Highway bill includes ethanol tax ‘fix’


WASHINGTON – Ethanol issues continue to brew on Capitol Hill, taking root in both the energy bill and a highway reauthorization bill.

The huge highway bill, approved by the Senate late Feb. 12, included a modification that will protect states that utilize ethanol-blended fuels.

The transportation bill, which one source pegs at $318 billion, reauthorizes the federal highway programs through 2009.

The bill modifies the method in which federal excise taxes are collected on ethanol-blended fuels.

The measure would generate more than $2 billion per year in additional trust fund revenues.

Ethanol exemption. Currently, ethanol-blended fuel is taxed at a lower rate than regular gasoline (5.2 cents on a 10 percent blend).

If the bill is enacted, the existing ethanol excise tax exemption would be eliminated, thereby allowing the full federal excise tax of 18.4 cents per gallon of gasoline to be collected and allocated to the Highway Trust Fund.

Proponents say this adds approximately $1.4 billion to trust fund revenue annually.

In place of the current exemption, the bill creates a new volumetric ethanol excise tax credit of 5.2 cents on a 10 percent ethanol blend.

Refiners and gasoline blenders would apply for this credit on the same tax form as before, only it would be a credit from general revenues, not the trust fund.

The transportation bill must still move through the House and, ultimately, through a conference committee, so nothing is set in stone.

Leaner energy bill. Also Feb. 12, Sen. Pete Domenici, R-N.M., introduced a revised $14 billion energy bill, S.2095, a much leaner bill from the original $31 billion measure.

Domenici chairs the Senate Energy and Natural Resources Committee.

The bill is leaner in terms of costs, but not content. It fills 1,246 pages.

Most of the cost trimming comes from delaying implementation of provisions in the earlier version.

Stalemate broken. The action came after Sen. Tom Daschle, D-S.D., and Senate Majority Leader Bill Frist, R-Tenn., agreed to break the impasse that stalled the bill’s conference report last November.

The Senate leaders’ agreement stripped a Republican-backed provision that protected methyl tertiary butyl ether (MTBE) manufacturers from liability for polluting groundwater. It was that last-minute addition that created November’s deadlock.

Get ready for debate. Domenici’s bill, however, still faces opposition, including the Energy Committee’s ranking Democrat, Sen. Jeff Bingaman.

“As was the case in conference last year, the legislation was written unilaterally, with no consultation with Democrats,” Bingaman said.

“The sooner we focus on what is realistic and most needed in energy policy,” he added, “the better off our country will be.”

Frist said last week he will seek an agreement to limit amendments to the new energy bill, but said the bigger question is, “Do we want to consider a slimmed-down energy package, or not?”

Renewable fuels. The new energy bill sets a standard of 5 billion gallons of renewable fuel use in motor fuels by 2012, and a small ethanol producer tax credit.

The renewable fuels standard could more than double ethanol production over the next 10 years, Daschle said.

The boost could mean an increase in corn prices by 50 cents per bushel and boost rural income as well as create 214,000 jobs.

Timeline. The bill can be brought to the Senate floor for consideration at any time. Proponents hope the Senate will consider the bill after it returns from the Presidents’ Day recess Feb. 23.

If the bill clears the Senate, it will go to the House of Representatives for its consideration.

For the last three years, legislators have disagreed about comprehensive energy legislation and no measure has been signed into law.

Restoring ethanol tax to the Highway Trust Fund

* Currently, 2.5 cents of the federal excise tax paid on ethanol-blended fuels is retained in the government’s general fund instead of being transferred to the Highway Trust Fund as is the case with all other fuel excise taxes.

* If enacted, the entire excise tax paid on ethanol-blended gasoline would be transferred to the Highway Trust Fund.


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