Closing Down $24 Billion Biofuels Tax Credit Loophole: a Good Idea (Here’s Why)

Business News/Analysis, Federal Legislation, Forestry/Wood/Residues/Waste, Infrastructure

November 10, 2009

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by Jim Lane (Biofuels Digest) In Washington, the Health Care Bill passed the US House of Representatives and included – as part of a 42-page “manager’s amendment”, a provision striking a biofuel tax credit used by pulp and paper firms that could have been worth up to $24 billion. … There has been some confusion about the provision in the industry – understandable, because “elimination of a biofuel tax credit” sounds like bad news. However, the House text is actually favorable.

First, the bill as passed amends the term “qualified feedstock” for the $1.01 per gallon cellulosic ethanol producer credit to mean “i. any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, and ii. any cultivate algae, cyanobacteria or lemna.”

This goes a long ways towards making the biofuels tax credits feedstock neutral, and specifically is favorable to producers of microcrops such as lemna (e.g. Petroalgae) and cyanobacteria (e.g. Biolight Harvesting, Inventure Chemicals), which had previously not received recognition.

… Second, the tax credit that was shut down was a credit recognizing black liquor – a byproduct of pulp and paper manufacturing – as a biofuel, rather than a biofuel feedstock. , … (C)ompanies that utilize black liquor as a feedstock for an advanced biofuels process – thereby using black liquor as a feedstock rather than a fuel, will still qualify for the credit, under the US House provision. READ MORE

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