GAO Report on government duplication reveals fragmented approach to alternative fuels

Written by Jonathan Eisenthal

A new report from the Government Accountability Office (GAO), the audit and investigative arm of the US Congress, indicates government duplication that is wasting federal resources.

Ethanol advocates decry its singling out of the ethanol blender credit program among all of the government’s energy spending. Farmers and ethanol producers suggest that ending the credit as a matter of fiscal austerity is a terribly narrow-minded approach during this critical time in the growth of alternative energy use in America. Given that price sensitivity to oil may be one of the worst drags on an economy that is still pulling itself up from Recession and still trying to add jobs, ethanol advocates suggest this move would be counterproductive if it slows growth in biofuels–a sector that supports hundreds of thousands of jobs.

The GAO report  ( spotlights 34 areas of duplication, and another 47 areas where agencies and Congress could reduce operational costs or enhance revenue collection. Though the majority of these findings concern homeland security and law enforcement spending, the ethanol program is singled out among all of the federal government’s energy spending.

The report finds that the Volumetric Ethanol Excise Tax Credit, which pays fuel blenders $0.45 cents per gallon of ethanol blended into gasoline, is unnecessary in light of the Renewable Fuels Standard (RFS) adopted as part of the 2007 Energy Independence and Security Act. The RFS provision alone should ensure that domestic production of conventional (grain) ethanol grows to 15 billion gallons per year by 2015. The report states that this past year, the government spent $5.4 billion on the VEETC, and in 2015, the amount would top out at $6.

“The VEETC blenders credit has worked very well as a component of the nation’s renewable energy program,” said Greg Schwarz, a farmer in Le Sueur, Minnesota who produces corn, soybeans and turkeys, and an active proponent of farmer-owned ethanol production. “It’s unclear whether ending VEETC would disrupt the incorporation of ethanol by gasoline fuel terminals, and we can’t help but perceiving politics in a report that would gut spending on ethanol and leave incentives for oil production in place.”

The only other element of the nation’s energy policy addressed in the GAO report is the “fragmented approach” to increasing alternative energy use, reducing petroleum use and lowering greenhouse gas emissions in the government’s vehicle fleet. It singles out the executive orders that have required the purchase of flexible fuel vehicles, noting that E85 is available in many areas and suggests that higher MPG non-FFVs be purchased instead.

“This is just the kind of suggestion that shows how fragmentary our approach to alternative energy remains in the US,” said Schwarz. “It’s clear that the best approach to the fleet vehicle fuel supply would be a program to vastly increase the fuel station infrastructure so that these government vehicles can pull up at any gas station and fill up with the E85 they are designed to be able to use. Like the federal highway program–this is spending that would achieve national security goals and improve the efficiency of government–and at the same time, the broader driving public would benefit. There are 8 million FFVs on American roads and not nearly enough stations that sell higher ethanol blends.”

Some ethanol advocates, including Rep. Collin Peterson (D-MN) have suggested transforming the VEETC credit into a program to fund infrastructure. With the undeniable benefits of lower emissions and reduced consumption of foreign oil, no matter how stringent the budget necessities in Washington, spending on E85 fueling infrastructure would make a handsome return on the investment.


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