RFA president says ethanol depends on blenders´ credit

Feb 19, 2010
by DTN

The ethanol industry could face the same difficulties hitting biodiesel producers if Congress doesn’t extend the 45-cent blenders’ tax credit by the end of 2010, the president of the Renewable Fuels Association (RFA) said last Tuesday.

“Nothing is more important in 2010 than extending the tax credit that has made this industry,” Bob Dinneen said during the RFA’s National Ethanol Conference.

The U.S. ethanol industry managed to survive an economic recession, a loss of credit, bankruptcies and challenges to its greenhouse gas emissions standing in 2009. But the industry may face its biggest challenge yet in 2010 when the blenders’ tax credit expires, Dineen said.

The 45-cent-per-gallon blenders’ tax credit is set to expire Dec. 31, 2010. Dinneen said the ethanol industry needs only to look at the recent experience of the U.S. biodiesel industry to see that nothing can be taken for granted.

A $1 tax credit for biodiesel producers expired Dec. 31, 2009. This led to widespread plant shutdowns.

Just last week, there was hope for renewing the credit in a proposed U.S. Senate jobs bill. However, the biodiesel tax credit was pulled from the bill.

The blenders’ credit for ethanol, Dinneen said, “must be extended. The future of advanced biofuels will depend on it.”

“The tax incentive saves the government money by saving on subsidies for farmers,” he said. “I am of the view that as the oil price increases, we need more investment in renewable energy.”

Dinneen said that while the state of the ethanol industry is strong, 2010 is full of potential potholes.

The industry received a boost from the new Renewable Fuel Standard (RFS) in recent weeks, he said. The new regulation grandfathers in existing corn ethanol plants under the new greenhouse gas emissions regulations. Those regulations penalize corn ethanol for international indirect land use change.

The new RFS creates a pathway for new corn ethanol plants to comply, while paving the way for the development of a cellulosic ethanol industry.

However, the industry is drawing close to the socalled blend wall, where ethanol production exceeds demand.

The industry is now producing about 10.6 billion gallons of ethanol per year. With an allowable blend level of 10 percent, the most the U.S. transportation fuel pool can handle is about 15 billion gallons.

“The market for these fuels needs clearer definition,” Dinneen said. “The blend wall is not a talking point. It demands response.”

The U.S. Environmental Protection Agency (EPA) this year is expected to rule on a request from ethanol advocacy group Growth Energy to allow the use of a 15-percent ethanol blend (E15) in standard vehicles. At the end of 2009, the agency announced it was leaning toward allowing E15 in vehicles made in 2001 and later.

“EPA should allow E15 for all vehicles,” Dinneen said. “There is no data to support difficulty with older vehicles.” — DTN