Senators Maria Cantwell, D-Wash., and Chuck Grassley, R-Iowa, have introduced bipartisan legislation to reinstate a tax incentive for the production of domestic biodiesel fuel.

The Biodiesel Tax Incentive Reform and Extension Act of 2014, or S. 2021, would reform and extend the $1-per-gallon tax credit for biodiesel producers through 2017. A similar tax break expired at the end of last year, the third time since the end of 2009.

[IMGCAP(1)]“Investing in America’s clean energy economy is the smart thing to do for our environment and America’s energy security,” Cantwell said in a statement. “Biodiesel is America’s first advanced biofuel, which can be made from a variety of feedstocks such as cooking grease and soybeans. This legislation gives businesses the certainty they need to invest in biodiesel and the development of affordable, domestic alternatives to fossil fuels.”

Industry growth stopped after Congress let the credit expire in 2012 and production remained flat at just under 1.1 billion gallons, the same level as 2011. When the credit was reinstated in 2013, the U.S. biodiesel industry produced 1.8 billion gallons in that year.

“When investors suspend their funding of clean energy production, jobs fall by the wayside,” Grassley said. “Continuing incentives for biodiesel and other green energy sources supports jobs, helps the environment and increases energy independence. There's every reason to support biodiesel production.”

The bill would provide a $1 per-gallon tax credit for the production of biodiesel, renewable diesel and aviation jet fuel that complies with fuel standards and Clean Air Act requirements. It would also increase the tax credit from $1 to $1.10 for the first 15 million gallons of biodiesel produced by small producers with an annual production capacity of less than 60 million gallons.

[IMGCAP(2)]The proposed legislation would also aim to eliminate potential abuses and simplify how the tax is administered by restricting the credit to fuel producers and excluding fuel blenders from eligibility. By focusing on production, the bill would eliminate any remaining opportunity for abuse known as “splash and dash” in which oil companies add a few drops of biodiesel to petroleum diesel to qualify for the tax credit. The change also ensures the credit benefits domestic producers. The old law allowed blenders to receive the credit for blends that included foreign-imported biodiesel.

In addition, the bill would simplify the definition of “biodiesel” to encourage production from any biomass-based feedstock or recycled oils and fats. It would also simplify the coordination between the income tax credit and the excise tax liability in order to reduce the administrative burden and tighten compliance.

The bill would also extend the tax credit for three years to give added financial predictability so more biodiesel facilities could be brought online in the United States.