Two Midwest senators have announced an agreement aimed at heading off more votes that have the potential of totally eliminating the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit and other measures promoting the use of renewable fuels.
The agreement, negotiated by Sens. Amy Klobuchar, D-Minn., and John Thune, R-S.D., would end the VEETC ethanol incentive on July 31 rather than allowing it to expire as scheduled at the end of this year. Two-thirds of the savings would go to debt reduction and the remaining one-third to other renewable fuel incentives.
“This bipartisan agreement is a major step toward providing our businesses a clear path forward and keeping the biofuels industry competitive while reducing our debt by over a billion dollars this year,” said Klobucharin a joint statement released by the senators’ offices.
“With this agreement we can not only continue to support homegrown energy, we can also demonstrate that members with different viewpoints can come together to find common ground to reduce the debt. It is a model for reducing government subsidies going forward.”
The agreement is based on the two senators’ Ethanol Reform and Deficit Reduction Act, which they announced last month before the Senate overwhelmingly passed a measure introduced by Sen. Dianne Feinstein, D-Calif., that would have repealed the VEETC tax incentive for ethanol.
The announced by Thune and Klobuchar was applauded by farm organizations, including the National Corn Growers Association and Growth Energy.
“NCGA is grateful to Senators Thune and Klobuchar for the hard work and dedication they have put in to reaching a final deal,” said Bart Schott, the NCGA’s president. “There are many positive components of this compromise that are important to the ethanol industry and rural America.”
While renewable fuel advocates have argued the VEETC and other incentives pale in comparison to the subsidies provided the oil and natural gas industries, studies by Iowa State University researchers have shown the loss of the 45-cent blender’s credit would not have a significantly negative effect on ethanol production.
“The final compromise reflects both the importance of the ethanol industry to achieve energy independence and the need for fiscal responsibility,” said Scott. “The ethanol industry continues to have a positive impact on all parts of America, and we are committed to working with Congress in the future on steps that can move the ethanol industry and the nation’s economy forward.
Thune cited the contributions of the farm groups and ethanol producers as important in the effort to “reduce the federal deficit and modify current biofuels policy without pulling the rug out from under producers.
“Domestic biofuels production in South Dakota and throughout the country continues to play an important role in reducing our nation’s dependence on foreign oil and creating American jobs. I look forward to moving our bipartisan plan through both the Senate and the House of Representatives.”
Growth Energy CEO Tom Buis said the compromise would benefit all Americans by helping consumers at the pump through lower gasoline prices, reducing dependence on foreign oil and making a contribution to reducing the deficit.
“At the same time, we call on Congress to level the playing field when it comes to energy policy,” said the NCGA’s Schott. “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.”
Additional details of the compromise include:
Immediately allocate $1.3 billion toward deficit reduction.
Blender Pump and Alternative Fueling Infrastructure Tax Credit
Extends the existing alternative fuel station tax credit to include blender pumps and extend the credit through 2014 by using 2011 funding only; modify the tax credit to allow for ethanol blends between E15 and E85; and clarify that entire cost of dual-use blender pumps qualify for the credit rather than the incremental cost.
A taxpayer may take a 20-percent tax credit for the installation of alternative fuel infrastructure, up to $30,000, including E85 (85 percent ethanol and 15 percent gasoline) infrastructure. This credit is currently scheduled to expire on Dec. 31. Other fuels that are eligible for the credit include electric charging stations and natural gas refueling stations.
Small Producer Ethanol Credit
Extend through 2012 the small producer ethanol credit by using 2011 funding only. This credit is currently scheduled to expire Dec. 31. The small ethanol producer credit is valued at 7 cents per gallon of ethanol produced. The credit may be claimed on the first 15 million gallons of ethanol produced by a small producer in a given year. It applies to any ethanol producer with production capacity below 60 million gallons per year.
Credit for Production of Cellulosic Biofuels and Special Depreciation Allowance for Cellulosic Biofuels Plants
Modify and extend through 2015 the existing $1.01 per gallon tax credit for cellulosic biofuels that would otherwise expire on Dec. 31, 2012. This is done by using 2011 funding only.
Includes a depreciation allowance for cellulosic plants, and the definition of cellulosic biofuels will include fuels made from algae.