Iowa Public Television


Senators Grassley and Conrad Introduce Plan to Extend Ethanol Tax Credits

posted on May 5, 2011

Hello, I'm Mark Pearson. Business owners are being faced with a conundrum of chicken and egg proportions – whether or not to hire new employees. In many cases, there is just a little more work to be done than there are people employed to do it.

In response to the dilemma, private employers continued a three-month trend by adding more jobs.

But despite the positive news, the Labor Department reported the unemployment rate was up to 9 percent last month but only because there were more people looking for work.

Reflected in the job surge is an increase in U.S. factory orders – which continues a five month upward trend as well.

While raw materials orders are up and the number of new employees is on the rise, USDA analysts are predicting the price of food will increase this year.

And in the wake of Osama bin Laden being killed in Pakistan oil prices moved lower. But analysts believe a strong dollar, a reduction in consumer demand and a general liquidation of commodities played a larger role in the decline.

Oil prices hovering near $100 are a market factor that puts alternative fuels like ethanol in a better light. One of many ways the alternative fuel gained a foothold in the marketplace was through subsidies like the Volumetric Excise Tax Credit -- more commonly known as the "Blenders Credit." At 45 cents per gallon the incentive has been instrumental in helping the industry grow.

There is a faction who believe ethanol has reduced the price of gas by nearly a dollar while there are those who believe the industry no longer needs any help. Even so, some lawmakers aren't quite ready to throw in the towel.


Senators Grassley and Conrad Introduce Plan to Extend Ethanol Tax Credits

Seeking to extend ethanol production tax credits, Senators Charles Grassley and Kent Conrad introduced a new spin on biofuels legislation this week. The Iowa Republican and North Dakota Democrat hope to continue current incentives but at decreasing financial levels with a future sunset planned for 2016.

The bill, known as the Domestic Energy Promotion Act of 2011, cuts the blender's tax credit from 45 cents per gallon to 20 cents in 2012 and then further reduces it to 15 cents in 2013. For the next three years, the credit would be tied to the cost of oil with a cap of 30 cents when oil drops below 50 dollars per barrel AND no credit for ethanol producers when oil crests higher than 90 dollars per barrel.

Bite from Grassley:

The bill would extend property tax credits for service stations owners who install ethanol blender pumps. And the legislation calls for the continuation of incentives for cellulosic biofuel production.

If adopted, the measure would also extend the American import tariff on foreign ethanol through 2016. Currently, foreign producers are slapped with a 54 cent tariff. Under the proposal, the tariff would drop to 20 cents in 2012 and 15 cents from 2013 through 2016.

Ethanol industry trade groups and corn growers support the legislation but it could face opposition from livestock producers, grocery associations and environmentalists who want to end all tax incentives for corn-based ethanol.


Tags: biofuels Congress ethanol government news renewable fuels