Ethanol Makers Shrug off Expiration of Key Tax Credit
by Chris O’Malley (Indianapolis Business Journal) …But it looks like motorists, rather than ethanol makers, stand to feel the pain.
The reason is the survival of another federal measure, known as the Renewable Fuels Standard. It requires that an increasing amount of renewable fuels such as ethanol be blended into transportation fuel—from 9 million gallons in 2008 to 36 billion gallons in 2022.
So, oil companies still need to blend ethanol into gasoline. But with those blenders no longer pocketing the tax credit, look for gasoline prices to rise 4 cents to 5 cents a gallon, say experts.
…Ethanol makers are trying to make the fuel additive from other parts of the corn plant, such as stalks. Companies such as Indianapolis-based Xylogenics Inc. are working to perfect strains of yeast that would optimize ethanol yields from corn stalks as well as other plants. Xlylogenics has licensed its yeast to a handful of firms.
Such progress in the industry, along with the continuation of the Renewable Fuels Standard, appears to have quelled the alarms sounded by the Renewable Fuels Association and other ethanol groups 18 months ago.
“The domestic ethanol industry has evolved, policy has progressed, and the market has changed, making now the right time for the incentive to expire,” the association said last month.
…(POET CEO Jeff) Broin said the industry was equipped to compete without the tax credit, noting improvements in the efficiency of ethanol production. That includes cutting energy use by half and water use by 80 percent.
…About 10 percent of most gasoline now contains ethanol, which became a replacement for the anti-knock additive methyl tert-butyl ether, or MTBE, which was pulled for environmental reasons.
…Alternative fuels advocates are looking for other ways to improve use of ethanol, including pumps that could dispense a blend of 30-percent ethanol, 70-percent gasoline.
Such pumps could allow flex-fuel vehicles to still burn a higher level of ethanol but incur less of a fuel economy penalty than if using E85.
“You’re going to start seeing a lot more E30 stations,” said Kellie Walsh, executive director of the Greater Indiana Clean Cities Coalition, a federally funded group that promotes alternative fuels.
Walsh said a handful of E30 pumps are being installed in Fort Wayne, and that a couple of fuel vendors in Indianapolis are kicking around the idea. READ MORE