Extension of Cellulosic Tax Credit and Allowance Sought

Cellulosic ethanol hasn't developed at a rate that will allow it to be competitive at this point.

Published on: Dec 16, 2011

The Advanced Ethanol Council, representing advanced and cellulosic ethanol producers, is pressing for the extension of the Cellulosic Biofuels Producer Tax Credit and the Special Depreciation Allowance for Cellulosic Biofuel Plant Property. These incentives are set to expire December 31, 2012.

When Congress passed the renewable fuels standard in 2006, a goal was set to produce 36 billion gallons of domestic renewable fuels by 2022. Ethanol from corn was to provide 15 billion gallons with cellulosic ethanol and other renewable fuels to provide the remainder. While it is estimated that the U.S. will produce 14 billion gallons of ethanol this year, cellulosic ethanol has yet to get off the ground.
In a letter to Congressional leaders, AEC Executive Director Brooke Coleman called these tax incentives vital to the ongoing development of the domestic advanced ethanol industry. AEC would like to see an extension of five years or more.

"The advanced and cellulosic biofuels industry is now in the process of building new plants, innovating existing production facilities with emerging technologies, and introducing new product streams that will allow the renewable fuels sector to become more profitable, diversified and efficient," Coleman wrote.

According to Coleman, a tax increase on advanced biofuels at this time would curtail investment and undercut an industry just starting to close deals and break ground on first commercial plants.

AEC thinks timing of the extension is important. Coleman says the mere prospect of the expiration of the PTC and Special Depreciation Allowance for cellulosic biofuels in 2012 will start to affect projects that take 18 months to build, and could drive our industry into a series of 'fits and starts' that has dampened investment in other domestic clean energy sectors for decades.

Steve Sorum, ethanol project manager for the Nebraska Ethanol Board, said if the tax incentive for cellulosic ethanol expires at the end of the month, it has the potential to stop alternative ethanol production in its tracks.