Diverse groups join to request cellulosic tax credit stability

By Kris Bevill | June 14, 2012

Extended policy support is crucial to the widespread launch of cellulosic biofuel production, but without Congressional action, several key incentives will expire at the end of this year.  Equally concerning, if not even more so, is the campaign being waged by the oil industry to eliminate the renewable fuel standard (RFS), which is viewed as the cornerstone policy of the advanced biofuels industry.

With several commercial-scale cellulosic ethanol plants currently under construction in the U.S., and more on the drawing board, leaders advanced ethanol, scientific and environmental groups issued a letter to Congressional leaders on June 12, urging them to protect the RFS and extend the cellulosic biofuel producer tax credit and special depreciation allowance for cellulosic biofuel plants. The groups also expressed support for energy tax policy reform that would level the playing field between fossil fuel and renewable fuel industries.

“The advanced and cellulosic biofuels industry is now in the process of building new plants, innovating at existing production facilities with emerging technologies and introducing new product streams that will allow the renewable fuels sector to become more profitable, diversified and efficient,” the groups said in the letter. “Significant investment dollars are being secured with the expectation that Congress will remain committed to advanced biofuels. Rapidly commercializing these technologies will provide substantial oil savings to consumers with far lower environmental impacts than today’s fuels.”

The cellulosic biofuel tax credit provides $1.01 per gallon of cellulosic biofuel sold for use in transportation fuels. The special depreciation allowance provides cellulosic biofuel plants the ability to take accelerated depreciation deductions the year the plant is put into service. Both provisions are currently set to expire on Dec. 31. The groups did not suggest a specific length of time for those credits to be extended in the June 12 letter to Congress members, but industry leaders have often noted that short-term policy extensions do not provide adequate assurance for investors.

Signers of the letter included the American Coalition for Ethanol, the Advanced Ethanol Council, the Advanced Biofuels Association, the Biotechnology Industry Organization, the Natural Resources Defense Council, the Institute for Agriculture and Trade Policy, the Environment and Energy Study Institute, the Union of Concerned Scientists and the Great Plains Institute.

Brent Erickson, executive vice president of BIO’s industrial and environmental section, reiterated the importance of maintaining the RFS and other policy incentives in a statement, noting that the RFS has driven U.S. companies to commercialize biofuels technologies as rapidly as possible. “These companies are at a critical juncture, with new biorefineries under construction and production coming online – at a time when major oil refineries are shutting down production capacity,” he said. “In order to foster the U.S. lead in innovation, the federal government must continue to support development of the advanced biofuel industry. Private investment in the industry relies on policy stability.”