U.S. biodiesel tax credit revived through 2013 by Congress

Wed Jan 2, 2013 10:22am EST

* About one-quarter of U.S. soyoil goes to biodiesel

* Fuel from algae is approved for biofuel credit

WASHINGTON Jan 2 (Reuters) - The $1 a gallon tax credit for biodiesel will run through 2013 at a cost of more than $2 billion under a provision of the mammoth legislation passed by Congress to avoid the so-called "fiscal cliff."

In reviving the credit, lawmakers made the extension retroactive to its expiration at the end of 2011. It now is set to expire at the end of this year.

The credit was one of an eclectic mix of handouts, takebacks and special-interest tax breaks included by Congress in the last-minute deal to avoid the automatic spending cuts and tax increases that otherwise would have kicked in for 2013.

Iowa Senator Chuck Grassley, a prominent backer of the credit, told reporters he expects the credit will be phased out at some point but that there is little sentiment to do so at the moment.

Roughly one-quarter of U.S. soybean oil is used in making biodiesel. Some 4.9 billion pounds of soyoil are forecast for conversion to the alternative fuel during the marketing year that ends on Sept 30.

Along with revival of the biodiesel credit, Congress extended the $1 a gallon credit for diesel fuel created from biomass and a 10-cent credit available to small agri-processors who make biodiesel. The steps were estimated to cost $2.2 billion over 10 years.

Also in the bill was an extension of a $1.01 a gallon credit for making biofuels from cellulose, found in woody plants, trees and grasses. Fuel produced from algae was made eligible for the credit as well. The one-year extension was estimated to cost $59 million.

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