SD Corn

With plenty of discussion over VEETC (the ethanol blenders credit) in Washington DC and rest of the nation, Iowa State University released a study showing results that downplayed the negative effects of VEETC expiring. The study was funded by UNICA, otherwise known as Brazilian Sugarcane Ethanol who has been lobbying for the removal of America’s ethanol tariff.

The study claims that losing VEETC and the ethanol tariff would result in the loss of 300 jobs compared to an earlier study by ENTRIX which showed jobs losses of 112,000.

The Iowa State study went on to claim a minimal decline in corn prices and that the import of Brazilian ethanol would only rise modestly to 740 billion gallons. This accounting is incomplete, as it does not contain the tax, gas price, national security, and other economic benefits from the ethanol industry.

Other accounting errors in the study include leaving the corn price and acreage stagnant through 2014 and not accounting for trigger payments from lower commodity prices. The Study also leaves gas prices at $2.30/gallon while they are expected to rise 19% over that time.

According to ENTRIX, United States ethanol production would be cut by 37.7% and the industry would purchase $6.6 billion less in grain and other raw materials. Corn prices would drop 8%. The elimination of tax revenues would equal $2.7 billion on the local and state tax level and $2.4 billion on the national level.

Brazilian Ethanol has everything to gain from VEETC expiring. Losing the 54 cent/gallon tariff will do nothing but hurt farmers, ethanol producers and the overall American economy. One of the reasons for domestically producing a fuel is to become less dependent on other nations; this would in turn defeat that purpose.

To close, attached is a comment from, Joel Velasco, Chief Representative for North America for UNICA, defending the Iowa State study.

“The results are still significant because they show that letting the VEETC and tariff expire would not have the dramatic, adverse effect U.S. ethanol producers have subjected all of us to for decades.”

“Our aim was to provide a realistic analysis of the various scenarios Congress is actually debating – regardless of whether they benefit us. This has not been the case with countless studies paid for and cited by the corn ethanol industry.”

Joel Velasco
UNICA

Good one Joel, you’re just looking out for the American people, right?

The Green Jobs Act of 2010 which resembles House Resolution 4940 was introduced today by Chuck Grassley (R-IA) and Kent Conrad (D-ND) in the United States Senate. The act includes extending the volumetric ethanol excise tax credit (VEETC), ethanol tariff, small producer credit and cellulosic ethanol producer tax credit through 2015.

“We are pleased to see that both the House and Senate understand how important the tax credit is to our industry. We look forward to working with them to pass this legislation,” said SDCGA Gary Duffy, a grower from Oldham, S.D.

South Dakota is very fortunate to have legislators that support the biofuels industry which is vital to our state. Sen. John Thune and Sen. Tim Johnson are co-sponsors for the Green Jobs Act while Rep. Stephanie Herseth-Sandlin is a co-sponsor of HR 4940.

There is plenty of concern over this legislation after a recent study by ENTRIX revealed that without these tax credits, approximately 112,000 people would lose their jobs nationally with about 8,000 of those being in South Dakota. A majority of these jobs reside in rural America and this sort of job loss would be devastating to small communities.

The biodiesel tax credit is a perfect example. Since its expiration on January 1 of this year, 29,000 people have lost their jobs and 23,000 more are at risk.

Besides the threat of job loss, corn prices would likely take a hit of about $.30 per bushel because of a lack in demand.

Last year, the ethanol industry returned $3.4 billion to the Federal Treasury above the cost of the tax credit, which does not figure in the taxes paid on the state and local level.

Conrad said, “Our country is in serious danger because of skyrocketing energy costs. This growing crisis demands urgent action. We must be committed to coming together in a bipartisan way to lessen our dependence on foreign oil, while aggressively pursuing alternative sources of energy such as biofuels. Extending these tax credits is a step in the right direction.”

America has experienced a tough economy over the last year and a half or so with people losing jobs and new ones extremely hard to come by. One industry that has fought through the recession with the potential to expand is the ethanol industry. South Dakota’s ethanol industry has helped rural economies and communities thrive through good jobs and the purchase of locally grown corn and locally manufactured ethanol.   

There is although a disaster in waiting. The Volumetric Ethanol Excise Tax Credit (VEETC), the blender’s credit, is set to expire at the end of 2010 which would be detrimental to the industry. According to ENTRIX, South Dakota would lose 8,412 jobs. Quality jobs like these just can’t be duplicated in South Dakota, especially in the rural communities.

Nationally, 112,000 jobs would be lost with majority of them in Iowa, Illinois, Nebraska, Minnesota, South Dakota and Indiana. Besides jobs, United States ethanol production would be cut by 37.7% and the industry would purchase $6.6 billion less in grain and other raw materials. Corn prices would drop 8%. The elimination of tax revenues would equal $2.7 billion on the local and state tax level and $2.4 billion on the national level. Where exactly do you make up that economic activity?

Progress on renewing VEETC has been made with United States Representatives, Earl Pomeroy, D-N.D., and John Shimkus, R-Ill. introducing HR 4940, the Renewable Fuels Reinvestment Act, legislation that would extend VEETC for an additional five years. A number of Reps have also co-sponsored this bill including South Dakota’s own, Stephanie Herseth-Sandlin.

“Extending the VEETC is the single most vitally important action Congress can take to support thousands of jobs in all sectors and allow the ethanol industry to continue bolstering the economy with domestically produced fuel,” said Gary Duffy, president of the SDCGA. 

Just try and imagine more than eight thousand additional people being out of a job in South Dakota. Not a pretty picture. How many of you work for or know someone who works for an ethanol plant, trucking company, or in the ag industry? This legislation is more than just a step towards energy independence; it’s about our state and nation’s livelihood.