[Congressional Record Volume 152, Number 20 (Thursday, February 16, 2006)]
[Senate]
[Pages S1430-S1431]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HARKIN:
  S. 2309. A bill to amend the Internal Revenue Code of 1986 to modify 
the definition of agri-biodiesel; to the Committee on Finance.
  Mr. HARKIN. Mr. President, I am introducing today a bill of modest 
scope but of great importance. The legislation would modify the 
existing Federal biodiesel tax credit in two ways--to make clear that 
only biodiesel produced from feedstocks listed, such as soy oil, are 
eligible and also to ensure the credit is available only for fuel of 
the highest quality.
  Biodiesel is a home-grown renewable fuel that helps wean our country 
off of its oil addiction, creates economic growth and jobs in rural 
areas while enhancing our environment and public health.
  In my State of Iowa, which leads the Nation in biodiesel production, 
there are three plants in operation and several more coming on-line. 
Each plant bolsters farm income, provides good jobs to surrounding 
communities and additional tax revenues to municipalities.
  The biodiesel tax credit was enacted into law just a few years ago. 
It was extended through 2008 in the energy bill. I have been a leading 
proponent of the tax credit since day one. However, the tax credit has 
recently subsidized biodiesel production from outside the U.S. While I 
am certainly not averse to trade, and generally believe that it is a 
good thing for renewable energy to supplant fossil fuels wherever it 
comes from, the practice does not enhance domestic energy security, a 
goal which the President endorsed in his recent State of the Union 
address.
  It would be terribly unfortunate if the Federal Government, which has 
sought to bolster our domestic energy security and environmental 
quality through the development of renewable fuels, suddenly found 
itself unintentionally undermining that goal. Congress intended the 
biodiesel tax credit to go to support production from a finite set of 
feedstocks. We are now off-track given how the Internal Revenue Service 
has been interpreting the law. The agency has improperly determined 
that biodiesel produced from a variety

[[Page S1431]]

of feedstocks, even those not listed in statute, are eligible for the 
credit.
  So I have put together a bill, as I said, that is modest in scope. 
The bill fixes the tax credit language by making biodiesel made from 
any source not listed in the statute ineligible for the tax credit.
  In addition, I have added a performance standard to help ensure that 
only high-quality biodiesel may receive tax benefits. There have been 
reports of late that some biodiesel doesn't perform as well as it 
should in certain situations, and this provision should help address 
that problem. The performance standard set forth in the bill specifies 
that only fuel listed with a cloud point of 45 degrees or less is 
eligible for the credit. Cloud point measures the point at which a fuel 
such as biodiesel will cloud or gel due to cold temperatures. My 
understanding is that cloud point is generally recognized as the best 
quality indicator for satisfactory performance.
  The bill as crafted should not interfere in any way with our 
international trade obligations under the World Trade Organization 
(WTO) rules since it does not differentiate between oilseeds of U.S. 
and foreign origin. This view is shared by several trade experts 
consulted by my staff.
  I stand ready to work with my colleagues on the Senate Finance 
Committee, which has direct jurisdiction over this issue, to move this 
legislation forward.
  In sum, I think this legislation is necessary to promote domestic 
energy security, ensure appropriate performance, and do so in a way 
that is compliant with our international trading obligations.
                                 ______