US ethanol subsidy regime may be amended, but funding likely to remain

Date: Feb 21, 2011
Renewable Fuels Association's annual conference, Phoenix, Arizona

End-2011 US ethanol credit expiry is 'very real possibility': RFA

End-2011 expiry of the US ethanol tax credit "is a very real possibility," said Bob Dinneen, president and CEO of the Renewable Fuels Association, at the group's annual conference in Phoenix, Arizona Monday.

"Congress does appear ready to end the ethanol tax incentive program...At least, end it in its current form and cost," said Dinneen in remarks prepared for delivery early Monday to kick-off the two-day event.

The $0.45/gal ethanol tax credit, known as the volumetric ethanol excise tax credit, was extended at the end of 2010 for one year.

Dinneen listed several proposals being discussed to "reform" the tax credit.

"There are those who believe a refundable producer tax incentive will be more politically viable than a market-based incentive," he said, adding there are also proposals to "limit the incentive only to gallons above the RFS [ Renewable Fuels Standard] obligations, or make it available to only mid-level ethanol blends and E85."

.....Meanwhile, there are "competing proposals" on how to boost investment in cellulose and advanced ethanol technology, said Dinneen, including "a refundable investment tax credit" and "a more aggressive Apollo-like government grant program to get plants built."

"The industry needs to rally around a specific proposal soon, or existing policy will be the default and investment may continue to languish," he said, adding that RFA's newly formed Advanced Ethanol Council will provide a voice on those issues.

Dinneen of the RFA said the US leads the world in ethanol production with 204 biorefineries in 29 states that produced more than 13 billion gallons of ethanol in 2010.

"We are no longer biting at the ankles of the petroleum industry. We are now one-tenth of the nation's gasoline supply and we are growing," he said.

Exports became a big part of the US ethanol industry last year, with a record 350 million gallons sent "to Europe, Canada, and Asia as well as, surprisingly, Brazil, the United Arab Emirates and Saudi Arabia," said Dinneen.

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