January 01, 2006 | By Keith Martin in Washington, DC

Biodiesl companies are angry about an apparent decision to allow tax credits on fuel made with imported biodiesel.

“Biodiesel” is processed oil from plants, like soybeans, sunflowers and rapeseed.  It is then mixed with gasoline or diesel fuel to make a biodiesel mixture that can be used in motor vehicles.  The US government rewards fuel blenders who mix biodiesel with vehicle fuel.  It allows a tax credit of 50¢ or $1 a gallon to such blenders. The higher credit applies to biodiesel made from agricultural sources.

Ten US congressmen wrote the Treasury secretary in November to complain about an apparent IRS decision to allow blenders who use biodiesel from palm oil to claim the $1-a-gallon incentive. The congressmen complained that palm oil is not produced in the United States, and that the decision only benefits farmers in Ecuador, which is preparing to export three million gallons of palm oil-based biodiesel a month to the United States.

US biodiesel production was 30 million gallons in 2005.  It is expected to grow exponentially in the next few years.

Keith Martin