Bredesen declares ‘Biofuels Day,’ vetoes tax credits

While Gov. Phil Bredesen declared Thursday “Biofuels Day” in Tennessee, the governor vetoed a measure earlier this week to give a tax break to certain ethanol dealers in the state.

Wednesday, Bredesen vetoed a bill with bipartisan sponsors that passed unanimously in both the House and Senate, which was entitled the “Tennessee Agricultural Ethanol Production Act of 2007.”

On Thursday, Bredesen held a press conference in Lebanon declaring the day “Biofuels Day” in Tennessee. Neither the governor nor his staff told the press about the veto until it became publicly known after the press conference.

In his veto message, Bredesen listed three reasons why he was against the measure, writing that it would be a “mistake” to let the ethanol bill become law.

“First, I am concerned that this bill would result in the state paying private companies millions of dollars to continue to engage in activities that they are already undertaking, instead of incentivizing the expanded use of ethanol blended gasoline,” Bredesen wrote in a June 27 veto message.

The bill would have created a tax credit of $2.50 cents per gallon of ethanol-blended gasoline sold by a particular ethanol dealer.

Knoxville-based Pilot Oil lobbied on behalf of the bill, which would have cost the state $3.3 million when fully implemented. The bill was a two-year life pilot project.

Bill Nolan, a lobbyist who represents Pilot Oil, said Bredesen’s veto shows that the governor was “misinformed” about the bill.

Nolan said Pilot Oil is already producing ethanol, but it’s not cost-effective currently. The tax credits were designed to help Pilot Oil as well as to make the Tennessee marketplace more attractive for other ethanol producers.

“It’s already being done, but it’s already being done at a loss,” Nolan said. “And the consumers don’t get a tax break. They have to pay more money to have it done, and the consumers are going to drift to where the lowest price is.”

The credits would have only applied to nine counties in East Tennessee — Knox County and surrounding counties — that the Environmental Protection Agency classifies as “non-attainment” areas because of their poor air quality.

The two other reasons Bredesen gave for vetoing the legislation were the bill not requiring the amount of ethanol required to be used in the blended gasoline and using a different “tax credit scheme” than the state traditionally uses.

Lydia Lenker, Bredesen’s press secretary, gave the administration’s explanation for failing to notify the press.

“Before discussing this matter with the press, we had to make sure the General Assembly had been notified,” Lenker wrote.

In his veto message, Bredesen said he believes “strongly” that ethanol production and sales were “an area of significant importance to our state.”

At the press conference, Bredesen said the approval of funding for his proposed $40 million ethanol plant in East Tennessee, combined with a $125 million grant from the Department of Energy for a bio-energy center at the Oak Ridge National Laboratory, set the table for Tennessee to be “leading the way” in alternative energy production.

Bredesen said Sen. Lamar Alexander recently compared the state’s successes in bio-fuels to the “first days of the automotive boom in Tennessee.” And Bredesen agrees.

“Today, we are becoming a national automotive hub,” Bredesen said. “I believe, as Sen. Alexander does, that the work we are doing with alternative fuels today has the potential to have the same transformational impact on Tennessee’s economy as the auto industry has had over these past two decades.”

Bredesen’s ethanol plan focuses on cellulosic ethanol, which uses bio-mass like switchgrass as opposed to corn-based ethanol.

Bio-fuel using corn for its ethanol is what Lebanon farmer Mark Johnson prefers as opposed to switch grass.

“I think (switchgrass) is further down the road,” Johnson said.

Supporters of cellulosic ethanol acknowledge that more research is required before it can actually be used in cars.