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Q & A: Tax Incentives for Ethanol


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Q. Do you still support tax incentives for ethanol?

A. I support ethanol. Among the renewable energy sources, ethanol is doing the most to displace foreign oil, and foreign oil comes with substantial hidden costs to taxpayers. Taxpayers are on the hook for an average of $84 billion a year in military expenditures just to keep open the transit routes that get the oil from there to here. America's dependence on foreign oil is a major national security issue. All together, America spends an estimated $1 billion a day on foreign oil. Imagine if that money were spent on domestically produced energy, including ethanol. Last year, 13 billion gallons of ethanol were produced in the United States. That's nearly 10 percent of America's transportation fuel needs. A lot of that was made in Iowa. It creates good-paying jobs. The tax incentive for ethanol encourages ethanol production in the United States. Not only has the tax incentive been a great success in spurring the production and use of corn-based ethanol, but it also has been the impetus for a new generation of ethanol made from other plants and plant waste, such as switch grass, corn stover, wood waste and other biomass. We've seen what ethanol can do, and the sky is the limit as we move to the next generation of advanced biofuels and cellulosic ethanol. Even so, there are efforts in Congress to end the ethanol tax incentive immediately and entirely. With gas prices at record highs and the unemployment rate at 9.1 percent, that doesn't make any sense. Eliminating the tax incentive without any transition time would lead to higher prices at the pump for consumers, increased dependence on foreign oil, and cost jobs in ethanol production.

Q. What's the reason for the ethanol bill you introduced in May?

A. I introduced a bipartisan bill with Senator Kent Conrad of North Dakota to make gradual reductions in the tax incentives for ethanol from corn. Our legislation is supported by the National Corn Growers Association, the American Coalition for Ethanol, Growth Energy, the Renewable Fuels Association, and the Advanced Ethanol Council. We proposed it as a responsible way for tax policies for ethanol to evolve. It's a first step to reducing and redirecting federal tax incentives for first generation ethanol. The Domestic Energy Promotion Act, or S. 884, would extend, through 2016, the cellulosic producers' tax credit and the volumetric ethanol excise tax credit, or VEETC. Under this extension, VEETC, also known as the blenders' credit, would be reduced from 45 cents to a fixed rate of 20 cents in 2012 and 15 cents in 2013, then convert to a variable tax incentive based on the price of crude oil for 2014 through 2016. Also extended through 2016 under this bill is the alternative fuel refueling property credit, which is offered to fueling station owners who install equipment for the distribution of alternative fuels. Establishing alternative fuel infrastructure would give consumers choice, and I know when they have one, they'll chose domestic, clean, affordable, and renewable fuel. Finally, the bill would extend the ethanol import tariff, stepping it down to 20 cents for 2012, and 15 cents for 2013 through 2016.

I've argued this year that it's not fair or logical for Congress to debate changes to the tax incentive for ethanol in a vacuum. Biofuels is not the only form of energy that receives incentives or supportive policies from the federal government. In fact, there are oil and gas incentives that have been permanent tax law for nearly 100 years. Ethanol incentives have always been temporary and subject to renewal, or not. Today, only the ethanol industry has stepped forward in the current energy and budget debates to back a forward-looking proposal for its industry, like the Grassley-Conrad proposal. I've challenged other sectors to be as forward-looking and responsible. And I've challenged Congress to make any changes to energy tax incentives as part of a comprehensive review of all energy tax incentives. I will continue to work for legislation that encourages the creation and use of domestic, renewable energy and do everything I can to educate members of Congress and the public about ethanol and the biofuels industry. Domestically produced renewable energy sources provide an effective way to reduce U.S. dependence on oil from the Middle East and increase national security, along with creating jobs for American workers.

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