Biodiesel out as jobs bill episode continues

By Nicholas Zeman
Posted February 18, 2010, at 10:05 a.m. CST

Republicans may feel like they fell for the classic "bait and switch"-a political maneuver where one party agrees to a deal simply to ascertain the wishes or motivations of an opponent, then once obtaining this information, backs out-regarding the recent actions of U.S. Senate Majority Leader Harry Reid, D-Nev., while negotiating a job creation bill that no longer includes an extension of the biodiesel tax incentive.

On February 11, Sen. Max Baucus, D-Mont., and Sen. Charles Grassley, R-Iowa, unveiled the Hiring Employees to Restore Employment (HIRE) Act, legislation that provided for the extension of expired tax provisions, including the biodiesel tax credit among other things.

This was a "jobs" bill worth $85 billion that had bipartisan support and approval of the White House. It didn't even take a day, however, once Grassley and Baucus' work was circulated, for Reid to announce his decision to move forward with a scaled-down jobs package that did not include an extension of the biodiesel tax incentive, "indicating that this issue and other expiring provisions would be addressed at some undetermined point in the future," the National Biodiesel Board said.

While some of the circumstances surrounding last week's jobs bill debacle remain mysterious, speculation indicates the Democrats have become sensitive to deficit critiques. "The Republicans are screaming that Obama is building the deficit more than any other president," said David Swenson, biofuels analyst and professor of economics at Iowa State University. "The Obama Administration has gotten halfway into the disbursement of the stimulus package and has become timid. Now there's going to be an emphasis on deficit reduction and a spending freeze-I think this is behind some of what we're seeing from Reid."

Actually, The White House announced last week that it had supported the Baucus-Grassley draft, saying that the President looked forward to working with members from both parties on this bill and on the additional job creation measures he identified, including incentives for energy efficiency investments and increased access to credit for small businesses.

Since Reid's announcement that the deal was off, however, the President signed into law H.J. Res. 45, the Statutory Pay-As-You-Go Act of 2010, which increases the public debt limit from $12.394 trillion to $14.294 trillion, and establishes a statutory Pay-As-You-Go procedure, requiring that new non-emergency legislation affecting tax revenue or mandatory spending not increase the federal deficit.

Reid's editing of the jobs bill cut approximately $70 billion from the Baucus-Grassley draft.

"We're very disappointed that Sen. Reid stripped the biodiesel tax credit out of the jobs bill, but we're still hopeful that the issue is going to be addressed quickly," said Randy Olson, director of the Iowa Biodiesel Board. "We hope that Sen. Tom Harkin, D-Iowa, emphasizes the importance of biodiesel-with the reenactment of the tax credit we can put people back to work the day after it's passed."

Backing a strategy to employ energy tax credits as a means to create jobs might be a hard position to defend, Swenson said. "A biodiesel plant that produces 30 MMgy would be subsidized at $30 million and only support 30 jobs-that's $1 million per job," he said. "If $100 million is spent constructing roads and bridges or doing building retrofits, it could support between 1,750 and 2,000 jobs. So I'm not sure the biofuels industry wants to make the argument that energy subsidies create jobs, because those jobs are extremely expensive."

The biodiesel tax incentive has been written into at least three bills since November that have never gotten to a Senate vote. Controversy aside, the current episode is a real setback for the biodiesel industry, which must now find a new legislative vehicle to move its excise tax incentive through the voting channels as soon as possible. "Grassley and Baucus worked hard to craft this legislation, and the fact that Reid changed it is terribly disappointing," Olson said.

Reid's announcement sends a message that "he wants to go partisan and blame Republicans when Sen. Grassley and others were trying to find common ground on solutions to help get the economy back on track and people back to work," Grassley's office stated last week. "The majority leader pulled the rug out from work to build broad-based support for tax relief and other efforts to help the private sector recover from the economic crisis."