Ethanol groups look beyond VEETC
April 1, 2011
OMAHA (DTN) – Ethanol groups remained in negotiations and publicly silent Tuesday, March 22, as talks continued over a plan to restructure the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit, commonly called the blenders’ credit.
Four key groups in the industry declined to comment or respond to questions about a meeting held Monday, March 21, with USDA Rural Development officials regarding the industry’s roadmap beyond the blenders’ credit. Groups taking part in the talks include the American Coalition for Ethanol, Growth Energy, National Corn Growers Association (NCGA) and Renewable Fuels Association. Essentially, all four have voted to adopt the framework of a unified proposal, but haven’t worked out all of the details of just what the groups would like to see.
A leader from one of the groups confirmed that talks within the industry to develop a single plan continued Tuesday afternoon. Groups also are getting feedback from supporters on Capitol Hill about the feasibility of their plans.
Since getting another one-year extension of the blenders’ credit last December, ethanol policy has been under criticism in the current Congress. House members voted last month to block agencies from spending money on implementing a waiver to allow 15 percent ethanol blends, or from spending money on blender pumps or other infrastructure. Senators have proposed legislation to end the blenders’ credit now rather than allow it to expire at the end of the year. The tax credit is projected to cost around $5.6 billion this year. Sen. Tom Coburn (R-OK) has proposed an amendment to a small-business bill that would do just that.
With that backdrop in mind, ethanol groups see their current talks as highly sensitive.
NCGA delegates voted earlier this month for several policy options for ethanol, including a variable ethanol tax rate, a tax credit at a reduced rate, investment in biofuel infrastructure, higher ethanol blends, increased flex-fuel vehicles and allowing ethanol from corn starch to be considered an advanced biofuel under the EPA definition in the Renewable Energy Standard.
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The ethanol groups have pushed that, in exchange for giving up the blenders’ credit, they would like to see either tax credits or another program to offer incentives to fueling stations to install blender pumps across the country, which would encourage sales of higher ethanol blends up to E85. If each service station had at least one blender pump, that could mean there would be close to 175,000 such pumps nationally.
Further, ethanol groups would like to push all automakers that sell vehicles in the U.S. to ensure at least 40 percent of their vehicles be flex-fuel capable. Auto manufacturers have been hesitant to expand their flex-fuel fleets even though most sell 100 percent ethanol-capable vehicles in Brazil.
The challenge, however, is how to reduce the blenders’ credit rather than eliminate it. Groups would like to see the credit decline over a three-year period. There are also questions over whether to then establish a mechanism that would increase the blenders’ credit based on changes in the price of oil, but no details on such a plan have been spelled out.
Lawmakers from ethanol-producing states have already proposed legislation to restructure ethanol incentives. As part of a broader energy bill offered earlier this month by Sens. Amy Klobuchar (D-MN) and Tim Johnson, (D-SD), the senators would replace the VEETC with a 20-cent tax credit in 2012 that phases down 5 cents a year until 2015 and thereafter. The bill had other biofuel incentives and drew praise from both Growth Energy and the Renewable Fuels Association.
Other senators also have suggested an interest in working on renewable-energy infrastructure. In a speech last week on the Senate floor, Energy and Natural Resources Chairman Jeff Bingaman (D-NM) expressed concern about oil prices and lack of resources. Moving toward reduced dependence on foreign oil required some changes.
“First, we need to enable further expansion of our renewable fuel industry, which is currently facing infrastructure and financing constraints,” Bingaman said. “Second, we need to move forward the timeline for market penetration of electric vehicles. Finally, we need to make sure we use natural gas vehicles in as many applications as make sense based on that technology.”
Senate Agriculture Committee Ranking Member Pat Roberts (R-KS) said in an interview last week with Informa Economics that he backs ethanol, but has never liked a mandate such as the 36-billion-gallon Renewable Fuels Standard. Roberts said there could be a chance for tradeoffs.
“Maybe lower some of the mandates, in exchange that gets you some tax incentives for infrastructure,” Roberts told Informa. “It’s an open question.”