Does the ‘Super Committee’ Matter to Ethanol?

By Bob Dinneen | September 12, 2011

The newest creation of Washington, the “super committee,” is hard at work trying to identify trillions of dollars in budget cuts to offset the necessary increase in the cap on the amount of money the federal government can borrow to pay for its prior commitments, such as medicare and social security.  While this committee is getting a lot of attention from lobbyists and the media, the impact of this effort remains hard to predict.  For ethanol, the impact, if there even is one, is harder to foresee.

We all remember the Kabuki theater that led up to the final deal raising the so-called debt ceiling and creating the super committee.  This highly partisan, rhetorically charged fight pushed America to the brink of default and, according to some economists, put America’s economic standing the world over on shakier ground.  For all its bluster, this debate did offer a glimmer of opportunity and bipartisanship on the important issue of ethanol tax incentives.

During this debate, an unlikely trio of senators—John Thune of South Dakota, Amy Klobuchar of Minnesota, and Dianne Feinstein of California—found common ground on ethanol tax policy that would have been instrumental to the industry’s future.  This compromise would have invested in ethanol fueling infrastructure, accelerated the commercialization of advanced and cellulosic ethanol technologies, and helped to pay down the national debt.  This deal, while far from perfect, contained enough to garner the support of the grain-based ethanol industry and at least one advanced and cellulosic ethanol group, the Advanced Ethanol Council.

Sadly, politics and posturing prevented this deal from being included in the final legislation to raise the debt ceiling and create this super committee.  Now, with the clock ticking on both the committee and the ethanol tax incentives already scheduled to expire at the end of this year, the future of any ethanol tax policy compromise is challenging, at best.

In order to find the $1.2 trillion in savings required of it, the super committee will have to tackle a wide range of issues, many of which carry price tags and present budget savings far greater than the ethanol tax incentive for the remainder of 2011.  Entitlement programs like medicare and social security, along with the budgets of the Department of Defense, U.S. EPA, and other federal agencies will be in the crosshairs.  So, too, will be tax cuts and other loopholes for very profitable industries that could garner tremendous budget savings over the next decade.

It is in this context that America’s ethanol industry sees a glimmer of hope.  While the full compromise offered this summer is no longer in play, a smaller package that provides for infrastructure investment and next generation commercialization incentives may be possible.  It is also conceivable, though challenging given the enormous political sway of the fossil fuel industry, that the lavish tax subsidies provided to the nation’s oil industry could be eliminated.

I say all of this is possible as an eternal optimist refusing to stop fighting until the fat lady has sung.  Additional legislative vehicles may present themselves as well.  But the reality on Capitol Hill is a tough one, and the political headwinds and magnitude of the work before the committee may very well exclude biofuels altogether.

Despite the hype of the super committee, it is entirely possible that it will be anything but super for America’s ethanol industry.  Fortunately, the expiration of the tax incentive is an event for which the industry has been preparing. A new era of American ethanol production is poised to begin.    

Author: Bob Dinneen
President and CEO of the
Renewable Fuels Association
(202) 289-3835