LANSING – Given that legislation would cap tax credits at $500,000, the Michigan Economic Development Corporation and the Granholm administration should be able to come up with funding for a package of tax credits to encourage creation of ethanol stations, the Senate Technology and Energy Committee said Wednesday.

The package (SB 1074, SB 1075, SB 1076, SB 1077, SB 1078, SB 1079), similar to a package moving quickly through the House, would provide tax credits of up to $2,000 to convert an existing gasoline station to carry ethanol-based fuels and up to $20,000 for construction of new stations that offer E85 or biodiesel.

Though committee Republicans were not looking to move as quickly on the bills as the House Agriculture Committee did, they did raise concerns that there were not provisions in the fiscal year 2006-07 budget to accommodate the tax credits.

“This is perhaps a technology that could get us out of crisis,” said committee Chair Sen. Bruce Patterson (R-Canton). “Take it back. Tell somebody that this isn’t going to fly.”

“Is there the possibility that there could be a negotiation on this?” said Sen. Patricia Birkholz (R-Saugatuck). “There should be a little bit of money there that would be available.”

“We would have no issue with running the grant program if a funding source could be identified and if we could be held harmless if no funding source is identified,” said Jim McBryde, MEDC spokesperson.

But he said the agency was not prepared for the $11.1 million potential hit if the industry developed the typical 37 gas stations that year and all applied for the credit in addition to renovations.

And he said the MEDC is working with Rep. Neal Nitz (R-Baroda), prime sponsor of the House package (HB 5181, HB 5751, HB 5752, HB 5753, HB 5754, HB 5755), on a source of funding.

Scott Schrager with the Department of Treasury said his department would be willing to go forward with the program because there is a cap on the credits that makes it essentially a pilot program. In addition to the credits for building stations, the bills also would provide fuel tax breaks for those using ethanol, 12 cents a gallon versus the current 19 cents for gasoline, until the state loses $2.5 million through the cut.

But Schrager said there were other technical issues that needed to be addressed in the bills, such as a definition of when an appropriation happens. The bills would require general fund appropriations to replace the transportation taxes lost to the ethanol rate cut, and would end the rate cut if that appropriation is not made.

“When is an appropriation not made? Is it when it’s not included in the budget bills or is it when the first supplemental fails?” he said.

He noted the bills also do not require ethanol fuel producers to be licensed, so it would be more difficult for the department to collect the fuel tax from them.

Committee members also raised concerns about the technology. “Ethanol may or may not be all that it is touted,” said Sen. Nancy Cassis (R-Novi). “These are powerful questions that we should not proceed quickly down.”

ELECTRIC CAPACITY: Patterson also indicated Wednesday that there would be legislation coming to address the state’s long-term electric need. He has a workgroup on a long-term energy policy, which will meet next on Thursday.

But he has also been taking testimony in committee on the Capacity Needs Forum report issued by the Public Service Commission staff.

Power marketers particularly have raised concerns that the plan outlined in the report would open the door for utilities to build power plants with no concern for the cost of the plants.

Among the recommendations is that the commission allow utilities to build plants into their rate bases before they are completed to ensure they can find the financing to build the plants.

Marketers have argued the process could leave the state with excess capacity that would raise rates.

Patterson cut off testimony Wednesday from Eric Schneidewind with Energy Michigan, asking him to come back at a future meeting where there would be more concrete policies or legislation to discuss. Mr. Schneidewind was arguing any plan should allow independent marketers to bid either on providing the power or at least on building the plants to then sell to the utilities.

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com