A View from the Hill

April 1, 2003

BY Bob Dinneen

Here in Washington we produce paper. So it should come as no surprise there is an overabundance of press releases with bold headlines, snappy sound bites, and overblown rhetoric.

Amidst all this clutter, sometimes a truly historic announcement can be lost.

A few weeks ago just such an announcement was made. A tri-partisan group of Senators, including Sens. Chuck Grassley, R-Iowa, Max Baucus, D-Mont., Jim Jeffords, I-Ver., and Tom Daschle, D-S.D., introduced legislation that would completely revamp the ethanol excise tax exemption.

Under the new proposal, the tax incentive gasoline marketers receive when they blend ethanol would no longer be funded out of the Highway Trust Fund (HTF). Instead it would be funded by general revenues - just like incentives for oil, gas, solar, hydrogen, and literally every other form of energy this country uses.

Further, the new ethanol excise tax incentive will not be tied to specific blend levels, but rather be applied on the total volume of ethanol blended. Therefore, problems with the current income tax credit and the alternative minimum tax (AMT) will be eliminated. This is great news for E85 and E-diesel.

Since the ethanol incentive was first enacted in 1979, it's gone through several modifications. However, one constant has been its impact on the HTF. Because expanded ethanol use equaled reduced HTF revenues, a broad array of highway groups have continuously fought to eliminate the incentive or to defeat proposals, like a renewable fuels standard, that would increase the use of ethanol.

The highway groups were not necessarily anti-ethanol. They simply wanted to increase funding to build and repair our nation's roads and bridges. Make no mistake; building roads and bridges is among the top priorities of nearly every Member of Congress. The highway lobby is considered one of the most powerful on Capitol Hill.

But the new ethanol tax credit ends the acrimony. After 20-plus years of being on opposing sides, an historic group of highway, ethanol and agriculture groups have united behind this proposal. In a letter to the bill's authors the group wrote: "Two important national priorities would be achieved: ensuring all users of the nation's highway network contribute equally to its improvement; and decreasing U.S. dependence on imported fuel."

Everyone wins. The highway industry will see HTF revenues grow by more than $2 billion annually. The oil industry will enjoy greater flexibility - opening new opportunities for ethanol. The auto industry will benefit as more E85 is used in their flexible-fuel cars, building support for that program. Consumers will benefit from a diversified fuel supply and reduced dependence on imported oil.

Even the government will benefit. Implementation simplification is expected to save the IRS more than $400 million over ten years.

Building coalitions, especially truly historic coalitions, is how progress is made in Washington. The Renewable Fuels Association is proud to have once again put comity over conflict. A sound energy policy and a sound highway policy need not be mutually exclusive.

We commend the tri-partisan leadership on this effort and believe strongly that their common sense approach to promoting two national priorities will garner overwhelming support on the way to becoming law.


Bob Dinneen
President and CEO,
Renewable Fuels Association

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