July 16, 2010
End ethanol tax credits, industry says
Published in Argus Leader
Ethanol proponents pitched a deal Thursday that would end federal tax credits for the industry in exchange for infrastructure investments such as pipelines, blender pumps and a commitment from automakers to build only flex-fuel vehicles.
The ethanol industry benefits from $6 billion a year in federal subsidies, including a 45-cent-a-gallon Volumetric Ethanol Excise Tax Credit that expires Dec. 31. The "Fueling Freedom" announcement by Growth Energy, a coalition of ethanol producers that includes Sioux Falls-based Poet, represents a fundamental shift in policy that, if supported vigorously in Congress, would end those supports within five years.
"With a blender pump in every neighborhood and a flex-fuel vehicle in every garage, ethanol can compete against oil without the tax incentive," said Jeff Broin, co-chairman of Growth Energy and president and chief executive officer of Poet. "Ethanol is already competitive with gasoline. I believe the time has come to transition to an open market where consumers can choose their fuel."
Ethanol opponents said the announcement was more of a shell game that shifts credits - but still doesn't guarantee the industry ever can or will stand on its own.
"Expanding ethanol use requires this massive investment in alternative infrastructure, and that should really give us pause as to whether we're on the right track in terms of our biofuels policy and creating a situation where different biofuels compete on a level playing field," said Craig Cox, senior vice president of the Environmental Working Group, which opposes government mandates on ethanol use. "That fact that we need these investments should really get people asking the question about whether ethanol, or any other alcohol product, is really where we want to go."
The announcement comes at a critical time in the nation's energy policy debate. Proponents are trying to find support for a VEETC extension, which at five years would cost $30 billion, while the federal Renewable Fuels Standard continues to call for more biofuels to be blended into the nation's domestic fuel supply.
The RFS calls for 10.5 billion gallons of renewable fuels such as ethanol to be blended annually into the gasoline supply. That increases to 15 billion gallons in 2015 and 36 billion gallons by 2022.
"It's all about wise policy choices," said Gen. Wesley Clark, Growth Energy co-chairman. "If we play our cards right, we have the right policy as we're suggesting today, we'll take that money and we'll transition it into building out our infrastructure to give Americans the freedom of choice on fuels."
Growth Energy's announcement created some tension Thursday with the Renewable Fuels Association, a rival biofuels trade association. The RFA, along with American Coalition for Ethanol, the American Farm Bureau Federation, the National Corn Growers Association and the National Sorghum Producers, jointly reaffirmed their support for two pieces of legislation that would extend ethanol incentives through 2015.
"Now is not the time to add uncertainty and complexity to the energy tax debate," RFA president Bob Dineen said. "Losing the tax incentive now will shutter plants and cost tens of thousands of jobs. This is a serious discussion with real-world implications. Numerous ideas exist and due diligence must be done to ensure the right ideas are put together so as to foster the continued growth of this industry."
Tom Buis, Growth Energy's chief executive officer, said debate on how best to improve infrastructure is good for the industry.
Growth Energy's plan calls for the current 45-cent tax credit to be switched to a blender pump initiative that would install 200,000 new pumps across the country, as well as federal backing of ethanol pipelines. The pumps allow people to choose higher ethanol blends to put into their vehicles.
The plan also ...
