US ethanol subsidies fit election mandate for more jobs - group

03 November 2010 16:49  [Source: ICIS news]

HOUSTON (ICIS)--The results of US mid-term elections underscore the importance of Congress extending subsidies for bio-ethanol, the president and CEO of the Renewable Fuels Association (RFA) said on Wednesday.

“The industrial midwest and rural America – places where ethanol plants are located – are among the most frustrated with Washington,” said RFA chief executive Bob Dinneen.

“What is clear to me is that this election was about the economy and jobs,” he added. “Can Congress risk failing to extend the ethanol tax incentive and lose even more jobs?”

Dinneen spoke on a conference call regarding Tuesday's elections - in which Republicans made significant gains - and their impact on the ethanol industry.

Earlier this year, the key House tax-writing committee proposed a 20% cut in the federal tax credit for corn-based ethanol, reducing the subsidy to 36 cents/gal for 2011.

But the proposed bill has yet to be acted on, and the 2010 version expires on 31 December. Private studies have suggested that Congress may sharply reduce or eliminate the subsidies amid growing worries about budget deficits and the national debt.

Also due to lapse on 31 December is the 54 cents/gal tariff on imported bio-ethanol, which has for years protected US producers from competing with Brazil’s sugarcane-based ethanol.

Dinneen, however, said the net impact of ethanol on the government is a positive one because of reduced dependence on foreign oil.

“I don’t think Tea Party members necessarily want us exporting jobs or our energy security any more than anyone else,” Dinneen said. “Ethanol is not a partisan issue. This will be an education effort we have to engage in.”

Dinneen characterised the process as an uphill battle, and warned that ethanol plants would shut down and discretionary ethanol blending would stop almost immediately if the credit was not extended.

“Allowing the tax incentive to expire would risk jobs in a very important domestic energy sector and across rural America,” Dinneen said. “It would halt and reverse investments in clean energy technology.”

The RFA president also said future Congressional debates should address a tax policy for all fuels, including petroleum.

The ethanol industry, and the domestic biofuel industry as a whole, ought not be asked to unilaterally disarm while extensive government support continues for petroleum companies,” Dinneen said.

Refiners have long opposed the federal mandate for more biofuels consumption, arguing that the marketplace should be allowed to choose energy fuels based on efficiency and economy.

The current Congress is scheduled to reconvene this month for what is known as a lame-duck session, so named because many sitting members were defeated in the polls and will be out of office on 1 January.

Many analysts have said such a session could struggle to pass unpopular tax measures, leading some to speculate that ethanol incentives may lapse at year end.

Additional reporting by Joe Kamalick in Washington

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By: Ben DuBose
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