By TIM THORNBERRY
Kentucky Correspondent

WASHINGTON, D.C. — The ethanol tax credit saga continued last week as competing bills were introduced in the U.S. Senate to address the matter – at issue is the “blender’s credit,” which provides a tax credit of 45 cents per gallon for blenders and marketers of fuel blended with ethanol.

Under the Energy Independence and Security Act (EISA) of 2007, the volume of renewable fuel required to be blended into transportation fuel would increase to 36 billion gallons by 2022. Proponents say the tax credit or something similar is necessary to provide stability to the market and investors.

Opponents say it is expensive and has caused the price of other commodities such as meat to increase in price because of the extensive use of corn in ethanol production. Last year, Congress agreed to extend the Volumetric Ethanol Excise Tax Credit (VEETC) – but only for one year. Last week, a bill was introduced to end the credit and the tariff on imported ethanol by June 30, 2011.

End it now

The Ethanol Subsidy and Tariff Repeal Act, introduced by U.S. Sens. Tom Coburn (R-Okla.) and Dianne Feinstein (D-Calif.) would “end 30 years and more than $30 billion of taxpayer support for the corn-based ethanol industry and would finally level the playing field for all commodities relying on corn as a major input,” according to information from the National Cattlemen’s Beef Assoc. (NCBA).

“NCBA supports the development of renewable and alternative fuels and we know ethanol plays a role in reducing our dependence on foreign oil. However, we don’t support forcing taxpayers to prop up an industry that should be able to stand on its own two feet,” said Bill Donald, president of the organization and a cattleman from Melville, Mont.

“Senators Coburn and Feinstein should be commended for their leadership on this issue and for introducing this common sense legislation that will not only level the playing field for a bushel of corn, but will also save taxpayers more than $6 billion annually.”

Coburn said the ethanol subsidy and tariff is bad economic policy, bad energy policy and bad environmental policy.

“As our nation faces a crushing debt burden, rising gas prices and the prospect of serious inflation, continuing our parochial ethanol policy that increases the cost of energy and food is irresponsible. I’m pleased to introduce this common sense bill with Senator Feinstein and will push for its consideration at the earliest opportunity,” he said, noting the bill has been filed as an amendment (No. 309) to the small business bill pending in the Senate.

Lower it gradually

In the same week – in fact, the next day – Sens. Chuck Grassley (R-Iowa) and Kent Conrad (D-N.D.), along with a number of their colleagues, introduced the Domestic Energy Promotion Act of 2011 which would instead alter the tax credit over a period of time. In his floor speech, Grassley explained some of the particulars about the bill, calling it a serious, responsible first step to reducing and redirecting federal tax incentives for biofuel.

“This legislation will reduce VEETC to a fixed rate of 20 cents in 2012, and 15 cents in 2013. It will then convert to a variable tax incentive for the remaining three years, based on the price of crude oil,” he said.

“When crude oil is more than $90 a barrel, there will be no blenders’ credit. When crude oil is $50 and below, the blenders’ credit will be 30 cents. The rate will vary when the price of crude is between $50 and $90 a barrel. When oil prices are high, a natural incentive should exist in the market to drive ethanol use.”

A host of supporting organizations, including the National Corn Growers Assoc. and the American Coalition for Ethanol, issued a statement following the introduction of the Grassley-Conrad bill.

“The leadership of Senator Grassley and this distinguished bipartisan group of cosponsors has been and remains instrumental in allowing America’s ethanol industry to grow and evolve,” it said. “At a time of near-record gas prices and continued volatility in world oil markets, America’s growing production and reliance of domestic ethanol sources is creating jobs, keeping gasoline prices down and reducing this nation’s appetite for imported oil.

“The Domestic Energy Promotion Act of 2011 would ensure we don’t abandon this increasingly vital American industry, but rather smartly and responsibly foster its continued growth and evolution.”

Coburn and Sen. Ben Cardin (D-Md.) introduced similar legislation last March that would eliminate the VEETC. Poultry and livestock organizations generally oppose tax credits for ethanol and say the use of corn for a biofuel has pushed up the price and caused them to incur more input costs. By some estimates, 40 percent of the nation’s corn crop could go to the ethanol industry.
Corn growers say they can produce all that is needed. That may be more difficult this year, as corn supplies are low and many cornfields in the middle of the country are under water right now from extensive flooding along the Mississippi and Ohio rivers.

Producers have their backs against the wall as planting dates to achieve optimum yields are about to pass.