Advocates of the corn ethanol industry note that agricultural business and rural economies benefit from ethanol production. Rural economies gain new jobs and an expanded tax base. The local impact of a dry grind facility producing 40 million gallons of ethanol per year is an estimated $56 million spent annually for feedstock (corn), labor, and utilities, and also $1.2 million in state and local tax revenues [8]. Farmers benefit from the establishment of a guaranteed market for a set number of bushels, with an increased value of $0.25-$0.50 per bushel in the national corn price plus an additional $0.05-$0.10 per bushel in the locality of ethanol plants. A strengthened domestic market for corn also prevents the United States from flooding the global corn market.

Federal and state tax support for ethanol production has driven growth of the ethanol industry. Federal ethanol tax incentives for ethanol-blended fuels are directed at gasoline marketers in one of two ways. The excise tax exemption reduces the federal excise tax, paid at the terminal by refiners and marketers, by 5.1 cents per gallon of 10% ethanol-blended fuel. Or, gasoline refiners can claim an income tax credit of 5.1 cents per gallon of gasoline blended with 10% ethanol. At the state level, tax incentives generally are directed to benefit small ethanol producers, which are typically farmer-owned cooperatives [9]. In some cases, states directly support new ethanol facilities with cash payments to help defray construction costs. State incentives for users range from cents-per-gallon tax exemptions for ethanol blends to rebates for purchase of alternative fuel vehicles and grants to fuel stations selling alternative fuels. Several states mandate use of ethanol blends or flexible fuel vehicles for state-owned fleets. Minnesota and Hawaii have renewable fuel standards requiring use of E10 blends in cars, and Minnesota’s E20 law offers two options for increasing ethanol use to 20 percent of the gasoline sold in the state by 2013. Montana’s E10 law states that most of the gasoline sold in the state must include 10% ethanol when annual production of ethanol in the state reaches 40 million gallons. A few other state legislatures are considering similar measures.