NCPA - National Center for Policy Analysis


June 16, 2008

U.S. taxpayers are being bilked to the tune of millions of dollars by a biofuel subsidy that helps to lower gas prices in Europe, says Rep. John Shadegg (R-Ariz.), and he's leading the charge to close the apparent loophole.  The scam -- as Shadegg and others call it -- is known as "splash and dash."

Here's how it works:

  • The scam stems from an existing $1 subsidy for every gallon of biodiesel fuel blended with regular diesel in the United States.
  • Biodiesel is produced abroad using South American sugar cane or Asian palm oil and shipped to the United States, where it's blended with just a "splash" of regular diesel.
  • A typical tanker-load of about 9 million gallons of biodiesel requires just 9,000 gallons of American diesel to make it qualify for the subsidy.
  • The ship then makes a "dash" for Europe, where its fuel is sold below market rates; that means each tanker-load that makes the dash nets importers about $9 million dollars in tax credits from the IRS.
  • In 2007 this subsidy cost the American taxpayers $300 million; it's projected to cost them $600 million next year.

Shadegg wants to end "splash and dash" by eliminating the subsidy for any biodiesel exported from the United States, which he says harms energy independence.   Shadegg is pushing his bill in the House, which has already passed measures to stop the scam.

And while Congress and the National Biodiesel Board say they know the loophole is being exploited -- as America is exporting much more biofuel than it is producing -- they've been unable to identify the guilty companies that continue to profit from this scam.

Source: William LaJeunesse, "'Splash-and-Dash' Biofuel Scam Costs Americans Millions, Lawmakers Say," Fox News, June 13, 2008.


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