[Congressional Record Volume 147, Number 85 (Tuesday, June 19, 2001)]
[Senate]
[Pages S6450-S6452]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HUTCHINSON (for himself and Mr. Dayton):
  S. 1058. A bill to amend the Internal Revenue Code of 1986 to provide 
tax relief for farmers and the producers of biodiesel, and for other 
purposes; to the Committee on Finance.
  Mr. HUTCHINSON. Mr. President, the debate over energy use in America 
has gripped our national attention for well over a year. A week doesn't 
go by that you don't pick up a newspaper or magazine and read at least 
one story about our Nation's domestic or foreign energy crisis. One 
issue in the energy debate that has caught my attention and that of 
farmers in my State is renewable fuels.
  The technology to convert agricultural crops into combustible fuel, 
suitable for use in modern diesel and gasoline engines, has existed for 
more than 100 years. I believe this process continues to hold great 
potential for America. The production and use of biofuels offers our 
Nation a safe, renewable source of energy for travel and transport, not 
to mention the long-term economic benefits for farmers and consumers.
  That is why I rise today to introduce the Biodiesel Renewable Fuels 
Act. I am pleased that Senator Dayton has joined with me as my lead 
cosponsor. This bill encourages the use of biodiesel by establishing a 
tax credit for manufacturers who produce a blend of conventional diesel 
and soybean or oilseed additives. By reducing the diesel fuel excise 
tax, suppliers will receive a 3-cent-per-gallon credit for using a 
diesel blend that contains at least 2 percent biodiesel. This tax 
credit is very similar to the existing tax incentive for ethanol, a 
biofuel made from corn-based products. I believe a tax incentive for 
soy-based biodiesel will increase domestic production and capture the 
agricultural, environmental and economical benefits associated with 
using this renewable source of energy.
  Most Americans don't realize that farm communities sit atop a vast 
and virtually untapped source of renewable fuels in the form of 
agriculture crops. Farmers in Arkansas are interested in developing new 
markets for soybean and oilseed products. In Arkansas for example, 
farmers grew 94 million bushels, or 2.5 million metric tons, of 
soybeans last year. Nationally, farmers produced 2.6 billion bushels of 
soybeans in 1999-2000, equal to 72 million metric tons. The oil derived 
from soybeans and other oilseed crops can be refined into a diesel 
additive or diesel alternative. According to a USDA study released in 
1996, an annual market for biodiesel of 100 million gallons in the 
United States would raise the price of soybeans by up to seven cents 
per bushel. Given the recent U.S. soybean crop, that kind of annual 
market would result in more than $168 million directly related to the 
use of soy-based biodiesel.
  Producing biodiesel domestically also means that more money stays in 
the U.S. Instead of purchasing more foreign petroleum, manufacturers 
can reduce their dependence on overseas oil by adding biodiesel blends 
for use in existing diesel engines. If domestic companies are 
encouraged to develop the infrastructure necessary to produce more 
biodiesel, the economic effect will be more U.S. jobs, lower prices for 
the consumer and larger markets for farmers.
  Developing markets for agricultural commodities and reducing our 
dependence on foreign oil is good, but there are environmental benefits 
as well. It is well documented that the burning of biofuels in 
combustion engines reduces the emissions of harmful greenhouse gases 
and particulate matter. In fact, biodiesel passes some of the 
Environmental Protection Agency's most stringent emissions and health 
standards for fuel additives and fuel alternatives. This becomes 
important when you consider the EPA's recent announcement that 
California should continue to use ethanol as a fuel oxygenate to 
improve air quality. As more cities and States are faced with having to 
improve the quality of their air, I believe biofuels are a sensible 
alternative to existing oxygenates which are not as friendly to the 
environment or human health.
  If using biodiesel improves air quality, reduces our dependence on 
foreign oil and provides a value-added market for soybean and oilseed 
crops, then we should support legislation to further development of 
this renewable source of fuel. My bill is good for farmers, it's good 
for consumers and it's good for

[[Page S6451]]

the environment. I ask unanimous consent that the text of the Biodiesel 
Renewable Fuels Act be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1058

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Biodiesel 
     Renewable Fuels Act''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to or a repeal of a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.

     SEC. 2. CREDIT FOR BIODIESEL USED AS FUEL.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by inserting after section 40 the following new section:

     ``SEC. 40A. BIODIESEL USED AS FUEL.

       ``(a) General Rule.--For purposes of section 38, the 
     biodiesel fuels credit determined under this section for the 
     taxable year is an amount equal to the biodiesel mixture 
     credit.
       ``(b) Definition of Biodiesel Mixture Credit.--For purposes 
     of this section--
       ``(1) Biodiesel mixture credit.--
       ``(A) In general.--The biodiesel mixture credit of any 
     taxpayer for any taxable year is the sum of the products of 
     the biodiesel mixture rate for each blend of qualified 
     biodiesel mixture and the number of gallons of the blend of 
     the taxpayer for the taxable year.
       ``(B) Biodiesel mixture rate.--For purposes of subparagraph 
     (A), the biodiesel mixture rate shall be--
       ``(i) the applicable amount for a B-1 blend,
       ``(ii) 3.0 cents for a B-2 blend, and
       ``(iii) 20.0 cents for a B-20 blend.
       ``(C) Blends.--For purposes of this paragraph--
       ``(i) B-1 blend.--The term `B-1 blend' means a qualified 
     biodiesel mixture if at least 0.5 percent but less than 2.0 
     percent of the mixture is biodiesel.
       ``(ii) B-2 blend.--The term `B-2 blend' means a qualified 
     biodiesel mixture if at least 2.0 percent but less than 20 
     percent of the mixture is biodiesel.
       ``(iii) B-20 blend.--The term `B-20 blend' means a 
     qualified biodiesel mixture if at least 20 percent of the 
     mixture is biodiesel.
       ``(D) Applicable amount.--For purposes of this paragraph, 
     the term `applicable amount' means, in the case of a B-1 
     blend, the amount equal to 1.5 cents multiplied by a fraction 
     the numerator of which is the percentage of biodiesel in the 
     B-1 blend and the denominator of which is 1 percent.
       ``(2) Qualified biodiesel mixture.--
       ``(A) In general.--The term `qualified biodiesel mixture' 
     means a mixture of diesel and biodiesel which--
       ``(i) is sold by the taxpayer producing such mixture to any 
     person for use as a fuel; or
       ``(ii) is used as a fuel by the taxpayer producing such 
     mixture.
       ``(B) Sale or use must be in trade or business, etc.--
     Biodiesel used in the production of a qualified biodiesel 
     mixture shall be taken into account--
       ``(i) only if the sale or use described in subparagraph (A) 
     is in a trade or business of the taxpayer; and
       ``(ii) for the taxable year in which such sale or use 
     occurs.
       ``(C) Casual off-farm production not eligible.--No credit 
     shall be allowed under this section with respect to any 
     casual off-farm production of a qualified biodiesel mixture.
       ``(c) Coordination With Exemption From Excise Tax.--The 
     amount of the credit determined under this section with 
     respect to any biodiesel shall, under regulations prescribed 
     by the Secretary, be properly reduced to take into account 
     any benefit provided with respect to such biodiesel solely by 
     reason of the application of section 4041(n) or section 
     4081(f).
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Biodiesel defined.--
       ``(A) In general.--The term `biodiesel' means the monoalkyl 
     esters of long chain fatty acids derived from vegetable oils 
     for use in compressional-ignition (diesel) engines. Such term 
     shall include esters derived from vegetable oils from corn, 
     soybeans, sunflower seeds, cottonseeds, canola, crambe, 
     rapeseeds, safflowers, flaxseeds, and mustard seeds.
       ``(B) Registration requirements.--Such term shall only 
     include a biodiesel which meets the registration requirements 
     for fuels and fuel additives established by the Environmental 
     Protection Agency under section 211 of the Clean Air Act (42 
     U.S.C. 7545).
       ``(2) Biodiesel mixture not used as a fuel, etc.--
       ``(A) Imposition of tax.--If--
       ``(i) any credit was determined under this section with 
     respect to biodiesel used in the production of any qualified 
     biodiesel mixture, and
       ``(ii) any person--

       ``(I) separates the biodiesel from the mixture, or
       ``(II) without separation, uses the mixture other than as a 
     fuel,

     then there is hereby imposed on such person a tax equal to 
     the product of the biodiesel mixture rate applicable under 
     subsection (b)(1)(B) and the number of gallons of the 
     mixture.
       ``(B) Applicable laws.--All provisions of law, including 
     penalties, shall, insofar as applicable and not inconsistent 
     with this section, apply in respect of any tax imposed under 
     subparagraph (A) as if such tax were imposed by section 4081 
     and not by this chapter.
       ``(3) Pass-thru in the case of estates and trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(e) Election To Have Biodiesel Fuels Credit Not Apply.--
       ``(1) In general.--A taxpayer may elect to have this 
     section not apply for any taxable year.
       ``(2) Time for making election.--An election under 
     paragraph (1) for any taxable year may be made (or revoked) 
     at any time before the expiration of the 3-year period 
     beginning on the last date prescribed by law for filing the 
     return for such taxable year (determined without regard to 
     extensions).
       ``(3) Manner of making election.--An election under 
     paragraph (1) (or revocation thereof) shall be made in such 
     manner as the Secretary may by regulations prescribe.''
       (b) Credit Treated as Part of General Business Credit.--
     Section 38(b) is amended by striking ``plus'' at the end of 
     paragraph (14), by striking the period at the end of 
     paragraph (15) and inserting ``, plus'', and by adding at the 
     end the following:
       ``(16) the biodiesel fuels credit determined under section 
     40A.''
       (c) Conforming Amendments.--
       (1) Section 39(d) is amended by adding at the end the 
     following:
       ``(11) No carryback of biodiesel fuels credit before 
     january 1, 2003.--No portion of the unused business credit 
     for any taxable year which is attributable to the biodiesel 
     fuels credit determined under section 40A may be carried back 
     to a taxable year beginning before January 1, 2003.''
       (2) Section 196(c) is amended by striking ``and'' at the 
     end of paragraph (9), by striking the period at the end of 
     paragraph (10), and by adding at the end the following:
       ``(11) the biodiesel fuels credit determined under section 
     40A.''
       (3) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 is amended by adding after the item 
     relating to section 40 the following new item:

``Sec. 40A. Biodiesel used as fuel.''

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 3. REDUCTION OF MOTOR FUEL EXCISE TAXES ON BIODIESEL 
                   MIXTURES.

       (a) In General.--Section 4081 (relating to manufacturers 
     tax on petroleum products) is amended by adding at the end 
     the following new subsection:
       ``(f) Biodiesel Mixtures.--Under regulations prescribed by 
     the Secretary--
       ``(1) In general.--In the case of the removal or entry of a 
     qualified biodiesel mixture, the rate of tax under subsection 
     (a) shall be the otherwise applicable rate reduced by the 
     biodiesel mixture rate (if any) applicable to the mixture.
       ``(2) Tax prior to mixing.--
       ``(A) In general.--In the case of the removal or entry of 
     diesel fuel for use in producing at the time of such removal 
     or entry a qualified biodiesel mixture, the rate of tax under 
     subsection (a) shall be the otherwise applicable rate, 
     reduced by the amount determined under subparagraph (B).
       ``(B) Applicable reduction.--For purposes of subparagraph 
     (A), the amount determined under this subparagraph is an 
     amount equal to the biodiesel mixture rate for the qualified 
     biodiesel mixture to be produced from the diesel fuel, 
     divided by a percentage equal to 100 percent minus the 
     percentage of biodiesel which will be in the mixture.
       ``(3) Definitions.--For purposes of this subsection, any 
     term used in this subsection which is also used in section 
     40A shall have the meaning given such term by section 40A.
       ``(4) Certain rules to apply.--Rules similar to the rules 
     of paragraphs (6) and (7) of subsection (c) shall apply for 
     purposes of this subsection.''.
       (b) Conforming Amendments.--
       (1) Section 4041 is amended by adding at the end the 
     following new subsection:
       ``(n) Biodiesel Mixtures.--Under regulations prescribed by 
     the Secretary, in the case of the sale or use of a qualified 
     biodiesel mixture (as defined in section 40A(b)(2)), the 
     rates under paragraphs (1) and (2) of subsection (a) shall be 
     the otherwise applicable rates, reduced by any applicable 
     biodiesel mixture rate (as defined in section 
     40A(b)(1)(B)).''.
       (2) Section 6427 is amended by redesignating subsection (p) 
     as subsection (q) and by inserting after subsection (o) the 
     following new subsection:
       ``(p) Biodiesel Mixtures.--Except as provided in subsection 
     (k), if any diesel fuel on which tax was imposed by section 
     4081 at a rate not determined under section 4081(f) is used 
     by any person in producing a qualified biodiesel mixture (as 
     defined in section 40A(b)(2)) which is sold or used in such 
     person's trade or business, the Secretary shall pay (without 
     interest) to such person an amount equal to the per gallon 
     applicable biodiesel mixture rate (as defined in section 
     40A(b)(1)(B)) with respect to such fuel.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2002.

[[Page S6452]]

     SEC. 4. HIGHWAY TRUST FUND HELD HARMLESS.

       There are hereby transferred (from time to time) from the 
     funds of the Commodity Credit Corporation amounts equivalent 
     to the reductions that would occur (but for this section) in 
     the receipts of the Highway Trust Fund by reason of the 
     amendments made by this Act. Such transfers shall be made on 
     the basis of estimates made by the Secretary of the Treasury 
     and adjustments shall be made to subsequent transfers to 
     reflect any errors in the estimates.

  Mr. DAYTON. Mr. President, I rise today to introduce, along with my 
distinguished colleague Senator Hutchinson from Arkansas, legislation 
that will increase the use of biodiesel fuel throughout our country.
  Biodiesel is a natural additive to diesel fuel, much as ethanol is to 
regular gasoline. It is also a fuel in its own right. Biodiesel is made 
from soybeans and other vegetable oils. Its use as a 2-percent blend 
with diesel fuel, and in some instances as high as a 20-percent blend, 
will increase the demand for these commodities, boost their market 
price, and reduce the toxic carbon emissions from trucks and other 
vehicles across this Nation, all at no additional cost to American 
taxpayers.
  Our legislation would provide a 3-cent-per-gallon credit to diesel 
fuel suppliers using 2-percent biodiesel and up to a 20-cent-per-gallon 
credit for blends containing 20-percent biodiesel.
  As soybean prices rise then due to the increased usage, Federal 
spending on the U.S. Department of Agriculture Marketing Assistance 
Loan Program will be reduced accordingly, resulting in substantial 
savings for the American taxpayers.
  A credit such as this would otherwise reduce the revenues that would 
be going into the highway trust fund. Given the deterioration of many 
of our Nation's highways, that would be unwise. Thus, this legislation 
provides for the Commodity Credit Corporation to reimburse the highway 
trust fund for its forgone revenues.
  Our current energy crisis is also an opportunity for our country. I 
currently have a van driving around the State of Minnesota that uses 
85-percent ethanol fuel with no difficulties whatsoever. These 
agricultural fuels are not just possible tomorrow, they are practical 
today. We just need to help them become financially competitive, until 
these industries can reach the volume of production necessary to 
compete with the giant oil industry.
  In conclusion, this legislation is an important step in several right 
directions--toward less foreign oil dependency, toward higher 
agricultural commodity prices for American farmers, toward lower 
taxpayer costs for our struggling farm economy, and toward a cleaner 
air quality for us all. I respectfully urge my colleagues to support 
this important legislation.
                                 ______