May 8, 2017

The Honorable Orrin Hatch The Honorable Ron Wyden

Chairman Ranking Member
Committee on Finance Committee on Finance
219 Dirksen SOB 219 Dirksen SOB
Washington, D.C. 20510 Washington, D.C. 20510

Dear Chairman Hatch, Ranking Member Wyden, and Members of the Finance
Committee:

The above organizations, representing the entire biodiesel supply chain,

including consumers and end-users write to reiterate the importance of the
biodiesel blenders tax credit in helping to displace traditional petroleum-based
fuel with a cleaner-burning substitute, all while lowering fuel prices for
consumers. Having first been enacted more than a decade ago, however, we
understand that the tax credit cannot and should not last forever, and that
eventually the biodiesel production industry will need to survive without it.

Accordingly, as the Finance Committee considers tax reform legislation in

the coming months, we urge you to extend and phase out the biodiesel blenders
tax credit, and oppose any change to the existing tax credits structure.

Since 2005, there has been a biodiesel and renewable diesel blenders tax
credit of $1.00 for each gallon of biodiesel used in a qualified mixture. This tax
credit, which expired at the end of 2016, was created to stimulate production and,
ultimately, consumption of biodiesel and renewable diesel, an agricultural
alternative to fossil fuels.

The biodiesel blenders tax credit has worked: It creates a strong incentive
for downstream fuel marketers to blend renewable fuel into the fuel supply all
while lowering prices at the pump for consumers.
 We understand there is an effort underway, led by a group of lawmakers
representing states where biodiesel is produced, and/or its feedstock is grown, to
convert the biodiesel blenders credit to a producers credit. (See S. 944; H.R.
2383.) In addition, the domestic biodiesel industry has filed anti-dumping and
counter-veiling duties actions before the International Trade Commission to try
and keep out of U.S. markets biodiesel and renewable diesel that is produced
overseas.

These efforts are premised upon an incontrovertibly false assumption:

That keeping foreign-sourced product out of the country would enable further
penetration of domestically sourced product. This is not true. In fact, foreign
product is only being brought into certain coastal markets where economics do
not support shipping domestically produced biodiesel from the middle of the
country (where most production facilities are located) long distances by rail or
truck (biodiesel cannot be shipped via pipeline).

These economics would not change if internationally-sourced biodiesel

were to be kept out of U.S. markets. Instead, diesel fuel that is currently blended
with biodiesel or renewable diesel would simply not be blended with renewable
fuels. This would undercut EPAs efforts to implement the Renewable Fuel
Standard, raise the price of diesel fuel and ultimately the cost of every consumer
product that is shipped via truck.

Converting the biodiesel tax credit to a producer credit would be counter-

productive, raising the price of the fuel and thereby discouraging increased
consumption. A producers credit may be good for biodiesel producers, but it
would be horrible for consumers and the American economy.

In other words, if the price of biodiesel and renewable diesel goes up, fuel
marketers and blenders would have less incentive to integrate these renewable
fuels into the fuel supply, because doing so would not lower their cost of goods
sold.

Were the Finance Committee to study this issue closely, it would find that
converting the biodiesel tax credit to a producers credit would clearly lead to
these undesirable outcomes. It would further find that a producers credit would
primarily benefit a small number of large biodiesel producers, and potentially
violate trade agreements, resulting in sanctions for domestic industries.

Congress was right in the past two years when it rejected converting the
credit to a producers credit. Nothing has changed. Indeed, no committee in the
House or Senate has held a single hearing to examine this change. Any policy
shift that would result in such undesirable policy outcomes should be closely
examined and studied before it is implemented.
 Extending and phasing out the biodiesel blenders tax credit would provide
the market blenders, producers, and consumers the necessary certainty that
it needs in order to realize the environmental and cost benefits that the credit was
designed to accomplish, while at the same time converting to a more market-
based, fiscally sound system where the product can thrive in the long-term
without direct government support.

Sincerely,

NATSO, Representing Americas Travel Plazas and Truckstops

Advanced Biofuels Association
Society of Independent Gasoline Marketers of America
American Trucking Associations
National Association of Convenience Stores
Petroleum Marketers Association of America