New lobbying push targets keeping ethanol blenders' credit for E85 only
Washington (Platts)--17Oct2011/316 pm EDT/1916 GMT
With the tax credit for ethanol due to expire at year's end, ethanol
backers have formed a new coalition to raise funds for a lobbying campaign to
amend the federal tax law, but only for E85.
The group, the Coalition for E85, is not looking to extend the life of
the tax credit for E10 fuel, which is now widely distributed throughout the
US. It says it is prepared to sacrifice that subsidy in order to get taxpayer
underwriting for the development of E85, a blend of 85% ethanol and 15%
Currently, fuel blenders receive a 4.5 cents/gal tax credit for E10 and a
38.25 cents/gal credit for E85 under the Volumetric Ethanol Excise Tax Credit
(VEETC), which expires in December.
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Under the VEETC, the 14 billion gallons of ethanol used in E10 cost
approximately $6.3 billion a year, while the subsidy for the 120 million
gallons in E85 cost about $54 million a year.
The Energy Policy Act of 1992 defines E85 as an alternative fuel, but
the blend does not qualify for the alternative fuel credit under the Internal
Revenue Code. It was excluded to avoid any instance where ethanol would
receive both the VEETC and the Alternative Fuel Credit.
However, with the possible expiration of the VEETC, the question of
ethanol double-dipping should no longer be an issue, the coalition contends.
It wants E85 to be eligible for a tax credit, which should be extended into
2012 and then for another five years, it says.
The coalition says it represents retailers, ethanol producers, and
equipment and automobile manufacturers. It is fronted by veteran ethanol
advocate Phil Lampert. Its goal is to raise an initial $75,000 to pay
well-known Washington lobbying firm Van Scoyoc Associates to advance its
agenda in Congress, according to a letter it sent out soliciting funds.
The coalition says $75,000 is "the minimum level needed to pay for the
government relations effort," according to the letter. For the money, Van
Scoyoc has agreed to mount an "intensive" three-month campaign.
In October, it will develop "a unified message," draft a policy paper
and communications materials, and meet with members of Congress and their
staffers. In November, it will draft language for a bill and request a
revenue estimate. It hopes to get the measure included in any tax extenders
package that Congress approves by December, the letter says.
More than 60 different tax extenders are due to expire at the end of
2011. The coalition believes Congress will try to deal with the issue in late
2011 or early 2012. Even if Congress allows most of the key extenders to
expire, the coalition believes its lobbying campaign will lay the groundwork
for Congress to retroactively extend the ethanol credit, the letter says.
"The ethanol industry has reached a consensus that the sale of E10 will
continue absent the existing incentive," according to the coalition.
"However, sales of E85 will be dramatically impacted with the loss of the
VEETC, as E85 requires the incentive to allow motorists to achieve a
competitive price of a gasoline gallon equivalency to regular unleaded
"Failure to preserve the E85 option may negatively impact the future
sale of other mid-level ethanol blends, such as E30," the coalition claims in
PETROLEUM MARKETERS WILL JOIN COALITION
Meanwhile, the Petroleum Marketers Association of America, a trade group
representing gasoline wholesalers and retailers, has decided to join the
"While $54 million seems like a lot for 2,500 dispensers, the greater
concern probably has to be the entire Flex Fuel Vehicle program," said PMAA
president Dan Gilligan. "Ford, GM and Chrysler have been manufacturing
millions of FFVs in cooperation with the U.S government with the specific
policy goal of having E-85 as an alternative to gasoline. If the ethanol tax
credit is not extended for E-85 blending, the entire FFV program might die.
Auto manufacturers might simply quit making FFVs."
Flex fuel vehicles can burn E85 as well as gasoline.
In a legislative white paper, the coalition acknowledges that only 1% of
ethanol is sold as E85 in the US, but believes the fuel will play an
increasing role under the volume requirements of the federal Renewable Fuel
If the tax credit isn't extended, 9 million drivers of flex-fuel
vehicles will pay as much as 38 cents/gal more and small businesses could be
forced to "close their pumps," according to a press release drafted by Van
According to a report by the Energy Information Administration, E85 was
being sold at only 2,454 stations as of September 30 this year. That would
put the cost of the $54 million incentive for the fuel at roughly $22,000 per
dispenser, assuming one pump per station.
Most of the E85 stations are concentrated in the Midwest. The largest
number is in Minnesota, with 362 outlets. Thirteen states have between 1 and
10 sites, while six states have none at all.
Other members of the Coalition include E85 supporters Propel Fuels,
Protect, Bosselman Biofuels, the Nebraska Ethanol Board, Clean Fuels
Development Coalition and the Nebraska Ethanol Industry Association.
--Carol Donoghue, email@example.com