US ethanol group proposes swapping subsidy for infrastructure

15 July 2010 17:31  [Source: ICIS news]

HOUSTON (ICIS news)--The US should shift public financial support for ethanol producers into the infrastructure that would allow the biofuel to compete with gasoline, industry group Growth Energy proposed on Thursday.

"Our problem is the infrastructure barriers," Growth Energy CEO Tom Buis said. "Oil is a 90% monopoly...and we need to break the monopoly."

The policy suggestion breaks away from the approach of other industry proponents such as the Renewable Fuels Association (RFA), which has focused on simply winning a renewal of the 45 cents/gal subsidy that expires at the end of the year.

Those groups immediately reiterated that a long-term renewal of the existing subsidy was critical.

Growth Energy officials acknowledged during a conference call with reporters that new ideas need to be put forward as the US Congress contemplated tackling a fresh set of energy laws, with plenty of anti-ethanol sentiment already being expressed.

A shift in public support toward infrastructure would ideally take place over a five-year period, after which there would be no more subsidy, Buis said.

One target for the infrastructure investment would be 200,000 blender pumps for service stations, Buis said. That would allow the expanded use of the 85% ethanol blend called E85 that can be used in flex-fuel vehicles (FFVs).

While most US gasoline markets now include the 10% E10 blend, availability at of E85 is largely restricted to the corn-growing midwest where the ethanol industry is based.

Service station operators elsewhere were reluctant to invest in blender pumps without greater demand, while motorists were reluctant to switch to FFVs without a ready supply of E85.

Buis said government policy should aim to get 120m FFVs on US roads, but did not suggest a possible timeframe. There should also be loan guarantees to get ethanol pipeline projects off the ground, he said.

The US had a "rich history" of government support for infrastructure investment, Buis said, citing railroads, canals, locks, dams, ports, and the electricity grid.

He said the US should follow the example of Brazil, where government policy created the conditions for ethanol's deep penetration into the transport fuel market.

In a joint statement, other ethanol groups distanced themselves from the idea that the subsidy could be allowed to fade away, and said that there was not enough time left on the legislative calendar to focus on anything but a five-year renewal.

The RFA, the American Coalition for Ethanol, the National Corn Growers Association, and the National Sorghum Producers reaffirmed their support legislation that would extend current ethanol tax incentives through 2015.

"Now is not the time to add uncertainty and complexity to the energy tax debate," RFA president Bob Dinneen said in the statement.

In June, Dinneen had called for unity within the industry, saying that ethanol's opponents would be encouraged by mixed messages.

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By: Stephen Burns
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