Ethanol-blended fuel tax revenue still in limbo

Senate Finance Committee leaders Charles Grassley (R-Iowa) and Max Baucus (D-Mont.) have reported out provisions to:

* Achieve the transfer to the Highway Trust Fund of the 2.5-cent-per-gal ethanol tax that goes to the general fund for deficit reduction; and

* Restructure the 5.2-cent-per-gal tax exemption for gasohol so that all motor fuels are taxed at the same level (18.3 cents for gasoline blends and 24.3 cents for diesel-fuel blends).

Enactment of those ethanol provisions is a priority for transportation supporters, since the transfer of the 2.5-cent tax would generate $4.3 billion and the restructuring of the 5.2-cent exemption would generate $9.8 billion for the Highway Trust Fund over a six-year period.

The Finance Committee attempted to include passage of such provisions in the short-term extension of TEA-21. However, the provision was dropped to produce a clean bill that would not have to go to conference with the House. Transportation supporters hope to see the ethanol transfers included in a comprehensive energy bill now pending in a House-Senate conference.

While negotiators say they are close to agreement, outstanding issues appear to surround language to ban the fuel additive MTBE and proposed tax breaks for developers of a new natural gas pipeline from Alaska to the lower 48 states.