Legislators battle it out over VEETC extension

By Holly Jessen | November 15, 2010
Posted Dec. 3, 2010

With such a short time remaining in the lame duck session, legislators on both sides of the aisle are making their feelings on the Volumetric Ethanol Excise Tax Credit known.

On Dec. 2, Sen. Chuck Grassley, R-Iowa, spoke out about the need to extend VEETC. Allowing it to expire at the end of the year would be like adding a new 5-cent per-gallon tax at the pump, he said in a speech on the Senate floor. The ethanol industry is just as deserving as the oil and gas industry, which gets millions in federal support yearly. "I know that removing incentives for oil and gas will have the same impact as removing incentives for ethanol -- we'll get less domestically produced ethanol, and be more dependent on those oil sheiks," he said. "It's important to remember that the incentives exist to help the producers of ethanol compete against the Big Oil industry."

On Nov. 30, Grassley was one of 15 senators who sent a letter to U.S. Senate leaders asking for action on legislation to extend renewable fuel tax and tariff provisions. "Allowing the provisions to expire or remain expired would threaten jobs, harm the environment, weaken our renewable fuel industries, and increase our dependence on foreign oil," the letter said.

Sen. Kent Conrad, D-N.D., pointed out that the U.S. has spent more than $730 million daily on imported oil in 2010. That money often goes to unstable or unfriendly governments. "This is not the time to reduce the supply of a domestic source of fuel and place at greater risk the thousands of well-paying jobs that the renewable fuels industry has created." The letter was also signed by Sens. Tom Harkin, Kit Bond, Ben Nelson, Amy Klobuchar, John Thune, Sam Brownback, Byron Dorgan, Tim Johnson, Al Franken, Mike Johanns, Mark Kirk, Debbie Stabenow and Claire McCaskill.

Grassley pointed out that the expiration of the biodiesel tax credit, which lapsed at the end of 2009, resulted in idled plants and lost jobs. "We can't risk a repeat performance with ethanol, where 112,000 jobs are at stake," he said.

Growth Energy commended the senators' efforts and reiterated how important extending VEETC is to the industry. "Growth Energy has proposed reforming ethanol policies in our Fueling Freedom plan and we stand ready to work with Congress and the administration to invest in ethanol infrastructure," Growth Energy CEO Tom Buis said. "But, this investment won't happen overnight. In the near-term, an extension of the ethanol tax incentive and the tariff will stabilize the marketplace, provide added certainty and give Congress the opportunity to consider longer term solutions next year."

Also on Nov. 30, Senate leadership received a letter opposing the extension of VEETC and the tariff from 17 senators. "These provisions are fiscally irresponsible and environmentally unwise, and their extension would make our country more dependent on foreign oil," the letter said.

If VEETC were extended five years, oil companies would be paid around $31 billion to use 69 billion gallons of corn ethanol that it is already required to be used due to the renewable fuel standard, the senators said. They stated that the tariff is making the U.S. more dependent on foreign oil because it puts imported ethanol at a competitive disadvantage to imported oil. "Eliminating or reducing the ethanol tariff would diversify our fuel supply, replace oil imports from OPEC countries with ethanol from our allies, and expand our trade relationships with democratic states," the letter said.

The letter was signed by Sens. Dianne Feinstein, Jon Kyl, Jack Reed, Richard Burr, Benjamin Cardin, Mike Enzi, Jim Webb, Bob Bennett, Barbara Boxer, John McCain, Sheldon Whitehouse, Tom Coburn, Susan Collins, Bob Corker, Jeanne Shaheen, Mark Warner and Chris Coons.

The Renewable Fuels Association responded by saying that eliminating VEETC could erase the $3 billion of net revenue in federal taxes brought in by U.S. ethanol producers in 2009. In addition, it could put many Americans out of work. As for the senators' concerns about the tariff, RFA disagreed that it drives U.S. dependence on foreign oil. Neither is it a burden on imports. "The tariff simply exists to offset the value of the tax credit, preventing American taxpayers from subsidizing foreign ethanol producers, RFA said. "In a time of budget concerns and tax debates, propping up industries in other nations that already enjoy the largesse of their native governments seems counterintuitive."