Domestic Fuel

For those of you who might be wondering just what the heck happened this week in the Senate, where they voted in favor of ethanol before they voted against it and then for it again, Renewable Fuels Association president and CEO Bob Dinneen offers some insight in a post on The E-xchange blog.

Dinneen explains that the vote Tuesday to defeat the Coburn amendment to end the ethanol blenders tax credit (VEETC) was more about the way the Oklahoma Republican went about getting a vote by filing for cloture, which is normally done on a bill, not an amendment, and is a privilege of the leadership. “In any case, the vote on the Coburn amendment Tuesday was certainly not about fiscal responsibility,” Dinneen says. “That fact was made clear when it was revealed every one of the 16 Senators signing the cloture petition had voted just a month earlier to preserve tax breaks for oil companies. (Also interesting, those senators supporting the Coburn amendment received more than $24 million in campaign contributions from lobbies opposed to renewable fuels.)”

On the other hand, Dinneen believes the motivation for passing the same amendment put forth by Sen. Dianne Feinstein two days later was about the growing battle over the debt ceiling and budget cuts. “For many Democrats, the vote on the Feinstein amendment was an opportunity to get Republicans on record as supporting the repeal of tax incentives (i.e., oil company subsidies) and raising taxes as a means of deficit reduction. In fact, following the vote Senate Leader Harry Reid stated, “With Republicans endorsing our position that we can cut the deficit by cutting spending that occurs through the tax code, I hope they will join Democrats in eliminating taxpayer giveaways to big oil companies that are raking in record profits.”

Dinneen expects to see Senate action on oil company tax breaks to come up again soon.

Read Dinneen’s blog post here.

While an amendment to cut federal funding for ethanol blender pumps failed in the Senate, another one passed in the House. The amendment, offered by Rep. Jeff Flake (R-AZ) to the Agriculture Appropriations bill passed by a vote of 283-128.

As the sun sets after a busy day on Capitol Hill for ethanol interests, the question is whether any of votes will matter in the long run. “This House bill is likely dead on arrival in the Senate, and the provision included by Rep. Flake was defeated in the vote on the amendment offered by Sen. McCain,” said the Renewable Fuels Association in a statement. “It remains our hope that lawmakers on both sides of the Capitol will now take up a serious conversation about American energy policy. Any discussion must include domestically produced renewable fuels like ethanol.”

Meanwhile, groups opposed to ethanol are pleased with the actions in both the House and Senate. A coalition that includes food retailers, poultry organizations and environmental interests called it “a tremendously important day in our fight to end the taxpayer-funded subsidies for corn-based ethanol” and applauded the votes “as the start of a new era for U.S. biofuels policy.”

The Senate voted to preserve federal funding for blender pumps right after it voted to end the ethanol blenders tax credit (VEETC) and associated tariff immediately.

The amendment by Senator John McCain (R-AZ) to prevent federal funding to help pay for installing alternative fuel infrastructure such as blender pumps and storage tanks at gasoline stations. The measure failed on a vote of 41 to 39.

The Obama administration voiced opposition today to ending the VEETC. “The Administration supports efforts currently underway in the Senate to reform and modernize tax incentives and other programs that support biofuels. However, today’s amendments are not reforms and are ill advised,” said U.S. Agriculture Secretary Tom Vilsack in a statement. “We need reforms and a smarter biofuels program, but simply cutting off support for the industry isn’t the right approach. Therefore, we oppose a straight repeal of the Volumetric Ethanol Excise Tax Credit (VEETC) and efforts to block biofuels infrastructure programs.”

The vote to end the VEETC is not likely to go anywhere, according to Growth Energy CEO Tom Buis. “Ironically, the United States Senate has spent the better part of a week on an amendment that is unconstitutional and going nowhere, even while the news pours in that OPEC has hit a high-water mark of $1 trillion in revenues,” Buis said.

The industry continues to support the Ethanol Reform and Deficit Reduction Act introduced last week by Senators John Thune (R-SD) and Amy Klobuchar (D-MN) that would would provide tax incentives for infrastructure such as blender pumps, and for cellulosic biofuels development, as well as a variable safety-net determined by the price of oil.

The same amendment to end the ethanol blenders tax credit (VEETC) that failed in the Senate on Tuesday passed today on a vote of 73 to 27. The only difference between the two amendments is that Sen. Dianne Feinstein (D-CA) took the lead on it instead of Republican Tom Coburn of Oklahoma who broke procedure to bring it to the floor last week.

The Renewable Fuels Association calls the vote “disappointing, ultimately inconsequential” since the underlying economic development bill to which this amendment is attached is “unlikely to make it to the president’s desk.” American Coalition for Ethanol (ACE) Executive Vice President Brian Jennings added that the votes are “symbolic and will not become law.” Both organizations note that just last month, the Senate voted to protect tax subsidies for the oil industry.

The Senate is now voting on an amendment by Sen. John McCain that would eliminate federal funding for blender pump infrastructure.

The ethanol industry is anxious to continue talks about the future of the Volumetric Ethanol Excise Tax Credit (VEETC) and how best to balance the budget while still ensuring the ethanol industry can move forward. Yet while many believe the Senate’s defeat of Sen. Coburn’s ethanol amendment opens the door for dialogue, others believe today’s action does little to move the debate forward.

“Today’s debate did little to move the ball forward in encouraging the development of an advanced and cellulosic biofuels industry,” said Michael McAdams, president of the Advanced Biofuels Association. “Our nation needs a comprehensive approach that focuses on the future of all biofuels, including advanced drop-in, algae, and cellulosic fuels to deliver as many gallons to back out foreign oil as quickly as possible. In order to best achieve this goal, Congress must consider policies that are technology, feedstock, and product neutral, and provide long term certainty for the markets. We remain committed to working with Congressional leaders and stakeholder groups to find a common sense approach the benefits all biofuels.”

While all groups remain committed to working with federal policymakers on a compromise, Bart Schott, a grower from Kulm, North Dakota and the current president of the National Corn Growers Association noted that should Coburn’s policy have been passed, the ethanol industry could have seen production reduced by 38 percent. “This would have significantly impacted an industry that provides and supports more than 400,000 U.S. jobs, many in rural America, during a time of economic uncertainty. The loss in ethanol production could have resulted in the shedding of approximately 112,000 of these jobs, in all sectors of the economy,” said Schott.

Schott pointed out that while the ethanol industry remains open to change the oil and gas industry has refused to proactively engage in debates about subsidy reform. He continued by reiterating his organization’s support of the Ethanol Reform and Deficit Reduction Act that was introduced yesterday by Sens. John Thune and Amy Klobuchar.

Jeff Broin, chairman and CEO, of POET, the country’s largest ethanol producer added that the country must transition away from the tax credit and make a short-term investment that will reap long-term rewards. This should be done through the expansion of flex fuel pumps and flex fuel vehicles.

“Over the years as the tax credit has declined, we have been able to improve our efficiency and stay competitive with gasoline. Now it is time for the ethanol industry to take the next step in competing with oil. That can only happen if ethanol is allowed greater access to the fuel market,” concluded Broin.

After the defeat Tuesday in the Senate of an amendment by Sen. Tom Coburn (R-OK) to immediately eliminate the Volumetric Ethanol Excise Tax Credit (VEETC), the ethanol industry is supporting another approach and the two concepts could be heading for a showdown in the Senate before the end of the month.

“That indeed has been teed up with a commitment by the majority leader for a vote on Coburn again in a couple of weeks and a vote on an alternative,” says Renewable Fuels Association CEO and President Bob Dinneen.

The alternative is the Ethanol Reform and Deficit Reduction Act introduced this week by Senators John Thune (R-SD) and Amy Klobuchar (D-MN) that would end the tax incentive this year while still helping the industry move forward. The legislation would provide tax incentives for infrastructure such as blender pumps, and for cellulosic biofuels development, as well as a variable safety-net determined by the price of oil. “It’s very fiscally responsible and makes sense as an insurance that the investment that the taxpayer has already made in this industry will be protected,” Dinneen said.

The ethanol industry and agriculture groups are supportive of the alternate approach, which would save about $1 billion toward deficit reduction and Dinneen hopes it will go head-to-head against the Coburn amendment. “I welcome that side-by-side comparison,” he says. “I think there would be a great deal of support for our vision.”

In this edition of “The Ethanol Report,” Dinneen talks about why ending the ethanol tax credit without a plan to move forward would be disastrous and how the ethanol industry is taking the initiative to work with Congress and develop a plan that cuts spending while continuing to move the country toward energy independence.

Listen to or download the interview with Dinneen here: Ethanol Report on Senate Legislation

In a vote of 40-59, Sen. Tom Coburn’s (R-OK) Amendment No. 436 to immediately eliminate the Volumetric Ethanol Excise Tax Credit (VEETC) and the tariff on imported ethanol was quashed. Coburn’s proposal needed 60 votes to move forward but fell short by 20 votes. Shortly after the news hit, the ethanol industry began calling for “real reform.”

“The fight is not over until we achieve real reform for the ethanol industry, but this vote sends a signal that there is a right way and a wrong way to go about it,” said Growth Energy CEO Tom Buis. “For more than a year, Growth Energy has advocated for our Fueling Freedom plan, which would phase out the VEETC in a fiscally responsible way, while redirecting the funds toward ethanol infrastructure build out. Opening the fuels market to ethanol, through Flex Fuel pumps and Flex Fuel vehicles, would give consumers a choice at the pump and allow us to ultimately eliminate all government assistance.”

The industry applauded the Senators who voted to stop the amendment from moving forward. Renewable Fuels Association President and CEO Bob Dinneen said, “This vote demonstrates the lack of appetite for this kind of destructive policy and political gamesmanship. The Senate and the country need to focus on a comprehensive energy strategy that seeks to expand America’s ability to renewably meet its fuel needs.”

Yesterday the ethanol industry joined together in support of another proposal introduced by Senators Thune and Klobuchar. This proposal also eliminates VEETC in its current form but replaces it with a variable tax incentive tied to the price of oil, which hit more than $120 a barrel today, a five week high. This proposal would also allocate funds to improve ethanol infrastructure and supports tax policies for emerging ethanol technologies.

“This vote is a major victory for the biofuels industry and American consumers and a setback for those clinging to our status-quo dependence on oil,” added Brian Jennings, executive vice president of the American Coalition for Ethanol. “It proves political stunts aimed at ethanol won’t be tolerated in the U.S. Senate. Now we can focus on continuing our work with the White House and both chambers of Congress to support meaningful and responsible legislation to reform ethanol policy.”

Ethanol is expected to be a hot topic when Republican presidential hopefuls debate tonight in New Hampshire.

The candidates who are scheduled to participate include Minnesota Congresswoman Michele Bachmann, businessman Herman Cain, former Speaker of the House Newt Gingrich, Texas Congressman Ron Paul, former Minnesota Governor Tim Pawlenty, former Massachusetts Governor Mitt Romney and former Pennsylvania Senator Rick Santorum.

Renewable Fuels Association President Bob Dinneen expects ethanol to be on the agenda during the debate and hopes it will provide the opportunity for a more comprehensive conversation about America’s energy future. “America desperately needs a thoughtful, comprehensive and realistic energy strategy that fully appreciates and incents the use of domestically produced renewable fuels like ethanol,” Dinneen said.

The candidates’ views on ethanol have already been the subject of many media reports, which started hot and heavy when Gingrich made headlines in January at the Iowa Renewable Fuels Summit. At the same meeting, Santorum said he supports ethanol and called himself a “biofuels convert”.

Pawlenty made news when he announced his candidacy and called for a reform of ethanol policy similar to what the industry supports, while fellow Minnesotan Bachmann is also reportedly interested in re-examining ethanol supports.

Romney says he believes that ethanol is “an important part of our energy solution in this country” and Herman Cain also sees ethanol as one part of a needed comprehensive plan for energy independence.

Of the candidates scheduled to appear tonight, only Ron Paul, as a Libertarian and representative of Texas, has been consistent in his opposition to ethanol support.

The ethanol industry is criticizing Sen. Tom Coburn’s (R-OK) amendment to eliminate the Volumetric Ethanol Excise Tax Credit (VEETC) immediately. During the past few months, the ethanol industry has acknowledged that the time is near for the tax credit to be phased out and has offered bipartisan plans to phase out VEETC over the next five years. Growth Energy has called his action a “job killing amendment” that would “permit hostile countries to exert influence over our economy by blocking American motorists from choosing the only viable alternative to foreign oil: domestic ethanol.”

“Sen. Coburn filed his legislation within 24 hours of OPEC’s decision to let Americans suffer through high gas prices this summer,” added Growth Energy CEO Tom Buis. “Sen. Coburn clearly doesn’t see the danger of letting Iran, Venezuela and Libya control our economy, but there are other senators who do. Domestic ethanol is the only viable alternative we have to foreign oil. Ironically, Sen. Coburn proposes his legislation to repeal ethanol tax policy just weeks after he helped defeat an effort to cut tens of billions of dollars in taxpayer giveaways to global oil companies who recently received all time record profits at the expense of American motorists.”

This amendment puts Big Oil politics ahead of the best interests of the country, believes Brian Jennings, executive director of the American Coalition for Ethanol (ACE). According to opensecrets.org, Coburn received $250,000 in campaign contributions from oil and gas companies since 2005. Jennings says that as a result, Coburn is doing the bidding of Big Oil, which is to effectively raise fuel prices on consumers, put American ethanol jobs in jeopardy and keep America dependent on foreign oil.

Jennings added, “ACE members encourage Senators to vote against the Coburn amendment and support our effort to reform VEETC, promote next-generation biofuels and provide consumers with fuel choice. We also urge Congress to recognize that budget cuts shouldn’t disproportionately discriminate against American ethanol while leaving taxpayers on the hook for hundreds of billions of dollars of subsidies for oil companies.”

The Renewable Fuels Association and Growth Energy are also asking consumers to contact their Senators and ask them to Vote NO on this amendment.

The ethanol industry is facing a double pronged attack in the U.S. Senate.

Sen. Tom Coburn (R-OK) went to the floor last night with an amendment to eliminate the Volumetric Ethanol Excise Tax Credit (VEETC) immediately, while at the same time Sen. John McCain (R-AZ) is proposing to eliminate funding of ethanol infrastructure.

“It is a two-pronged attack, it is designed to stop the growth and evolution of the ethanol industry, it is decidedly anti-farmer, anti-consumer and really leads us down the path toward continued reliance on imported energy and higher prices at the pump,” said Renewable Fuels Association president and CEO Bob Dinneen.

The Coburn amendment is being added to an economic development bill and Dinneen says it has nothing to do with reducing the federal deficit. “This isn’t about fiscal responsibility or his amendment would have included the tens of billions of dollars that taxpayers continue to contribute to oil companies,” said Dinneen.

Dinneen urges ethanol producers, corn growers and anyone who buys gas to call their senators and encourage them to oppose the amendments. “It’s an attack on the nation’s rural economy, it’s an attack on our energy security and it’s an attack on consumers across this country,” he said.

The VEETC is scheduled to expire at the end of this year and the ethanol industry is already working with Congress to develop a phase-out plan that would allow the continued growth and development of the renewable fuel.

Listen to or download Dinneen’s comments here: RFA CEO Bob Dinneen

While one biofuels group has expressed concern about Open Fuel Standard legislation, the three main ethanol organizations in the country are in favor of it.

Renewable Fuels Association President and CEO Bob Dinneen says they endorse the Open Fuel Standard Act introduced by Representatives John Shimkus and Elliot Engel. Additionally, the RFA has endorsed similar legislation offered by Senators Tom Harkin and Richard Lugar. “Ethanol remains the only proven, widely available alternative to gasoline today and will so for the foreseeable future,” Dinneen said. “Investments in vehicle technologies that can accommodate a wide range of ethanol blends will necessarily expand the market for ethanol and create new opportunities for developing and nearly commercial ethanol technologies. More ethanol-ready vehicles are a critical component to the nation’s strategy to end our addiction to oil.”

American Coalition for Ethanol (ACE) Executive Vice President Brian Jennings says the legislation offers a wide range of fuel choices for both consumers and energy independence advocates. “ACE strongly supports the Open Fuels Standard because it provides consumers with meaningful fuel choices, including American-made ethanol. With gas prices hovering at four dollars a gallon, and with oil companies unapologetic about massive profits, and refusing to even consider changes to their favored tax status, it is time for us to create real competition in the fuel marketplace, and this legislation does just that,” he said.

“Each additional Flex Fuel vehicle on the road gives consumers a choice in their fuels, while lowering the price at the pump and strengthening our energy security,” said Growth Energy President Jim Nussle. “Our nation’s dependence on foreign oil is unsustainable and is hurting our economy and national security. It’s time to invest in smart policies like these that will create competition in the fuels market and break the stronghold that oil companies and Middle East cartels have on our nation.”

H.R. 1687, the Open Fuel Standard Act of 2011, would require that 50 percent of new automobiles in 2014, 80 percent in 2016, and 95 percent in 2017 would be warranted to operate on non-petroleum fuels in addition to, or instead of, petroleum based fuels.

A new analysis done by Advanced Biofuels USA finds that the Open Fuel Standard (OFS) is “bad for advanced biofuels and will add to environmental damage if passed and implemented.”

The Open Fuel Standard Act was introduced recently in the House and a similar bill in the Senate. The bills mandate that specific percentages of vehicles be built to operate on alternative fuels. However, Robert Kozak with Advanced Biofuels USA says while on the surface that may seem to benefit the biofuel industry, “there is a very significant part of the “alternative fuels” definition that should give all biofuel, and especially advanced biofuel producers pause.”

Of main concern to Kozak is the inclusion of “methanol produced from non-renewable natural gas … on equal grounds with renewable biofuels.”

“For the biofuels market, implementation of the OFS would immediately mean that gasoline blenders could use a 10% natural gas (NG) methanol to meet EPA oxygenate requirements. Depending on the price charged by a large methanol producer such as Methanex for the initial sale of NG-methanol, existing ethanol sales could plummet,” according to Kozak.

Read the analysis here.

Congressman Bruce Braley (D-Iowa) this week introduced legislation that would require all gasoline sold in the U.S. to carry country-of-origin labeling (COOL).

“I am introducing legislation in the House that would require a label that clearly states the nation of origin for the fuel you’re pumping,” Braley said in a Huffington Post op-ed yesterday, penned with retired General Wesley Clark of Growth Energy. “The legislation, dubbed “COOL for Fuels,” will require the Department of Energy to conduct a study and implement its recommendations to ensure American consumers have the ability to decide at the gas pump whether they want to purchase domestic fuel products or gas produced by potentially hostile oil-producing nations.”

Clark urged the public to sign on as a citizen co-sponsor of Congressman Braley’s country-of-origin labeling legislation. “Americans need to know what this addiction is costing us in real terms, and country-of-origin labeling is a commonsense way to get that message across,” said Clark.

Growth Energy president Jim Nussle says the law would create more market transparency for American consumers of foreign petroleum. “Congressman Braley’s bill would let U.S. drivers know where they are sending their dollars when they fill up at the pump. American motorists should know where their money is going – whether it is staying here or being sent overseas to the coffers of foreign nations,” said Nussle.

Growth Energy first introduced the concept of country of origin labeling for fuel during a press conference at the 2009 Farm Progress Show.

Two renewable energy programs designed to help make America more energy independent were slashed in the spending bill passed Tuesday night by the House Appropriations Committee.

The Rural Energy for America Program (REAP) which provides grants and loan guarantees to agricultural producers and rural small businesses to help purchase renewable energy systems, including ethanol blender pumps, was cut from the current $75 million to just $1.3 million, but that was at least a slight victory since the program was slated for elimination. Rep. Marcy Kaptur (D-OH) sponsored the amendment which salvaged the small amount that will allow USDA to continue to operate the program for the time being. Agriculture Secretary Tom Vilsack just announced in April that the program could be used to install blender pumps, with a goal of installing 10,000 pumps nationwide in the next five years. Last week, he was in Tennessee promoting the program.

At the same time, the committee provided no funding for the Biomass Crop Assistance Program (BCAP) in the fiscal year 2012 appropriations bill, despite pleas from a variety of agriculture, biofuels and even environmental organizations. “BCAP is just beginning to take shape in transforming rural America’s contribution to the nation’s renewable energy supply,” the groups wrote in a letter to committee leadership. “BCAP provides critical assistance to help farmers and foresters plant and collect next generation, purpose grown energy crops and other biomass that are key to ensuring the near‐term commercialization of low‐carbon advanced biofuels, power, and products. Failing to strongly fund BCAP in FY 2012 will severely stunt the development of these new dedicated energy crops just at a time when they are needed to further develop domestic sources of energy.”

The bill now goes to the full House for a vote but is likely to change substantially in the Senate.

Iowa Governor Terry Branstad has made good on a promise he made to the state’s renewable fuels industry back in January to revitalize Iowa’s rural economy by boosting sales of ethanol and production of biodiesel.

“I want to work with the legislature to change the incentive from 10 percent to 15 percent,” Branstad said of ethanol in Iowa during an address at the annual Iowa Renewable Fuels Summit.

Today, Governor Branstad formally signed a comprehensive renewable fuels bill passed by the state legislature that establishes the nation’s first specific E15 incentive for local retailers to offer the mid-level blend to motorists, a new short-term production incentive program for Iowa biodiesel producers and several other provisions for renewable fuels in the state. “Governor Branstad’s signature completes the long process of putting Iowa in the forefront of renewable fuels policy, not just production,” said IRFA Executive Director Monte Shaw.

Under the new law, retailers will get a 3 cent tax credit for E15 sales. EPA is expected to give final approval for E15 later this summer for use in all 2001 and newer cars and light trucks. Other provisions include misfueling liability protection for retailers, an enhanced E85 retailer tax credit, an extension of the biodiesel retailer tax credit for blends of B5 and higher, $3 million in annual funding for Iowa’s Renewable Fuels Infrastructure Program (which provides grants for installation of blender, E85 and biodiesel dispensers as well as biodiesel terminal infrastructure), modifications to Iowa’s 25% Iowa renewable fuels standard and ethanol tax credit and codifying the ASTM fuel specification for biodiesel blends between 6 and 20 percent.