Iowa Public Television


Ethanol Under Attack in Congress

posted on June 17, 2011

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In what is being labeled as an attempt to cut the budget by not catering to “special interests”, several bills with a focus on agriculture and renewable energy came before Congress this week.

With complaints of balancing the $14 trillion national debt on “the backs of farmers” the measures brought ire from politicians, farm organizations, trade groups, and environmentalists.

The week began with a battle in the U.S. House. An attempt to limit the dispersal of farm subsidies by capping gross adjusted income for farmers was proposed and withdrawn. Another measure to stop annual payments to Brazil -- part of a World Trade Organization settlement -- passed.

The week ended in the Senate, where ethanol was at the forefront. Two attempts were made to cut the Volumetric Ethanol Excise Tax Credit – more commonly known as the blender’s credit -- and the billions it disperses. If nothing else, the handwriting is on the wall that political support for ethanol is weakening.


The Senate voted 73-27 Thursday to end the tax break that significantly benefits the ethanol industry – a big win for a bipartisan group of lawmakers that call the incentive needless and expensive.

Sen. John McCain, R-Arizona: "It's time to say enough is enough. This industry has been collecting corporate welfare for far far too long. For those of us who have been fighting against these handouts over the last two decades, it's been far too long since we've had a full debate on this issue."

Most Democrats and a number of Republicans supported the end to the subsidy, which gives refiners a 45-cent-a-gallon tax credit for blending ethanol into gasoline. The U.S. ethanol industry also is protected by a tariff of 54 cents a gallon on imports of the predominately corn-based fuel. That, too, would end under the Senate measure.

The amendment was sponsored by Senator Dianne Feinstein, a Democrat from California, who has long pushed for an end to the tax credit, which expires at the end of the year. Thursday’s vote was a turnaround from earlier in the week when just 40 members voted for Republican Senator Tom Coburn’s identical legislation. Coburn, a prominent deficit hawk, insisted the cuts needed to be made in an era of record red ink.

Sen. Tom Coburn, R-Oklahoma: "For every gallon of ethanol that gets consumed in this country, when you go buy E-85, $1.72 is what you need to add to the price you're paying at the pump. That's what we are subsidizing per gallon. If it makes sense from an economic standpoint, let's do it. If it doesn't, don't do it. And let the markets really decide that."

According to the Government Accountability Office, the ethanol tax credit paid $5.4 billion to fuel blenders last year.

While critics say the subsidies are no longer needed. Supporters say ethanol helps reduce U.S. dependence on foreign oil.

Sen. Charles Grassley, R-Iowa: "These amendments won't lower the price of gasoline at the pump. That's what people today are concerned about, the price of gas at the pump. These amendments won't lesson our dependence on foreign oil. We spend $835 million every day importing oil. And, these amendments won't create a single job."

Senators from other leading ethanol-producing states are also opposed an end to the subsidy, regardless of political party.

Ethanol backers have been trying to beat back challenges to the subsidies at a time when conservatives are complaining about the national debt.

Bob Dinneen, President and CEO of the Renewable Fuels Association, an ethanol trade group, instead praised the introduction of a bipartisan bill by Senator John Thune, a Republican from South Dakota, and Senator Amy Klobuchar, a Democrat from Minnesota. Their legislation would end the blender’s credit, but maintain a smaller and “variable” subsidy for three years when oil prices fall below certain levels.

In addition, it also would extend credits for cellulosic ethanol development, small ethanol production facilities, and installation of blender pumps.

In a statement on Thursday, Dinneen said, “"We are disappointed in the shortsightedness of this vote, particularly as this same body voted less than one month ago to preserve billions of dollars in taxpayer handouts to the oil industry. As the underlying bill to which this amendment is attached is unlikely to make it to the President's desk, this vote was a freebie with no real consequences. With this theater now in the past, the ethanol industry stands ready to work with the Senate, House, and the Obama Administration to enact thoughtful policies that responsibly address fiscal concerns while moving American ethanol production forward.”


Tags: alternative energy biofuels Congress corn ethanol industry