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Ethanol Compromise Unlikely to be Salvaged

AFBF doesn't see deal happening before biofuels tax break expires at year's end.

Published on: Aug 18, 2011

American Farm Bureau Federation tax adviser Pat Wolff says it's just getting too late in the year to realize significant savings from a Senate deal to end the Volumetric Ethanol Excise Tax Credit, known as "VEETC." Those savings would go to extend cellulosic credits, for blender pumps and deficit reduction, but the new deficit super committee won't act until late in the year.

"To cancel VEETC on Dec. 23 doesn't really save any money," Wolff said. "There is only one week of it left anyway, therefore there is no money to spend for other programs that would promote the use of ethanol." 

Biodiesel credits also expire at the end of this year and like VEETC, failed to make it into the deal this month to raise the nation's debt ceiling, leaving few alternatives.

"Congress left at the beginning of August after their vote on the deficit in complete shambles," Wolff said. "So there is no clear path for the fall; we really don't know whether there will be a tax bill moving or not. There isn't one now and there is no prediction of one." 

The National Biodiesel Board is urging policy makers to look at what the biodiesel tax credit has been able to do. The reinstatement by Congress of the biodiesel tax incentive this year now has the biodiesel industry on track to produce at least 800 million gallons this year, more than double the biodiesel production of 315 million gallons last year. According to a recent economic study, this year's rejuvenated production will support more than 31,000 U.S. jobs and generate income of nearly $1.7 billion. It also is expected to generate an estimated $345 million in federal tax revenue and $283 million in state and local tax revenue.

There's also no predicting yet, how much influence the agriculture committees will have over agriculture deficit cuts; whether they'll get a number, or recommend one. Though Wolff expects they'll try to play some role in shaping their part of the pie.

"Agriculture will argue that they've already contributed to deficit reduction," Wolff said. "Therefore they shouldn't be asked to contribute as much this time around, but there is no credit for things that happened in the past, no official credits."

The super committee, charged with coming up with at least $1.2 trillion in deficit cuts over ten years meets in early September, when Wolff says the process should become clearer.