Governors' coalition calls for VEETC reform, long-term extension

By Holly Jessen | October 14, 2010
Posted Oct. 18, 2010

In a draft letter to U.S. Senators, the Governors' Biofuels Coalition has thrown its support behind reform to the Volumetric Ethanol Excise Tax Credit. "We are writing to express our support for the inclusion of ethanol tax credit modifications and blender pump programs in the energy and tax bills that may be considered by the Senate when it reconvenes after the general election," the draft letter said. "These changes to the ethanol tax credit structure represent a fiscally responsible way to modernize the tax and regulatory framework for the nation's ethanol industry."

The leaked letter follows another leaked document put together by the Renewable Fuels Association, Growth Energy, National Corn Growers Association and the American Coalition for Ethanol.

This summer, RFA, NCGA and ACE disagreed with Growth Energy's timing in releasing its Fueling Freedom plan, but in recent months the four groups have been meeting periodically to come up with a long-term policy road map for ethanol. A draft document put together in those meetings calls for accelerating the "deployment of flexible fuel vehicles [FFVs] and blender pumps to allow market access and a level playing field for ethanol while reducing reliance on foreign oil," all items that were prominent parts of Growth Energy's plan.

The proposed modifications in the Governors' Biofuels Coalition draft letter are to "enable the domestic biofuels industry to compete on a more level playing field with petroleum transportation fuels" and closely mirror the provisions developed by RFA, NCGA, ACE and Growth Energy. They include:

1. Extending VEETC for one year while transitioning from a blenders' credit for oil companies, blenders and importers to a refundable credit only for domestic biofuel producers for five years. (The industry groups called for no less than four years.)
2. Reduction of the tax credit from 45 cents, the current level, by about 50 percent. (The industry groups didn't provide a percentage reduction.)
3. Rewards for ethanol producers that reduce their carbon footprint.
4. Provide consumer choice for blends from conventional gasoline to E85 and an aggressive FFV and fuel dispenser program modeled after Brazil's ethanol friendly infrastructure.

‘We believe that these improvements to the ethanol tax credit provisions and blender pump program deserve the strong support of Congress," the governors' letter said. "They will save taxpayers billions, provide much needed certainty to investors in advanced technologies, offer motorists unprecedented freedom to choose at the pump, thereby lowering fuel costs due to enhanced competition, and reward environmental performance."

Two things mentioned in the industry groups' document, but not in the Governors' Biofuels Coalition draft letter, were establishing a loan guarantee program for ethanol pipeline projects and enabling corn ethanol to qualify as an advanced biofuel.

It isn't clear when the Governors' Biofuels Coalition letter will be delivered to senators or if changes will be made to the final version. The group held a conference call about the letter Oct. 5 and gave members a deadline of Oct. 8 to submit comments.

All four groups agree that more blender pumps, FFVs and a level playing field for ethanol is important, said Matt Hartwig, RFA communications director. However, he said priority No. 1 is extending VEETC. "The tax incentive has been wildly successful and before we abandon a program that has worked, we need to be sure new ideas are fully vetted," he said.

There are a lot of ideas for reforming VEETC and the RFA looks forward to continuing to work with its friends as the discussion continues. "We need to be sure that any changes will accomplish our shared goal of expanding the production and use of domestic ethanol," he said.

The ethanol industry has been working together to extend VEETC for a long time, said Nathan Schock, director of public relations for Poet LLC, a founding member of Growth Energy. Extending the tax credit is the best "short-term solution," he told EPM. "We are happy that the rest of the industry has now coalesced around the need to transition the tax credit to address the long-term need for FFV and blender pump infrastructure as Growth Energy laid out in the Fueling Freedom plan. Market access is the most critical issue facing the industry and with a united voice we have a better chance for success."

The Governors' Biofuels Coalition is a bipartisan group that has been in existence for 15 years. It includes members from the majority of U.S. states as well as a few other countries. For a complete list, see the group's website.