By HYONHEE SHIN
Capital News Service
Oct. 2, 2009
LANSING – Next year gas stations could receive a tax credit for selling more renewable fuels under a bill awaiting Senate action.
A proposal by Sen. Gerald Van Woerkom, R-Norton Shores, would provide a credit on their Michigan Business Tax (MBT) or income tax if they sell certain amounts of ethanol and biodiesel.
“The idea is that the only way the gas station will sell enough ethanol to reach the threshold is to price the ethanol-blended fuel at a better price than gas not blended with ethanol,” said Derek Bajema, Van Woerkom’s legislative director and clerk of the Senate’s Local, Urban and State Affairs Committee.
The biofuel threshold would be determined based on the retailer’s volume of gallons of gasoline sold, according to the proposal.
“For example, a gas station selling 200,000 gallons of fuel in 2010 would have to include at least 20,000 gallons of ethanol to qualify for a 6-cent MBT credit per gallon,” said Bajema. “Each year, the threshold would increase but allow for a lesser credit if the retailer comes within 4 percent of the goal.”
The intent is to see renewable fuels such as ethanol and biodiesel competitively priced for motorists, Bajema said.
“Renewable energy should not be a burden,” he said. “People support the idea of renewable fuels but rightfully often refrain from purchasing a product like E-85 – fuel mixture that typically contains up to 85 percent of ethanol and 15 percent gasoline – until they can at least break even on a mile-per-gallon basis compared to regular unleaded and diesel.”
Bajema said the legislation is largely modeled on an Iowa program.
“Retailers there use ethanol to blend up their regular octane to mid-grade, which is always a few cents cheaper than regular,” he said. “And it has led to a net effect of much cheaper gas prices than across the river in Illinois.”
Iowa lawmakers have enacted a new incentive program this year, the Iowa Renewable Fuels Standard, to provide retail gasoline dealers an ethanol promotion tax credit.
To qualify, at least 60 percent of the total gallons of gasoline sold must be ethanol blend, according to the Iowa Office of Energy Independence. In addition, dealers are eligible for a tax break of 25 cents per gallon for selling E-85 gasoline.
The renewable energy market is active, said Michael Boulus, a member of board of directors of NextEnergy, a Detroit-based nonprofit research group focused on accelerating investment in alternative and renewable energy.
There were 233 biodiesel and 117 E-85 fueling stations throughout the state in 2008, according to the Department of Agriculture. It’s a significant increase compared to two E-85 stations in 2003.
The Department of Management and Budget said the number of E-85 fueling stations is growing slowly but steadily. By the end of this year, E-85 availability is expected to grow rapidly, when Meijer will introduce E-85 at 20 of its stations.
“That’s where the world needs to go,” said Boulus, who was founder and former president of Michigan Schools Energy Cooperative. “And also it’s the top priority of federal and local governments in new ways of economic development using clean and renewable energy.”
Bajema said the bill would also advance the environmental benefits of renewable energy.
“This incentive program would encourage the reduction of fossil fuels,” he said. “Past legislative efforts in this area have included tax breaks, but the problem has been getting the tax breaks passed on to the consumer.
“If we can get ethanol-blended gasoline one to two cents cheaper at the pump, it’s a win for consumers and a small step toward energy independence,”
However, the proposal faces challenges in the Legislature because of the budget cuts, Bajema said.
“The legislation reduces revenue at a time when it has already declined 12 percent and so many important programs are being cut to balance our budget,” he said. “But, if we are serious about asking the public to use more renewable energy, this is a great opportunity to make it enjoyable for them.”
The bill’s co-sponsors are Sens. Ron Jelinek, R-Three Oaks; Cameron Brown, R-Fawn River Township; Roger Kahn, R-Saginaw; Randy Richardville, R-Frenchtown Township; Wayne Kuipers, R-Holland; and Patricia Birkholz, R-Saugatuck Township.
The bill is pending in the Senate Finance Committee.
© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.