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Ethanol's Congressional Turning Point

posted on June 24, 2011

One day after Bernanke outlined challenges, the economic recovery was dealt a new one.

On Thursday, the Obama administration announced plans to release 30 million barrels of oil from the nation's emergency reserve. The move is part of a larger International Energy Agency response to supply disruptions due to turmoil in the Middle East, and North Africa -- particularly in Libya.

Crude oil prices, of course, plummeted on the news, shedding $4.39 per barrel. But crude isn't the only commodity taking it on the chin these days...

Prospects for increased biofuels production were dealt a setback of epic proportion last week when ethanol subsidies were attacked in Washington. Andrew Batt sat down with the chief architect of one of the assaults and filed this report.

Sen. Tom Coburn, R-Oklahoma:

When Market to Market sat down with Oklahoma’s junior Senator last week, he was in the midst of a legislative marathon. The two-term Senator had suffered a procedural setback just days earlier but was moments away from dealing a body blow to government subsidized ethanol.

Sen. Tom Coburn, R-Oklahoma:

Alongside California’s Dianne Feinstein, Coburn garnered more than enough votes to slash the federal blenders credit and eliminate America’s import tariff on foreign ethanol. The 73-27 rout of farm-state biofuel interests was a stunning turnaround for a federal subsidy considered “untouchable” for decades.

But federal ethanol subsidies have collided with a nexus of government debt, market volatility, and general legislative distaste for federal spending.

Sen. John McCain: “

Coburn’s critics have essentially handed him that signature talking point. Pro-ethanol groups like Growth Energy and the Renewable Fuels Association have advocated a transition away from blenders credits and import tariffs to gas station infrastructure for E85 pumping stations. But not until the tax credits were set to expire later this year.

Bob Dineen, president of the RFA is no fan of Senator Coburn’s legislation or the congressional movement against ethanol. As a major lobbyist on Capitol Hill, he saw this vote coming. So did many of the other lobbyists who spent considerable resources battling over ethanol’s future

According to nonpartisan publisher CQ Press, Exxon Mobil, Kraft Foods, General Mills, and the Grocery Manufacturers Association were principal lobbyists on the Coburn-Feinstein amendment. In addition to Dineen’s RFA and Tom Buis from the biofuel advocacy group Growth Energy, the National Corn Growers Association lobbied in favor of ethanol interests.

Critics of Coburn criticize his actions as an “attack” on ethanol while he defends oil company tax benefits. But the former accountant sees the energy landscape differently.

The Coburn victory stunned scores of rural and urban Americans, many of which had turned a blind eye to a rising political tide against corn-based fuel. Riding the top of that wave is Tom Coburn.

Curtailing the national debt is more than a political talking point of the moment for the Oklahoma physician turned politician….

Coburn’s Senate office proudly displays the national debt clock for the Senator and all guests to see.

While Coburn sees ethanol subsidies as the first step towards deficit reduction, his farm state Republican colleagues have different opinions.

South Dakota Republican John Thune and Minnesota Democrat Amy Klobuchar are co-sponsoring legislation that will slowly draw down the federal ethanol tax credits and repurpose them for gas pump infrastructure. But negotiation with Coburn will be essential. His subsidy-slashing amendment is NOT law despite an overwhelming, if not, symbolic victory.

For one of the most conservative Senators on Capitol Hill to build a 70-vote majority on any tax-related bill is an uncanny achievement of bipartisanship but it’s not the first one for Coburn.

Shortly after entering the Senate in 2005, the Oklahoman befriended a fellow freshman from Illinois who would later become President. But the Senatorial relationship has not prevented him from criticizing President Obama on debt and deficit issues.

It remains to be seen if he can come together with fellow farm state Senators to bridge a divide between deficit and ethanol.

For Market to Market, I’m Andrew Batt.


Tags: agriculture alternative energy biofuels Congress corn Energy/Environment ethanol farm subsidies industry renewable fuels