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Published April 26, 2010, 01:01 PM

Bill would extend ethanol tax credits, tariff

WASHINGTON — A bill to extend the ethanol tax credits and the ethanol tariff introduced April 20 by Senate Budget Committee Chairman Kent Conrad, D-N.D., and Senate Finance Committee ranking member Charles Grassley, R-Iowa, prompted praise from U.S. ethanol producers and critical analysis from the Brazilian Sugarcane Industry Association, which goes by the acronym UNICA.

By: Jerry Hagstrom, Special to Agweek

WASHINGTON — A bill to extend the ethanol tax credits and the ethanol tariff introduced April 20 by Senate Budget Committee Chairman Kent Conrad, D-N.D., and Senate Finance Committee ranking member Charles Grassley, R-Iowa, prompted praise from U.S. ethanol producers and critical analysis from the Brazilian Sugarcane Industry Association, which goes by the acronym UNICA.

The bill extends the current 45-cents-per-gallon volumetric ethanol excise tax credit known as VEETC and the 10-cents-per-gallon small ethanol producers tax credit, which are set to expire at the end of this year, through the end of 2015. In addition, the bill extends through 2015 the $1.01-per-gallon cellulosic biofuel producer tax credit, which is set to expire Dec. 31, 2012. The bill also extends the tariff on imported ethanol, which is set to expire at the end of this year, through the end of 2015.

Grassley and Conrad said in a news release that extension of the tax credit is necessary because biofuels offer an alternative to foreign oil and generate economic activity in the United States.

The bill, which Conrad and Grassley are calling the Green Jobs bill, is cosponsored by Sens. John Thune, R-S.D., Ben Nelson, D-Neb., Mike Johanns, R-Neb., and Tim Johnson, D-S.D. A companion measure was introduced in the House in December by Reps. Earl Pomeroy, D-N.D., and John Shimkus, R-Ill.

Costly mistake?

Grassley said the lapse of the separate tax credit for biodiesel, which expired at the end of 2009, has cost 29,000 clean-energy jobs and put 23,000 more at risk.

“We can’t risk a repeat performance with ethanol, where 112,000 jobs are at stake,” he said.

Of the ethanol tariff, Grassley said, “the United States already provides generous duty-free access to imported ethanol under the Caribbean Basin Initiative, but the CBI cap has never once been fulfilled. In fact, last year, only 25 percent of it was even used by Brazil and other countries.”

Sen. Tom Harkin, D-Iowa, said he supported the Conrad-Grassley effort to extend the ethanol tax credits, but added “I do believe, however, that as part of this goal we must also extend the biodiesel tax credit.”

Renewable Fuels Association President Bob Dinneen said, “Tax incentives aiding the expansion of America’s ethanol industry are sound public policies by any economic, environmental or energy measure. Domestic ethanol use is lowering the price of gasoline, reducing imports of foreign oil and helping stabilize and reinvigorate rural economies all across the country.

UNICA response

But Joel Velasco, chief representative of UNICA in the United States, said that the tariff keeps Americans from participating in the benefits of Brazilian sugar cane-based ethanol.

“Sugarcane ethanol from Brazil is an advanced, low-carbon fuel that could help the United States cut dependence on Middle East oil, save money at the pump and improve the environment as both the U.S Environmental Protection Agency and the California Air Resources Board have recognized,” Velasco said. “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.”

Noting that Brazil has eliminated its tariff on imported ethanol, Velasco said UNICA is asking the Brazilian government to make the tariff elimination permanent if Congress will do the same and drop the U.S. tax on imported ethanol.

But Tom Buis of Growth Energy, a major builder and operator of U.S. ethanol plants, said, “Removing the tariff will do nothing to reduce our dependence on foreign oil; all it will do is replace domestically produced ethanol and eliminate U.S. jobs. It would essentially replace our nation’s addiction to foreign oil with a dependence on foreign ethanol — and that is not in the best interests of our nation.”

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