Congressional negotiators have agreed to extend the 45-cent-per-gallon subsidy for ethanol for one year and also continue a tariff on imports of the biofuel, said Sen. Chuck Grassley, R-IA.
The tariff will continue at 54 cents per gallon through 2011, said Grassley, who announced that the provisions would be included in tax legislation worked out with the White House.
The bill also would resurrect and extend for another year the $1-a-gallon subsidy for biodiesel that expired at the end of 2009. Biodiesel production slowed significantly this year, and many plants shut down.
The ethanol subsidy and tariff were due to expire at the end of this month.
Extending these provisions "will boost jobs and investment in the alternative energy sector, exactly when the economy needs a real shot in the arm," Grassley said.
Given the growing concern about deficit spending and the success of the tea party movement in last month’s congressional elections, critics of the ethanol industry thought they had their best chance ever this year to kill the subsidy and tariff. But Grassley, the ranking Republican on the Senate Finance Committee, was well-positioned to defend the industry. The ethanol subsidies are provided through tax credits.
A top executive in the ethanol industry said a one-year extension of the subsidy would buy some time for producers to persuade Congress to put money into installing the pumps and pipelines needed to expand the market for the biofuel.
"We can’t live without that incentive today," said Jeff Broin, president and CEO of Poet LLC.
Broin helped found an industry trade group, Growth Energy, that surprised observers this summer by proposing to phase out the subsidy and to shift the money into infrastructure needs.
Other groups, including the Renewable Fuels Association, said the proposal was premature. Growth Energy subsequently endorsed the idea of a short-term extension of the tax credit but still argues that the money eventually should be shifted into retrofitting service station pumps and financing pipelines. The group’s plan also calls for requiring automakers to equip all new cars and trucks to run on ethanol as well as gasoline.