Time is Short for Passage of Ethanol Compromise

The Thune-Klobachar bill is looking for a legislative vehicle.

Published on: Jul 27, 2011

A Senate deal to end the ethanol blenders tax credit this month may now be off any debt ceiling bill the House and Senate are taking up this week.

Many in the ethanol industry see the $2 billion compromise as a way to transition away from the Volumetric Ethanol Excise Tax Credit before it expires at the end of the year. But Renewable Fuels Association spokesman Matt Hartwig says getting that done as part of House or Senate bills to raise the debt ceiling may no longer be possible.

"If nobody is willing to raise revenues in any way, shape or form, then it makes inclusion, or prospects of inclusion of this provision in a final bill, dim," Hartwig said.

The deal replaces the nearly $6 billion a year ethanol subsidy and tariff on imported ethanol with a consolation $668 million in continued tax breaks for cellulosic ethanol and blender pumps, plus $1.3 billion in deficit reduction.

But disallowing tax measures in the debt bill, or the unthinkable of not passing a debt bill, would force ethanol deal negotiators to find another bill to hitch onto.

"They certainly could look to other bills like the Federal Aviation Administration reauthorization bill and a couple of other," Hartwig said. "But I think after the debt deal people will sit down and take yet another look at it. If it is not included nothing changes in terms of the way the industry operates, the existing tax credit is still on the books and in place until the end of this calendar year."

Without any ethanol reform deal, Hartwig says the blenders credit gets axed anyway when it expires with nothing to replace it.

"After the debt deal is over, if the ethanol provision is not included then we'll have sit down and reevaluate that," Hartwig said. "I would add that the industry has been in positions like this before, where we've been in the eleventh hour only to see cooler heads prevail, and an extension or the inclusion of ethanol policy changes and provisions."

And while an ethanol deal is still possible, Hartwig says removing the 45-cent per gallon tax credit will still mean higher taxes - four-and-a-half cents on a gallon of 10% ethanol-blended gasoline.