U.S. Ethanol Makers Seek Renewal of Tax Breaks

Facing stiff opposition, though, the ethanol industry said it would consider revising the incentives, which total $6 billion this year.

U.S. ethanol makers are seeking to retain substantial tax breaks that are set to expire at the end of the year, Reuters reports.

The industry said it will consider revising the incentives, which total $6 billion a year. However, they face stiff opposition from foodmakers, livestock producers, and environmentalists who maintain there is no need for subsidies because biofuels are guaranteed by law a share of the motor fuel market.

"The ethanol industry is addicted to subsidies," said Steve Ellis of Taxpayers for Common Sense. "It's time for the decades-old ethanol party to end."

With more than 200 ethanol plants nationwide, ethanol producers, including POET, Archer Daniels Midland Co. and Valero Energy Corp., are citing the thousands of jobs at stake in their effort to gain a renewal of the tax breaks.

"I think it would be very irresponsible to take away an incentive overnight," Jeff Broin, head of POET. "We're working hard with the White House (and) dozens of lawmakers to get a solution as soon as possible."

Their last chance this year will come after the November 2 mid-term elections, when an omnibus tax bill could be a vehicle for the biofuel tax breaks. However, with a fiscally conscious Congress having blocked the revival of a $1 a gallon biodiesel credit, Reuters speculated the tax incentive could be similarly affected.

Corn growers and ethanol trade groups support a one-year extension of the tax credit, which would be followed by revisions to lower the support costs.

The credit is currently 45 cents a gallon, the largest of the expiring incentives. Additionally, a 54-cent tariff on ethanol imports and a 10-cent credit for small producers are also expiring.

One suggestion is to convert the tax credit to a producer tax credit at a lower rate. Other changes could include a fund to pay for blender pumps and loan guarantees for an ethanol pipeline.

NACS and other marketer organizations support the extension of the tax credit but oppose its conversion to a producers tax credit. For years, the tax credit has been an incentive for marketers to sell ethanol-blended gasoline and now that it is mandated the credit is a critical only element making the product cost competitive. Moving the credit up the producers would reduce the likelihood the incentive would find its way to retailers and ultimately consumers.

Further, NACS continues to have concerns about converting the blenders credit to a government incentive program to help retailers install equipment. There are very few devices certified as compatible with higher blends of ethanol. There may be much less need for the installation of new devices if the entire ethanol industry would support and Congress would pass H.R. 5778 and provide retailers with the ability to have existing equipment recertified as compatible with higher blends of ethanol.

source: nacsonline