Massachusetts state house passes nation’s first cellulosic ethanol tax exemption

In Massachusetts, the state House passed a bill that would exempt cellulosic ethanol from state fuel excise taxes, the first such exemption in the country. Qualifying fuels must achieve at least a 50 percent reduction of lifecycle greenhouse gas emissions (GHG) over petroleum. Moreover, all fuels will be required to undergo a full lifecycle analysis, which includes “significant indirect emissions” and land use changes.

Also, the bill allows state regulators to delay or scale back the blending requirement if there are issues associated with supply or cost.

Specifically, the legislation exempts cellulosic ethanol from the state’s gasoline excise tax based on the percentage of renewable fuel used. For example, the gasoline tax for a blend of E10 (10 percent cellulosic ethanol/90 percent petroleum) would be reduced by about 2.3 cents. The bill also requires that by July, 2010, all diesel transportation fuels and distillate heating oil blends contain 2 percent biodiesel, or other qualifying renewable diesel. It then increases the requirement by 1 percent a year to a cap in 2013, when all diesel transport and heating oil blends will contain 5 percent of the renewable fuel by volume.

Massachusetts background

A report on biofuel policy initiatives by the Massachusetts Energy and Environmental Affairs office, including an exemption from the state’s gas tax for cellulosic ethanol and a blending requirement for biodiesel, has received endorsements from congressional Rep. William Delahunt and the New Fuels Alliance.

“Advanced biofuels companies located right here in the Commonwealth and their investors are looking for state leadership. This report will be welcome news to those who are actively working to reduce our use of petroleum,” said Andrew Schuyler, director of the Northeast Biofuels Collaborative. Schuyler added that much of the recent coverage of biofuels has been misleading. “While biofuels have been blamed for driving food prices higher, the truth is nothing poses a bigger threat to grocery aisle prices than the skyrocketing price of oil.”

Late last year, a biofuels policy bill was been introduced into the state legislature, generating “overwhelmingly positive” reaction from lawmakers according to the state’s Secretary for Energy and Environment Affairs, but drawing criticism from some industry groups and legislators.

The bill required all diesel and home heating fuel sold in the state to contain 2 percent of renewable alternatives by 2010, increasing to a 5 percent by 2013. The bill also exempts cellulosic ethanol from the state gasoline excise tax.

The Massachusetts Petroleum Council called the bill “ill-advised” and said it would increase natural gas prices. Overall, the bill is expected to create 3,000 new jobs in Massachusetts and add $320 million to the domestic the economy.

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