Editorial: Tax break for biodiesel doesn't meet the test

Oregon’s Legislature is considering a proposal to give a tax break to one type of biodiesel fuel. Despite some possible benefits, the negatives outweigh the positives for House Bill 2435.

The bill would give special treatment to diesel fuel that contains 20 percent biodiesel made from used cooking oil.

If that fuel were used in a vehicle weighing 10,000 pounds or less, users would not pay the 30 cent-per-gallon state fuel tax. The exemption would be in effect from 2014 to 2020.

Gavin Carpenter, director of sales for SeQuential Pacific Biodiesel, spoke in favor of the bill during a hearing of the House Committee on Energy and Environment last week.

He said the bill would incentivize the use of lower-emission fuel, help restaurants sell their used cooking oil and keep more of the biofuel business in Oregon.

Carpenter told us much of the used cooking oil is now being sent out of state because there isn’t enough demand in Oregon. At the same time, biodiesel made from soy comes here from the Midwest.

This bill would help grow the in-state biodiesel business, he said, and reduce transporting of cooking oil and fuel in and out of the region.

In addition, more vehicles would likely use biofuels, thus lowering their emissions.

Doug Kleeb, the Oregon Department of Transportation fuels tax manager, opposes the measure. His written testimony estimated the loss in fuel tax revenue at $1 million to $3 million per biennium, plus an additional $335,000 for added reporting requirements.

The fuel tax is used to maintain and improve Oregon’s roads, and it is already under assault as more fuel-efficient vehicles pay less per mile driven.

HB 2435 is too narrowly focused on cooking oil and would take funds from road maintenance. Tax incentives are a time-honored way to encourage certain behaviors, but they must be carefully crafted to protect taxpayer interests and avoid unfairly benefiting one business over another. This bill doesn’t meet the test.