Growth Energy proposes shift in fuel policy

By Holly Jessen | July 15, 2010
Posted July 15, 2010

With the Volumetric Ethanol Excise Tax Credit, set to expire at the end of the year, Growth Energy is calling for a change in the way ethanol tax incentives are used and an eventual phase out of governmental support of ethanol.

In a conference call on July 15, CEO Tom Buis revealed Growth Energy's Fueling Freedom Plan. The organization calls it a creative option that it hopes policymakers will make part of upcoming energy legislation. Recent news stories suggest that lawmakers will proceed with the energy debate, Buis said, but only time will tell if legislation will get passed. If progress isn't made on that, the goal is to move forward as soon as possible on legislation incorporating the Growth Energy plan.

The Fueling Freedom Plan calls for, ideally, a five-year extension to VEETC. However, rather than provide the all incentive money to blenders, the oil industry, Growth Energy is advocating that some of that tax money go to installing 200,000 blender pumps and ethanol pipelines. This would give the consumer a choice at the pump and create a level playing field for ethanol. "Oil has a 90 percent monopoly," Buis said. "We need to break the monopoly."

Another part of the plan would require that all automobiles sold in the U.S. be flex-fuel vehicles (FFVs). As many as 120 million FFVs would require no additional cost to taxpayers and only about $120 per vehicle, Growth Energy said.

Jeff Broin, CEO of Poet LLC, said it was about getting a blender pump in every neighborhood and a FFV in every garage. If investments in infrastructure are made, that tax credit could be phased out. "I believe the time has come to transition to an open market," he said. On the other hand, he added that the cellulosic ethanol industry is still in its infancy and will continue to need tax incentives to grow.

The U.S. has a long history of government support of infrastructure projects, Buis said. That includes projects to build roads, railroads, airports and electrical lines, to name a few. If there were enough blender pumps, pipelines and FFVs, the ethanol industry could function without government assistance. "We think that building out the infrastructure to reducing our dependence on foreign oil is long overdue," he said.

Currently, the ethanol industry is supplying about 10 percent of the U.S. fuel needs. And, Broin pointed out, that ethanol is saving consumers money at the pump. For most of the year, the price of ethanol has been 50 to 80 cents below the price of gas. "We can do more, much more," Buis said. "Open up the market and let us compete. Let American consumers choose."

Ethanol tax incentives cost the U.S. about $5 to $7 billion a year, said Growth Energy co-chair Ret. Gen. Wesley Clark. However, compare that to the $300 billion spent yearly, importing oil from foreign countries—including from some countries hostile to the U.S.

Rep. Jim Nussle, a Growth Energy advisory board member, also spoke on behalf of the Fueling Freedom Plan. He said the proposal is asking policymakers to do something a bit different. "If you always do what you always did you'll always get what you always got," he said.

Noticeably absent from the conference call was the Renewable Fuels Association. In a follow up question, one reporter asked if Growth Energy had reached out to the RFA and how the plan would work if the entire industry wasn't backing this plan. Buis responded by saying Growth Energy would work with anyone "on or off Capitol Hill" to get this project done. "I don't think that there's anyone in the industry that doesn't want to see us build out the infrastructure," he said. "There may be differences of opinion, but let's start the debate."

On the same day as Growth Energy's announcement, RFA joined with the American Coalition for Ethanol, the National Corn Growers Association and the National Sorghum Producers to lend its support to the current tax incentive legislation on the table. This spring, legislation was introduced in the U.S. House of Representatives and U.S. Senate to extend ethanol tax incentives through 2015.

The current ethanol tax policies have been successful in supporting the growth of the industry, said RFA President Bob Dinneen. While waiting on the U.S. EPA to approve E15, margins are razor thin and losing the tax incentives would mean closed plants and many lost jobs. "Now is not the time to add uncertainty and complexity to the energy tax debate," he said. "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."

ACE has supported legislation for more FFVs and blender pumps for years, said Brian Jennings, executive vice president. The group has also looked at alternatives to VEETC, some of which were very appealing. However, in discussions with lawmakers the group came to the conclusion that with only 30 days left in the calendar before mid-term elections, the timing isn't right. "Based on that congressional feedback and in consultation with other ag and ethanol groups, we have come to the conclusion we need to support the dozens of members of Congress in both parties who are fighting to extend the current tax incentive as long as we can," Jennings said. "At the same time, we will continue to fight aggressively in support of FFV and blender pump policies to help break through the blend wall."