AEC lobbies hard to extend tax incentives for cellulosic biofuels

By Holly Jessen | March 28, 2012

The Advanced Ethanol Council is continuing to fight the good fight, asking legislators to extend two key tax incentives for cellulosic biofuels. The group recently sent a letter to Senate Finance Subcommittee on Energy, Natural Resources, and Infrastructure Chairman Jeff Bingaman, D-N.M., and Ranking Member John Cornyn, R-Texas, asking them not to let the Cellulosic Biofuels Producer Tax Credit and the Accelerated Depreciation Allowance for Cellulosic Biofuel Plant Property expire at the end of 2012.

“With gas prices soaring, it is increasingly important to diversify U.S. motor fuel markets with viable and competitive alternatives to gasoline, such as advanced ethanol, that will offer American consumers greater choice at the pump,” the group said in the March 26 letter.

The Cellulosic Biofuels Producer Tax Credit is a $1.01 per gallon tax credit. The Accelerated Depreciation Allowance for Cellulosic Biofuel Plant Property is a cost-recovery mechanism that allows investors to take 50 percent of the normal graduated depreciation allowance in the first year, Brooke Coleman, executive director of AEC told EPM, adding that the tax incentive is important for two reasons. “First, it helps reduce risk of investment in the space by allowing quicker cost recovery,” he said. “Second, because other sectors have accelerated cost recovery allowances, it levels the marketplace for investors.”

Both tax incentives provide investment certainty and letting them lapse would create uncertainty for the industry at a critical time. In addition, letting the tax incentives expire “runs counter to the goals set forth by Congress to foster the development of advanced biofuels under the renewable fuels standard,” the letter said. The renewable fuels industry is already an American success story in which several billions have been invested. “The advanced and cellulosic biofuels industry is now in the process of building new plants, helping drive innovation at existing production facilities with emerging technologies, and introducing new product streams that will allow the renewable fuels sector to become more profitable, diversified and efficient,” the group said in the letter.