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Senate bill targets aid for small biodiesel producers
Grassley and Klobuchar propose to preserve the credit of 20 cents per gallon through 2029
Fuel pump with renewable biodiesel. (Smith Collection/Gado via Getty Images)
Key Takeaways:
- Sens. Chuck Grassley and Sen. Amy Klobuchar introduced legislation Sept. 30 extending the Small Agri-Biodiesel Producer Credit through 2029.
- The credit provides qualifying small agricultural biodiesel producers 20 cents per gallon on their first 15 million gallons.
- EPA plans an October supplemental rule addressing refinery exemptions, while American Trucking Associations supports extending both biodiesel tax credits.
A bipartisan bill aimed at boosting U.S. biodiesel production was introduced Sept. 30, with supporters arguing it would provide stability for smaller producers.
The legislation, sponsored by Sens. Chuck Grassley (R-Iowa) and Amy Klobuchar (D-Minn.), would extend the Small Agri-Biodiesel Producer Credit through 2029. The credit is scheduled to expire at the end of December. It provides a federal income tax credit of 20 cents per gallon for the first 15 million gallons produced by qualifying small agricultural biodiesel manufacturers.
Kurt Kovarik, vice president of federal affairs for Clean Fuels, a trade association representing biodiesel, renewable diesel and sustainable aviation fuel producers, said the extension would provide certainty for small manufacturers.
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“Small biodiesel producers are making an outsized contribution to America’s energy security right now, producing lower-cost, drop-in distillate fuel that’s needed to keep the economy moving,” Kovarik said Sept. 30. “These companies are investing in rural communities, creating and preserving jobs, and running full-out to provide cleaner, better, more affordable fuel to meet today’s demand.”
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Kovarik
The bill follows separate bipartisan legislation introduced in the House in 2025 and reintroduced in 2026 that would extend the Biodiesel Blenders Tax Credit. That measure would continue a $1-per-gallon biodiesel tax credit through 2029 after it expired in 2024.
American Trucking Associations told Transport Topics that it supports both measures.
Some biofuel industry groups contend that increased biodiesel production could help offset higher fuel costs for commercial trucking. Diesel prices have climbed sharply this year, most notably after the U.S. and Israel in February launched a military campaign against Iran; for the week of Sept. 28, diesel cost, on average, $6.382 a gallon, up about $2.63 from a year ago.
The proposed extension also comes amid uncertainty in the biofuels industry. Biofuel groups pushed back against small-refinery exemptions announced by the Trump administration in September under the Renewable Fuel Standard for 2025.
The Environmental Protection Agency said it would exempt 1.76 billion Renewable Fuel Standard compliance credits for 25 small refineries. Biofuel advocates argue the exemptions weaken demand for biofuels and could further constrain fuel supply. The agency, however, said it plans to finalize a supplemental rule before the end of October to ensure the exemptions do not undercut biodiesel and renewable diesel production.
