If Congress doesn’t act soon, biodiesel producers will lose a $1 per gallon tax credit.

Creative Commons photo by turtlemoon via Flick

Creative Commons photo by rrelam via Flick

The credit, which is given for biodiesel made from soybean oil or yellow grease and animal fats, helps to maintain the competitiveness of the domestically-produced fuel, and experts warn that American jobs could be at stake if the credit is not extended.

U.S. Sen. Chuck Grassley, R-Iowa, took to the floor of the Senate Thursday to both sound a warning alarm about the pending crisis and to paint executive and congressional Democrats as just paying lip service to the creation and maintenance of green jobs.

“Without an extension of the tax credit, all U.S. biodiesel production will grind to a halt,” Grassley said. “Plants will be shuddered and workers will be let go.”

No one should be surprised that the credit is ending, Grassley said, since “we’ve known for 14 months that it needed to be extended by the end of 2009.”

“The Democratic leadership is content to leave here without doing the necessary work on extenders, believing they can extend the tax provisions retroactively sometime next year,” he said. “But, retroactively doesn’t help the U.S. biodiesel market from grinding to a halt on Jan. 1, 2010, because without the incentive, biodiesel will cost much more than petroleum diesel.”

On a conference call with reporters Thursday morning, however, U.S. Sen. Tom Harkin, D-Iowa, said a biodiesel agreement is one of many that has fallen victim to a Republican “scorched earth” policy.

“The bottom line is that the biodiesel tax credit and the 50-provision tax extender bill that it is a part of is largely a hostage of the Republicans’ scorched earth, using the maximum floor time possible, policy that we have been seeing,” Harkin said.

“We need to act on that, but, because of Republican opposition, we haven’t been able to do it. We wanted to put it on the defense bill, the bill that we had before us. But we could not find one Republican that would support it — not one.”

When asked specifically about Grassley supporting the defense appropriations bill with the tax credit extension on it, Harkin replied, “No one. I repeat, we had not one Republican who would support the defense bill with things on it like the biodiesel tax credit.”

In early December the U.S. House approved HR 4213, the Tax Extenders Act of 2009, by a vote of 241 to 181 that fell mostly along party lines. One provision within that bill extends the biodiesel tax credit for one more year to Dec. 31, 2010. Iowa’s Democratic U.S. Reps. Dave Loebsack, Bruce Braley and Leonard Boswell, voted in favor. Iowa Republica U.S. Reps. Steve King and Tom Latham, voted against.

In a letter to Harkin, the Iowa Renewable Fuels Association wrote, “If the biodiesel tax incentive is allowed to expire — even for a brief period of time — the Iowa biodiesel industry will cease production and many plants will likely not reopen under current ownership. With the tax credit, biodiesel blends are very competitive in today’s marketplace. However, if the biodiesel tax incentive expires, biodiesel blends will be priced out of the marketplace and our customers — the oil companies — will stop purchasing biodiesel.”