Attacked as subsidy addicts, U. S. ethanol makers may need help from friends in high places, including the White House, to hold on to lucrative tax breaks set to expire at the end of the year.
The industry says it is ready to discuss revisions in the incentives, worth $6 billion a year. An amalgam of foodmakers, livestock producers, environmentalists and deficit hawks say 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, a good-government group. “It’s time for the decades-old ethanol party to end.”
Corn-based ethanol is a farm belt favourite, valued as a homegrown fuel that reduces reliance on imported oil and creates jobs and income for rural areas. Rural lawmakers back ethanol as a success story.
The average ethanol plant employs 40-50 people and spends $130 million a year on supplies, wages and transport. With 204 plants nationwide, that amounts to thousands of jobs and billions of dollars in outlays.
The largest ethanol makers are privately owned POET, Archer Daniels Midland Co. and Valero Energy Corp.
“Ethanol is an expanding market, unlike some of our traditional customers,” said Jon Doggett of the National Corn Growers Association.
In Congress, backers include Democrat Collin Peterson, chairman of the House Agriculture Committee, and Charles Grassley, the Republican leader on the Senate Finance Committee, which oversees tax law.
The farm bloc has influence because rural districts often are a pathway to control of the House. Two-thirds of the most competitive House races are in rural districts this year.
“I think it would be very irresponsible to take away an incentive overnight,” Jeff Broin, head of POET, told Reuters in an interview. “We’re working hard with the White House (and) dozens of lawmakers to get a solution as soon as possible.”
The last chance this year would be the brief congressional session set after the Nov. 2 midterm elections, when an omnibus tax bill could be a vehicle for ethanol incentives. However, an anti-spending mood has blocked revival of a $1-a-gallon biodiesel credit and could affect ethanol too.
Corn growers and ethanol trade groups back a one-year extension of the excise tax credit for ethanol, to be followed by revisions to lower the cost of supports.
The tax credit, now 45 cents a gallon, is the largest of the expiring incentives. Also expiring are the 54-cent tariff on ethanol imports and a 10-cent credit for small producers.
One industry suggestion is to convert the excise tax credit to a producer tax credit at a lower rate. Other changes could include opening the door for corn ethanol to qualify as an advanced biofuel, which could more than double its sales; a fund to help pay for so-called blender pumps; and loan guarantees for an ethanol pipeline.
“It is very much a work in progress, but we all agree extending the tax incentive is critical,” said a spokesman for one of the groups, the Renewable Fuels Association.