Coalitions support E85 inclusion in alternative fuel tax credit

Source: Holly Jessen, Ethanol Producer Magazine • Posted: Thursday, April 26, 2012

Minnesota Gov. Mark Dayton is the 2012 Governors’ Biofuels Coalition Chair. The coalition recently threw its support behind extending a tax credit it says should apply to E85

The Governors’ Biofuels Coalition has joined forces with the Coalition for E85, pressing lawmakers to extend the 50-cent per gallon alternative fuel tax credit and make E85 eligible for the tax credit, alongside fuels such as compressed natural gas, propane and hydrogen.

The Governors’ Biofuels Coalition sent a letter April 18 to high-ranking officials in the U.S. House of Representatives and Senate, expressing support for the extension of the now-expired alternative fuels tax credit. That letter will also be submitted into the official record as testimony in advance of a House Subcommittee on Select Revenue Measures hearing, said Phil Lampert, spokesperson for the Coalition for E85. The hearing is set for April 26 on member proposals related to tax provisions that expired in 2011, or will expire in 2012, informally known as tax extender bills.

Although E85 did not previously qualify for the alternative fuel tax credit, both coalitions say that should be changed due to the fact that the Volumetric Ethanol Excise Tax Credit expired at the end of 2011. “The language was correctly formulated at the time to prevent double dipping,” Lampert said. In addition, E85 is defined as an alternative fuel in the 1992 Energy Policy Act and multiple other places in federal statutes.

E10 may no longer need a subsidy, the Governors’ Biofuels Coalition said in the letter, but E85 still needs a short-term tax incentive to establish its position in the marketplace and encourage continued expansion of retail E85 pumps. If it is not included in the alternative fuel tax credit, the drivers of flex-fuel vehicles will pay as much as 38 more cents per gallon, which could significantly reduce demand for the fuel. Letting VEETC lapse “without addressing the E85 issue would have serious unintended consequences for thousands of small businesses, millions of flex-fuel vehicle owners and the nation’s ability to achieve the volume requirements of the renewable fuel standard,” the letter said.

Extending the tax credit and including E85 would only cost 0.8 percent what VEETC cost. “We believe this small, short-term investment will make a significant difference in the success of petroleum fuel alternatives,” the Governors’ Biofuels Coalition said.

Ideally, the Coalition for E85 would like to see the tax credit extended for five years, Lampert said. By that time, the group hopes the cellulosic ethanol industry will have reached successful commercial scale, bringing larger supplies of ethanol to the marketplace and more competitive prices. “We very much appreciate the efforts of the Governors’ Biofuels Coalition and will continue to work with the Congress to ensure that the nation’s fleet of millions of flexible fuel vehicles can take advantage of the significant energy independence, environmental and economic development benefits provided by the use of E85,” Lampert said.