The U.S. biodiesel industry has overcome one hurdle towards extension of its $1/gal tax credit, with the House passing a $31 billion tax package this afternoon that extends for one year more than 40 provisions that are scheduled to expire at the end of this year, including the biodiesel tax credit.

By a 241-181 vote, the House passed H.R. 4213, the tax extenders package introduced earlier this week by House Ways and Means Committee Chairman Charles Rangel (D-N.Y.). Among the provisions in the package is a one-year extension of the $1/gal tax credit for biodiesel producers, as well as extension of the 10ct/gal small agri-biodiesel producer credit, for up to 15 million gal/yr for producers with a capacity of less than 60 million gal/yr.
The bill would also extend for one year the $1/gal production tax credit for diesel fuel created from biomass. These provisions are estimated to cost $1.008 billion over 10 years.

The news is welcome to the U.S. biodiesel industry, already hampered by challenging production economics that has left less than one-third of facilities operating. The biodiesel tax credit currently expires at the end of this year.

But the fight is not over. The tax package still has to make its way through the Senate before the end of the year. However, with much of the Senate’s time focused on passing health care legislation, and must-pass funding measures, it’s unclear whether the Senate will be able to get to the tax extenders bill by that timeframe.

With that in mind, Sen. Tom Harkin (D-Iowa) wrote the Senate Finance Committee leaders yesterday, asking for the Senate tax extenders package to be passed this month. “[A]n extension that isn’t enacted until sometime in the spring of 2010 [as part of a tax extenders package], even if it is retroactive to Jan. 1, 2010, will be far less effective in supporting the continued production of biodiesel” because of the urgent need for continuing the tax credit now, he concluded.