Grassley offers strong argument for continuing ethanol incentives/tariffs

Written by Jonathan Eisenthal

Senator Chuck Grassley (R-Iowa) made a very compelling argument for continuing incentives and tariffs in support of biofuels in America in a March 7 speech on the floor of the US Senate.

If the United States wants to free itself from dependency on foreign energy sources then the combined ethanol blenders tax credit and the tariff weighed against foreign ethanol are key elements in achieving that goal, he told his colleagues.

The Government Accountability Office recently identified the ethanol tax credit, officially known at the Volumetric Ethanol Excise Tax Credit (VEETC), as a wasteful duplication, and argued that the domestic production of ethanol is adequately encouraged by the requirement specified in the Energy Independence and Security Act (EISA). The 2007 law mandates 15 billion gallons of grain ethanol be blended in US gasoline supplies annually by 2015 and an additional 21 billion gallons of next generation biofuels by 2022.

Grassley refutes the GAO argument, saying the EISA law requires only that America use ethanol. Without the addition of the VEETC ($0.45 cents per gallon, set to expire at the end of this year) and the tariff ($0.54 cents per gallon of imported ethanol), he argues we will simply substitute an addiction to foreign ethanol for our current addiction to foreign oil.

For the time being, the incentive structure is what fosters the growth and continued strength of the domestic ethanol production industry.

“We are happy to hear about Senator Grassley’s strong support for ethanol,” said Greg Schwarz, a farmer in Le Sueur, Minnesota, and an investor in his local farmer-owned ethanol plant, Heartland Corn Products in Winthrop. “There are a lot of people who are arguing for change in the nation’s approach to supporting biofuels, especially in light of renewed calls to deal with the national deficit. In the midst of all this debate, it’s helpful to have a voice like Grassley’s delivering a clear message about the values and benefits of the current approach to biofuels. We’re supporting American farmers, American rural communities and making real progress in the quest for energy independence with this policy. About ten percent of the US transportation fuel supply comes from US produced ethanol–this is a key factor in moderating gasoline prices that are extremely volatile as uncertainty in the Middle East continues.”

Schwarz hopes that Grassley’s clear message attracts the support of others in the Senate and in the House of Representatives as well.

Grassley noted that in the past year, US ethanol producers made 13 billion gallons of fuel–which displaced 445 million barrels of crude oil from Saudi Arabia and other foreign sources. Ethanol represents the third largest segment of the American transportation fuel market–the only bigger sources are US crude oil production and Canadian Crude Oil production.

“By any measure this policy has been a huge success in achieving the goals of energy independence and national energy security,” said Schwarz. “Any proposals to change our biofuels policy will have to come up with some very compelling programs to do better than VEETC and the ethanol tariff.”

To see an excerpt of Grassley’s speech, reprinted in the DesMoines Register, go to


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