Ag weighs in on Obama's energy plans
President Barack Obama devoted more than a tenth of his State of the Union address to Congress Tuesday to energy. And farm and ethanol groups welcomed his comments in a flurry of press releases Wednesday.
But what will it mean in Washington this year?
Probably not much.
That’s the view of Purdue University economist Wally Tyner, an authority on the ethanol industry who emphasizes that he’s not an expert on what politicians may do in the nation’s capital.
Little action is especially true for corn ethanol, which the President did not mention.
“My view is, that it’s a mature industry. The industry has almost voluntarily ceded the subsidy. They have the renewable fuel standard as their backdrop,” Tyner says.
The tax credit that paid blenders to use ethanol expired last year, and with oil prices around $100 a barrel, ethanol will be used in the marketplace, Tyner says. The renewable fuel standard, passed with the 2007 energy law, is a mandate for biofuel use that includes a requirement of blending 15 billion gallons of ethanol by 2015.
Tyner says the industry’s nameplate capacity is about 14 billion gallons right now and that it could easily ramp up to 15 billion gallons of output.
In theory, the Renewable Fuel Standard could be changed to allow more use of corn ethanol, but that would be fought by food manufacturers and environmentalists, Tyner says. Some ag groups favor creating a bigger mandate for corn ethanol.
But Tyner thinks that might be a risky strategy.
“The Tea Party people want to get rid of the renewable fuel standard because it’s government intervention,” Tyner says.
“My guess is they [Congress] are going to leave it alone,” he says.
Obama did mention tax credits for other energy industries that have expired.
“We’ve subsidized oil companies for a century. That’s long enough,” he said to applause. “It’s time to end the taxpayer giveaways to an industry that rarely has been more profitable, and double-down on a clean energy industry that never has been more promising. Pass clean energy tax credits. Create these jobs.”
Among the tax credits that expired last year is the $1 a gallon credit for biodiesel.
The American Soybean Association said in a statement from its president, Steve Wellman, that “ASA also cheers the president’s commitment to domestic energy production, but we hope that both the administration and Congress will recognize the vast potential of biodiesel.”
“ASA calls on Washington to continue the biodiesel success story by immediately renewing the biodiesel tax incentive and continuing the commitment to the RFS,” he added.
Tyner says he’s not certain what Congress will do about the tax credits, but that for the young biodiesel industry, they remain an important incentive, along with the renewable fuel standard.
ASA also responded to Obama’s statements on trade, regulation and infrastructure.