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Biodiesel US

US blenders’ credit back on legislative agenda

The US biodiesel blenders’ credit made its annual bounce back onto the legislative agenda on Friday as the Senate Finance Committee put the bill up for the first round of likely lengthy debate and alteration on 21 July.

The proposal would extend the $1/gal biodiesel and HVO blenders’ credit for two years, through the end of December 2016. Approval would be applicable retroactively to fuel sold or used in 2015, with the bill aiming to provide a 180-day claim period once approved.

Uncertainty over the fate of the credit dogged US producers for most of last year, deepening the fug over much delayed RVO proposals as the market was left second guessing a large chunk of its blend economics as well as its wider supply/demand balance. Debate over the tax extenders’ bill only got into gear late in the year, with final approval stretching into the second half of December. Biodiesel prices surged nearly $1/gal as the late December presidential bill approval sent buyers scrambling for credit eligible product to blend, before crashing back to earlier levels as the 31 December deadline expired.

US producer REG noted in early May that the US market continued to trade through the first quarter on the assumption that the credit would be retroactively reinstated, with falling prices through the quarter accompanied by a near 40% jump in output between February and March, according to RIN generation data.

A guarantee over the $1/gal credit would further cushion supply chain economics and create a massive extra production incentive. Biodiesel prices since the beginning of July have already fallen hard despite rising bean oil/heating oil spreads, with RIN generation data showing output rising 3.6% between May and June and D4 RIN prices falling nearly 10% over the same period.

The bill would also extend a $1.01/gal income tax credit for US-produced lignocellulosic second generation biofuel.

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