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
http://www.renewableenergyworld.com/articles/2015/12/biofuel-maker-rallies-on-possible-u-s-tax-credit-extension.html
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