Opportunity Missed, Opportunities Ahead

By Brian Jennings | August 15, 2011

Last month, Congress missed a golden opportunity to enact a plan to save taxpayers more than $1 billion by reforming the ethanol blenders credit to support the commercialization of cellulosic ethanol and provide modest, yet important incentives for small ethanol producers and blender pumps. The Ethanol Reform and Deficit Reduction Act S1185, introduced by Sens. John Thune, R-S.D. and Amy Klobuchar, D-Minn., would have ended VEETC on July 31, instead of the current expiration date of Dec. 31.  Two-thirds of the savings—$1.3 billion—would have been directed toward federal deficit reduction, and the remaining $688 million would have gone to ethanol incentives.  The agreement was struck with Sen. Diane Feinstein, D-Calif., an ardent opponent of corn ethanol.

But when the final debt ceiling and deficit reduction deal was negotiated in Congress on Aug. 1, the ethanol compromise, unfortunately, was left on the cutting room floor.

The American Coalition for Ethanol has worked closely with bipartisan leaders on reform of the Volumetric Ethanol Excise Tax Credit.  Despite our good-faith effort, certain House members demanded that provisions which return revenue to the federal Treasury, such as reforming VEETC, not be included in the final debt deal.  By disregarding reform of the ethanol tax credit as part of that deal, consumers and the American ethanol industry have been shortchanged.

But we are not giving up.  While the calendar may not be working in our favor, there’s still substantial deficit savings on the table not to mention important incentives for ethanol in this plan. ACE took advantage of the annual congressional August recess to encourage our grassroots members to contact their senators and representatives and make the case for the reform plan.  In September, ACE will work with Sens. Thune and Klobuchar to determine how, and if, the reform effort can be resurrected in Congress.

If adopted, the ethanol agreement would expand an existing tax credit for fuel stations to install blender pumps and would extend the credit through 2014. The credit would also be modified to allow for blends between E15 and E85, and the entire cost of the blender pump would qualify for the credit, not just the E85 portion of the equipment. The agreement would also extend the Small Ethanol Producer Tax Credit through 2012, albeit at a lower rate. Finally, because commercializing next-generation ethanol is a national imperative, the plan would extend the $1.01 per gallon production tax credit for cellulosic ethanol and allow for accelerated depreciation of cellulosic facility equipment. Because Sen. Feinstein demanded that two-thirds of the funds go to deficit reduction, some of our priorities were jettisoned from this brokered compromise, making it far from perfect. It was the art of the possible, however, given the temperament of Congress.

During the month of August, ACE also encouraged our grassroots supporters to invite members of Congress to their ethanol plants and discuss with them the job creation and economic benefits of ethanol because the top priority when Congress returns to work this month will be a Clean Energy Jobs Bill. This legislation is a natural vehicle with which to advance ethanol industry priorities. VEETC will either undergo reform or expiration in 2011, but our industry still has a renewable fuels standard to protect and consumer fuel choice policies to advance. 

ACE has long held the position that tackling these priorities through effective lobbying means more than simply getting access to a key member of Congress. In fact, ACE’s grassroots identity enables us to elevate our lobbying and advocacy to build coalitions and identify voices outside the Beltway to validate the arguments we make to lawmakers every day. The message matters, but the messenger is important as well. That’s why our annual grassroots fly-in has been so effective, and that’s the strategy we’ll improve upon as we tackle the unfinished priorities of the industry.

Author: Brian Jennings,
Executive Vice President,
American Coalition for Ethanol
(605)334-3381
bjennings@ethanol.org