US Fuel Groups Warn of Higher Prices Without Credit Guidance

(Bloomberg) -- Three dozen trade groups across the energy, farming and transport sectors say a lack of US government guidance on tax credits is putting Americans at risk of higher fuel prices.

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The current US Congress, whose session expires in early January, should do a short-term extension of various energy-related credits set to expire next month, including a $1 a gallon biodiesel tax incentive that’s been in place since 2005, the groups said in a letter to lawmakers. Such a so-called bridge measure is needed to ensure market stability as companies including airlines wait for details on how new credits set to take effect next year will work.

“Absent the certainty provided by a bridge package, American consumers would face rising energy and fuel prices, and our organizations and the members we represent would face regulatory, legal, and tax filing uncertainty,” groups including those representing fuel retailers and truck stops said.

‘Orderly Transition’

The transition to a new administration under President-elect Donald Trump, along with a lack of guidance under President Joe Biden, has the energy and agriculture industries in a quandary on how to proceed. The new incentives under Biden’s signature climate change law are meant to encourage lower-emitting energy sources and help jump-start developing industries like green jet fuel.

“We don’t know whether or not the credit will be there for us on Jan 1st of next year nor how long it would take for it to be there,” Tom Michels, director of government affairs for United Airlines Holdings Inc., said in an interview.

Another issue that needs to be addressed is extending the upcoming credits for at least 10 years so investors can see the government is serious about the transition to clean energy and companies can get new fuel plants up and running, Michels said. As of now, upcoming tax incentives like the clean fuels credit, known in the industry as “45Z,” is set to expire in 2027.

The so-called biodiesel blenders’ tax credit, scheduled to expire for good next month, is among existing tax laws that should be kept in tact into next year amid the uncertainty, according to the groups including Airlines for America and the Advanced Biofuels Association.

The credit keeps diesel prices down and reduces carbon emissions, according to Doug Kantor, general counsel for NACS, which advocates for the global convenience and fuel retailing industry.

“We should not sacrifice those goals simply because guidance on a new tax credit is not ready,” he said in an emailed statement. “It’s time for an extension that will allow for an orderly transition to a new tax policy next year and avoid chaos at the end of this year.”

(Updates with details and comments starting in the first paragraph.)

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