July 16, 2010
Time Ripe for Ending Ethanol Tax Credits
Published in Farm Progress
The Senate is expected to begin work on its energy bill as soon as July 19. And days before the debate, Growth Energy comes out with a radical idea to many in the ethanol industry - phase out the tax credits.
Growth Energy CEO Tom Buis said the Fueling Freedom plan would shift government programs to reduce barriers the ethanol industry faces in competing. Producing ethanol is no longer a barrier, with the domestic industry producing over the currently mandated levels.
The primary elements of the plan include redirecting funds currently going to the oil industry as an incentive for blending ethanol into gasoline (the Volume Excise Ethanol Tax Credit) to provide backing for the build out of distribution infrastructure for ethanol – such as tax credits for retailers to install 200,000 blender pumps and federal backing of ethanol pipelines. A second component of the plan requires that all automobiles sold in the U.S. be flex-fuel vehicles – as many as 120 million. This requires no additional cost to taxpayers and a minimal cost (about $120 per vehicle) to vehicle manufacturers.
The group said it hopes for a multi-year extension of the ethanol tax credit, with some of those funds redirected as proposed, to give the market certainty. Jeff Broin, chairman of Growth Energy and president of POET, said due to the complexity of the process and the infancy of the cellulosic industry, policymakers need to approve a long-term extension of the cellulosic tax credit. "Over time, as the technology matures, it is our hope that cellulosic ethanol will be able to compete with gasoline as well," Broin said.
Stage set for change
The livestock industry and ethanol opponents for years have cried that the ethanol industry needs to stand on its own without government support. And with media stories laying out that oil companies such as BP reaped as much as $510 million from the tax credits in 2008, the ethanol industry could have a tough fight ahead in getting the 45-cent tax credit extended once it expires at the end of this year.
In a press call announcing the plan, former Congressional member Jim Nussle, who now serves as a Growth Energy Advisory Board Member, warned that if the industry doesn't bring forth some innovative ideas, Congress may extend the tax credit, but it could be less than it is now and not address the biggest issue facing the industry today: infrastructure.
Nussle said if this year brings a typical energy debate, that those impacted will operate in fear asking Congress not to implement any big changes. And that's exactly what it looks like many corn and ethanol groups are seeking with a fearful reaction to Growth Energy's notion of phasing out the subsidies.
"The time is short and extension is in the best interests of the corn industry,” said National Corn Growers Association president Darrin Ihnen.
Bob Dinneen, Renewable Fuels Assn president, added, "Now is not the time to add uncertainty and complexity to the energy tax debate." Read the organizations' full statement here.
Since its inception, Growth Energy has tried to blaze the trial, calling out the falsehoods of the food vs. fuel debate and making the E15 waiver request of EPA. And their forward thinking approach to ethanol and energy policy may be just what this country needs.
Give them some credit, they're the only ones out there with somewhat of a plan on ending government support. And isn't that what the American taxpayer deserves?
