The battle lines are drawn in the U.S. Senate over the ethanol subsidy, with competing bills to eliminate or extend it. Ethanol interests are also seeking much more federal support for “blender pumps” that they hope will build the market for their product.

“The ethanol subsidy and tariff is bad economic policy, bad energy policy, and bad environmental policy,” said Senator Tom Coburn (R-OK), who joined with Senator Dianne Feinstein (D-CA) to introduce a bill to repeal the Volumetric Ethanol Excise Tax Credit (VEETC) and the import tariff on foreign ethanol. Cosponsors also include Senators Ben Cardin (D-MD), Richard Burr (R-NC), Jim Webb (D-VA), Susan Collins (R-ME), and James Risch (R-ID).

“Ethanol subsidies and tariffs sap our budget, they’re bad for the environment, and they increase our dependence on foreign oil,” Feinstein said.  “It’s time we end subsidies that we cannot afford and tariffs that increase gas prices.”  The bill would eliminate VEETC, which allows fuel blenders to claim a tax credit of 45 cents per gallon of ethanol added to motor gasoline, as of July 1, 2011.  If successful, the bill would save the Treasury Department approximately $3 billion between July 1 and December 31, when the credit is scheduled to expire.

The bill was hailed by a broad coalition including the National Chicken Council and other business associations, taxpayer advocates, hunger and development organizations, agricultural groups, free-market groups, religious organizations, environmental groups, budget hawks, and public interest organizations.

“The extravagant federal program of support for corn ethanol is driving up the cost of food.  Consumers and poultry producers alike urgently need relief from this wrong-headed policy,” said Mike Brown, president of the National Chicken Council.  “After 30 years being propped up by the taxpayers, it is time for the ethanol industry to stand or fall on its own.”

Meanwhile, Senator Charles Grassley (R-IA) and seven other farm-state Senators introduced a bill to extend VEETC at lower rates: 20 cents per gallon in 2012 and 15 cents in 2013.  For 2014-2016, the rate would vary depending on the price of crude oil, from zero when crude is more than $90 per barrel to 30 cents when crude is $50 per barrel or less.

The bill also sweetens the tax credit for installation of blender pumps and other equipment at service stations.  The bill would modify the alternative fuel refueling property credit to allow the credit for ethanol blends from 20 percent to 85 percent.  Owners could take a credit for 100 percent of the cost of the property (up from 50 percent), as long as dual-use pumps are used partly for alternative fuels.

Groups representing the ethanol industry praised the Grassley bill, which they said would “provide Americans more choice when they fill up.”

 

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