Earlier today, Sens. John Thune (R-SD) and Amy Klobuchar (D-MN) created waves when they announced their new biofuels bill the Ethanol Reform and Deficit Reduction Act. This act is designed to address federal budget issues while phasing out ethanol tax incentives (VEETC) that are designed to go to the fuel blender of record. While the ethanol industry came out in full support of the bill, expected to be voted on tomorrow, some in the fuel retail industry have quite a different view – in favor they are not.
In an exclusive interview with DomesticFuel, Mike Lewis, Principal of one of the largest renewable fuel retailers in California, Pearson Fuels, said that
while ethanol subsidies have become unpalatable to many legislators, it is important to keep in mind that in the short term there are really only two fuel options for the 200 million plus gasoline and flex fuel vehicles on the the US roads. These two options are 1) gasoline or 2) gasoline and ethanol blends, period.
Lewis continued by saying, “As distributors and proponents of E85, we can tell you with certainty that when the VEETC is reduced or eliminated there will be an immediate decrease in the price advantage E85 has versus gasoline and this will immediately, significantly hurt E85 volumes, gasoline’s only real competitor. It will also put more pressure on the price of gasoline, causing it to increase.”
The Thune/Klobuchar Ethanol Reform and Deficit Reduction Act will incentivize some E85 infrastructure, says Lewis, but this will pale in comparison to the existing benefits of the VEETC enjoyed by E85.
“What we really need is a carve out for E85 from any elimination of the VEETC,” said Lewis. “Gasoline is subsidized in so many direct and indirect ways. For example, why do so many Americans know where the Straight of Hormuz is and how many tax dollars have we spent there? There is no line item for US Military on oil company expense statements, but it is absolutely an expense required to ensure access to their raw materials. The expense to carve out E85 from VEETC elimination is insignificant by comparison.”
Should the Ethanol Reform and Deficit Reduction Act be passed, it would take effect July 1, 2011.