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Biodiesel

Biodiesel is made from the oil that is separated from the soybean meal when soybeans are
crushed at facilities like Bunge or Cargill. The soybean meal is used as a protein feed source in
livestock feed. Since the oil is not in demand by livestock farmers, the livestock farmers benefit
from increased demand of the oil that may cause the price of soybean meal to decrease.
Indiana is home to the world’s largest integrated soybean biodiesel plant in the world at the
Louis Dreyfus location in Claypool, Indiana. Each year the facility can produce 88 million gallons
of biodiesel.

 

Tax Incentive

The biodiesel tax incentive has encouraged significant investment to expand the domestic
biodiesel industry and help it become price competitive with petroleum diesel. Extension of the
tax incentive is critical to the industry’s existence and growth. At this stage, biodiesel requires
the tax incentive to be cost competitive with the more mature and entrenched petroleum
industry. Biodiesel is the only advanced biofuel that is currently commercially available in the
U.S. and it provides significant economic, energy security, environmental and health benefits.
The tax credit expired on December 31, 2011.


An economic impact study conducted for the industry found that the expiration of the tax credit
and the accompanying 42 percent drop in production for 2010 resulted in the loss of nearly
8,900 jobs, a reduction in real GDP of $879 million, and a drop in household income of $485
million.


The study estimated that the industry supported more than 31,000 jobs in 2011, generated
income of nearly $1.7 billion, and created more than $3 billion in GDP. Under projected
expansion by 2015, that economic impact would grow even further to supporting more than
74,000 jobs, $4 billion in income, and some $7.3 billion in GDP.


Rep. Aaron Schock (R-IL) and Rep. Collin Peterson (D-MN) have introduced H.R. 2238 in the
House and Sen. Maria Cantwell (D-WA) and Sen. Chuck Grassley (R-IA) have introduced S.
1277 in the Senate. Co-sponsorship and support for these bills is important to ensure that
biodiesel is in position to be included if there is a tax extenders package in 2011.


The legislation also includes a restructuring of the tax credit from a blender’s credit to a
production tax credit. This change will further support domestic biodiesel production, improve
administration of the incentive, eliminate potential abuses and improve tax compliance.

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