Senate bill revives biodiesel credit for 2010

The Old Town Fuel and Fiber mill in Old Town, Maine, opened in the spring of 2009 with a focus on biofuels and traditional logging. Photo from June 2, 2009.

WASHINGTON (Reuters) - The $1 a gallon biodiesel tax credit would be revived for 2010 under a jobs and tax-cut bill under consideration in the Senate, Finance Committee leaders said Tuesday.

A vote on the bill, which was unveiled on Monday and would be the second in a series of job creation legislation, is possible later this week.

The biodiesel credit expired at the end of 2009. About 12 percent of U.S. soyoil is used to make biodiesel. The American Soybean Association says production has virtually ceased since expiration of the credit.

Traders in soybean oil on the Chicago Board of Trade have been watching whether the credit would be restored as it would improve market demand.

Besides renewing the $1 biodiesel credit through 2010, the bill extends the small agri-biodiesel producer credit of 10 cents per gallon. It also extends through 2010 the $1.00 per gallon tax credit for diesel fuel created from biomass.

Altogether, the biodiesel incentives are estimated to cost $1 billion over 10 years.

The bill also has a disaster-relief package for farmers, estimated at $1.98 billion. The package is a priority of Senate Agriculture Committee leader Blanche Lincoln, of Arkansas. Heavy rains disrupted the harvest in the South last fall.

The bill would deny cellulosic biofuels tax credits to so-called "black liquor," a byproduct of paper-making that is used to fuel paper plants.

(Reporting by Charles Abbott; Editing by Rebekah Kebede)