Domestic Fuel

There are rumors coming out of Washington, DC that several ethanol groups have come together to offer an alternative proposal to both VEETC, also known as the blender’s credit, as well as the ethanol tariff. DomesticFuel has confirmed that four groups, including the American Coalition for Ethanol (ACE), Growth Energy, National Corn Growers Association (NCGA), and the Renewable Fuels Association (RFA) have agreed upon a broad outline and framework that will be principles for a long-term policy road map for ethanol.

The goals of the road map are threefold and designed to overcome several major obstacles that if not addressed, could keep the country from meeting its renewable fuels goals as set out in the Renewable Fuels Standard (RFS2) that mandates the country use 36 billion gallons of biofuels by 2022.

Goal 1: Accelerate the deployment of blender pumps and flex-fuel vehicles (FFVs). Both of these actions will allow market access and a level playing field for biofuels.

Goal 2: Put into place long-term policy that will create a marketplace that investors feel confident in and one that will revive rural economies and create jobs.

Goal 3: Reward energy efficient technologies and practices that reduce greenhouse gas emissions at biorefineries creating a more sustainable future for ethanol.

While the details are still being discussed behind closed doors in DC, here are a few elements of the tentative plan that have surfaced through various media reports as well as from a communication from a Republican DC staffer.

The current proposed plan would extend the current $54 cent ethanol import tariff for one year, expiring on December 31, 2011. Over five years, VEETC would be phased out and replaced by an ethanol producer’s tax credit that would go to funding biofuel infrastructure (aka blender pumps) as well as to encourage more flex-fuel vehicles on the road. This could be done through a variety of grants, incentives or through a loan guarantee program.

Two of the most critical elements of the tentative proposal, and the two that have already created a heated debate, is that through this revised program, corn-based ethanol would qualify as an “advanced biofuel” under the RFS2. This would remove the corn-based ethanol cap of 15 billion gallons.

The second critical element of the road map would be to suspend indirect land use penalties on corn ethanol pending a sound science program that would determine the lifecycle greenhouse gas emissions of all fuels being sold into the U.S. market.

It is important to note that no details of this road map have been officially released by the ethanol industry, but there is hope that a refined version of the proposal will be presented during a lame duck session in November.