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Harkin frustrated by ethanol infighting

All of the major ethanol groups backed a bill introduced in
the Senate this week that would extend ethanol tax credits for a few more years
after the current 45 cent-a-gallon credit expires in December.

But the industry is still struggling to find agreement on
the best ways to support expanding ethanol production, with major ethanol
groups and the National Corn Growers Association meeting Thursday afternoon to
talk about possible changes to the tax credit.

Most people don’t expect the bill introduced Wednesday by
Senators Chuck Grassley (R-IA) and Kent Conrad (D-ND) to become a law by
itself. But they’re hoping it might be part of comprehensive energy bill if
the Senate passes one this year. 
And the smaller 20-cent credit Grassley proposes for next year might
stave off efforts by others in the Senate to completely kill the 45-cent
Volumetric Ethanol Excise Tax Credit.

But when Senator Tom Harkin was asked about his sense of
support for the Grassley-Conrad Bill on Thursday, he said that it has some
risks. Harkin supports Grassley’s bill, and is one of the original
co-sponsors.  But if the bill
fails, it could leave the ethanol industry with less room to grow.

“They could lose the tax credit, and they could lose it very
quickly,” Harkin told

If that happens, then Harkin says it would be harder to
bargain with members of Congress for another bill Harkin has introduced, the
Biofuels Market Expansion Act of 2011.

Unlike the Conrad-Grassley bill, which deals with tax
credits, Harkin’s bill provides support for the industry to reach more
consumers, by mandating that a large majority of cars sold in the U.S. be
flex-fuel (able to burn up to 85% ethanol), by requiring that over six years
major fuel distributors must install blender pumps to dispense varying levels
of ethanol blends, and by offering federal loan guarantees for ethanol

Harkin has introduced versions of that bill for several
years, and the industry has backed it in the past, he said, but it seems to be
less actively supporting it now.

“Believe me, if we have market access, ethanol will really
take off,” Harkin said.

Officially, ethanol groups do back the Harkin bill.

“Growth Energy is a strong supporter of Harkin’s legislation,”
Growth CEO Tom Buis told 
“He’s right on target. The most important thing for our industry and
the nation is to get these infrastructure barriers removed.”

Buis said he thinks all of the ethanol groups also favor
expanding the infrastructure needed to get more than 10% ethanol to consumers,
but “different people have different views on how you get there.”

The Renewable Fuels Association also backs the Harkin bill.

The group’s spokesman, Matt Hartwig, said in an email that
RFA president, Bob Dinneen, testified in support of the Harkin bill at an early
April hearing of the Senate Energy and Natural Resources Committee.

In the past, however, the two groups have approached ethanol
policy differently, with Growth more willing to give up some tax credits in
return for government programs to bring more ethanol to the marketplace. And
RFA has been more cautious about giving up VEETC.

According to congressional staffers familiar with the
debates over ethanol policy, none of these approaches are without some risk.

Giving up tax credits in exchange for new programs to build
ethanol blender pumps and pipelines assumes that the lost tax credits go into
some kind of Congressional pot of money that can be tapped for ethanol. The
bottom line is that there is no pot of money, especially in today’s environment
of cutting federal spending. Congress will have to agree that the new
infrastructure is needed for national energy security.

The bill introduced this week to extend VEETC in one form or
another for five years, also faces an uncertain future.  The bill would keep a 20-cent tax
credit in 2012, a 15-cent credit in 2013, then shift to a variable credit for
three more years. In today’s fiscal environment, a tax bill that lasts five
years will seem more expensive than just a one-year extension of VEETC in 2012,
the congressional staffers say.

But there is agreement on one thing, one staffer said. “I
think the industry pretty much understands there are going to be significant
revisions (in the credit) in one way or another, and they’re going to be
downward revisions.” 

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