U.S. Senator Baucus Proposes One-Year Ethanol Credit Extension

Government incentives for the ethanol industry would be reduced by 20 percent and extended for one year under a bill by U.S. Senator Max Baucus that is set for a vote tomorrow.

The tax credit to refiners for each gallon of ethanol blended with gasoline would be cut to 36 cents from 45 cents under the bill introduced by Baucus, a Democrat from Montana and chairman of the Finance Committee. A 54-cent tariff levied on Brazilian imports would also remain in place for a year.

Extending the credit and the tariff has been a source of bipartisan dissension among lawmakers. In separate letters this week to Senate Majority Leader Harry Reid and Minority leader Mitch McConnell, groups of legislators called for either the end or extension of the tax credits.

“Senator Baucus’s approach is a good one, recognizing the importance of this investment and providing some market stability as good-faith efforts to responsibly reform ethanol tax policy continue,” Bob Dinneen, president of the Washington-based Renewable Fuels Association, said in a statement today.

Denatured ethanol for December delivery slumped 2.4 cents, or 1.2 percent, to $2.051 a gallon at 12:23 p.m. on the Chicago Board of Trade. Futures have fallen 14 percent in the past month.

U.S. refiners are required to use 12 billion gallons of renewable fuels such as ethanol this year and 15 billion gallons by 2015 under a 2007 energy law.

Production of biodiesel has ground to a near-halt since its $1-a-gallon incentive expired last year, according to the National Biodiesel Board, an industry trade group. That credit would be extended for one year under Baucus’s bill.

Poet LLC, based in Sioux Falls, South Dakota, is the largest U.S. ethanol producer, followed by Decatur, Illinois-based Archer Daniels Midland Co. (ADM)

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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