Feinstein says ethanol credit reform at an impasse

By Kris Bevill | August 02, 2011

The good news is Congress has finally reached a deal to raise the debt ceiling. The bad news for ethanol producers is that it failed to include the ethanol tax credit repeal compromise brought forth in July by Sens. Amy Klobuchar, D-Minn., John Thune, R-S.D., and Dianne Feinstein, D-Calif. As a result, Feinstein predicts the ethanol package is dead and won’t be voted on before the Volumetric Ethanol Excise Tax Credit’s scheduled expiration at the end of the year.

“Our efforts to repeal ethanol subsidies have reached an impasse,” Feinstein said in a statement. “The debt agreement excludes all immediate revenue raisers and there are simply no other tax vehicles to which we can attach a repeal.”

The ethanol compromise would have eliminated the 45-cent-per-gallon VEETC at the end of August. It would have also repealed the long-standing 54-cent-per-gallon import tariff on ethanol, giving a break to Brazilian producers seeking to market their sugarcane ethanol at a more competitive price to U.S. end-users. More positively for U.S. producers, the package also included extensions to tax credits for cellulosic ethanol and small producers and would have provided additional financial support for new alternative fuel infrastructure. The package received the full backing of ethanol industry groups, who say they are disappointed it wasn’t included in the debt package but they remain committed to finding other ways to pass ethanol reform.

“This was a truly missed opportunity,” said Brian Jennings, executive vice president of the American Coalition for Ethanol. “By disregarding reform of the ethanol tax credit as part of this deal, consumers and the American biofuels industry have been shortchanged. It remains frustrating that some elected officials are continuing to protect billions in subsidies for the oil industry, while dismissing efforts to improve consumer choice at the pump.”

Bob Dinneen, president and CEO of the Renewable Fuels Association said that because the debt deal includes a call for a future budget framework, the opportunity to discuss comprehensive energy tax policy still exists. This could include infrastructure support, tax incentives for second-generation ethanol technologies and feedstocks and the repeal of petroleum subsidies. “With the debt ceiling crisis looking as though it has been averted for now, we hope Congress and the administration are now prepared to address the nation’s worsening energy crisis, as oil and gasoline prices continue to rise and the nation’s investment in homegrown renewable fuels languishes,” he stated.

Klobuchar recently expressed confidence that the ethanol compromise package would pass the Senate if it was brought to a vote and said legislators are supportive of cellulosic ethanol and the “next stage of biofuels.” A long-term extension of the $1.01-per-gallon cellulosic ethanol tax credit is vital to the commercialization of those technologies according to producers who say that without it, it will be very difficult to scale up their projects. Wes Bolsen, chief marketing officer and vice president of government affairs for Coskata Inc., which is developing a 55 MMgy wood-to-ethanol plant in Boligee, Ala., said the ethanol deal would have enabled the future of cellulosic ethanol. “After making progress with the Thune-Klobuchar-Feinstein agreement, we find the industry back at square one: ready to make a difference but still waiting for predictable and enduring government policy that is greatly needed in order to commercialize,” he stated.  The cellulosic producer’s credit is currently set to expire at the end of 2012. The compromise package would have extended it through 2015.

Feinstein said repealing VEETC as part of the debt deal would have saved taxpayers $1.33 billion this year. “There is some consolation that this wasteful subsidy will expire at the end of the year, but I’m disappointed the bipartisan agreement to repeal wasn’t included in the final debt agreement.”

Klobuchar and Thune could not be reached for comment.