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Best case for ethanol credit next year: gradual phaseout

DANIEL LOOKER Updated: 12/14/2010 @ 4:15pm Business Editor

So far, Senator Chuck Grassley and other Midwestern senators from both parties seem to have salvaged ethanol and biodiesel tax credits for another year.

But next year they’re not expecting to maintain the status quo, Grassley told reporters Tuesday.

“I think where we are for next year, we’re all kind of committed to taking a new approach and the phasing out of the tax credits,” Grassley told Agriculture.com

Grassley said he would like to see a five- or ten-year phase out that would shift public support to more flexible fuel vehicles, blender pumps and dedicated ethanol pipelines for what he calls “a maturing industry” that’s not quite ready to stand on its own.

Grassley said that his support for that concept isn’t necessarily an endorsement of Growth Energy’s Fueling Freedom plan, which calls for all three of those methods of gaining more market access for ethanol. But he’s willing  to sit down and discuss it.

When asked if Congress might just end the subsidy completely at the end of 2011, Grassley said, “It’s difficult to say. There are 90 new members of Congress and I don’t know how to read that.”

Grassley sounded confident that the tax credit will survive as the entire tax compromise worked out between the Obama Administration and Republican leaders moves through Congress.

Grassley said there may be an effort by Senator Dianne Feinstein of California to amend the Senate bill to lower the tax credit from 45 cents a gallon to 36 cents next year, but it’s likely to face procedural hurdles that will keep the amendment from being voted on.

He also doesn’t think the House will try to alter the compromise, with the exception of the estate tax. Grassley said he’s surprised that the compromise included a $5 million exemption and 35% rate, which is more generous than what the House passed earlier this year. But he sees it as good for small businesses and farmers, whose estates will face a $1 million exemption next year without passage of the compromise.  

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