New Regime for the Promotion of Production and Use of Biofuels in Argentina

The Law provides that as of January 1, 2010, all fossil fuels sold within the Argentine territory must contain 5% of biofuels at minimum based on the quantity of the final product.  Liquid fuels as “fuel oil” and “diesel oil” shall be mixed with “biodiesel”, and “gasoline” (nafta) shall be mixed with “bioethanol”. The governmental agency that shall oversee compliance of the law (the “governmental agency”) may increase or reduce such percentage depending of the evolution of the internal market or during duly verified energy shortage situations.

The Law defines as biofuels the bioethanol, biodiesel and biogas produced from agricultural products or organic waste which comply with the quality requirements established by the governmental agency.

The governmental agency shall be appointed by the Executive Branch. The Law creates an Adviser National Commission (“Comisión Nacional Asesora”) that shall provide support and advice to the governmental agency.  The Law regulates the activities of the governmental agency including the control of the production, regulations of biofuels quality, permits of treatment and mixtures plants, audits, inspections, etc.

The mixture of biofuels with fossil fuels will be made by plants authorized by the governmental agency for such purpose. The Law establishes that to obtain an approval to operate the plants shall previously submit to the governmental agency an “environmental impact report” that shall include an evaluation of effluents treatment and waste management.

The Law provides a promotional regime that shall be effective for a 15 year term as of the date of its approval, that could be extended by the Executive Power.  The benefits of the promotion shall include, among others, the anticipated reimbursement of the Value Added Tax and the accelerated amortization of the Income Tax in the acquisition of capital assets or infrastructure works according to the dispositions set forth by Law No 25,928. The Law provides that the National Budget shall annually determine a maximum amount of these fiscal benefits, and these shall be distributed by the Executive Power giving priority to the promotion of medium and small companies (“PYMES”), farming industry and regional economies.

The Law also provides that the projects approved by the governmental agency shall receive the benefits of the Kyoto Protocol of the United Nations Framework Convention on Climate Change of 1997, ratified by Argentina by Law No 25,438, that provides voluntary compromises of reduction of emissions of greenhouse gases.