Speaker: Subsidy’s end could help ethanol industry

12/08/2011 5:00 AM

12/09/2011 7:05 AM

The tax subsidy for ethanol will likely go away on Jan. 1, but the industry won’t, the head of the industry’s trade group said Thursday.

Tom Buis, CEO of Growth Energy, which represents the ethanol industry, said it might even help ethanol producers in the current political environment.

“It’s probably a good thing for our image,” said Buis, who spoke to members of the ethanol industry in Old Town. “It served as a rallying point for everyone who wanted to go after us.”

The subsidy, called the Volumetric Ethanol Excise Tax Credit, is worth 45 cents per gallon of ethanol or 4.5 cents on a gallon of fuel pumped at the local gas station. That money does not go to ethanol producers, but to the producer’s customers to encourage them to buy it.

“Most people in the industry will see some market disruption, but not a lot,” he said.

The reason, Buis said, is that the federal government still requires automobile fuel producers to use a minimum amount of ethanol – 12.5 billion gallons this year – in a regulation called the Renewable Fuel Standard. The RFS ultimately sets production at 36 million gallons by 2022.

That standard has long been in conflict with another federal mandate, which caps the amount of ethanol in automobile fuel at 10 percent, called E10. But the Environmental Protection Agency is considering the industry’s request to raise the cap to 15 percent, or E15. That would likely cause the industry to grow by 50 percent.

Opponents of the ethanol industry – oil companies, the small engine and livestock industries, and environmental groups – are trying to block E15. But Buis said he thinks E15 will happen mid-year in 2012.

“It’s been a long time coming,” he said.

The livestock industry blames ethanol for driving up the cost of feed. Buis disputes that.

The spikes in corn prices, such as the rise from $3 to $6 last year, come from unregulated speculation in the commodity markets, rather than ethanol production, he said.

Buis said he recently addressed the chicken industry’s trade group, the Chicken Council, to discuss the issue. The chicken industry has enjoyed a 30-year run of growth, but U.S. demand has leveled off and growers are livid about spikes in the cost of corn in 2008 and 2010.

The room to hear him at the Chicken Council meeting was packed, he said.

“I told them that many times in my career, I had figuratively been tarred and feathered, but today I figured this is the real thing,” he said.

Ethanol is all American fuel, unlike partly foreign-produced gasoline, he said. Building political support for it means the industry needs a better marketing campaign.

“We simply have to do a better job of educating the public,” he said.

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