Where Do We Go from Here?

Roadmapping the political future of biofuel subsidies
By Michael McAdams | December 02, 2010

Voters in November’s election sent a strong message of their dissatisfaction with Washington, ushering in 106 new members of Congress and giving Republicans more than a 60-seat gain in the House. As Congress returns to finish its business in the lame-duck session, many inside the Beltway are still scratching their heads and asking, “Where do we go from here?”

The answer for the advanced biofuels industry is, “Full steam ahead!” Our industry will play an integral role in strengthening our energy security while generating real and lasting job growth. My answer comes after key decision makers, from both sides of the aisle and the White House, met with members of the Advanced Biofuels Association for our board meeting last month in Washington.

As we heard separately from senior Democrat and Republican staff members on Capitol Hill and a key energy and environmental advisor to President Obama, one thing is becoming clearer: investment in advanced biofuels, and our technologies to build better fuels and products is not a partisan issue. But it will be incumbent upon us as an industry to inform and educate as we move into another session of Congress and approach a presidential election year. Clearly, the new tone in town is one far more focused on the cost of government, and more determined to cut programs rather than extend and create new ones. This will require the biofuels industry be clear in the cost benefits of current or future programs.

There will be a complete new slate of committee chairmen in the House, and as many as 12 new members of the tax-writing Ways and Means Committee. There is less turnover at the chairmanship and leadership level in the Senate, although the balance has significantly shifted from 59D to 41R to 53D to 47R. The new chairman of the Senate Agriculture Committee will be Debbie Stabenow from Michigan, replacing Blanche Lincoln from Arkansas. Also of key note, is the replacement of Sen. Chuck Grassley, R-Iowa, by Sen. Orrin Hatch, R-Utah, as ranking member on the Finance Committee.

Top staff members on both the Ways and Means and Finance Committees briefed our board on the future of tax extenders. They addressed both the short-term opportunities surrounding the Bush tax credits for individuals as well as the longer-term effort to address all the biofuels provisions in any potential reform package. The Democrats have not agreed yet on an overall tax strategy between the White House and Congress on the larger extender provisions. However, the White House has specifically called for Congress to pass the extenders package, which includes all biofuels tax credits, in the lame-duck session.

A current open discussion focuses on the level at which the current ethanol tax credit should be set, and for how long. The numbers range from 30 to 45 cents through the end of 2011. Finance Committee Chairman Baucus , D-Mont., is also drafting a bill that would grant a one-year extension of the biodiesel and ethanol tax credits, along with the Alternative Minimum Tax patch. If this fails, the likelihood of these extenders passing gets more complicated because of statutory requirements that oblige Congress to find revenue streams to offset the cost of the tax credits— something more likely to get waived because of the popularity of extending the AMT patch. Longer-term reform efforts will take time with all the personnel changes on the House Committee. This should be of concern if the extenders are only renewed through 2011.

Heather Zichal, deputy assistant to the president for Energy and Climate Change Policy, addressed the ABFA board about the future of the current Investment Tax Credit (Sec. 1603) and DOE’s loan guarantee program, and reiterated Obama’s commitment to the biofuels industry. While making it very clear that the White House was pushing Congress to pass the tax extenders package in the lame-duck session, she also acknowledged that the administration was keenly aware of the frustration from the biofuels sector, with the accessibility and requirements of the DOE program. She assured ABFA members that before any decision was made concerning either program, there would be full stakeholder involvement across the board. 

As an industry, we need to be very clear what specific federal support we need across first- and second-generation biofuels companies. Our request must be clear, precise and demonstrate the benefits to the American people, and detail when policy objectives will be achieved.  The day of the subsidy without end, without clear overriding benefit to the country, at least for now, is clearly over. 

Author: Michael McAdams
President, Advanced Biofuels Association
(202) 747-0518