The ethanol industry may be in for another year of federal help. Ethanol lobby poised for another win

The ethanol industry — which is being attacked from everyone from tea party backers to Al Gore — nonetheless may be poised to win another victory on Capitol Hill and continue a decades-long ride of federal help for at least one more year.

Senate Finance Committee Chairman Max Baucus (D-Mont.) undoubtedly gave comfort to backers of the corn-based gasoline additive when he included a sought-after one-year extension of a key expiring ethanol tax credit as part of a much-larger middle class tax cut package he unveiled Thursday.


The 45-cent volumetric excise ethanol tax credit — set to expire at year’s end — would be extended through next year at 36 cents per gallon. This is the level Democrats on the tax-writing House Ways and Means Committee recommended this summer, and it is supported by the Obama administration, which feels it must address calls to reduce federal spending during the next Congress.

The credit cost taxpayers an estimated $5 billion this year and lowering it to 36 cents would bring the annual cost down to $3.8 billion. Baucus also proposed extending for a year the 54-cent-per-gallon tariff on imported ethanol, as well as extending a small ethanol producer’s tax credit through next year at 8 cents per gallon.

Ethanol is a key product in Iowa — home to Finance ranking Republican Sen. Charles Grassley — and the gasoline additive has always enjoyed backing from a powerful Midwestern congressional lobby.

“Tax policies that create jobs in green industries like domestic ethanol have bipartisan support, and we are confident that Congress will see this through to the finish,” said Chris Thorne, a spokesman for the pro-ethanol group Growth Energy.

But a broad batch of critics of the continued subsidy say nothing should be paid out to an industry that has already enjoyed three decades of help.

A coalition including Friends of the Earth, the Tea Party-supporting FreedomWorks and food industry groups sent a letter Monday to Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) urging them to let the ethanol tax breaks expire.

“At a time of spiraling deficits, we do not believe Congress should continue subsidizing gasoline refiners for something that they are already required to do” by Congress, the letter stated. The groups are referring to a renewable-fuels production mandate that mainly benefits ethanol.

Green groups have long contended that ethanol worsens air quality. Gore — who once favored tax incentives for the gasoline additive — recently reversed course, telling a green energy conference in Athens, Greece, last month that he had done so only to help farmers in his home state of Tennessee and key presidential caucus states such as Iowa. “It is not good policy to have these massive subsidies for first-generation ethanol,” Gore said at the conference, as quoted by Reuters

Food and farm groups worry about the effect ethanol production has on livestock and corn prices and have also opposed expanding its use.

The four main ethanol trade groups — American Coalition for Ethanol, Growth Energy, Renewable Fuels Association and the National Corn Growers Association — banded together an at-times fractious industry this fall to draw up a draft blueprint offering a long-term policy roadmap. This included a one-year extension of the expiring 45-cent volumetric excise ethanol tax credit for ethanol “at the highest level possible” for another year.

The plan calls for transitioning to a new four-year production tax credit essentially based on the greenhouse gases used to produce a gallon of fuel. For example, a facility that makes ethanol using biofuels would receive a bigger tax credit than an ethanol plant using fossil fuels. Those that employ new technology to reduce energy and water use could also receive a bigger credit.

Baucus also proposed extending other expiring energy tax incentives Thursday. These include an additional $2.5 billion for an advanced manufacturing tax credit in last year’s economic stimulus bill; tax credits for heavy hybrid vehicles, or those over 8,500 pounds, and natural gas vehicles; incentives to boost energy efficiency in new and existing homes and appliances, and for a host of alternative fuels, including biodiesel, biomass, natural gas and propane.