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Battle Over Ethanol Subsidies far from Dead

June 15, 2011
By: Fran Howard, AgWeb.com Contributing Writer

With roughly 40% of the U.S. corn crop headed to ethanol plants and livestock producers crying foul because corn prices are double what they were a year ago, the battle over ethanol subsidies is far from over. Senate majority leader Sen. Harry Reid, D-Nev., has promised another vote on whether to end the subsidies within the next two weeks.

The U.S. Senate’s rejection yesterday of a bipartisan amendment introduced by Sen. Dianne Feinstein, D-Calif., and Sen. Tom Coburn, R-Okla., to eliminate the 45-cent-per-gallon blenders’ credit as well as the 54-cent-per-gallon ethanol import tariff was only the first volley in what could be the dismantling of nearly $6 billion in ethanol subsidies that many—even some ethanol trade groups—agree have become unnecessary long term to support the industry.
 

A Split Vote

Despite touting their commitment to reducing the budget deficit, 59 senators voted against eliminating the subsidies, which livestock producers argue put upward pressure on corn prices, thus harming their business. Forty senators voted to eliminate the subsidies. Passage would have required 60 votes.
 ethanol pump
In a surprise twist, Feinstein who represents the nation’s No. 1 dairy state voted against the amendment she co-authored in protest to Coburn’s insistence on forcing the vote without Reid’s approval. Despite pleading from Feinstein, Coburn refused to delay the vote in an attempt to block an effort by farm-state Sens. John Thune, R-S.D., and Amy Klobuchar, D-Minn., to channel the subsidies into building ethanol pipelines and flex fuel tanks, which would allow consumers to choose the blend of gasoline they want to pump into their gas tanks.
 
“We’re going to see a phasing out of the support for biofuels in terms of federal policy,” says Klobuchar. “But the time to do it is not in the middle of the year, after seven years of federal support, with five days notice.” Both Klobuchar and Thune voted against the amendment.
 
Taxpayers have spent $22.6 billion on ethanol subsidies since 2005, according to Feinstein, and are expected to spend $31 billion in the next three years. By letting the subsidies continue, Feinstein argues that Congress has helped inflate food prices by providing incentives for growers to raise corn for fuel instead of food.
 
Some farm-state senators, however, remain fully committed to the subsidies. Sen. Charles Grassley, R-Iowa, argues that because ethanol now accounts for 10% of the nation’s fuel supply, it makes no sense for Congress to end the tax breaks.
 
“We’ll get less domestically produced ethanol and be more dependent upon those oil sheiks. But it will also cost U.S. jobs. It will increase our dependence on foreign oil. It will increase prices for American consumers,” Grassley says.
 
The battle to eliminate the current ethanol subsidies is far from over. The effort has strong support from many Democrats—as long as the savings are diverted to other channels designed to support and grow the industry. President Barack Obama and Secretary of Agriculture Tom Vilsack have come out in support of diverting subsidies away from gasoline blenders and into the ethanol infrastructure, which includes flex fuel pumps and pipelines.
 
Republican residential hopefuls are mixed on the issue. Tim Pawlenty, former governor of Minnesota, and Rick Santorum, former senator from Pennsylvania, have come out against ethanol subsidies, while Mitt Romney, former governor of Massachusetts, supports them.
 
Regardless of how the subsidy battle plays out over the next few weeks or months, the federal fuel standard that requires a 10-percent blend of ethanol into gasoline—which is not under attack—will keep ethanol plants running at near to full capacity for many years to come. And if Congress were to increase the standard to require a 15-percent blend—which the the U.S. Environmental Protection Agency approved earlier this year for cars made in 2001 and later—a greater percentage of the nation’s corn crop could be diverted to fuel.
 

 

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COMMENTS (20 Comments)

NW Iowa Farmer - IA
Edmund do you take a lot of drugs? Sounds like it.
3:11 PM Sep 29th
 
NW Iowa Farmer - IA
Edmund do you take a lot of drugs? Sounds like it.
3:11 PM Sep 29th
 
jbolser
Edmund,

I one word came to mind when reading your comments... perfect!
12:21 PM Jun 29th
 
Edmund - Chicago, IL
On those oil so called OIL "subsidies"...have you ever depreciated a new tractor or grid tile?,,,That is what they are talking about with the oil companies..Those so called "subsidies" are normal capital investments being written off over time....it is the same depreciation of a wasting asset,offsett against income...that you take on every tax return. You ready to jump on that bandwagon and lose the ability to write off your equipment and capital investments over time?...By the way,the oil fields are not owned by the oil companies...they are like screwed up the wazzoo cash renters....price of oil goes up,they hand over 85% of the profits to the soveriegn gov't in who's territories they are drilling. Please,read the Wall Street journal and figure out how the world works rather than spouting off like a 4th grader about how the big oil companies are manipulating prices...you got a better shot at making that case with the Terra's,the syngentas,monsantos,deere,and potash.cause they have an oligopoly and have been "farming the farmer" for generations. Ditto regarding your local bank.
11:05 PM Jun 16th
 
Edmund - Chicago, IL
On those oil so called OIL "subsidies"...have you ever depreciated a new tractor or grid tile?,,,That is what they are talking about with the oil companies..Those so called "subsidies" are normal capital investments being written off over time....it is the same depreciation of a wasting asset,offsett against income...that you take on every tax return. You ready to jump on that bandwagon and lose the ability to write off your equipment and capital investments over time?...By the way,the oil fields are not owned by the oil companies...they are like screwed up the wazzoo cash renters....price of oil goes up,they hand over 85% of the profits to the soveriegn gov't in who's territories they are drilling. Please,read the Wall Street journal and figure out how the world works rather than spouting off like a 4th grader about how the big oil companies are manipulating prices...you got a better shot at making that case with the Terra's,the syngentas,monsantos,deere,and potash.cause they have an oligopoly and have been "farming the farmer" for generations. Ditto regarding your local bank.
11:05 PM Jun 16th
 
Edmund - Chicago, IL
Keep the focus on this. A subsidy is the same as welfare,so,if you are a qualified graduate student in a science program,you should know that,the BTU (British thermal Unit) measure of the ability of corn based ethanol to do "work" aka,provide power,is NEGATIVE when all the input costs of fertilizer production,growing and harvesting,then hauling,distilling,hauling again on dedicated trains,to blend..there is energy waste with ethanol,no contribution whatsoever after energy inputs are totalled up vs fuel outputs..and,distillers residue fed to animals does not make up the difference. The only "grow it" option that is not BTU negative and requires a barrel of oil going for more than about 80 bucks,to compete,is sugar cane...Why do you think there is a 50 cent per gallon tarrif on it?,,,It is ther to protect this gov't welfare boondoggle. So,please check your facts and stop listening to "feel good" politicians like grassly who are ignoring the fact that we import more than a gallon of crude to produce a gallon of ethanol,which,as noted,has 30% less BTU content. I got over a thousand acres of corn/bean ground in Illinois,but,always understand when you are standing on firm ground and quicksand. take away the subsidies(and they are going away) and then tabulate the damage to the meat industry,and this bad gov't policy just has to go. Corn based ethanol is a negative and increased imports of oil.
10:48 PM Jun 16th
 
Edmund - Chicago, IL
Keep the focus on this. A subsidy is the same as welfare,so,if you are a qualified graduate student in a science program,you should know that,the BTU (British thermal Unit) measure of the ability of corn based ethanol to do "work" aka,provide power,is NEGATIVE when all the input costs of fertilizer production,growing and harvesting,then hauling,distilling,hauling again on dedicated trains,to blend..there is energy waste with ethanol,no contribution whatsoever after energy inputs are totalled up vs fuel outputs..and,distillers residue fed to animals does not make up the difference. The only "grow it" option that is not BTU negative and requires a barrel of oil going for more than about 80 bucks,to compete,is sugar cane...Why do you think there is a 50 cent per gallon tarrif on it?,,,It is ther to protect this gov't welfare boondoggle. So,please check your facts and stop listening to "feel good" politicians like grassly who are ignoring the fact that we import more than a gallon of crude to produce a gallon of ethanol,which,as noted,has 30% less BTU content. I got over a thousand acres of corn/bean ground in Illinois,but,always understand when you are standing on firm ground and quicksand. take away the subsidies(and they are going away) and then tabulate the damage to the meat industry,and this bad gov't policy just has to go. Corn based ethanol is a negative and increased imports of oil.
10:48 PM Jun 16th
 

For those of you trying to balance the budget by eliminating one of the only remaining source of jobs in the Midwest (Ethanol and related technologies), please check out the Tariff Act of 1913.

Tell me why with record profits for oil companies we still have to give them subsidies and tax credits to survive ?

Isn't nearly 100 years of tax credits enough ????

http://blog.maxdunn.com/articles/2010/07/06/oil-company-tax-breaks


12:52 PM Jun 16th
 

For those of you trying to balance the budget by eliminating one of the only remaining source of jobs in the Midwest (Ethanol and related technologies), please check out the Tariff Act of 1913.

Tell me why with record profits for oil companies we still have to give them subsidies and tax credits to survive ?

Isn't nearly 100 years of tax credits enough ????

http://blog.maxdunn.com/articles/2010/07/06/oil-company-tax-breaks


12:46 PM Jun 16th
 
Tiny
It might have been $2.50/bu 5 or 6 years ago but with the government check you got you didn't get just $2.50/bu out of it. You can keep telling that bs to the politicians so the budgets aren't made but it still bs.

8:21 PM Jun 15th
 



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