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Bill phases down ethanol tax credit

DANIEL LOOKER 05/04/2011 @ 3:45pm Business Editor

A bipartisan coalition of Midwest senators, headed by Republican Chuck Grassley of Iowa and Democrat Kent Conrad of North Dakota, introduced a bill Wednesday that would extend the tax credit for ethanol over five years, but at declining rates in 2012 and 2013 and variable rates through 2016.The current 45 cent-a-gallon Volumetric Ethanol Excise Tax Credit, or VEETC, expires at the end of this year and some members of the Senate from oil producing states, including Tom Coburn (R-OK) and Dianne Feinstein (D-CA) are calling for ending VEETC completely this year.

Grassley and Conrad’s “Domestic Energy Promotion Act of 2011” would instead cut VEETC to 20 cents in 2012 and 15 cents in 2013.

In 2014 the tax credit would shift to a variable tax incentive for the remaining three years, based on the price of crude oil.  When crude oil is more than $90 a barrel, there will be no blenders’ credit.  When crude oil is $50 and below, the blenders’ credit will be 30 cents.  The rate will vary when the price of crude is between $50 and $90 a barrel.

The bill also offers tax credits for blender pumps and extends an existing tax credit of $1.01 a gallon for cellulosic ethanol.

On the floor of the Senate, Grassley responded to those who want to kill VEETC completely.

“Not only is this bad energy policy, poor tax policy, and dangerous to our national security, it’s also intellectually dishonest,” Grassley said.  “I believe a discussion concerning our nation’s energy and tax policy should be debated in a comprehensive manner.  Biofuels are not the only form of energy that receives incentives or supportive policies from the federal government. How about the incentives for wind, oil, natural gas, nuclear, and geothermal?  If the Senate intends to consider reforms to biofuels incentives, it should be in the context of a comprehensive review of all energy tax incentives.  This bill is meant to serve as a first step in the process.”

The bill is also co-sponsored by Senators Mike Johanns (R-NE), Amy Klobuchar (D-MN), Al Franken (D-MN), Tom Harkin (D-IA), Tim Johnson (D-SD), and Ben Nelson (D-NE).

It also has strong support from the National Corn Growers Association and all three major ethanol lobbying groups, American Coalition for Ethanol, Growth Energy and the Renewable Fuels Association.

The groups said in a statement: “The leadership of Senator Grassley and this distinguished bipartisan group of cosponsors has been and remains instrumental in allowing America’s ethanol industry to grow and evolve.  At a time of near-record gas prices and continued volatility in world oil markets, America’s growing production and reliance of domestic ethanol sources is creating jobs, keeping gasoline prices down, and reducing this nation’s appetite for imported oil.  Domestic Energy Promotion Act of 2011 would ensure we don’t abandon this increasingly vital American industry, but rather smartly and responsibly foster its continued growth and evolution.”

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