Tax incentive extension remains hot topic

By Holly Jessen | May 21, 2010
The fight to extend ethanol tax incentives took another step forward in April when the Green Jobs Act of 2010 was proposed in the Senate by Sens. Kent Conrad, D-N.D., and Chuck Grassley, R-Iowa.

If passed, the three tax incentives for ethanol and the U.S. tariff on imported ethanol would be extended through 2015. It's a companion bill to the Renewable Fuels Reinvestment Act introduced in the House at the end of March by Reps. Earl Pomeroy, D-N.D., and John Shimkus, R-Ill. Specifically, both bills would extend the current 45-cent per gallon Volumetric Ethanol Excise Tax Credit, or blenders' credit, and the 10-cent per gallon Small Ethanol Producer's Tax credit for five years. The bill will also extend the $1.01 per gallon Cellulosic Biofuel Producer Tax Credit by three years and push the ethanol tariff out five years. If not voted into law, VEETC, the small producers credit and the tariff would all expire at the end of this year. The tax incentive for cellulosic ethanol would expire at the end of 2012
Grassley pointed toward the lapse in the biodiesel tax credit at the end of 2009, which has resulted in the loss of 29,000 jobs and put 23,000 more jobs at risk. "We can't risk a repeat performance with ethanol, where 112,000 jobs are at stake," he said. Conrad said extending the tax credit was a "step in the right direction" toward decreasing the county's dependence on foreign oil and pursing alternate sources of energy on domestic soil. "Our country is in serious danger because of skyrocketing energy costs," he said. "This growing crisis demands urgent action."

Lawmakers highlighted the fact that it was bipartisan legislation in both the House and the Senate. As of late April, the bill in the House had a total of 32 co-sponsors and the bill in the Senate had six.
Renewable Fuels Association President Bob Dinneen said that tax incentives like these help the industry expand and are sound public policy. "Domestic ethanol use is lowering the price of gasoline, reducing imports of foreign oil, and helping stabilize and reinvigorate rural economies all across the country," he said.

Tom Buis, CEO of Growth Energy talked about the need for this country to reach for foreign oil independence. He also mentioned the economic impact to the industry, should they not be extended. "Extending these measures will ensure job growth and economic development across the entire country," he said.

The issue of whether to extend the tariff on imported ethanol has received a lot of attention. In early April, the Brazilian government temporarily dropped the country's 20 percent tariff on imported ethanol until the end of 2011. UNICA, Sugarcane Industry Association of Brazil, has made no secret of the fact that it would like to see the U.S. drop its import tariff. The association has said it plans to petition the Brazilian government to permanently drop the tariff if the U.S. does the same. "Consumers win when industries compete," said Joel Valasco, UNICA's chief representative for North America. "Brazilian ethanol producers are willing to compete for consumers. What about American producers?"

RFA, Growth Energy and American Coalition for Ethanol disagree. Allowing the tariff to lapse, they have said, will mean the renewable fuels standard mandates for ethanol blending will be fulfilled by imported ethanol from Brazil, meaning a blow to the domestic ethanol industry, including lost jobs, particularly in rural areas. One study, conducted by the University of Missouri's Community Policy Analysis Center, projected that, if the tariff were not extended, within three years job losses would climb to more than 161,000 and the decline in economic activity would hit $36.7 billion.

Grassley also disagrees with UNICA. "The U.S. already provides generous duty-free access to imported ethanol under the Caribbean Basin Initiative, but the CBI cap has never once been fulfilled," Grassley said. "In fact, last year, only 25 percent of it was even used by Brazil and other countries."