The National Biodiesel Board (NBB) commended congressional leaders for reinstating the expired biodiesel tax incentive in the tax and spending proposal released late Tuesday but continued pressing to reform the incentive as a domestic production credit.

“Restoring this tax incentive will create jobs and economic activity at biodiesel plants across the country, so we want to thank leaders in the House and Senate for proposing this extension,” said NBB Vice President of Federal Affairs Anne Steckel. “Unfortunately the impact would be muted because this proposal would continue allowing foreign biodiesel to qualify for the tax incentive. This not only costs taxpayers more money but it paves the way for foreign fuels that already receive incentives in their home countries to undercut US production.”

“We have yet to hear any member of Congress articulate why US tax dollars should be used to support foreign production,” Steckel added. “Clearly, incentivizing predatory biodiesel imports was not the intent of Congress, so we will continue urging Congress to make this reform.”

Under the current “blender’s” tax credit, biodiesel produced overseas that is blended with diesel in the US qualifies for the $1-per-gallon tax credit. This has caused imports to rise sharply in recent years. In 2012, the US imported fewer than 100 million gallons of biodiesel. This year, imports will exceed 650 million gallons, and the Energy Information Agency recently estimated that volume will grow to more than 700 million gallons in 2016.

The vast majority of those imports are coming from companies in Argentina, Asia and Europe. In most cases, the imported fuel has already received significant policy support in its country of origin, and the double-dipping of overseas and US incentives paves the way for predatory exports that undercut US producers. Additionally, many of the imports do not meet strict sustainability requirements under the U.S. Renewable Fuel Standard (RFS) aimed at protecting environmentally sensitive land from being cleared for the production of biofuels. Palm biofuels, for example, have not met the sustainability requirements that of the RFS yet are being incentivized by the blender’s tax incentive.

By narrowing the scope of the credit to domestic production, the producer’s incentive would save some $90 million, according to the Joint Committee on Taxation. The proposed reform is inconsistent with other manufacturing tax incentives in current law focused on stimulating domestic production such as bonus depreciation (Section 168(k)), the R&D tax credit (Section 41), and the domestic manufacturers deduction (Section 199).

“We want to thank Sens. Grassley and Cantwell and Reps. Noem and Pascrell for sponsoring the biodiesel incentive legislation and for pushing so hard to support domestic producers and jobs with this producer’s reform,” Steckel said. “Given the short-term nature of this extension, we will be back at it next year fighting for the reform again.”

Biodiesel – made from a variety of resources including soybean oil, recycled cooking oil and animal fats – is the first EPA-designated Advanced Biofuel to reach commercial-scale production nationwide. The U.S. has consumed a record of roughly 1.8 billion gallons of biodiesel for two consecutive years – displacing an equivalent amount of petroleum diesel.