Post election: Groups continue to lobby for VEETC, California says yes to LCFS

By Kris Bevill | October 14, 2010
Posted Nov. 3, 2010

The Republican Party claimed victory Nov. 2 as it regained control of the U.S. House and defeated incumbent Democrats for positions at the local, state and federal level throughout the country. But what effects will this changing of the guards have on the ethanol industry? Perhaps none, according to industry representatives. Growth Energy and the Renewable Fuels Association both said they will continue to lobby Congress to pass an ethanol incentive extension, which is a cause that can be supported by both sides of the legislative aisle.

"Every election means change of some sort, but Congressional support for ethanol is bipartisan, and it will remain that way despite changes in the majorities of either chamber," Growth Energy CEO Tom Buis stated. "In the short-term, we intend to work with the current Congress on proposals such as Fueling Freedom, extending the ethanol tax credit and expanding market access for domestic ethanol."

"Ethanol is not now, nor has it ever been a partisan issue," RFA President and CEO Bob Dinneen said. "There were strong ethanol proponents lost last night, but there were many more ethanol advocates that won last night, too. And, more importantly, for the most part those that may have been defeated were replaced with equally strong advocates for value-added agriculture and ethanol."

Dinneen said ethanol advocates must work during the upcoming lame duck session of Congress to make a clear connection between an extension of the ethanol tax incentive and retained jobs. "Allowing the tax incentive to expire would risk jobs in a very important domestic energy sector and across rural America," he said. "It would halt and reverse investments in clean energy technology. I believe, strongly, Congress must extend the incentive before adjournment." According to Dinneen, discretionary blending by refiners will immediately cease if the Volumetric Ethanol Excise Tax Credit is not extended, which will almost immediately result in ethanol plant closures and job loss. It will be difficult to secure a VEETC and import tariff extension, he admitted, but it is possible.

Regionally, California's low carbon fuel standard (LCFS) and proposed cap and trade program escaped the chopping block when voters defeated Proposition 23. The measure was an attempt by oil refiners and other industrial manufacturers to halt the California Air Resources Board from pursuing regulatory activities allowed by the state's climate change legislation, known as Assembly Bill 32. Because voters decided not to approve Prop 23, CARB will be allowed to continue implementing programs such as the LCFS, which is scheduled to go into effect next year.

The petroleum industry was obviously disappointed by the outcome of California's election and said the defeat will result in job loss and higher energy costs for consumers. "Proposition 23 was defeated because a sophisticated multimillion-dollar misinformation campaign falsely led Californians to believe they were voting to clean their air of pollutants that posed a danger to their health," the National Petrochemical and Refiners Association said in a statement. "In fact, Proposition 23 would simply have temporarily postponed drastic reductions in greenhouse gas emissions that are made up largely of carbon dioxide, the same substance humans and animals exhale after every breath we take."

The biofuels industry appears to be divided on Proposition 23. Algae-to-oil developer OriginOil Inc. heralded the proposition's defeat as a "triumph for the future of clean technology" and likened California's potential for growth in renewable energy to the technology boom of the 1990s. Meanwhile, the RFA and Growth Energy didn't publicly support efforts to pass Proposition 23, but they are opposed to AB 32 and the LCFS. The groups filed a lawsuit in 2009 over issues regarding indirect land use change and CARB's carbon rating for ethanol derived in the Midwest. And on Nov. 1, they filed motions with a California district court seeking a preliminary injunction that would prevent implementation of the LCFS. "Our argument is that the regulation as written is unconstitutional and injurious to the domestic ethanol industry, and we don't believe a full trial is needed to decide that," the RFA said in a statement. A hearing is scheduled for Feb. 23, 2011.