• WisBusiness

Tuesday, June 21, 2011

A detour in the ethanol debate

By Bob Sather
Last week, Wisconsin’s ethanol blenders kept a close eye on the Senate as they twice voted on whether or not to continue the existing Volumetric Ethanol Excise Tax Credit (VEETC) for ethanol producers.

Though the first attempt to end VEETC was not successful, a second amendment was passed late last week. Wisconsin’s state Senators remained consistent in their view of the amendment, with Senator Herb Kohl advocating for continued support of the ethanol industry and Senator Ron Johnson rejecting such support.

The votes cast by Wisconsin Senator Ron Johnson in support of eliminating the VEETC is a concerning one to this essential state industry. The votes do not take into account the economic impact of the existing ethanol industry in Wisconsin or its future growth and potential.

Wisconsin ranks ninth in the nation in ethanol production with overall capacity of more than 500 million gallons. There are nine large-scale ethanol plants in the state. In 2010, Wisconsin’s $1.168-billion ethanol industry produced 462 million gallons of ethanol.

Members of the Wisconsin Bio Industry Alliance are open to and seek proactive, constructive debate on the issue of subsidies and welcome a dialogue with our elected officials. A vote to discontinue this subsidy without equal consideration for long-time subsidies in place for Big Oil is very troubling. From a fiscal standpoint, the attack on ethanol is arbitrary and shows a lack of long-term vision for the American bio fuel industry.

The ethanol industry welcomes the opportunity to operate on a level playing field with Big Oil. For that to happen, however, all subsidies must be addressed. We import nearly $1 billion in oil each day, meaning that in one week, we spend more on imported oil than on an entire year of biofuel-related tax incentives. On an international level, global-fossil fuel subsidies reached $312 billion in 2009.

The VEETC was originally created as part of the American Jobs Creation Act of 2004. It provides a $0.45-per-gallon tax incentive to qualifying ethanol blenders of pure ethanol blended with gasoline. Through a market-based approach, the VEETC enhances the sustained, cost competitiveness of ethanol with gasoline, and provides long-term protection against a volatile petroleum fuel market. As such, VEETC has been a major factor behind the spectacular increase in ethanol use, production and continued innovation in the industry.

Together with the Renewable Fuel Standard, which requires a certain amount of biofuel to be blended into the nation’s existing transportation fuel supply, VEETC helps ensure that the goals of energy security and job creation are met with the production of clean, renewable, home-grown alternatives to foreign oil.  While the RFS encourages the use and consumption of ethanol, VEETC ensures that those volumes are met with domestically produced ethanol, rather than imported ethanol.  By ensuring that U.S. ethanol is used to satisfy the volumes mandated by RFS, VEETC allows our nation to achieve the intended goals of energy independence and domestic economic development.

The VEETC is also a critical part of the ethanol industry in our own state. This credit helps Wisconsin’s ethanol producers and blenders focus on further economic development efforts, opening up further opportunities, not just for physical expansion but also in adding more good-paying jobs to Wisconsin’s employment base.

According to a recent study, termination of the VEETC would result in an ethanol production reduction of nearly 38 percent nationwide, and a reduction of nearly 5,000 jobs in the state of Wisconsin alone.

It’s time to bring the debate back to a collaborative discussion between ethanol producers, industry representatives and our elected officials. This is not the time for knee-jerk reactions based on short-term impacts. Investing in ethanol production through producer subsidies requires a longer-term view, and we look forward to working with our state’s elected officials on this issue.

-- Sather is president of the Wisconsin Bio Industry Alliance and is the director of government relations and member of Ace Ethanol LLC, based in Chippewa Falls, Wis.


Comments: 31

At June 22, 2011 at 8:20 PM, Blogger Deekaman said...

Perhaps our friends in the ethanol lobby might like to pay my food bill? They can claim all they want that it has no impact on food prices, but it doesn't pass the smell test. Therefore, not only are they hurting us to enrich themselves at the public trough, they are lying to us as well. Ethanol is a bad fuel. An energy "wash" at best and a complete failure without government subsidies and mandates. They are stealing our food and water while taking our money both in taxes and at the pump.

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