Biofuels Incentives: A Summary of Federal Programs

Order Code RL33572

Biofuels Incentives:

A Summary of Federal Programs

Updated July 29, 2008

Brent D. Yacobucci

Specialist in Energy and Environmental Policy

Resources, Science, and Industry Division

Biofuels Incentives:

A Summary of Federal Programs

Summary

With recent high energy prices and the passage of major energy legislation in

2005 (P.L. 109-58) and 2007 (P.L. 110-140), there is ongoing congressional interest

in promoting alternatives to petroleum fuels. Biofuels — transportation fuels

produced from plants and other organic materials — are of particular interest.

Ethanol and biodiesel, the two most widely used biofuels, receive significant

government support under this law in the form of mandated fuel use, tax incentives,

loan and grant programs, and certain regulatory requirements. The 24 programs and

provisions listed in this report have been established over the past 27 years, and are

administered by five separate agencies and departments: Environmental Protection

Agency, U.S. Department of Agriculture, Department of Energy, Internal Revenue

Service, and Customs and Border Protection. These programs target a variety of

beneficiaries, including farmers and rural small businesses, biofuel producers,

petroleum suppliers, and fuel marketers. Arguably, the most significant federal

programs for biofuels have been tax credits for the production or sale of ethanol and

biodiesel. However, with the establishment of the renewable fuels standard (RFS)

under P.L. 109-58, Congress has mandated biofuels use; P.L. 110-140 significantly

expanded that mandate. In the long term, the mandate may prove even more

significant than tax incentives in promoting the use of these fuels.

The 2008 Farm Bill — The Food, Conservation, and Energy Act of 2008 —

amended or established various biofuels incentives, including lowering the value of

the ethanol excise tax credit, establishing a tax credit for cellulosic biofuel

production, extending import duties on fuel ethanol, and establishing several new

grant and loan programs.

This report outlines federal programs that provide direct or indirect incentives

for biofuels. For each program described, the report provides details including

administering agency, authorizing statute(s), annual funding, and expiration date.

The Appendix provides summary information in a table format.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Environmental Protection Agency (EPA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Renewable Fuel Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Internal Revenue Service (IRS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Volumetric Ethanol Excise Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Small Ethanol Producer Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Biodiesel Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Small Agri-Biodiesel Producer Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Renewable Diesel Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Credit for Production of Cellulosic Biofuel . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Special Depreciation Allowance for Cellulosic Ethanol Plant Property . . . . 4

Department of Agriculture (USDA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Bioenergy Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Renewable Energy Systems and Energy Efficiency Improvements . . . . . . . . 5

Value-Added Producer Grants Program (VAPG) . . . . . . . . . . . . . . . . . . . . . 6

Biorefinery Development Grants (Unfunded) . . . . . . . . . . . . . . . . . . . . . . . . 6

Business and Industry (B&I) Guaranteed Loans . . . . . . . . . . . . . . . . . . . . . . 6

Rural Business Enterprise Grants (RBEG) . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Other USDA Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

New Farm Bill Programs Under USDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Biorefinery Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Repowering Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Bioenergy Program for Advanced Biofuels . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Feedstock Flexibility Program for Producers of Biofuels (Sugar) . . . . . . . . . 8

Biomass Crop Assistance Program (BCAP) . . . . . . . . . . . . . . . . . . . . . . . . . 9

Department of Energy (DOE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Biomass Research and Development Initiative . . . . . . . . . . . . . . . . . . . . . . . 9

Biorefinery Project Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Loan Guarantees for Ethanol and Commercial Byproducts from

Cellulose, Municipal Solid Waste, and Sugar Cane . . . . . . . . . . . . . . 10

DOE Loan Guarantee Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Cellulosic Biofuels Production Incentive . . . . . . . . . . . . . . . . . . . . . . . . . . 11

U.S. Customs and Border Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Import Duty for Fuel Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Appendix. Summary of Federal Incentives for Promoting Biofuels . . . . . . . . . . 12

List of Tables

Table 1. Federal Biofuels Incentives by Agency . . . . . . . . . . . . . . . . . . . . . . . . . 12

Biofuels Incentives:

A Summary of Federal Programs

Introduction

With recent high energy prices and the passage of the Energy Policy Act of 2005

(P.L. 109-58) and the Energy Independence and Security Act of 2007 (P.L. 110-140),

there is ongoing congressional interest in promoting greater use of alternatives to

petroleum fuels. Biofuels — transportation fuels produced from plants and other

organic materials — are of particular interest. Ethanol and biodiesel, the two most

widely used biofuels, receive significant federal support in the form of tax incentives,

loan and grant programs, and regulatory programs.1 The 2008 Farm Bill also

modified existing incentives — including ethanol tax credits and import duties —

and established a new tax credit for cellulosic biofuels.2 The Farm Bill also

authorized new biofuels loan and grant programs, but these will be subject to

appropriations, likely starting with the FY2010 budget request.

This report outlines 24 current, expired, or pending federal programs and

provisions (plus one authorized but unfunded program) that provide direct or indirect

incentives for biofuels. The programs are grouped below by administering agency.

The incentives for biofuels are summarized in the Appendix. This information is

compiled from authorizing statutes, committee reports, and Administration budget

request documents.

1

For more information on ethanol, see CRS Report RL33290, Fuel Ethanol: Background

and Public Policy Issues, by Brent D. Yacobucci. For more information on biofuels in

general, see CRS Report RL30758, Alternative Transportation Fuels and Vehicles: Energy,

Environment, and Development Issues, by Brent D. Yacobucci, and CRS Report RL32712,

Agriculture-Based Renewable Energy Production, by Randy Schnepf.

2

For more information on biofuels provisions in the Farm Bill, see CRS Report RL34239,

Biofuels Provisions in the 2007 Energy Bill and the 2008 Farm Bill: A Side-by-Side

Comparison, by Tom Capehart, Randy Schnepf, and Brent D. Yacobucci.

CRS-2

Environmental Protection Agency (EPA)

Renewable Fuel Standard

Administered by: EPA

Annual funding: N/A

FY2008 budget request: N/A

Established: 2005 by the Energy Policy Act of 2005, §1501 (P.L. 109-58); expanded

by the Energy Independence and Security Act of 2007, §202 (P.L. 110-140)

Scheduled termination: None

Description: The Energy Policy Act of 2005 established a renewable fuels standard

(RFS) for automotive fuels. The RFS was expanded by the Energy Independence and

Security Act of 2007. The RFS requires the blending of renewable fuels (including

ethanol and biodiesel) in transportation fuel.3 In 2008, fuel suppliers must blend 9.0

billion gallons of renewable fuel into gasoline; this requirement increases annually

to 36 billion gallons in 2022. The expanded RFS also specifically mandates the use

of “advanced biofuels” — fuels produced from non-corn feedstocks and with 50%

lower lifecycle greenhouse gas emissions than petroleum fuel — starting in 2009. Of

the 36 billion gallons required in 2022, at least 21 billion gallons must be advanced

biofuel. There are also specific quotas for cellulosic biofuels and for biomass-based

diesel fuel. On May 1, 2007, EPA issued a final rule on the RFS program detailing

compliance standards for fuel suppliers, as well as a system to trade renewable fuel

credits between suppliers.4 While this program is not a direct incentive for the

construction of biofuels plants, the guaranteed market created by the renewable fuel

standard is expected to stimulate growth of the biofuels industry.

Internal Revenue Service (IRS)

Volumetric Ethanol Excise Tax Credit

Administered by: Internal Revenue Service

Annual funding: N/A

Established: 2005 by the American Jobs Creation Act of 2004, §301 (P.L. 108-357);

modified by the Food, Conservation, and Energy Act of 2008, §15331 (P.L. 110-234)

Scheduled termination: December 31, 2010

Description: Gasoline suppliers who blend ethanol with gasoline are eligible for a tax

credit of 51 cents per gallon of ethanol.

Qualified applicant: Blenders of gasohol (i.e., gasoline suppliers and marketers)

For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and

Refunds [http://www.irs.gov/publications/p510/ch02.html]

Note: The 2008 Farm Bill amended the credit: Starting the year after 7.5 billion

gallons of ethanol are produced and/or imported in the United States, the value of the

credit will be lowered to 45 cents per gallon — it is expected that the United States

will pass this mark in 2008.

3

The original requirement was for renewable fuel in gasoline. P.L. 110-140 expanded the

mandate to include all transportation fuels, and increased the amount of renewable fuel

mandated annually.

4

72 Federal Register 23899-24014.

CRS-3

Small Ethanol Producer Credit

Administered by: Internal Revenue Service

Annual funding: N/A

Established:1990 by the Omnibus Budget Reconciliation Act of 1990, §11502 (P.L.

101-508); extended by the American Jobs Creation Act of 2004, §301 (P.L. 108357); expanded by the Energy Policy Act of 2005, §1347 (P.L. 109-58)

Scheduled termination: December 31, 2010

Description: The small ethanol producer credit is valued at 10 cents per gallon of

ethanol produced. The credit may be claimed on the first 15 million gallons of

ethanol produced by a small producer in a given year.

Qualified applicant: Any ethanol producer with production capacity below 60

million gallons per year

For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and

Refunds [http://www.irs.gov/publications/p510/ch02.html]

Biodiesel Tax Credit

Administered by: Internal Revenue Service

Annual funding: N/A

Established: 2005 by the American Jobs Creation Act of 2004, §302 (P.L. 108-357);

extended by the Energy Policy Act of 2005, §1344 (P.L. 109-58)

Scheduled termination: December 31, 2008

Description: Biodiesel producers (or producers of diesel/biodiesel blends) can claim

a per-gallon tax credit. The credit is valued at $1.00 per gallon of “agri-biodiesel”

(biodiesel produced from virgin agricultural products such as soybean oil or animal

fats), or 50 cents per gallon of biodiesel produced from previously used agricultural

products (e.g., recycled fryer grease).

Qualified applicant: Biodiesel producers and blenders

For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and

Refunds [http://www.irs.gov/publications/p510/ch02.html]

Small Agri-Biodiesel Producer Credit

Administered by: Internal Revenue Service

Annual funding: N/A

Established: 2005 by the Energy Policy Act of 2005, §1345 (P.L. 109-58)

Scheduled termination: December 31, 2008

Description: The small agri-biodiesel producer credit is valued at 10 cents per gallon

of “agri-biodiesel” (see Biodiesel Tax Credit, above) produced. The credit may be

claimed on the first 15 million gallons of ethanol produced by a small producer in a

given year.

Qualified applicant: Any agri-biodiesel producer with production capacity below 60

million gallons per year

For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and

Refunds [http://www.irs.gov/publications/p510/ch02.html]

CRS-4

Renewable Diesel Tax Credit

Administered by: Internal Revenue Service

Annual funding: N/A

Established: 2005 by the Energy Policy Act of 2005, §1346 (P.L. 109-58)

Scheduled termination: December 31, 2008

Description: Producers of biomass-based diesel fuel made through a thermal

depolymerization process (or producers of diesel/renewable biodiesel blends) can

claim $1.00 per gallon tax credit. As defined by law, diesel fuel substitutes produced

through thermal processes are not considered “biodiesel,” and thus are ineligible for

the biodiesel credits.

Qualified applicant: Renewable diesel producers and blenders

For more information: IRS Publication 510, Chapter 2: Fuel Tax Credits and

Refunds [http://www.irs.gov/publications/p510/ch02.html]

Credit for Production of Cellulosic Biofuel

Administered by: Internal Revenue Service

Annual funding: N/A

Established: January 1, 2009, by the Food, Conservation, and Energy Act of 2008,

§15321 (P.L. 110-234)

Scheduled termination: December 31, 2012

Description: Producers of cellulosic biofuel can claim $1.01 per gallon tax credit.

For producers of cellulosic ethanol, the value of the credit is reduced by the amount

of the volumetric ethanol excise tax credit and the small ethanol producer credit (see

above) — currently, the value would be 40 cents per gallon. The credit applies to

fuel produced after December 31, 2008.

Qualified applicant: Cellulosic biofuel producers

Special Depreciation Allowance for Cellulosic Ethanol

Plant Property

Administered by: Internal Revenue Service

Annual funding: N/A

Established: 2006 by the Tax Relief and Health Care Act of 2006, §209 (P.L. 109432)

Scheduled termination: December 31, 2012

Description: A taxpayer may take a depreciation deduction of 50% of the adjusted

basis of a new cellulosic ethanol plant in the year it is put in service. The accelerated

depreciation applies only to cellulosic ethanol plants that break down cellulose

through enzymatic processes (as opposed to gasification). Any portion of the cost

financed through tax-exempt bonds is exempted from the depreciation allowance.

Qualified applicant: Any enzymatic cellulosic ethanol plant acquired after December

20, 2006, and placed in service before January 1, 2013. Any plant that had a binding

contract for acquisition before December 20, 2006, does not qualify.

For more information: See Senate Finance Committee, Summary of House-Senate

Agreement on Tax, Trade, Health, and Other Provisions, December 7, 2006.

CRS-5

Department of Agriculture (USDA)

Bioenergy Program

Administered by: Commodity Credit Corporation (CCC)

Annual funding: $100 million appropriated for FY2005, $60 million for FY2006; up

to $150 million authorized annually for FY2004 through FY2006

FY2008 budget request: $0

Established: FY2001 in response to Executive Order 13134 (August 12, 1999)

Developing and Promoting Biobased Products and Bioenergy, through CCC’s

general authority to conduct commodity programs; extended by the Farm Security

and Rural Investment Act of 2002, §9010 (P.L. 101-171)

Termination: End of FY2006

Description: The Bioenergy Program reimbursed ethanol and biodiesel producers for

expanding their production capacity. Payments helped defray the purchase cost of

the additional commodities needed for that expansion. The amount of each payment

was based on the change in production capacity, as well as the number of applicants

selected for funding. Eligible commodities included grain and oilseed crops (e.g.

barley, corn, soybeans), cellulosic crops (e.g. switchgrass, rice hulls), animal fats,

agricultural byproducts, and oils. For more information, see “Bioenergy Program for

Advanced Biofuels,” below.

Qualified applicant: Any ethanol or biodiesel producer who expanded production

capacity

Renewable Energy Systems and Energy

Efficiency Improvements

Administered by: Rural Business Cooperative Service

Annual funding: $23 million for all projects through FY2007, including biofuels

projects; $36 million for FY2008

FY2008 budget request: $34 million

Established: FY2003 by the Farm Security and Rural Investment Act of 2002, §9006

(P.L. 101-171); funding authorization for FY2007 reduced to $3 million by §1301

of the Deficit Reduction Act of 2005 (P.L. 109-171); full funding restored by

FY2007 Continuing Resolution (P.L. 110-5)

Scheduled termination: End of FY2007

Description: This program provides grants, loans, and loan guarantees for the

development of renewable energy projects and energy efficiency improvements. The

construction of a biofuel plant could be an eligible project. Grants are limited to 25%

of the costs of the project; loans are limited to 50% of the cost of the project.

Qualified applicant: Farmers, ranchers, and rural small businesses

For more information: [http://www.rurdev.usda.gov]

CRS-6

Value-Added Producer Grants Program (VAPG)

Administered by: Rural Business Cooperative Service

Annual funding: $15.5 million appropriated for FY2005; $20.5 million for FY2006;

$20.3 million for FY2007; $18.9 million for FY2008

FY2008 budget request: $15 million

Established: FY2001, expanded in FY2003 to include renewable energy projects by

the Farm Security and Rural Investment Act of 2002, §6401 (P.L. 101-171); the

Deficit Reduction Act of 2005, §1402 (P.L. 109-171), required that all previously

appropriated funds unobligated by October 1, 2006 be returned to the Treasury

Scheduled termination: End of FY2007

Description: VAPG provides grants to independent producers for the development

of value-added agricultural activities, including biofuel production. The grants can

be used for feasibility studies, the development of a business plan, or to acquire

working capital to operate a value-added business. Grants are limited to $500,000

per recipient.

Qualified applicant: Independent producer, producer group, cooperative, or a

majority-controlled producer-based business venture

For more information: [http://www.rurdev.usda.gov/rbs/coops/vadg.htm]

Biorefinery Development Grants (Unfunded)

Administered by: If funded, it would likely be administered by USDA’s Rural

Development Agency

Annual funding: $0

Established: 2002 by the Farm Security and Rural Investment Act of 2002, §9003

(P.L. 101-171)

Scheduled termination: End of FY2007

Description: This program was established by the Farm Security and Rural

Investment Act of 2002 (P.L. 101-171); however, no funding has been provided. If

funded, the program would provide grants for the development and construction of

biorefineries, including those that produce biofuels.

Qualified applicant: Virtually any non-federal entity (including a national laboratory)

or group of entities that plans to build a biorefinery

For more information: N/A

Business and Industry (B&I) Guaranteed Loans

Administered by: Rural Business Cooperative Service

Annual funding: Approximately $1 billion in loans are guaranteed annually

Scheduled termination: None

Description: This program provides guarantees for up to 90% of a loan made by a

commercial lender. Loan proceeds may be used for working capital, machinery and

equipment, buildings and real estate, and certain types of debt refinancing.

Qualified applicant: Virtually any legal entity.

For more information: [http://www.rurdev.usda.gov/rbs/busp/b&i_gar.htm]

CRS-7

Rural Business Enterprise Grants (RBEG)

Administered by: Rural Business Cooperative Service

Annual funding: Approximately $40 million in each of FY2005 through FY2007;

$38.7 million for FY2008

Scheduled termination: None

Description: RBEG provides grants to finance and facilitate development of small

and emerging private rural business enterprises. The grant is awarded to a third party

to assist a business; grant funds do not go directly to the business.

Qualified applicant: Public bodies, private nonprofit corporations, and federally

recognized Indian Tribal groups.

For more information: [http://www.rurdev.usda.gov/rbs/busp/rbeg.htm]

Other USDA Programs

The following programs within the Rural Business Cooperative Service could

possibly be used to assist biofuels producers indirectly:

!

!

!

Rural Economic Development Loan Program;

Rural Development Loan Program;

Rural Economic Development Grants.

New Farm Bill Programs Under USDA

In addition to tax and tariff provisions (above), the 2008 Farm Bill also

established several new biofuels incentive programs. Funding for these programs has

yet to be appropriated.

Biorefinery Assistance

Administered by: To be determined

Annual funding: $75 million in mandatory funding for FY2009, and $245 million in

FY2010 for loan guarantees, plus $150 million authorized annually for FY2009

through FY2012 — appropriations pending

Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001 (P.L.

110-234)

Scheduled termination: End of FY2012

Description: Loan guarantees and grants for the construction and retrofitting of

biorefineries to produce advanced biofuels.

Qualified applicant: Individual, entity, Indian tribe, or unit of State or local

government, including a corporation, farm cooperative, farmer cooperative

organization, association of agricultural producers, National Laboratory, institution

of higher education, rural electric cooperative, public power entity, or consortium of

any of those entities.

CRS-8

Repowering Assistance

Administered by: To be determined

Annual funding: $35 million in mandatory funding for FY2009, to remain available

until expended, plus $15 million authorized annually for FY2009 through FY2012

— appropriations pending

Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001 (P.L.

110-234)

Scheduled termination: End of FY2012

Description: Grants to biorefineries that use renewable biomass to reduce or

eliminate fossil fuel use.

Qualified applicant: Biorefineries in existence at the date of enactment.

Bioenergy Program for Advanced Biofuels

Administered by: To be determined

Annual funding: Mandatory funding of $55 million for FY2009, $55 million for

FY2010, $85 million for FY2011, and $105 million for FY2012, plus $25 million

authorized annually for FY2009-FY2012 — appropriations pending

Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001 (P.L.

110-234)

Scheduled termination: End of FY2012

Description: Provides payments to producers to support and expand production of

advanced biofuels.

Qualified applicant: Producer of advanced biofuels

Feedstock Flexibility Program for Producers

of Biofuels (Sugar)

Administered by: Commodity Credit Corporation (CCC)

Annual funding: Such sums as necessary are authorized to be appropriated —

appropriations pending

Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001 (P.L.

110-234)

Scheduled termination: None

Description: Authorizes the use of CCC funds to purchase surplus sugar, to ensure

the sugar program operates at no-net-cost, to be resold as a biomass feedstock to

produce bioenergy.

Qualified applicant: Producer of biofuels using eligible sugar as a feedstock

CRS-9

Biomass Crop Assistance Program (BCAP)

Administered by: Commodity Credit Corporation (CCC)

Annual funding: Such sums as necessary are authorized to be appropriated for

FY2008 through FY2012 — appropriations pending

Established: 2008 by the Food, Conservation, and Energy Act of 2008, §9001 (P.L.

110-234)

Scheduled termination: End of FY2012

Description: Encourages biomass production or biomass conversion facility

construction with contracts that will enable producers to receive financial assistance

for crop establishment costs and annual payments for biomass production. Producers

must be within economically practicable distance from a biomass facility. Also

provides payments to eligible entities to assist with costs for collection, harvest,

storage, and transportation to a biomass conversion facility.

Qualified applicant: Owner or operator of contract acreage that is physically located

within a BCAP project area

Department of Energy (DOE)

Biomass Research and Development Initiative

Administered by: National Biomass Coordination Office (a joint DOE-USDA

program)

Annual funding: $14 million per year through FY2007 ($12 million in FY2006); $11

million for FY2008

FY2008 budget request: $12 million

Established: FY2001 by the Biomass Research and Development Act of 2000, §307

(P.L. 106-224); program extended and mandatory appropriations provided bythe

Farm Security and Rural Investment Act of 2002, §9008 (P.L. 101-171); program

extended and funding authorization expanded by the Energy Policy Act of 2005,

§941 (P.L. 109-58) — currently authorized at $200 million per year

Scheduled termination: End of FY2015

Description: Grants are provided for biomass research, development, and

demonstration projects. Eligible projects include ethanol and biodiesel demonstration

plants.

Qualified applicant: Wide range of possible applicants

For more information: [http://www.brdisolutions.com/default.aspx]

CRS-10

Biorefinery Project Grants

Administered by: Office of Energy Efficiency and Renewable Energy

Annual funding: For FY2008, $186 million appropriated for the biomass program —

not all of this funding will go toward biorefinery project grants

FY2008 budget request: $179 million for entire biomass program

Established: FY2001 through funding authorized in various statutes

Scheduled termination: None

Description: This program provides funds for cooperative biomass research and

development for the production of fuels, electric power, chemicals, and other

products.

Qualified applicant: Varies from year to year, depending on program goals in a given

year

For more information: [http://www.eere.energy.gov/biomass/]

Loan Guarantees for Ethanol and Commercial Byproducts

from Cellulose, Municipal Solid Waste, and Sugar Cane

Administered by: DOE

Annual funding: Not specified

FY2008 budget request: $0

Established: 2005 by the Energy Policy Act of 2005, §§1510, 1511, and 1516 (P.L

109-58)

Scheduled termination: Varies, depending on specific program

Description: The Energy Policy Act of 2005 authorizes several programs to provide

loan guarantees for the construction of facilities that produce ethanol and other

commercial products from cellulosic material, municipal solid waste, or sugar cane.

Qualified applicant: Private lending institutions, to guarantee loans for the

construction of biofuels plants

DOE Loan Guarantee Program

Administered by: DOE

Annual funding: $5.3 million for administrative expenses; authority for $38.5 billion

in loan guarantees for energy projects in FY2008, including $10 billion for renewable

energy and energy efficiency

FY2008 budget request: $2 million for administrative expenses

Established: 2005 by the Energy Policy Act of 2005, Title XVII (P.L 109-58)

Scheduled termination: Not specified

Description: Title XVII of the Energy Policy Act of 2005 authorizes DOE to provide

loan guarantees for energy projects that reduce air pollutant and greenhouse gas

emissions, including biofuels projects.

Qualified applicant: Private lending institutions, to guarantee loans for clean energy

projects.

For more information: [http://www.lgprogram.energy.gov/]

CRS-11

Cellulosic Biofuels Production Incentive

Administered by: DOE

Annual funding: $25 million total authorized for all fiscal years

FY2008 budget request: None

Established: 2005 by the Energy Policy Act of 2005, §942 (P.L 109-58)

Scheduled termination: Not specified

Description: Section 942 of the Energy Policy Act of 2005 authorizes DOE to

provide per-gallon incentive payments for cellulosic biofuels until annual U.S.

production reaches 1 billion gallons or 2015, whichever is earlier. DOE accepted

comments on the program through July 14, 2006; DOE has yet to promulgate

regulations.

Qualified applicant: Any U.S. cellulosic biofuel production facility that meets

applicable permitting requirements, as well as any financial requirements set by

DOE.

U.S. Customs and Border Protection

Import Duty for Fuel Ethanol

Administered by: U.S. Customs and Border Protection

Annual funding: N/A

Established: 1980 by the Omnibus Reconciliation Act of 1980 (P.L. 96-499);

amended by the Tax Reform Act of 1986, §423 (P.L. 99-514; extended by the Tax

Relief and Health Care Act of 2006, §302 (P.L. 109-432); further extended by the

Food, Conservation, and Energy Act of 2008, §15333 (P.L. 110-234)

Scheduled termination: December 31, 2010

Description: A 2.5% ad valorem tariff and a most-favored-nation duty of $0.54 per

gallon of ethanol (for fuel use) applies to imports into the United States from most

countries; most ethanol from Caribbean Basin Initiative (CBI) countries may be

imported duty-free.

Covered Entities: Fuel ethanol importers

For more information: CRS Report RS21930, Ethanol Imports and the Caribbean

Basin Initiative, by Brent D. Yacobucci; Senate Finance Committee, Summary of

House-Senate Agreement on Tax, Trade, Health, and Other Provisions, December

7, 2006.

CRS-12

Appendix. Summary of Federal Incentives for Promoting Biofuels

Table 1. Federal Biofuels Incentives by Agency

Original

Authorizing

Legislation

Administering

Agency

Program

Environmental

Protection Agency

Renewable Fuels

Standard

Mandated use of renewable fuel in gasoline: 4.0

billion gallons in 2006, increasing to 7.5 billion

gallons in 2012

P.L. 109-58

§1501

N/A

None

Internal Revenue

Service

Volumetric Ethanol

Excise Tax Credit

Gasoline suppliers who blend ethanol with gasoline

are eligible for a tax credit of 51 cents per gallon of

ethanol

P.L. 108-357

§301

N/A

End of 2010

Small Ethanol Producer

Credit

An ethanol producer with less than 60 million gallons

per year in production capacity may claim a credit of

10 cents per gallon on the first 15 million gallons

produced in a year

P.L. 101-508

N/A

End of 2010

Biodiesel Tax Credit

Producers of biodiesel or diesel/biodiesel blends may

claim a tax credit of $1.00 per gallon of agri-biodiesel

(produced from virgin agricultural products) or 50

cents per gallon of biodiesel from recycled products

P.L. 108-357

N/A

End of 2008

Small Agri-Biodiesel

Producer Credit

An agri-biodiesel producer (see above) with less than

60 million gallons per year in production capacity

may claim a credit of 10 cents per gallon on the first

15 million gallons produced in a year

P.L. 109-58

N/A

End of 2008

Description

FY2008

Funding

Expiration

Date

CRS-13

Administering

Agency

Department of

Agriculture

Original

Authorizing

Legislation

FY2008

Funding

Expiration

Date

Program

Description

Renewable Diesel Tax

Credit

Producers of renewable diesel (similar to biodiesel,

but produced through a different process) may claim

a tax credit of $1.00 per gallon.

P.L. 109-58

N/A

End of 2008

Credit for Production of

Cellulosic Biofuel

Producers of cellulosic biofuel may claim a tax credit

of $1.01 per gallon. For cellulosic ethanol producers,

the value of the credit is reduced by the value of the

volumetric ethanol excise tax credit and the small

ethanol producer credit — currently, the credit is

valued at 40 cents per gallon. The credit applies to

fuel produced after December 31, 2008.

P.L. 110-234

N/A

End of 2012

Special Depreciation

Allowance for Cellulosic

Biomass Ethanol Plant

Property

Plants producing cellulosic ethanol through

enzymatic processes may take a 50% depreciation

allowance in the first year of operation, subject to

certain restrictions

P.L. 109-432

N/A

End of 2012

Bioenergy Program

Reimburses ethanol and biodiesel producers for

feedstocks necessary to expand operations

P.L. 101-171

§9010

$0

Expired: End of

FY2006

Renewable Energy

Systems and Energy

Efficiency Improvements

Grants, loans, and loan guarantees for the

development of renewable energy projects and energy

efficiency improvements

P.L. 101-171

§9006

$36 million

Scheduled: End

of FY2007

Value-Added Producer

Grants

Grants to independent producers for the development

of value-added agricultural activities, including

biofuel production

P.L. 101-171

§6401

$19 million

Scheduled: End

of FY2007

CRS-14

Administering

Agency

New Farm Bill

Programs under

USDA

Original

Authorizing

Legislation

FY2008

Funding

Expiration

Date

Program

Description

Biorefinery Development

Grants - Unfunded

If funded, would provide grants for the development

and construction of biorefineries, including biofuel

plants

P.L. 101-171

§9003

$0

Scheduled: End

of FY2007

Business and Industry

(B&I) Guaranteed Loans

Loan guarantees for various projects — could be used

for biofuels

Various

statutes

Approx. $1

billion

None

Rural Business

Enterprise Grants

Grants to finance and facilitate development of small

and emerging rural business enterprises

Various

statutes

Approx. $40

million

None

Biorefinery Assistance

Loan guarantees and grants for the construction and

retrofitting of biorefineries to produce advanced

biofuels

P.L. 110-234

§9001

N/A

End of FY2012

Repowering Assistance

Grants to biorefineries that use renewable biomass to

reduce or eliminate fossil fuel use

P.L. 110-234

§9001

N/A

End of FY2012

Bioenergy Program for

Advanced Biofuels

Provides payments to producers to support and

expand production of advanced biofuels

P.L. 110-234

§9001

N/A

End of FY2012

Feedstock Flexibility

Program for Producers of

Biofuels (Sugar)

Authorizes the use of CCC funds to purchase surplus

sugar, to be resold as a biomass feedstock to produce

bioenergy

P.L. 110-234

§9001

N/A

None

Biomass Crop Assistance

Program (BCAP)

Provides financial assistance for biomass crop

establishment costs and annual payments for biomass

production; also provides payments to assist with

costs for biomass collection, harvest, storage, and

transportation

P.L. 110-234

§9001

N/A

End of FY2012

CRS-15

Administering

Agency

Department of

Energy

U.S. Customs and

Border Protection

Program

Description

Original

Authorizing

Legislation

FY2008

Funding

Expiration

Date

Biomass Research and

Development Initiative

Grants for biomass research, development, and

demonstration projects

P.L. 106-224

$11 million

End of FY2015

Biorefinery Project

Grants

Funds cooperative R&D on biomass for fuels, power,

chemicals, and other products

Various

statutes

$186 million

total for

biomass

R&D

program

None

Loan Guarantees for

Ethanol and Commercial

Byproducts from Various

Feedstocks

Several programs of loan guarantees to construct

facilities that produce ethanol and other commercial

products from cellulosic material, municipal solid

waste, and/or sugarcane

P.L. 109-58

§§1510, 1511,

and 1516

N/A

Varies

DOE Loan Guarantee

Program

Loan guarantees for energy projects that reduce air

pollutant and greenhouse gas emissions, including

biofuels projects

P.L. 109-58

Title XVII

N/A

None

Production Incentives for

Cellulosic Biofuels

Authorizes DOE to provide per-gallon payments to

cellulosic biofuel producers

P.L. 109-58

§942

N/A

August 8 ,2015

Import Duty for Fuel

Ethanol

All imported ethanol is subject to a 2.5% ad valorem

tariff; fuel ethanol is also subject to a most-favorednation added duty of 54 cents per gallon (with some

exceptions)

P.L. 96-499

N/A

End of 2010