The American Soybean Association (ASA) praised Senators Tim Hutchinson (R-AR) and Mark Dayton (D-MN) for introducing the “Biodiesel Renewable Fuels Act” today. The legislation (S. 1058) would provide a partial exemption to the diesel fuel excise tax to fuel suppliers who choose to include low-blend biodiesel. “

Soybean farmers, the public as well as fuel providers and users benefit from this legislation,” said ASA First Vice President Bart Ruth, a producer from Rising City, Neb. “It boosts the farm market for soybean oil, which is used to make biodiesel. Furthermore, it helps the public and fuel users reap the rewards of a cleaner-burning domestically produced fuel.”

“The production and use of biofuels offers our nation a safe, renewable source of energy for travel and transport, not to mention the long-term economic benefits for farmers and consumers,” Senator Hutchinson said. “That is why I am introducing the Biodiesel Renewable Fuels Act. This bill encourages the use of biodiesel, establishing a tax credit for manufacturers who produce a blend of conventional diesel and soybean or oilseed additives. By reducing the diesel fuel excise tax, suppliers will receive a 3-cent-per-gallon credit for using a diesel blend that contains at least 2 percent biodiesel. I believe a tax incentive for soy-based biodiesel will increase domestic production and capture the agricultural, environmental and economical benefits associated with using this renewable source of energy.”

“Renewable fuels need to be a key part of our national energy policy,” Senator Dayton said. “With surging energy prices in Minnesota and across the country hitting consumers, businesses, farmers, and communities, we need to explore new options - such as encouraging production of biodiesel - which will help decrease U.S. dependence on foreign oil and help the farm economy,” Dayton said. “In addition, biodiesel is an environmentally sound resource that will reduce emissions from motor fuels. Further, as we increase demand for soybeans, we are investing in the economic well being of farmers and rural communities across the country.”

The biodiesel tax incentive would provide a partial exemption to the federal excise tax in the amount of 3 cents for diesel fuel that contains 2 percent biodiesel. This approach is similar to the partial tax exemption for ethanol, which provides a 5.4 percent exemption for gasoline that contains 10 percent ethanol. (Biodiesel and ethanol are complementary renewable fuels since they are made from different agricultural co-products and are sold in separate fuel markets.)

The proposal would boost farm prices and save taxpayer dollars. Every 100 million gallons of biodiesel requires 760 million pounds of a feedstock, such as vegetable oils, recycled grease or animal fats. If soybean oil were the only feedstock used, 100 million gallons of biodiesel would reduce by one-third the current surplus of 2.1 billion pounds of soy oil. Reducing soy oil supplies by this amount would increase the U.S. soy oil price by an estimated 1.5 cents per pound. With 11 pounds of soy oil in a bushel of soybeans, this would raise U.S. soybean prices by as much as 16.5 cents per bushel.

The new legislation would save taxpayer dollars because it would reimburse the Federal Highway Trust Fund through U.S. Department of Agriculture’s Commodity Credit Corporation (CCC). The cost to the CCC would be offset, at least initially, by the savings from increased biodiesel sales that would reduce government expenditures under the soybean marketing loan program.

For example, if 100 million gallons of biodiesel were used under this program, it would be blended at 2 percent per gallon into five billion gallons of diesel fuel. At a cost of 3 cents per gallon, the cost of the program would be $150 million. Reduced soybean oil surpluses will result in higher soybean prices, and raising soybean prices in the marketplace would reduce CCC outlays under the soybean marketing loan program. Using a conservative 13 cents per bushel impact on price, the cost savings on this year’s estimated 3.0 billion bushel soybean crop would be $390 million. As a result, the proposal will save more than two dollars for each dollar it costs.

Biodiesel is commonly produced from soybean oil, which is currently in surplus and depresses the price of soybeans and other oilseed crops. Biodiesel contains no petroleum, but it can be blended easily with diesel or used in its pure form. The fuel offers many environmental and operational benefits. It has the highest energy content of any alternative fuel, which is especially important in heavy-duty diesel applications. Biodiesel is the only alternative fuel to have passed the rigorous Health Effects testing requirements of the Clean Air Act, and it is nontoxic, biodegradable and free of sulfur. Independent studies also show that the use of biodiesel in conventional diesel engines results in a substantial reduction of emissions, including carbon dioxide and other air toxics. Moreover, it increases the lubricity of diesel, which is especially valuable when the sulfur content of diesel is reduced. Additional information on the attributes of biodiesel is available at www.biodiesel.org.