US ethanol mandate matters more than subsidy – producers

22 February 2011 02:13  [Source: ICIS news]

PHOENIX, Arizona (ICIS)--US ethanol mandates are more important for the industry than tax credits, ethanol makers said on Monday, downplaying concerns that the US may pull the plug on ethanol subsidies at the end of the year.

In December 2010, the US extended subsidies for the ethanol industry, including a 45 cent/gal credit given to fuel blenders to mix ethanol in gasoline and a 54 cent/gal tariff levied on imported ethanol.

The tariff and the blender credit will expire at the end of 2011 unless Congress renews them, but a key US ethanol group is predicting the US industry is unlikely to get another extension.

“An expiration of the tax incentive is a very real possibility,” said Renewable Fuels Association (RFA) president and CEO Bob Dinneen at the opening of the National Ethanol Conference in Phoenix.

Congress appears ready to end the ethanol tax incentive programme in its current form and cost, Dinneen told delegates.

While ending government support could significantly cripple the sector according to some estimates, a US ethanol producer said the industry would survive if mandates for renewable fuels remained in place.

As long as the mandates were there, ethanol demand would exist, the producer said on the sidelines of the conference.

The US requires gasoline to contain 10% of ethanol, a number that could jump to 15% for vehicles produced after 2001, according to a recent ruling by the Environmental Protection Agency (EPA).

The higher blends have drawn fire from ethanol critics, who claim increased levels of ethanol in gasoline could damage vehicle engines and have a negative impact on performance.

Another producer said inconsistent state legislation on ethanol was also more worrisome for the industry than an end to federal subsidies.

That includes state rules that could supersede federal mandates, the producer said, citing a rule in some US states that would not require ethanol to be blended in gasoline if the biofuel costs the same as gasoline.

“This is what keeps me up at night,” the producer added.

The US produced 13bn gal (49bn litres) of ethanol in 2010, according to data from the RFA, which estimates US gasoline consumption at 147bn gal/year.

Federal mandates will require that 36bn gal/year of renewable fuels be used in the US by 2022.

The 16th National Ethanol Conference opened on Monday. The event, which is organised by the RFA, will close on Tuesday.

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By: William Lemos
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