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Groups welcome ethanol compromise

DANIEL LOOKER 07/07/2011 @ 11:31am Business Editor

Ethanol supporters in the U.S. Senate on Thursday announced a deal that will preserve about $668 million in tax credits for the industry while allowing the main 45 cent-a-gallon blenders credit to expire on July 31.

U.S. Senators John Thune (R-SD) and Amy Klobuchar (D-MN) said in a statement that $1.3 billion of the savings from allowing the blenders credit to expire will go toward reducing the federal deficit. Thune and Klobuchar have been negotiating with Senator Dianne Feinstein (D-CA), who led an effort in the Senate to kill the tax credit.

Because the credit was slated to expire by the end of this year anyway, each day Congress delays in ending the credit reduces how much money will be saved.

The remaining tax credits that will be allowed for ethanol are modest in comparison to more than $5 billion in annual lost revenue from the blenders credit. Nevertheless, industry groups, including the National Corn Growers Association, were pleased at the result.

 “NCGA is grateful to Senators Thune and Klobuchar for the hard work and dedication they have put in to reaching a final deal, “said NCGA president Bart Schott, in a statement. “There are many positive components of this compromise that are important to the ethanol industry and rural America.  The final compromise reflects both the importance of the ethanol industry to achieve energy independence and the need for fiscal responsibility. The ethanol industry continues to have a positive impact on all parts of America, and we are committed to working with Congress in the future on steps that can move the ethanol industry and the nation’s economy forward.”

The remaining tax credits will go toward helping gas stations to pay for the installation of blender pumps. They also extend through 2012 a smaller, 7 cent-a-gallon tax credit for small ethanol producers, plants with capacity below 60 million gallons. And the credit applies only to the first 15 million gallons of production.

The compromise also extends through 2015 a $1.01 per gallon tax credit for cellulosic ethanol.

The agreement still isn’t law, but spokesmen for two leading ethanol groups are optimistic that it will make it through Congress.

“It could be part of the final compromise on the debt talks and be included in the bill that moves.  The timing of that is anyone’s guess,” said Matt Hartwig, a spokesman for the Renewable Fuels Association, in an email to Agriculture.com.  

Chris Thorne, a spokesman for Growth Energy, concurred. “The intent is for this to become part of whatever legislation deals with the debt ceiling, which makes sense as it reforms the VEETC and puts money toward deficit reduction.” VEETC refers to the blenders credit, or the Volumetric Ethanol Excise Tax Credit.

Here is the statement released by Senator Thune’s office.

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