Ethanol: Subsidy extension limited

Producers of ethanol from corn were among the beneficiaries of the tax cut extension deal brokered on Capitol Hill that saw the Bush-era tax cuts kept in place. But the one-year extension of subsidies and protections granted under current law was less than the ethanol industry had sought.

Clearly, the economy and the world oil markets are increasing skepticism on Capitol Hill as ethanol producers try to move from basic research and development to broader production. Corn ethanol production has for years been supported by large government subsidies.

But producers worry those subsidies may be going away. Currently, refiners get nearly 12 cents of federal cash for every liter of corn ethanol they can blend into gasoline. There is also a tariff of more than 14 cents per liter on imported ethanol that the tax cut deal extended for another year.

But the limited extension of the subsidies and tax breaks for ethanol producers is a cause for concern by corn farmers as well.

The ethanol boom, which helped push corn prices to about $4.50 a bushel, nearly double what they were before the Energy Policy Act of 2005 established a renewable fuels standard and mandated use of ethanol in gasoline. Competition among livestock producers for feed for cattle, poultry and hogs also kept corn prices strong.

Mississippi has long been a beneficiary of the ethanol production business. And the state's role in alternative fuels is only expected to expand.

In 2010 in Mississippi, a company called KiOR proposed to turn trees into gasoline and while the KiOR biofuels company process for essentially turning trees into gasoline is technically complex enough to defy easy explanation, suffice it to say that it's a process that's clean, green and promising for Mississippi's future.

KiOR will initially build three Mississippi facilities in Columbus, Newton and Bude, and expects to build two additional facilities in the future.

The company is slated to invest more than $500 million in Mississippi and has committed to create 1,000 direct and indirect jobs in the state. Each facility is expected to employ 50 or more people depending on the biofuels production capacity.

Mississippi's developing biofuels and biomass industries get help from Strategic Biomass Solutions at the Mississippi Technology Alliance, a non-profit public-private partnership dedicated to driving innovation and technology-based economic development in Mississippi.

Some believe the limited extension of ethanol tax breaks signals an Obama administration effort to play hardball on so-called "cap and trade" legislation in 2011 during the run-up to the 2012 presidential election.

source: clarionledger