House legislation calls for extension of VEETC

By Holly Jessen
Posted March 25, 2010, at 5:01 p.m. CST

Reps. Earl Pomeroy, D-N.D., and John Shimkus, R-Ill., held a press conference March 25 announcing legislation to extend ethanol tax credits and the ethanol tariff. The bipartisan bill has 27 co-sponsors and, if passed, would extend the Volumetric Ethanol Excise Tax Credit and the tariff on imported ethanol through 2015. It would also extend the Cellulosic Ethanol Production Tax Credit and the Small Ethanol Producers Tax Credit until Jan. 1, 2016.

"At a time when our economy is struggling, we cannot afford to let these tax incentives expire and stymie the growth we have seen in our ethanol industry," Pomeroy said. "This is a bipartisan bill that will promote not only economic growth, but also the transformation of our energy industry from one that is reliant on foreign oil to one that is based on energy that's grown in farm fields in the heartland of America."

"Extending the ethanol and cellulosic tax credits helps give much-needed certainty to the industry," Shimkus said, "and will continue to help our nation's energy security."

Growth Energy, Renewable Fuels Association, American Coalition for Ethanol and National Corn Growers Association quickly responded in support of the proposed legislation. Recent studies from the University of Missouri and one commissioned by RFA both pointed to lost jobs and a decline in ethanol production if VEETC were not extended.

Growth Energy pointed out that if the ethanol tax credit were eliminated, it would raise taxes on motorists who currently benefit from lower fuel prices thanks to VEETC. Tom Buis, CEO, said a Growth Energy-commissioned study shows taxpayers get a $19.2 billion annual return from VEETC. "Extension of these measures is a surefire way to create jobs, improve our nation's environment and strengthen our national security," he said. "If we let the tariff expire, it would drain both hundreds of thousands of jobs and billions of dollars right out of our economy."

As RFA has said before, the renewable fuels standard mandates the use of ethanol-but not that the ethanol be domestically produced. Extending the tax incentives and tariff helps insure that ethanol comes from both grain-based and cellulosic ethanol from domestic sources. "Allowing the tax incentives for ethanol to expire is simply not an option," said RFA President Bob Dinneen. "Failure to extend these incentives would force 112,000 Americans out of their jobs and shutter nearly two out of every five ethanol plants operating today. Long-term extensions of these important incentives are good policy that encourages investment in current and next generation ethanol technologies."

ACE said 30 members participated in the organization's second annual DC fly-in earlier in the week. While there, they met with more than 60 members of Congress and their staff, asking, among other things, that VEETC be extended. "In today's economy, the focus must be on creating jobs, and extending the federal ethanol tax credit will not only save thousands of American jobs, but it will allow new American jobs to be created as U.S. ethanol production and use continues to expand," said Brian Jennings, executive vice president of ACE.

NCGA President Darrin Ihnen expressed the organization's approval to the work of Pomeroy and Shimkus. "The extension of VEETC would contribute to energy independence, create and secure thousands of jobs in rural America and allow for a stronger agriculture sector," the grower from Hurley, S.D., said.

Of course, not everybody was happy with the proposed legislation. The Brazilian Sugarcane Industry Association (UNICA) sent out a press release even before the press conference started. The group pointed out that the U.S. EPA and California Air Resources Board have recognized Brazilian ethanol made from sugarcane as an advanced, low-carbon fuel. It could help save money and cut America's dependence on Middle East oil. "However, Americans will not fully benefit from this clean, more affordable alternative if Congress continues to erect trade barriers against imported ethanol," said Joel Velasco, UNICA's chief representative in North America. "It is ironic that Congress allows oil from nations hostile to America into the country tariff-free, but is more than willing to punish clean energy from Brazil, a long-standing democratic ally."

A Senate companion bill is expected soon.