NSAC's Blog

Cellulosic Ethanol Drops in Renewable Fuel Standard / Dueling Letters on Corn Ethanol Tax Break

December 3, 2010

This week, the Environmental Protection Agency (EPA) posted an updated Renewable Fuel Standard (RFS2) for 2011 with a low number for cellulosic biofuel — 6.6 million gallons (the equivalent of 6.0 million gallons of ethanol).  The RFS2 sets the level for the amount of various biofuel categories that are to be blended into U.S. gasoline in 2011.

The 2007 Energy Independence and Security Act set a goal for 2011 that included 250 million gallons of cellulosic biofuels, but EPA determined that volume was unrealistically high in light of current cellulosic energy production.  In July, EPA had dropped the estimated amount of cellulosic ethanol from 250 million gallons to a range of 5 million to 17.1 million gallons.

Also this week, the debate heated up on whether to renew a 45 cent per gallon Volumetric Ethanol Excise Tax Credit (VEETC) for ethanol.  The tax credit is provided to refiners that blend ethanol into gasoline.  It is scheduled to expire at the end of the year if not renewed by Congress.

U.S. production of ethanol is estimated to be about 13 billion gallons in 2010.  About 36 percent of the U.S. corn crop is expected to go to ethanol production in 2010-2011.  Through September 2010, the volume of US corn ethanol exports doubled to an all time high of 251 million gallons, which is about 3% of total production.

On Monday, a diverse group of business associations, hunger and development organizations, taxpayer advocates, agricultural trade groups, religious organizations, environmental groups, budget hawks, and public interest organizations delivered a letter to Congressional leaders urging that the VEETC not be renewed.  The letter stated that the VEETC subsidy for gasoline refiners rewards them for the same action mandated by the Renewable Fuel Standards and that in light of the large federal deficit, the VEETC should not be renewed.

On Tuesday, a bipartisan group of 17 Senators sent a letter to Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell also calling for the end to the VEETC.  Their letter also stated that the VEETC subsidized blending of ethanol mandated by the RFS.  The letter also called for the end of a 54 cent per gallon tariff on imported ethanol.

Also on Tuesday, another bipartisan group of 16 Senators from farm states sent a letter to Senators Reid and McConnell calling for renewal of the VEETC.  They contended that the VEETC lowers U.S. dependence on foreign petroleum and that its production supports U.S. jobs.

On Friday, Senate Finance Chairman Max Baucus (D-MT) introduced a bill, The Middle Class Tax Cut Act of 2010, that includes an extension of the VEETC through 2011 at a lowered rate of 36 cents per gallon, as well as extension of the current tariff on imported ethanol.

The White House went on the record in October with its support for extending the VEETC.  In addition, Growth Energy, a major pro-ethanol advocate, called for using some of the VEETC funding for ethanol infrastructure including blended fuel pumps at gas stations and pipelines that can carry ethanol.

Categories: Conservation, Energy & Environment

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