Top U.S. oil refiner says corn ethanol tax credit is unnecessary

Valero Energy Corporation, the country’s largest independent oil refiner and top corn ethanol producer announced released their second quarter earnings today, and made some telling comments about the Volumetric Ethanol Excise Tax Credit (VEETC)—the $0.45 credit, set to expire at the end of the year, that blenders and marketers of fuel receive in exchange for blending corn ethanol in with gasoline.

In an earnings call with investors, Gene Edwards, Valero’s Executive Vice President for Corporate Development and Strategic Planning, was asked about implications for the company if the VEETC is removed.  What was his response

From an ethanol manufacturing perspective, he said, the VEETC is “almost irrelevant today” and “doesn’t factor into our ethanol plant economics”.  Because ethanol today is trading at $0.30 cents below the price of gasoline, blending margins already favor blending ethanol with gasoline and so blenders are capturing 100% of VEETC value, not ethanol plants. Ethanol prices, he said, would remain the same without the credit, and Valero would still have profit margins of $0.30 cents per gallon, “whether the credit is there or not”.

This is a far cry from the dire warnings issued by corn ethanol lobbyists like the Renewable Fuels Association, who claim that removal of the VEETC will cause debilitating drops in corn ethanol prices and a massive contraction in corn ethanol production. On the contrary, Edwards assures his investors that in today’s market, we would “not see blending decrease by one barrel because the credit is gone”.

That’s right, you heard it straight from the horse’s mouth: more than $5 billion in taxpayer dollar this year—and $6 billion more next year if the VEETC is extended—for not a single barrel’s worth of difference in terms of domestic corn ethanol consumption. It’s time for Congress to stand up to the corn ethanol lobby and stand up for U.S. taxpayers by letting the VEETC expire at year-end.