While Democrats and Republicans have been fighting tooth and nail on health care reform, there was at least one bi-partisan effort announced this week, and it’s good news for ethanol.
Congressman Earl Pomeroy (D-ND) and Congressman John Shimkus (R-IL) announced legislation (HR 4940) that would extend the current $.45 Volumetric Ethanol Excise Tax Credit (VEETC), often called the blenders’ credit, and the secondary tariff on imported ethanol until December 31, 2015. The legislation would also extend the Small Producers Tax Credit and the Cellulosic Ethanol Production Tax Credit to January 1, 2016.
The Renewable Fuels Association (RFA) reported that if these incentives were allowed to expire (most of them are due to expire at the end of 2010), some 112,000 jobs would be lost and “nearly two out of every five ethanol plants operating today” could be closed.
The RFA also said that without the incentives, domestic ethanol production could fall by 38 percent and be replaced with imported fuels.
Domestic ethanol production generated $8.4 billion in federal revenue in 2009, or $3.4 billion more than the cost of the credit, according to the legislation’s sponsors.
The Renewable Fuels Reinvestment Act would:
• Extend the $.45 per gallon tax credit available to oil and gasoline refiners for each gallon of ethanol they blend through December 31, 2015. VEETC is set to expire at the end of this year.
• Extend the secondary tariff on ethanol through December 31, 2015. This tariff exists to offset the benefit of the VEETC which is available to all sources of ethanol, regardless of its country of origin. The tariff also expires at the end of this year.
• Extend the Small Producers Tax Credit until January 1, 2016. This $.10 per gallon tax credit is available on the first 15 million gallons of ethanol produced by ethanol companies producing no more than 60 million gallons per year. This tax credit expires at the end of 2010.
• Extend the Cellulosic Ethanol Producer Tax Credit until January 1, 2016. Currently, cellulosic ethanol is eligible for both the $.45 per gallon VEETC as well as a $.56 per gallon production tax credit. This tax credit expires at the end of 2012.
Extending these incentives ensures that both the grain-based and cellulosic sources of ethanol needed to meet the Renewable Fuels Standard (RFS) are produced domestically. RFA’s Dinneen said that without tax incentives to support domestic production, the RFS would simply allow increased U.S. dependence on imported biofuels. He added that long-term extensions of these incentives encourages investment in current and next generation ethanol technologies.
The RFA listed the other cosponsors of the legislation. They are: Stephanie Herseth-Sandlin (D-SD), Tim Johnson (R-IL), Tom Latham (R-IA), Phil Hare (D-IL), Collin Peterson (D-MN), Bruce Braley (D-IA), Dave Loebsack (D-IA), Leonard Boswell (D-IA), Steve King (R-IA), Tim Walz (D-MN), Aaron Schock (R-IL), Chris Lee (R-NY), Dennis Moore (D-KS), John Salazar (D-CO), Debbie Halvorson (D-IL), Sam Graves (R-MO), Brad Ellsworth (D-IN), Danny Davis (D-IL), Jo Ann Emerson (R-MO), Artur Davis (D-AL), Blaine Luetkemeyer (R-MO), Lee Terry (R-NE), Marcy Kaptur (D-OH), Jerry Costello (D-IL), Baron Hill (D-IN), Bill Foster (D-IL), and Betsy Markey (D-CO).
A Senate companion bill is expected soon.