Late Thursday Senate Finance Committee Chairman Max Baucus (D-MT) unveiled a bill to extend middle class tax cuts that also includes a one-year extension of the ethanol tax credit through 2011. The Volumetric Ethanol Excise Tax Credit, or VEETC, would fall from the current 45 cent a gallon rate to 36 cents.

The bill reflects the Democrats’ goal of extending Bush-era middle class tax cuts but not the tax cuts for high income earners that Republicans want to keep, so it’s not expected to pass the Senate, which may vote on the measure Saturday.

Still, it was greeted by ethanol interests Friday as good news.

“Investments in ethanol are proven policies that create jobs and put America firmly on the path to energy self-reliance,” Renewable Fuels Association President and CEO Bob Dinneen said in a statement. “Senator Baucus’s approach is a good one, recognizing the importance of this investment and providing some market stability as good faith efforts to responsibly reform ethanol tax policy continue.”

Brian Jennings, executive vice president of the American Coalition for Ethanol, said the fate of the tax credit will depend on negotiations between leaders of Congress and the White House.

“I think this is very much inside baseball,” Jennings told Agriculture.com. “If there is an agreement on Bush tax cuts, we have a chance to be in the game.”

“We stand a slightly better than 50% chance of getting a one-year extension of VEETC somewhere between 45¢ and 36¢,” he said.

Jennings said that the industry has been helped by an agreement between four lobbying groups to support reform of the tax credit in return for support for more access to markets through flexible fuel vehicles and blender pumps, even though major changes in ethanol support are unlikely in the short lame duck session of Congress.

“The White House supports an extension (of VEETC). Key members of Congress support an extension,” Jennings said.

Jennings’ group put out a statement Friday acknowledging that it would have preferred a 45¢ tax credit, but “based on our recent discussions with White House and congressional officials, ACE expected this tax package.  We recognize some may suggest the bill is not good enough for ethanol, but the hard truth is that given federal budget constraints, national political realities, and fact that our ethanol tax incentives are scheduled to expire in less than 30 days, ACE is prepared to support the ethanol provisions in the tax package.”

Both political parties are split over the ethanol tax credit. Baucus, a supporter, is among the small group negotiating on the final tax package, but the Republican senator in the same group, Jon Kyl of Arizona, is among the critics.