House Backs Extended Ethanol Credit

The House of Representatives on Friday approved extending and expanding the fuel tax break for ethanol as part of a $275 billion transportation bill, leaving the ethanol industry confident that the changes will become law.

The Senate earlier approved a similar provision in its version of the transportation bill. The pro-ethanol Renewable Fuels Association said in a press release that it was "very confident" the ethanol language would be included in a final, compromise bill to be assembled by a House-Senate conference committee.

Besides extending the excise tax break for ethanol through 2010, the House and Senate bills would encourage fuel companies to use richer blends of ethanol in fuel and would revamp the tax collection system so more money goes into the highway trust fund, removing one complaint about the tax credit.

At present, the ethanol tax credit is worth 5.2 ¢/gal. of gasoline that is 10% ethanol. Under the House and Senate bills, the tax credit would be proportional to the amount of ethanol used in motor fuel.

The tax changes, dubbed the volumetric ethanol excise tax credit (VEETC) by the ethanol industry, are one of the industry’s two main goals for 2004. The other is the passage of a national renewable fuels standard that would mandate a doubling in ethanol use by 2012 while ending the requirement for use of oxygenated fuels to combat smog.

According to the Renewable Fuels Association, the VEETC would generate more than $2 billion per year in additional highway trust fund (HTF) revenues. In addition to boosting revenues for the HTF, the USDA estimates the ethanol tax incentive saves the federal government more than $3.2 billion in lower farm program payments each year.

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.