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Biofuel Subsidy in Flux

Every year producers and distributors of biofuel cross their fingers and wonder whether an extension of a federal subsidy of biofuels will pass, and this year they drew the short straw. 

The Federal Excise Tax Credit (FET) on biofuels expired in January. The FET was created in the late 1990s to incentivize the use of biofuels — it provided a wholesale level subsidy on biofuels. Without this funding, the biofuel industry, including the biofuel industry in Oregon, is scrambling to maintain stable prices for its products. 

Champions of alternative energy have been pushing fuels derived from renewable organic resources as a sustainable substitute for petroleum-based fuel for decades, but it has been difficult for biofuels to become established in the fickle, politically charged fuel market. 

According to Ian Hill, the CEO and co-founder of biofuel retail company SeQuential-Pacific that has three stations here in Eugene, “the fluctuating policies and support of biofuels creates a terrible business climate.” Hill points out that more sustainable small-scale producers and distributors of biofuel are unfortunately among the most affected by the policy change.

So far SeQuential has not had to raise the prices of its fuel, but depending on whether the federal government reinstates the subsidy, prices for biofuel may hike as much as a dollar per gallon. “Some legislators say that they want to bring back the FET and some say no, and that makes it really hard,” Hill says.

Companies like SeQuential are working to compete with petroleum-based fuels even without the federal subsidy, but the government also subsidizes the supply of petroleum products, and that subsidy isn’t going away anytime soon, he says. “In an ideal world this would be a level playing field, and the domestically produced, renewable fuel would win out,” Hill says, “for now, however, we are just hoping that we can be given a consistent idea of what our funding will be so that we can create a plan for a sustainable future.”

SeQuential has cards at its Eugene stations asking customers to call on their senators and representatives to vote in favor of SB 1277 the biodiesel tax credit extension bill.