BUSH SIGNS "WALL STREET BAILOUT" AND ENERGY TAX EXTENDERS INTO LAW
As was previously reported in a NEFI Action Center Alert, the President signed into law last week the Emergency Economic Stabilization Act. The bill did not provide immediate relief to the markets. Any administration action under the bill is at least four to five weeks away, which may not be soon enough. Congressional leaders are now pondering whether or not to meet after the November 4th election in order to address additional "bailout" requests and possibly another economic stimulus package. Since the bailout passed, the Dow has dropped below 9,000. Recession fears and investment bank woes have also taken their toll on energy futures. NYMEX oil futures are now trading below $90 bbl, heating oil below $2.50 pg, and gasoline around $2.00 pg.

The $810+ billion dollar rescue package can be best broken down into two parts. The first, a $700 billion "bailout" that allows the Treasury, with oversight from Congress, to buy up bad mortgages and other assets that have frozen the credit markets. Of interest to NEFI members, it also increases deposit and share insurance coverage from $100,000 to $250,000 through December 31, 2009.

Second, the Act contains a sweeping "tax extenders package" that includes a number of energy-related measures of interest to NEFI members, including:

• Closes the "splash and dash" loophole in federal tax policy that allows diesel fuel from foreign countries to be eligible for the US biodiesel tax credit. The loophole allowed foreign tankers with finished diesel fuel to temporarily enter American ports and splash blend with biodiesel in order to qualify for the federal biodiesel tax credit. Once blended, both the fuel and the tax credit would be shipped to foreign countries. The language of the bill disallows any splash and dash blending occurring on or after May 15, 2008.

• Extends the $1 per gallon biodiesel blender's tax credit set to expire on December 31, 2008 to December 31, 2009 (one year extension). Increases and extends for one year the 50-cent per gallon biodiesel blender’s credit available for product containing animal fats (yellow grease) to $1.00 per gallon, the same rate as biodiesel made from 100% plant oils (effective for biodiesel blended after December 31, 2008).

• Clarifies that biodiesel containing a petroleum feedstock prior to downstream blending with diesel fuel does not qualify for the federal biodiesel tax credit. Biodiesel blends containing a petroleum feedstock (prior to downstream blending with diesel fuel) will no longer be eligible for the federal credit beginning October 3, 2008.

• Revised the definition of "renewable diesel fuel" to eliminate the "thermal depolymerization process" requirement and to include jet fuels produced from biomass.

• Also extends for one-year renewable energy production tax credits for wind, solar, geothermal, and other renewable energy sources. Solar also gets an eight year extension on the 30 percent tax credit for residential and commercial installations, and are no longer confined to $2,000 cap.

• Extends the federal alternative fueling infrastructure tax credit for one year. The credit, 30% of cost or $30,000 maximum, whichever is less, was set to expire on December 31, 2009 but will now be available through December 31, 2010.

• Creates a new $2,500-7,500 tax credit for plug-in electric hybrid vehicles.

The law also increases the federal Oil Spill Liability Trust Fund excise tax paid by the major oil refiners from 5 cents per barrel to 8 cents per barrel from 2009-2016. In 2017, the tax will rise to 9 cents per barrel. The majors pass-on the cost of the tax, which is often included as a separate line item on product transfer documents, provided by terminal operators. The legislation also includes a tax incentive for oil refineries to encourage more refining of gasoline and diesel fuel. IRS forms and instructions reflecting the changes in the bill will be available in the near future.