The sectors two leading groups Growth Energy and the Renewable Fuels Association are prepping for a fight this week over a Congressional proposal to cut tax credits for ethanol producers.
Growth Energy wants the subsidies to phase out, while the RFA and its allies at the American Coalition for Ethanol, the National Corn Growers Association and the National Sorghum Producers support extending the current ethanol tax incentives through 2015.
This week, the House Ways and Means Committee is expected to take up the issue. Growth Energy, a coalition of ethanol producers, last week announced its Fueling Freedom initiative, which aims to end the subsidies within five years.
What do we need to do to move forward? Growth Energys Tom Buis said. We no longer have a problem in producing ethanol. In fact, we are overproducing more than the government regulations will use.
The coalition would like the tax credits to be redirected toward infrastructure, such as pipelines, blender pumps and the manufacturing of more flex-fuel cars before phasing the supports out entirely.
But that plan is at odds with the agenda of rival biofuel trade group RFA.
RFAs Matt Hartwig said that now is not the time to start debating reworking the tax incentives, taking into consideration the limited Congressional calendar and the tough fight needed to get just the tax credits extended.
Such a discussion cant happen in a vacuum, Hartwig said, noting that oil and gas tax credits must also be under discussion.
The ethanol industry receives about $6 billion a year in federal subsidies, including a 45-cent-per-gallon volumetric ethanol excise tax credit that expires at the end of the year.
The intraindustry feud comes as Congress is looking to pass a national energy package. The federal renewable fuels standard requires biofuels to be blended into the nations fuel supply.
The tax-writing panel met Wednesday to discuss moving forward on an energy bill. While the tax credit has long been seen as a legislative headache, the ballooning deficit and inability to get unemployment benefits passed has made inclusion even more uncertain.
Rep. Early Pomeroy (D-N.D.), a senior member on Ways and Means, who is in a tough re-election battle, pushed hard to keep the tax credits at the meeting last week.
Democratic Reps. Joe Crowley (N.Y.), Mike Thompson (Calif.) and Pete Stark (Calif.) have been pushing their own piece of legislation that would eliminate the tax credit by 2014.
The committee, which is expected to mark up an energy bill later this week, is looking at including a one-year extension of the ethanol tax credits at a reduced 36-cents-per-gallon rate. The 54-cents-per-gallon tariff for imported ethanol is likely to remain.
Its unclear how the Senate will move forward on the ethanol tax credits. Sen. Chuck Grassley (R-Iowa), the panels ranking member, has long been a proponent of the ethanol industry. However, the provision hasnt been widely discussed as part of the energy bill that Senate Majority Leader Harry Reid (D-Nev.) is putting together.
Further complicating the ethanol industrys situation is a backlash among the food industry, livestock groups, environmentalists, free-trade and poverty groups that oppose the tax incentives.