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Fuel for Fighting: Big Industry Players at Odds

The ethanol lobby just can’t seem to get along.

The sector’s 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 Energy’s 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.

RFA’s 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 can’t 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 nation’s 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.

It’s unclear how the Senate will move forward on the ethanol tax credits. Sen. Chuck Grassley (R-Iowa), the panel’s ranking member, has long been a proponent of the ethanol industry. However, the provision hasn’t been widely discussed as part of the energy bill that Senate Majority Leader Harry Reid (D-Nev.) is putting together.

Further complicating the ethanol industry’s situation is a backlash among the food industry, livestock groups, environmentalists, free-trade and poverty groups that oppose the tax incentives.

“Congress should redirect our subsidies to invest in advanced biofuels that help the environment, that improve our energy security and that can be easily integrated into our fuel supplies,” said Scott Faber of the Grocery Manufacturers Association. Growth Energy’s “announcement is further evidence that the ethanol refiners have enormous incentives to produce ethanol, including the renewable fuel standard,” he added.

Joel Velasco, chief lobbyist for the Brazilian sugar industry, said he’s disappointed that the ethanol industry still wants U.S. tax dollars.

“Why do [they] claim to be mature and the largest ethanol industry in the world?” Velasco said, while the industry is still arguing for subsidies. “If they want a level playing field and they are ready to compete, why do they need to raise trade barriers?”

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