American Coalition for Ethanol : Home

Federal Legislation

E15 Action Center

Renewable Fuels Standard

Volumetric Ethanol Excise Tax Credit

Small Ethanol Producer Tax Credit

Cellulosic Producer Tax Credit

Tax Credit for E85 Infrastructure

Prohibition on Franchise Agreement Restrictions Related to E85 Infrastructure

Infrastructure Development Grants for Mid-Level Blends of Ethanol

Ethanol Trade Policy

Consumer Fuels and Vehicle Choice Act

2012 Farm Bill

Renewable Fuels Standard (RFS)

The Energy Policy Act of 2005 (EPAct 2005, P.L. 110-58), established the first-ever Renewable Fuels Standard (RFS) in federal law, requiring increasing volumes of ethanol and biodiesel to be blended with the U.S. fuel supply between 2006 and 2012.

The Energy Independence and Security Act of 2007 (P.L. 110-140, H.R. 6) amended and increased the RFS, requiring 9 billion gallons of renewable fuel use in 2008, stepping up to 36 billion gallons by 2022.

Under the modified RFS, corn-based ethanol (conventional biofuel) is essentially capped at 15 billion gallons by 2015, while 21 of the 36 billion gallons in 2022 must be derived from advanced biofuel such as cellulosic and non-corn-based ethanol.

RFS Schedule under the Energy Independence and Security Act of 2007

Biofuel Definitions:

Conventional Biofuels (Corn Ethanol)
Renewable fuel that is derived from corn starch. The renewable fuel produced from facilities that commence construction after the date of enactment (December 19, 2007) must achieve a 20% reduction in greenhouse gas (GHG) emissions compared to baseline lifecycle GHG emissions of gasoline and diesel.

Advanced Biofuels
Renewable fuel other than ethanol derived from corn starch, that is derived from renewable biomass and has lifecycle GHG emissions, as determined by the EPA Administrator that are at least 50% less than baseline GHG emissions. This term includes "cellulosic biofuels" and "biomass-based diesel." The schedule for Advanced Biofuels includes the schedule for Cellulosic Biofuels, Biomass-Based Diesel, and Undifferentiated Advanced Biofuels.

Cellulosic Biofuels
Renewable fuel derived from any cellulose, hemicellulose, or lignin that is derived from renewable biomass and that has lifecycle GHG emissions, as determined by the EPA Administrator, that are at least 60% less than the baseline lifecycle GHG emissions.

Biomass-Based Diesel
Renewable fuel that is biodiesel as defined in section 312(f) of the Energy Policy Act of 1992 (42 U.S.C. 13220(f), which according to the EPA is, a diesel fuel substitute produced from nonpetroleum renewable resources that meets the registration requirements for fuels and fuel additives established by the EPA under section 7545 of the Clean Air Act." It is derived from renewable biomass and has lifecycle GHG emissions, as determined by the EPA Administrator that are at least 50% less than baseline GHG emissions. It does not include the co-processing of biomass with a petroleum feedstock, which is classified as an "advanced biofuel."

Undifferentiated Advanced Biofuels
Renewable fuel other than ethanol derived from corn starch, that is derived from renewable biomass and has lifecycle GHG emissions, as determined by the Administrator that are at least 50% less than baseline GHG emissions. This term includes "cellulosic biofuels," "biomass-based diesel" and "co-processed renewable diesel."

ACE was the first ethanol association to back the concept of a Renewable Fuels Standard a decade ago and is proud to be taking the lead on ensuring the RFS is set at levels progressive enough to ensure ethanol a long-term, central role in the nation's energy strategy. The RFS is critically important to provide lenders, investors, farmers, and ethanol producers with a signal that a substantial, sustainable market exists for this renewable fuel.

Related Reading:

Related Reading: U.S. EPA presentations from the May 10, 2007 RFS implementation workshop

Volumetric Ethanol Excise Tax Credit (VEETC) - The "Blenders' Credit"

Commonly referred to as the "blender's credit," the Volumetric Ethanol Excise Tax Credit (VEETC) was created in 2004 as part of H.R. 4520, the American Jobs Creation Act of 2004 (JOBS Bill, P.L. 108-357). VEETC provides oil companies with an economic incentive to blend ethanol with gasoline. As of January 1, 2009, the original tax credit totaling 51 cents per gallon on pure ethanol (5.1 cents per gallon for E10, and 42 cents per gallon on E85) was reduced to 45 cents per gallon. The tax credit is passed on to motorists in the form of more cost-effective fuel at the pump. VEETC is currently authorized through December 31, 2010.

On March 25, 2010, Representative Pomeroy (D-ND) and Representative Shimkus (R-IL) along with 27 other Members of Congress introduced H.R. 4940, a bill that would extend VEETC at .45 cents per gallon for five years. Please visit ACE's Legislative Action Center to ask your Member of Congress to support this important bill.

Click here to read about the benefits created by VEETC and what would be at stake if it is not extended beyond 2010.

Read a letter from supporters of H.R. 4940

Read a letter in support of VEETC to the NE Congressional Delegation from Governor Heineman

Small Ethanol Producer Tax Credit - Internal Revenue Code "Section 40" Tax Credit

Under Section 40(b)(3) of the IRC, ethanol producers that manufacture less than 60 million gallons of ethanol per year qualify for a tax credit equaling 10 cents per gallon on 15 million gallons of fuel ethanol. The maximum incentive is $1.5 million annually. The American Jobs Creation Act of 2004 (P.L. 108-357) modified the Small Ethanol Producer Tax Credit by allowing the $1.5 million credit to be passed-through to farmer owners of ethanol cooperatives. The Energy Policy Act of 2005 (EPAct 2005, P.L. 109-58) made further modifications to the tax credit. EPAct 2005 amended the definition of a "small ethanol producer" from 30 mgy of ethanol production to 60 mgy of ethanol production. This tax credit is on the books through December 31, 2010.

Cellulosic Producer Tax Credit

Click here to read a letter in support of the cellulosic producer tax credit.

Tax Credit for E85 Infrastructure

The Energy Policy Act of 2005 (EPAct 2005, P.L. 109-58) created a 50 percent federal income tax credit, up to $30,000 maximum, to establish alternative fuel infrastructure. The provision permits taxpayers to claim a 50 percent credit for the cost of installing clean-fuel vehicle refueling property to be used in a trade or business of the taxpayer or installed at the principal residence of the taxpayer. Under the provision clean fuels are any fuel at least 85 percent of the volume of which consists of ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, and hydrogen and any mixture of diesel fuel and biodiesel containing at least 20 percent biodiesel. The provision is effective for property placed in service after December 31, 2005 and before January 1, 2010.

Prohibition on Franchise Agreement Restrictions Related to E85 Infrastructure

Section 241 of The Energy Independence and Security Act of 2007 (P.L. 110-140) amends the Petroleum Marketing Practices Act to prohibit for a franchisor (i.e. oil company) to restrict a franchisee from installing E85 infrastructure through a franchise agreement.

Infrastructure Development Grants for Mid-level Blends of Ethanol

Section 244 of The Energy Independence and Security Act of 2007 (P.L. 110-140) authorizes the Secretary of Energy to establish a new program for making grants and providing assistance to retail and wholesale fuel dealers for the installation, replacement, or conversion of fuel storage and dispensing equipment for renewable fuel blends greater than E10 but less than E85. Funding assistance is subject to appropriations from Congress.

ACE Executive Vice President Brian Jennings wrote a letter to Senators Dorgan (D-ND) and Domenici (R-NM) requesting they provide full funding of the Renewable Fuel Infrastructure Grants program authorized in Section 244 of the Energy Independence & Security Act of 2007 (EISA). Read the full text of that letter here.

Special Depreciation Allowance for Cellulosic Biomass Ethanol Plant Property

Section 209 of the Tax Relief and Health Care Act of 2006 (P.L. 109-432) is administered by the Internal Revenue Service (IRS). It allows a taxpayer to take a depreciation deduction of 50% of the adjusted basis of a new cellulosic ethanol plant in the year it is put in service. The accelerated depreciation applies only to cellulosic ethanol plants that break down cellulose through enzymatic processes (as opposed to gasification). Any portion of the cost financed through tax-exempt bonds is exempted from the depreciation allowance. Any enzymatic cellulosic plant acquired after December 20, 2006 and placed in service before January 1, 2013 qualifies. Plants that had binding contracts for acquisition before December 20, 2006 do not qualify. The provision is effective through December 31, 2012.

Ethanol Trade Policy

Ad Valorem Tariff
U.S. ethanol imports are subject to a 2.5 percent ad valorem tariff, which is quite modest compared to the tariffs that other countries impose. For example, Brazil levies a 20 percent ad valorem tariff on ethanol imports.

Secondary Tariff
All ethanol blended with gasoline in the U.S. qualifies for the VEETC or blenders' credit, no matter the country of origin of the fuel ethanol. To offset this fact and to ensure that taxpayer dollars are not invested to support foreign ethanol production, U.S. ethanol imports from non-Caribbean Basin countries are subject to a 54 cent per gallon secondary tariff. This tariff is in effect through December 31, 2008.

Duty-free Imports from Caribbean Basin Nations
Under the Caribbean Basin Initiative (CBI), up to 7 percent of domestic ethanol production may be imported to the U.S. free of the 54 cent per gallon secondary tariff so long as the fuel ethanol is derived from nations covered by the CBI. The U.S. International Trade Commission is charged with determining the volume of duty-free ethanol imports, and set that rate at 452 million gallons for 2008. U.S. imports of ethanol totaled around 205 million gallons in 2006, and while imports are expected to exceed that total in 2007, imports remain within the duty-free limit. Nothing prohibits imports of ethanol to exceed the duty-free limits.

Consumer Fuels and Vehicle Choice Act (S.1627)

While the ethanol industry continues to pursue a ruling from EPA that permits the use of E15 in all vehicles, the best long term strategy to overcome the E10 blend wall and provide consumers with access to more cost-effective, homegrown, and environmentally-friendly fuel is though legislation such as S. 1627, the "Consumer Fuels and Vehicle Choice Act." Sponsored by Sens. Harkin (D-IA) and Lugar (R-IN), S. 1627 would provide for more Flexible Fuel Vehicles (FFVs), autos which can operate on any blend of gasoline and up to 85% ethanol, and blender pumps, units which dispense ethanol-gasoline blends at various percentages at the retail level. Similar legislation is being considered in the U.S. House of Representatives.

Full Text of S.1627

Click here to read a summary of the blend wall and S.1627

Click here to read a letter sent to Senate Leadership in support of S. 1627

Read a letter to Senate Majority Letter Reid in support of CHOICE Act & VEETC legislation

Click here to sign a petition in support of the Consumer Fuels and Vehicle Choice Act!