Posted: Thursday, March 03, 2011 1:00 PM
As tax credit nears expiration, ethanol groups strive for unity
By JERRY HAGSTROM
For the Capital Press
PHOENIX -- The ethanol industry needs to quickly get behind a reform program to take to Congress and has key meetings planned in Washington, industry leaders said here at the National Ethanol Conference Feb. 21 and 22.
"We need to unite," Renewable Fuels Association President and CEO Bob Dinneen said in a speech Feb. 21. "We need to focus our agenda; this is not a time for a wish list."
The ethanol industry has been supported for many years by the volumetric ethanol excise tax credit known as VEETC, which reduces blenders' taxes by $5 billion to $6 billion per year. Congress extended it in December as part of the tax package, but the extension expires at the end of this year.
"The message from that debate was unambiguous. Our industry needs to work with Congress and the administration to reform the tax incentive moving forward," Dinneen said.
National Corn Growers Association CEO Richard Tolman said in an interview that the four major ethanol groups -- NCGA, RFA, Growth Energy and the American Coalition for Ethanol -- have a discussion paper under consideration and were planning further meetings to try to reach agreement.
Both Tolman and Dinneen said the groups agreed on major sections of the proposal, but not all of it. Both men declined to discuss the proposal, but other industry sources said it would most likely involve reducing the VEETEC in exchange for federal help getting more flex fuel vehicles on the road and getting gas stations to install pumps that would sell ethanol as well as other gasoline. The industry's big challenge is no longer production, the source said, but making ethanol more accessible to American consumers and convincing them to buy it.
Dinneen noted there are several proposals under discussion besides the VEETEC phase-down: A refundable producer tax incentive that might be more politically viable than a market-based incentive; a limitation on the incentive only to gallons above the renewable fuel standard obligations or only for mid-level ethanol blends and E85; a carbon-based performance credit; and a variable tax incentive tied to the price of oil, and/or crush margins that would provide a consumer safety net.
"Frankly, each of these has both advantages and disadvantages," Dinneen said. "Ultimately, the arbiter will be Congress, and we will all have to live with the consequence."
Dinneen described 2010 as a year of great accomplishments for the ethanol industry, with the EPA authorizing E15, the Energy and Agriculture departments making loan guarantees to encourage production, and exports of 350 million gallons to Canada, Europe and even Brazil, the United Arab Emirates and Saudi Arabia.
But he said even though the industry prevailed when President Reagan wanted to end the ethanol program and has managed to get it extended four times, 2011 will be a challenge.
"Congress and the President are facing a mountain of debt," he said. "Reigning in spending and balancing the budget will be the number one priority over the next several years."