US Biodiesel and Ag Groups Try to Block Palm Oil

17 July 2005

The Des Moines Register reports that the American Soybean Association and the National Biodiesel Board are attempting to have the IRS explicitly exclude palm oil from the list of virgin oils to which the new biodiesel tax credit applies.

The two groups are concerned about the potential for lower-cost palm oil, imported from Malaysia and Indonesia, to encroach into the US market. Fediol, the EU’s vegetable oil federation, recently speculated that palm oil could supply up to 20% of the EU’s biodiesel needs by 2010. (Earlier post.)

There’s little indication that palm oil is headed here for fuel use anytime soon, and there are questions about how well it would work in fuel. Still, palm oil now costs several cents a pound less than soybean oil, and that has farmers worried.

The language in the law applies the tax credit to “virgin oils, including . . . oils from corn, soybeans, sunflower seeds, cottonseeds.”

Palm oil isn’t in the list, but that pesky word “including” suggests that the oils named in the law are examples of what products qualify for the tax credit, not the only ones that qualify.

The two groups wrote the U.S. Internal Revenue Service in June asking for a ruling that palm oil does not qualify for the tax credit. The groups said that Congress clearly intended to exclude any oils not listed in the law.

Allowing palm oil to qualify for the tax credit would put soybean farmers at a “severe competitive disadvantage,” the groups said in their letter.