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.
