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Ethanol industry gets lifeline in COVID aid package

USDA ethanol blender pump
USDA will be allowed to use CCC funds offering assistance to the struggling ethanol industry in post-pandemic environment.

Just days ahead of the vote on the coronavirus aid package in Congress, President and CEO of the Renewable Fuels Association Geoff Cooper feared the time for individual, targeted aid for the ethanol industry had passed for an industry grappling with losses near $4 billion for 2020. However, the ethanol industry received an early Christmas present with language that at least opened the door for allocated funds to be used to support the biofuels sector as well as important tax provisions extended.

The COVID-19 emergency relief aid package provides $13 billion in agricultural assistance and programs and specifies that the funding boost to the Commodity Credit Corporation may be used to “make payments to producers of advanced biofuel, biomass-based diesel, cellulosic biofuel, conventional biofuel, or renewable fuel…produced in the United States, for unexpected market losses as a result of COVID–19.”

Cooper says the “passage of this landmark legislation is great news for America’s ethanol producers, who have struggled through the most difficult and trying year in the industry’s history.” More than half of the ethanol industry shut down during the extraordinary demand collapse in the spring, and producers across the country still have not fully recovered from that market shock. The pandemic has cost the industry nearly $4 billion in lost revenue to date, with losses expected to continue well into 2021, he adds.

Related: Ethanol outlook goes from bad to worse

Growth Energy CEO Emily Skor notes, “In 2020, ethanol production is down about 13% compared to the previous year, and 2021 is also projecting to be lower than 2019 levels. Ensuring stability is imperative as we head into the new year, and we urge Secretary Perdue to move quickly on providing relief to the biofuels industry.”

Cooper adds the passage “provides a ray of hope for the industry and provides decisive direction to the Secretary regarding the eligibility of renewable fuel producers to receive assistance from USDA.” The ag secretary nominee – Tom Vilsack – spoke in the early days of the pandemic about the need for USDA to use CCC funds to offer help to the biofuels sector, and now if confirmed he will be able to have the authority himself if Perdue doesn’t take action first.

Tax provisions extented

The bill also extends key tax provisions supporting innovation and expansion in the renewable fuels industry, including a one-year extension of the Section 40 Second Generation Biofuel Producer Tax Credit, a $1.01 credit per gallon of second-generation biofuel produced; and two-year extension of the Section 45Q Tax Credit, a credit on a per-ton basis of carbon dioxide sequestered. 

While the economic relief package provisions could provide a near-term shot in the arm for the ethanol industry, the bill’s tax extender measures will help spur longer-term innovation and expansion in the industry, RFA says. In addition to that $1.01 per gallon nonrefundable income tax credit for second-generation biofuel sales. The measure also extends through 2021 the credit for installation of alternative fuel vehicle refueling property, including property that dispenses ethanol, biodiesel, natural gas, hydrogen, and electricity. The credit is capped at $30,000 per location.

“While the industry would prefer multi-year certainty for key tax provisions, we are pleased to see these important credits extended for another year,” Cooper says. “These measures are critical to the future of the renewable fuels industry. They help stimulate the commercialization of new feedstocks and fuels, while at the same time encouraging the build-out of the infrastructure needed to distribute low-carbon renewable fuels more broadly across the nation.”

Just the week prior to the bill’s passage, Growth Energy sent a letter to Congressional leadership asking “use all legislative tools available to support our businesses and infrastructure workforce during a time of depressed gasoline demand.” 

“We are also glad to see long-term investment in innovation that helps protect our climate, our health, and our economy through the extension of several key biofuels tax credits,” Skor says. “Getting these updates signed into law will jumpstart growth in these innovative technologies at a time when revitalizing rural communities has never been more important.” 

TAGS: Policy
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