February 8, 2018 / 8:44 PM / 17 days ago

Budget deal includes 1-year U.S. biodiesel credit reinstatement; RINs rally

CHICAGO, Feb 8 (Reuters) - U.S. renewable fuel credits were sharply higher on Thursday after a proposed budget deal included a one-year reinstatement of a biodiesel rebate, and not the two-year extension sought by the biofuels industry, traders and lobbyists said.

The U.S. Senate and House of Representatives on Thursday were expected to vote on the package that would avert a government shutdown but add $300 billion to the deficit.

Part of the deal is a $1-per-gallon credit given to biodiesel blenders retroactively for 2017.

U.S. Senator Chuck Grassley of Iowa and the industry group National Biodiesel Board (NBB) had pushed for a credit both for 2017 and 2018.

Grassley told reporters the one-year reinstatement was “not very good” and contrary to promises he had received from members of the House of Representatives for a two-year credit.

The credit first went into effect as part the American Jobs Creation Act from 2005-09 and has often been renewed retroactively. It lapsed for the fifth time at the end of 2016.

The $1 rebate can be the difference between profiting and losing money for some biodiesel producers who in the United States make the biofuel largely using soybean oil.

“Candidly, we are disappointed that some of the negotiators prevented the extension from covering 2018,” Kurt Kovarik, vice president of federal affairs at the NBB, said in a statement.

Prices of the biomass-based diesel (D4) Renewable Identification Number (RIN) credits traded at 84 cents a piece, up from lows of 72 cents on Wednesday, traders said.

With no credit in place for 2018, higher RINs prices might be needed to encourage producers to ramp up production. Oil refiners use the credits to meet government requirements for use of renewable fuels including ethanol. Fuel companies can either meet the requirements by blending biodiesel with petroleum-based biodiesel, or buy RINs credits.

“The one-year deal means RINs have to provide the margin for the loss of the $1-per-gallon,” a fuel credits trader said.

Prices for soyoil fell about 1 percent to a two-week low of 32.21 cents per pound, easing in part on worries demand for the vegetable oil could ebb without the tax incentive to make the biofuel. (Reporting by Michael Hirtzer in Chicago; Editing by Tom Brown)

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