Ethanol producers call for federal tax credit extensions
Wisconsin stands to lose more than 13,000 jobs and future ethanol opportunities if Congress fails to pass a five-year extension of federal tax credits, according to a recent University of Missouri study.
Ethanol producers in the state are using that finding to fuel their lobbying effort this week in Washington.
“The industry is in a real evolutionary phase right now,” said Gary Kramer, president and general manager of Monroe-based Badger State Ethanol LLC. “If you take credits away, you’re going to kill it, and it quickly becomes a question of how many plants stay open.”
Joshua Morby, executive director of the Wisconsin Bio Industry Alliance, is in Washington this week meeting with lawmakers and urging them to pass a measure that would extend tax credits that include a 45-cents-a-gallon credit to companies that blend ethanol with gasoline.
Morby and WBIA President Bob Sather are meeting with Wisconsin’s congressional delegation this week to support Senate and House resolutions introduced by U.S. Reps. Earl Pomeroy, D-N.D., John Shimkus, R-Ill., and U.S. Sens. Chuck Grassley, R-Iowa and Kent Conrad, D-N.D., to make those credits viable through 2015.
The credits are needed, Morby said, to help keep ethanol financially competitive with oil. If the credits disappear, he said, it becomes more expensive to blend ethanol and could drive up the price of ethanol-blended gasoline by 10 cents a gallon. The credit expires in December.
In an industry where development is on hold because of a lagging economy, Morby said, any loss of a competitive edge could kill future projects.
“We went from zero plants to nine in Wisconsin in six years,” he said. “That was more than $1 billion worth of steel in the ground, and honestly, I don’t see another nine being built anytime soon.
“But the lion’s share of expansion is going to happen at Wisconsin plants, and for alternative fuel production to grow in the state, these incentives need to be there.”
Considering expansion at this point is unlikely for any state ethanol producer, Kramer said. He said 46 plants throughout the country filed for bankruptcy protection in the past two years and most companies are trying to stay afloat.
“Historically, we’ve seen gold rush fever,” he said. “And the boom in ethanol production in the last few years was nothing more than a gold rush. The industry quite simply expanded too big and too fast.”
Even though Badger State has no expansion plans on the horizon, Kramer said losing the credits not only could kill any future plans, it could threaten the company.
“I don’t know the point where the economy turns around and I have no way of predicting how low values will go,” he said. “But if they stay low and the credits disappear, then it would be time to make the hard decisions.”