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The Cost Side of Fuel Ethanol
- In 1985 Louisiana's actual gasohol tax exemption amounted to $28 million based on the production of 176 million gallons of gasohol. This made the state's exemption the largest in the nation in 1985. If all of the alcohol plants that have been certified by the Louisiana Agriculture Industrial Board as of this writing were able to produce at capacity (155 million gallons per year of ethanol) and sell their output in Louisiana, gasohol would command between 75 and 80 percent of the State's gasoline market. The resulting gasoline subsidy (at $1.40 per gallon) would be $217 million dollars a year. The Legislature however, has only appropriated 52 million dollars in 1986 - 1987 for gasohol subsidies. It is the Author's understanding that the preceding figure cannot be exceeded.
| Highway fund losses due to gasohol motor fuel tax exemptions |
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| Current exemption (¢/gal) |
Projected 1985 sales (Million gal) |
Projected 1985 state highway revenue loss (Million $/year) |
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| Alabama | 3.0 | 250 | 7.5 |
| Colorado* | 5.0 | 270 | 13.5 |
| Florida | 2 2.0 | 640 | 19.2 |
| Idaho* | 4.0 | 13 | 0.5 |
| Iowa | 3 1.0 | 450 | 6.8 |
| Kansas | 4 4.0 | 267 | 12.0 |
| Kentucky* | 3.5 | 465 | 16.3 |
| Louisiana* | 16.0 | 60 | 9.6 |
| Michigan* | 1.0 | 525 | 5.2 |
| Minnesota | 5 4.0 | 50 | 2.0 |
| Montana* 1 | 5.0 | 12 | 0.6 |
| Nebraska | 6 3.0 | 234 | 9.4 |
| New Mexico* | 11.0 | 78 | 8.6 |
| North Dakota* | 7 8.0 | 11 | 0.8 |
| Ohio | 2.5 | 680 | 17.0 |
| South Dakota | 8 3.0 | 40 | 1.4 |
| Tennessee | 4.0 | 250 | 10.8 |
| Texas* | 5.0 | 460 | 10.9 |
| Virginia | 8.0 | 263 | 21.0 |
| Washington | 1.8 | 9 | 0.2 |
| Total sales | |||
| Exemption states | 5,027 | 173.3 | |
| Other states | 1,436 | --- | |
| Federal exemption | 6.0 | 6,463 | 388.0 |
| Total state and federal highway revenue loss |
561.3 | ||
| *-Exemption limited, usually in-state alcohol. 1-50¢/gal producer credit 2-Midyear decrease to 2¢ from 4¢ 3-Midyear decrease to 1¢ from 2¢ 4-Midyear decrease to 4¢ from 5¢ 5-Midyear increase to 4¢ from 2¢ 6-Midyear decrease to 3¢ from 5¢ 7-Midyear increase to 8¢ from 6¢ 8-Midyear decrease to 3¢ from 4¢ Source: Highway Users Federation |
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- The above table was compiled from the following source:
- "Oil and Gas Journal", January 20, 1986 p.32
Fuel Alcohol Capacity and Exemption
in Louisiana
| Alcohol Production (gallons) |
Exemption (dollars) |
|
| 1985 Actual | 17.6 million | $ 28 million1 |
| 1986 Capacity | 47 million | $ 66 million2 |
| 1986 Capacity plus under construction |
155 million | $ 217 million3 |
- 1 This amount was the actual value of the gasohol tax exemption at $1.60 per gallon of ethanol in calendar year 1985 as supplied by the Department of Revenue and Taxation.
- 2 The potential direct tax subsidy at $1.40 per gallon of ethanol for all the plants in operation in January 1986 without a $52 million dollar cap is represented by this figure.
- 3 The potential direct subsidy for all plants completed and actually under construction at $1.40 per gallon is represented by this figure. It is highly unlikely that gasohol would have ever been able to capture close to 80 percent of the Louisiana gasoline market.
- Several plants began operation late in 1985 and as they establish and develop their operations, the total gasohol tax exemption would have risen to 66 million dollars a year in 1986 if the Legislature had not changed the exemption to a subsidy with a $52 million cap for 1986. At current capacity the ratio of tax exemption to jobs created is between 300,000 and 350,000 dollars a year per job. There are two very large plants currently under construction which when completed will triple the industry's current capacity.
- The amount Louisiana agriculture received in l985 due to increased demand for alcohol feedstocks was calculated as 5.3 million dollars (see section on sugarcane). It is not known how much of this increase actually reached the farmer as it was split with those who buy and store the molasses and then resell it to the ethanol plants. The cost to the state for the same time period was 28 million dollars in foregone revenue.
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This page updated June 1989
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