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U. S. bill to wipe out “splash and dash”

The lucrative “splash and dash” practice of collecting U. S. tax credits on imported biodiesel fuel that is sent to Europe would end under the financial rescue bill sent to the White House Oct. 3.

President George W. Bush was expected to sign the bill, which also extends the $1-a-gallon biodiesel tax credit through 2009 (all figures US$). Soybean oil is a major feedstock for U. S. biodiesel.

The bill would end the practice of shipping biodiesel through the U. S. to collect the credit, said a Senate Finance Committee spokeswoman.

In “splash and dash,” tankers loaded with foreign-made biodiesel stop at U. S. ports to pick up enough conventional diesel fuel to qualify for the biodiesel credit before sailing for a final destination.

The addition of 9,000 gallons of conventional diesel would be enough for a nine-million-gallon tanker to collect the credit on its entire cargo, according to one description.

The step would end the loophole but would not resolve objections by the European Union. One EU source said U. S.-produced biodiesel could receive the tax break and be shipped to Europe, where it may undercut European biodiesel.

“We have no problem with the U. S. providing incentives for biodiesel for use in the U. S.,” the source said.

EU trade officials began an investigation in June whether imports of U. S. biodiesel violate international trade rules because of subsidies.

U. S. biodiesel makers said elimination of “splash and dash” would end a tax and energy policy abuse. By one estimate, “splash and dash” cost the U. S. Treasury $300 million in 2007.

In January, the EU said up to a fifth of its biodiesel market was taken by fuel imported via the United States.

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