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Ethanol Subsidy Still at Risk

posted on August 18, 2011

Ethanol Subsidy Still at Risk

Congress failed to remove the subsidy allowing ethanol blenders to defer some of their costs. Known as the Blenders Credit, fuel companies receive 45 cents for every gallon of the corn-based fuel mixed into conventional gasoline. According to the Renewable Fuels Association, or RFA, after the recent failed attempt to remove the Blender’s Credit there are still those in Congress who want to eliminate subsidies for biofuels.

 While new moves may not be as blatant as recent attempts to eliminate the Blender’s Credit, according to RFA President and CEO Bob Dinneen, Congressional members from “oil patch” states – as well as others -- could eliminate funding for certain EPA and USDA programs and slash income for ethanol producers. Dinneen has said he would support elimination of the Blender’s Credit if there was a gradual phase-out. The RFA’s support comes on the heels of the official federal increase in the amount of ethanol blended in U.S. motor fuel from 10 percent to 15 percent.

 Dinneen also points out oil companies receive subsidies as well. While as much as $6 billion goes to ethanol blenders every year a recent study conducted by DTN/Progressive Farmer revealed oil companies receive up to $17 billion in subsidies annually.

 And the Obama administration remains committed to developing biofuels in the United States.

 President Barrack Obama: “I will say that the more we see the science, the more we want to find ways to diversify our biofuels so that we’re not just reliant on corn-based ethanol. The key going forward is going to be, can we create biofuels out of switchgrass and wood chips and other materials that right now are considered waste materials?  And part of the reason that’s important is because, as I think most farmers here know, particularly if you’re in livestock farming, right now the costs of feed keep on going up and the costs of food as a consequence are also going up.”

 The President also announced a joint project between the Department of Energy, USDA and the Navy to develop alternative fuels for the U.S. military this week. Over the next three years, the biofuels industry will receive an injection of $510 million to help the Navy power vehicles, planes and ships. The Navy has set a goal of receiving half of its energy needs from biofuels by 2020.

 One of the more vocal objections to the program came from Minnesota Congressman Collin Peterson, a democrat.  Peterson, the ranking member of the House Agriculture Committee, says the plan will likely not work and threatens Minnesota’s 21 ethanol plants. Peterson has lobbied against the plan for two years because he feels costs would be too high and the only ones to benefit would be large oil companies.



Tags: agriculture biofuels ethanol Navy RFA subsidies