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Short-Term Ethanol Tax Extension is Only Hope

The ethanol industry won't get the long-term tax extension it's been looking for and may not even get the same size credit that soon expires when Congress returns after Thanksgiving.

Matt Hartwig with the Renewable Fuels Association says all the tax extensions likely to pass after the holiday are short-term.

"I think we're looking at a one or two year extension, maybe the Bush tax cuts and some of those things," Hartwig said. "In that discussion I think there is an opportunity to extend some of the critical tax incentives for biofuels. The biodiesel tax incentive needs to be extended and the ethanol tax incentive needs to be extended. In that debate and in that context I think you are probably looking at a year or two."

RFA and other ethanol groups favor a long-term extension of the ethanol tax credit, which is called for in pending House and Senate bills. But Hartwig says the political reality doesn't favor that. In fact he says it may mean a reduction of the 45 cent per gallon credit.

Hartwig says the pressure to modify the credit is coming largely from deficit hawks, many who still want the industry to grow, but in a fiscally responsible way. A one or two year extension still allows time to have the larger debate over how to restructure energy policy.

"We believe that there are ways that you can responsibly reform the tax incentives for ethanol, for petroleum, for all energy," Hartwig said. "And do it in a manner that is sensitive to fiscal concerns but at the same time allows the industry to continue to grow because they are of the industries that are going to provide the economic boost and recovery that the nation so desperately needs."

Former Senate Agriculture Chair Tom Harkin, D-Iowa, argued recently that the ethanol credit may cost nearly $6 billion a year but saves consumers $24 billion and will create some 400,000 new jobs.