S.) and are seen by the majority of producers as essential for the continuance of their respective industries.

The timing here is especially critical, since the credits expire at year end. With Congress currently fully engrossed in the universal healthcare debate, every day that passes seems to herald that the credit extensions will not happen this year. Most of the people I have spoken to regarding this issue, as well as some of the folks at NBB, seem to agree that it is unlikely that an eleventh hour credit extension will occur. Some offer that it is more likely that some sort of retroactive extension will pass through the halls of Congress in the first or second quarter of the 2010.

Of course, a passage of a retroactively applicable credit extension may not heal the wounds inflicted to the industry in todays economic climate.

Some producers may not be able to raise sufficient capital to survive to see the first quarter and may be forced to cease production permanently as their credit problems worsen or their principal investors seek the certainty of taking a known loss today versus increasing the amount of capital they have at risk for the future prospect of a retroactive extension.

And of course, even the extension of the future may change as current proposals seek to make the biofuels producer eligible for the credit and not the blender, as is currently the case in the biodiesel sector.

We shall all just have to wait and see what happens next.

Make it a better place.

Todd