Senators Reach Ethanol Deal, Bill Would Eliminate Blenders Credit, Import Tariff
(DTN) Ethanol industry leaders said Thursday a deal struck to
overhaul ethanol incentives isn't exactly what they want, but it's a workable
plan to move the industry forward and replace the ethanol blenders' credit
with, among other items, incentives for blender pumps.
"From the industry's perspective, we have been willing to reform these programs for quite some time, looking for the proper legislative vehicle in order to enact them," said Growth Energy CEO Tom Buis. "I think this gives us the opportunity to move in the correct direction in order to remove the barriers to the marketplace we face in competing with oil."
Senators announced Thursday they had reached a bipartisan agreement that would end the ethanol blenders' tax credit at the end of this month.
Sens. Amy Klobuchar, D-Minn., and John Thune, R-S.D., issued a release stating that ethanol would "transition to a more sustainable model of incentives for domestic renewable fuel production while reducing the nation's deficit by $1.3 billion."
Helping to advance the deal on ethanol in the Senate, Sen. Dianne Feinstein, D-Calif., also signed off on the agreement.
"This agreement is the best chance to repeal the ethanol subsidy, and it's the best chance to achieve real deficit reduction," Feinstein said. "Absent this agreement, taxpayers stand to lose $1.33 billion -- that was the bottom line for me."
Feinstein stated the agreement has been sent to Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., to consider legislation for passage.
"I believe this bipartisan agreement should be included in the deficit reduction package that will likely accompany a vote on raising the debt limit, and I hope the president will consider that approach."
Ethanol advocates in the Senate suffered a blow last month when the Senate voted 73-27 to immediately end the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit, commonly known as the blenders' credit. Yet, the bill to which that provision was attached failed to pass, giving ethanol backers a reprieve.
The agreement among senators is based on Thune and Klobuchar's legislation, the "Ethanol Reform and Deficit Reduction Act." The bill would end the blenders' credit on July 31, instead of the current expiration date of Dec. 31.
Along with that, the bill would end the 54-cent ethanol import tariff that has been a major complaint of the Brazilian ethanol industry for years.
In return, the ethanol industry would see an extension and expansion of a tax credit for fuel stations to install pumps to sell higher blends of ethanol. EPA has recently approved selling 15% ethanol blends for newer vehicles.
Any bill, however, still would need to clear both the Senate and the House, as well as be adopted by the president. Further, given that the bill increases federal revenue, House leaders may require that such a bill actually begin in the House before being adopted, a technical issue lawmakers call "blue slipping" a bill.
According to senators, the agreement would dedicate two-thirds of the savings this year, about $1.3 billion, for debt reduction, and the remaining $668 million would go to renewable fuel incentives. The compromise can now be considered by the full Senate.
"After productive discussions with industry stakeholders over the past several weeks, we have reached a bipartisan solution that reduces the federal deficit and modifies current biofuels policy without pulling the rug out from under American renewable energy producers," stated Thune. "Domestic biofuels production in South Dakota and throughout the country continues to play an important role in reducing our nation's dependence on foreign oil and creating American jobs. I look forward to moving our bipartisan plan through both the Senate and the House of Representatives."
"This bipartisan agreement is a major step toward providing our businesses a clear path forward and keeping the biofuels industry competitive while reducing our debt by over a billion dollars this year," Klobuchar stated. "With this agreement we can not only continue to support homegrown energy, we can also demonstrate that members with different viewpoints can come together to find common ground to reduce the debt. It is a model for reducing government subsidies going forward."
National Corn Growers Association President Bart Schott stated the group is committed to working with Congress to move renewable energy forward. At the same time, NCGA stated Congress should "level the playing field when it comes to energy policy" by cutting subsidies for oil.
"Unlike the oil and gas industries, ethanol has been proactively working to reform tax policy affecting the industry and secure a safety net while reducing the overall cost to the federal government."
Growth Energy and the Renewable Fuels Association also back the proposal, though the industry isn't pleased with the overall reduction in support.
Generally, most ethanol plants aren't going to be directly affected by a loss of the blenders' credit because they don't directly receive the credit anyway. Still, the ethanol industry had wanted a two- to three-year phase-out of the credit and phase-in of the infrastructure components that isn't going to happen.
"Because of the debates that were going in Congress, etc., it was obvious that something more immediate was going to happen," Buis said.
A plan to create a counter-cyclical blenders' credit was dropped from the legislation.
"This is not the perfect compromise, but it does demonstrate the willingness of American ethanol producers and advocates to do their part to address budget concerns while not sacrificing the progress and evolution of the industry," stated Bob Dinneen, CEO of the Renewable Fuels Association. "I would challenge other industries to step up to the plate in the same manner. The status quo of American energy and tax policy simply won't work."
The existing $1.01-per-gallon tax credit for cellulosic biofuels also would be modified and extended through 2015. But the agreement would cap the cellulosic tax credit at $50 million in 2013, $100 million in 2014 and $155 million in 2015. RFA and Growth Energy both see it is as unrealistic. RFA stated the group would work to improve that provision before it might become law.
Other provisions of the bill would extend the Alternative Fueling Infrastructure Tax Credit including tax breaks for installing blender pumps for ethanol blends between 15% to 85% blends. Further, the tax credit would be extended through 2014 and cost about $250 million over that time, paid through savings from the blenders' credit. Buis said it will create a push to get those pumps installed to get the credit.
"Certainly, we have a lot of work to do to get out and encourage people to install these pumps in that timeframe," he said. "Our goal has always been to get as many of these pumps out there."
The Small Producer Ethanol Credit also would be extended through 2012. The small ethanol producer credit amounts to 7 cents per gallon of ethanol produced and can be claimed on the first 15 million gallons of ethanol produced by a small producer in a given year. It applies to any ethanol producer with production capacity below 60 million gallons per year.
A special depreciation allowance for cellulosic plants would be modified and extended as well.
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"From the industry's perspective, we have been willing to reform these programs for quite some time, looking for the proper legislative vehicle in order to enact them," said Growth Energy CEO Tom Buis. "I think this gives us the opportunity to move in the correct direction in order to remove the barriers to the marketplace we face in competing with oil."
Senators announced Thursday they had reached a bipartisan agreement that would end the ethanol blenders' tax credit at the end of this month.
Sens. Amy Klobuchar, D-Minn., and John Thune, R-S.D., issued a release stating that ethanol would "transition to a more sustainable model of incentives for domestic renewable fuel production while reducing the nation's deficit by $1.3 billion."
Helping to advance the deal on ethanol in the Senate, Sen. Dianne Feinstein, D-Calif., also signed off on the agreement.
"This agreement is the best chance to repeal the ethanol subsidy, and it's the best chance to achieve real deficit reduction," Feinstein said. "Absent this agreement, taxpayers stand to lose $1.33 billion -- that was the bottom line for me."
Feinstein stated the agreement has been sent to Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., to consider legislation for passage.
"I believe this bipartisan agreement should be included in the deficit reduction package that will likely accompany a vote on raising the debt limit, and I hope the president will consider that approach."
Ethanol advocates in the Senate suffered a blow last month when the Senate voted 73-27 to immediately end the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit, commonly known as the blenders' credit. Yet, the bill to which that provision was attached failed to pass, giving ethanol backers a reprieve.
The agreement among senators is based on Thune and Klobuchar's legislation, the "Ethanol Reform and Deficit Reduction Act." The bill would end the blenders' credit on July 31, instead of the current expiration date of Dec. 31.
Along with that, the bill would end the 54-cent ethanol import tariff that has been a major complaint of the Brazilian ethanol industry for years.
In return, the ethanol industry would see an extension and expansion of a tax credit for fuel stations to install pumps to sell higher blends of ethanol. EPA has recently approved selling 15% ethanol blends for newer vehicles.
Any bill, however, still would need to clear both the Senate and the House, as well as be adopted by the president. Further, given that the bill increases federal revenue, House leaders may require that such a bill actually begin in the House before being adopted, a technical issue lawmakers call "blue slipping" a bill.
According to senators, the agreement would dedicate two-thirds of the savings this year, about $1.3 billion, for debt reduction, and the remaining $668 million would go to renewable fuel incentives. The compromise can now be considered by the full Senate.
"After productive discussions with industry stakeholders over the past several weeks, we have reached a bipartisan solution that reduces the federal deficit and modifies current biofuels policy without pulling the rug out from under American renewable energy producers," stated Thune. "Domestic biofuels production in South Dakota and throughout the country continues to play an important role in reducing our nation's dependence on foreign oil and creating American jobs. I look forward to moving our bipartisan plan through both the Senate and the House of Representatives."
"This bipartisan agreement is a major step toward providing our businesses a clear path forward and keeping the biofuels industry competitive while reducing our debt by over a billion dollars this year," Klobuchar stated. "With this agreement we can not only continue to support homegrown energy, we can also demonstrate that members with different viewpoints can come together to find common ground to reduce the debt. It is a model for reducing government subsidies going forward."
National Corn Growers Association President Bart Schott stated the group is committed to working with Congress to move renewable energy forward. At the same time, NCGA stated Congress should "level the playing field when it comes to energy policy" by cutting subsidies for oil.
"Unlike the oil and gas industries, ethanol has been proactively working to reform tax policy affecting the industry and secure a safety net while reducing the overall cost to the federal government."
Growth Energy and the Renewable Fuels Association also back the proposal, though the industry isn't pleased with the overall reduction in support.
Generally, most ethanol plants aren't going to be directly affected by a loss of the blenders' credit because they don't directly receive the credit anyway. Still, the ethanol industry had wanted a two- to three-year phase-out of the credit and phase-in of the infrastructure components that isn't going to happen.
"Because of the debates that were going in Congress, etc., it was obvious that something more immediate was going to happen," Buis said.
A plan to create a counter-cyclical blenders' credit was dropped from the legislation.
"This is not the perfect compromise, but it does demonstrate the willingness of American ethanol producers and advocates to do their part to address budget concerns while not sacrificing the progress and evolution of the industry," stated Bob Dinneen, CEO of the Renewable Fuels Association. "I would challenge other industries to step up to the plate in the same manner. The status quo of American energy and tax policy simply won't work."
The existing $1.01-per-gallon tax credit for cellulosic biofuels also would be modified and extended through 2015. But the agreement would cap the cellulosic tax credit at $50 million in 2013, $100 million in 2014 and $155 million in 2015. RFA and Growth Energy both see it is as unrealistic. RFA stated the group would work to improve that provision before it might become law.
Other provisions of the bill would extend the Alternative Fueling Infrastructure Tax Credit including tax breaks for installing blender pumps for ethanol blends between 15% to 85% blends. Further, the tax credit would be extended through 2014 and cost about $250 million over that time, paid through savings from the blenders' credit. Buis said it will create a push to get those pumps installed to get the credit.
"Certainly, we have a lot of work to do to get out and encourage people to install these pumps in that timeframe," he said. "Our goal has always been to get as many of these pumps out there."
The Small Producer Ethanol Credit also would be extended through 2012. The small ethanol producer credit amounts to 7 cents per gallon of ethanol produced and can be claimed on the first 15 million gallons of ethanol produced by a small producer in a given year. It applies to any ethanol producer with production capacity below 60 million gallons per year.
A special depreciation allowance for cellulosic plants would be modified and extended as well.
http://www.dtnprogressivefarmer.com
Posted by Colvin & Co. at 7/9/2011 5:04 AM 
Categories: Renewable Energy
Tags: ethanol corn Renewable Energy soybeans exports Brazil
Categories: Renewable Energy
Tags: ethanol corn Renewable Energy soybeans exports Brazil
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