Vilsack calls for 'fiscally responsible' ethanol tax credit extension

Agriculture Secretary Tom Vilsack is pressing Congress to approve a “fiscally responsible short-term extension” of a key ethanol tax credit.
 
Vilsack said lawmakers need to extend an excise tax credit for ethanol before it expires at the end of the year and also need to reinstate a tax break for biodiesel production.
 
The agriculture secretary pointed to job losses in the biodiesel industry to make the case for the extension of the ethanol credit. He said 12,000 positions have been lost since a $1-per-gallon biodiesel tax credit expired at the end of 2009.
 
“We’ve already seen what happens when incentives are ended too quickly,” Vilsack said after a speech at the National Press Club.

“These are jobs we simply cannot afford to lose,” he added.
 
Leaders of the Senate Finance Committee have sought to at least grant a retroactive extension of the biodiesel credit through the end of the year as part of the larger “tax extenders” package.
 
Vilsack was unable to map out what a fiscally responsible extension of the ethanol excise tax credit would look like.
 
“We have to recognize the reality where we are confronting a fiscal situation in this country that demands us to rethink a lot of what we do and for how long we do it,” he said. “What I want the message for today to be is: I think it would be premature to end this support for the industry.”
 
The House Ways and Means Committee has suggested giving a one-year extension of the current 45-cent-per-gallon volumetric ethanol excise tax credit but lowering it to 36 cents.

The ethanol industry has asked for a short-term extension of the tax credit as part of a broader strategy the industry views as vital for its long-term survival.
 
Part of that draft industry strategy includes transitioning to a new four-year production tax credit that would be based on the greenhouse-gas emissions needed to produce biofuels-blended gasoline. 
The credit would be available only to domestic producers, eliminating the need for the current import tariff on ethanol. Under a draft policy blueprint from the four main ethanol industry groups, the tariff would be reduced from the current rate of 54 cents per gallon to 36 cents before being eliminated outright in 2012.
 
Vilsack said the ethanol groups offered up a “positive set of suggestions” but also said others might also have ideas as part of a “healthy debate” on the topic. He said a short-term extension of the ethanol excise tax credit is needed “for a brief period of time to allow that conversation” to occur.
 
Vilsack gave little clarity on the future of the ethanol import tariff, merely noting that “it’s safe to say the tariff is likely to continue, but over time it’s going to be phased out, and I think we’re going to have to be ready for that day."
 
The Agriculture secretary used a 19-minute speech Thursday at the National Press Club to roll out several new Obama administration initiatives intended to boost biofuels production, including a plan to provide matching federal funds for 10,000 pumps and storage systems that can handle higher amounts of biofuels blended in gasoline over the next five years.
 
The department is also setting up five biomass research centers around the country that ideally would lead to new biorefineries, Vilsack said.
 
He did not have a price tag for the new federal initiatives, but saidfunding for the department that has already appropriated and authorized would pay for it.
 
Environmental, public health, taxpayers and other groups attacked continued federal subsidies for the ethanol industry. The groups view ethanol as environmentally detrimental and argue the industry is mature enough to take care of itself.
 
Protesters from Friends of the Earth dressed as “Billionaires for Biofuels” camped outside the National Press Club to argue against further federal help. “Thank you for our tax subsidy” one protester called out.