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Ethanol Subsidy Under Fire

April 21, 2011
By: Ed Clark, Top Producer Business and Issues Editor

The $5 billion blenders credit for ethanol is on the chopping blocks for some senators seeking ways to trim the massive federal deficit. But the issue has created a firestorm of sorts within Republican ranks as other party leaders contend that eliminating the subsidy is tantamount to a tax increase. 

Proposing elimination of the ethanol subsidy is conservative Senator Tom Coburn (R-Okla), who is working with a bipartisan group of senators on a plan to reduce government borrowing. 
 
"This is definitely a concern," says Stephanie Dreyer, a spokesman for Growth Energy, an organization working with other pro-ethanol groups to make sure the blenders credit is maintained.
 
Her group is not opposed to terminating the tax credit longer term, but first, government aid is important to develop an infrastructure that will allow gasoline to contain more than 10% ethanol. Because the 10% ethanol blending "wall" is being approached, additional investment within the industry will not likely occur without additional investment by the government.
 
According to the April 15 Washington Post, Coburn’s narrow proposal to eliminate the blender’s credit pits him against orthodox Republicans who for decades have opposed any tax increase, including tax credits. Agreeing that the blender’s credit should go are conservative fixtures such as the Heritage Foundation and the Wall Street Journal editorial board.
 
Despite attacks from Coburn and others, the ethanol subsidy is likely to remain from the battle unscathed, numerous speakers said at last week’s Informa Economics Food and Agriculture Policy Summit.
 
The ethanol subsidy also may have significant support on the hill. Sen. Tom Harkin, (D-Iowa), has introduced the Biofuels Market Expansion Act, which would ensure an increasing number of automobiles in the U.S. be flexible fuel (capable of running on high level blends of ethanol) and expand the number of flex fuel pumps across the country.
 
In March, Sens. Amy Klobuchar, (D-Minn.), and Tim Johnson, (D-S.D.), introduced legislation with the acronym SAFEST. Their bill would not only establish a tax credit for ethanol and biodiesel, but would use tax incentives to encourage greater production of flex-fuel vehicles and the development of infrastructure to deliver ethanol.
 
On April 13, Brooke Coleman, executive director of the Advanced Ethanol Council said in testimony before the Senate Environment and Public Works Committee, that advanced ethanol will expand rapidly upon the market foundation being built by existing ethanol production if government policies allow advanced ethanol technologies to compete.
 
He warned against "backsliding" on current investments in domestic ethanol production and challenged what he termed the misperceptions of American’s ethanol industry.
 
"The advanced ethanol industry is in the first stages of building on the market established by conventional ethanol. What [advanced ethanol producers] need to meet expectations is the same type of tax treatment that the oil industry has enjoyed for decades."
 
Meanwhile, USDA is now accepting applications for federal REAP funds to help gasoline retailers install blender pumps to give consumers flexibility and choice in the ethanol blends they use. Originally announced last spring, USDA Secretary Tom Vilsack said on April 8 that the department is moving forward with plans to install 10,000 blender pumps over the next five years.
 

 

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RELATED TOPICS: Policy, Energy, Ethanol

 
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COMMENTS (16 Comments)


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


12:49 PM Jun 16th
 
Scott - SIBLEY, IA
Responding to Hearly in Wy. Iowa has not mandated Ethonal use. The 10% blend is 12cents less than regular, 30% is 30 plus cents less and E-85 80 cents less. There is no way in hell your getting 20% less mpg.The only noticable difference is with E-85 and you need to consider the price. I know there is oil in Wy. do you have a well on your property?
2:17 PM Apr 23rd
 
Seed Guy - Glenwood, IN
Ethanol is processed here in this country. To many jobs have gone overseas. When we buy oil from other countries it is mostly from people that don't like us and would destroy us, some of that revenue likely supports terrorist groups. That oil is not only paid for with dollars better spent here , it is paid for with the blood of our brave soldiers. We produce more corn today because the price insentive is there. Farmers will put that money back into the economy. I'm for doing anything that insures the survivability of America
8:08 AM Apr 23rd
 
Seed Guy - Glenwood, IN
Ethanol is processed here in this country. To many jobs have gone overseas. When we buy oil from other countries it is mostly from people that don't like us and would destroy us, some of that revenue likely supports terrorist groups. That oil is not only paid for with dollars better spent here , it is paid for with the blood of our brave soldiers. We produce more corn today because the price insentive is there. Farmers will put that money back into the economy. I'm for doing anything that insures the survivability of America
8:08 AM Apr 23rd
 
HEARLEY - PAVILLION, WY
We pay the same price for the ethanol blend as we do for regular gas. With a 20% reduction in mileage we are really getting ripped off. Let ethanol stand on it's own. If it is so great it will survive and if not let it die. I resent the fact the gov't has mandated it's use. It is inferior and less efficient. You would have to be very naive to believe the spin put on it's benefits. The lobby groups pushing this are unreal. Ethanol will never make us energy independent. Just dependent on more gov't handouts thanks to those who pay taxes.
11:11 PM Apr 22nd
 
il.farmer - lockport, IL
Do you really think farmers are making anymore money at $7.oo corn when you just pay $400.00 rent and hundred$ more for seed, chemicals and fert.? Someone is making more money but it's not average farmers, we are just handling more of someone else's money! we all( americans) need to work to reduce spending that is not creating any new jobs, and real wealth. WE are making money for other countries with $7.00 corn while hurting the US.
10:26 AM Apr 22nd
 
Scott - SIBLEY, IA
Why is it ok to subsidize oil and other countrys but not ethonal? Why not buy corn when it is cheap,last July-Sept. the price in N.W. Iowa was 3.00-4,25. Why do some want grain farmers to produce corn, at times for little or no profit for the food and livestock industry? We also have bills to pay! If all this country wants is cheap grain, shut down the CRP! I do farm and feed hogs, the prices will cycle down as in 2008.
8:49 AM Apr 22nd
 
Dairy Farmer
I heard about an article that said that if we switch all annual crop production to perennial crops, we would solve the excess carbon problem, as the ground having a crop growing, instead of bare ground would convert the carbon to oxygen, so the more corn grown, is making the carbon worse.
8:08 AM Apr 22nd
 
Dairy Farmer
I heard about an article that said that if we switch all annual crop production to perennial crops, we would solve the excess carbon problem, as the ground having a crop growing, instead of bare ground would convert the carbon to oxygen, so the more corn grown, is making the carbon worse.
8:08 AM Apr 22nd
 
Buckeye54 - Coldwater, OH
I will avoid ethanol usage any time that I can. My "Flex" vehicle will average 25-26 MPG on normal gas. With E85 I have never gotten to 19 MPG. It is not sold cheap enough to overcome the lack of performance.
6:56 AM Apr 22nd
 



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