Senate Compromise Reached on Ethanol Tax Credit

Cindy Zimmerman

A deal has been reached in the Senate that would eliminate the ethanol blenders tax credit but still provide incentives for infrastructure development.

U.S. Senators John Thune (R-S.D.) and Amy Klobuchar (D-Minn.) announced the agreement “that allows for a transition to a more sustainable model of incentives for domestic renewable fuel production while reducing the nation’s deficit by $1.3 billion.” The agreement, based on Thune and Klobuchar’s bipartisan Ethanol Reform and Deficit Reduction Act, would end the existing 45 cent per gallon Volumetric Ethanol Excise Tax Credit at the end of this month, five months earlier than its current expiration date of December 31, 2011. According to the announcement from Sen. Thune’s office, “The bipartisan agreement would dedicate two-thirds of the savings from existing money—$1.3 billion—to debt reduction and the remaining $668 million in savings to renewable fuel incentives, helping provide consumers with lower gas prices.”

Renewable Fuels Association (RFA) Chairman Chuck Woodside, CEO of farmer-owned KAAPA Ethanol in Nebraska says the compromise is not perfect, but the industry is willing to do its part to help the budget deficit. “While it is clear this agreement does not encompass everything proposed by Senators Klobuchar and Thune in their bill (the Ethanol Tax Reform and Deficit Reduction Act), their tireless effort to find a path forward is a testament to their commitment to American ethanol production and is greatly appreciated by advocates of renewable fuels,” Woodside said in a statement from RFA.

Something the ethanol industry would like to still see addressed is limitations placed on the cellulosic biofuel incentives, which American Coalition for Ethanol Executive Vice President Brian Jennings says needs “to be fixed in order to meaningfully help spur the commercialization of these promising fuels.” The agreement includes a modification and extension of the existing $1.01 per gallon tax credit for cellulosic biofuels through 2015 that would otherwise expire on December 31, 2012. It would be changed from a yearly credit to a gallon-based, capped credit, according to Brooke Coleman, Executive Director of the Advanced Ethanol Council (AEC), something that “adds artificial and unnecessary layers of uncertainty and risk for the financing community.”

National Corn Growers Association President Bart Schott says the “compromise reflects both the importance of the ethanol industry to achieve energy independence and the need for fiscal responsibility” but they would still like to see a more level playing field for energy policy. “Unlike the oil and gas industries, ethanol has been proactively working to reform tax policy affecting the industry and secure a safety net while reducing the overall cost to the federal government,” said Schott.

Sens. Thune and Klobuchar say that the agreement is consistent with recent votes in the Senate that have sought to end the current Volumetric Ethanol Excise Tax Credit while still continuing to fund blender pumps. The compromise can now be considered by the full Senate.

ACE, biofuels, Ethanol, Ethanol News, Government, RFA