"Cauldron Of Confusion;" Senate Ends Ethanol Subsidy & Tariff

Jun 17: On June 16, the U.S. Senate voted 73-27 in favor of an amendment (S.Amdt. 476) by Senator Dianne Feinstein (D-CA) to eliminate the Volumetric Ethanol Excise Tax Credit (VEETC) and repeal the import tariff on foreign ethanol. The amendment was identical to the Ethanol Subsidy and Tariff Repeal Act, which was introduced by Senator Tom Coburn, M.D. (R-OK) and Senator Feinstein in May. The vote reversed a vote on June 14, on an identical amendment offered by Senator Coburn -- Amdt. No. 436 to S.782, the Economic Development Revitalization Act of 2011, that was defeated by a vote of 40-59.

    Senator Feinstein said, "Today's overwhelming vote shows a bipartisan consensus to repeal irresponsible ethanol subsidies and tariffs. The 73 votes sent a powerful message that the days of big subsidies for ethanol are coming to a close. We must be serious about addressing the debt and deficit, and this is a good first step." The ethanol subsidy currently gives large oil companies 45 cents for every gallon of ethanol they blend with gasoline, even though much of that use is mandated by law. If the subsidy is repealed by July 1, as the amendment calls for, it will save approximately $2.7 billion for the remainder of 2011.

    The ethanol tariff is comprised of a 54-cent-per-gallon secondary tariff and a 2.5 percent ad valorem tax. The ethanol tariff makes the United States nation more dependent on foreign oil by increasing the price of imported ethanol. Senator Feinstein said, "Ethanol is the only industry I know of that receives a triple crown of government support: its use is mandated by law, it enjoys protective tariffs and oil companies receive federal subsidies to use it. These flawed policies, which cost taxpayers nearly $6 billion a year, must be changed."

    Senator Coburn issued a release saying, "Today's vote was a major victory for taxpayers and a positive step toward a serious deficit reduction agreement, which is our only hope of averting a debt crisis. An overwhelming bipartisan majority of senators embraced pro-growth tax reform while rejecting the parochial politics that so often paralyze the Senate. The best way to reduce our crushing $14.3 trillion debt is by reducing wasteful spending a billion dollars at a time. This amendment saves taxpayers $3 billion. In light of today's lopsided vote, I urge my colleagues in the House to eliminate this wasteful earmark and tariff at their earliest opportunity." Coburn indicated that on an annual basis the Feinstein-Coburn amendment would save taxpayers $6 billion. Because the year is half over, the amendment would save $3 billion.

    Sen. Coburn also indicated that a broad coalition of organizations on the left and right including the Club for Growth, Americans for Prosperity, Koch Industries, and the Sierra Club all supported the Feinstein-Coburn amendment. The highly diverse coalition included many other major national environmental organizations supported the amendment, along with the Competitive Enterprise Institute.

    In response to a question: "What's the White House's reaction to the ethanol subsidies vote that's going to take place in the Senate?"; White House Press Secretary Jay Carney responded, "Well, we oppose the full repeal of that subsidy, but as you know, we are focused and have been focused on a broad strategy including increasing domestic development of oil and gas but also aggressive development of alternative fuels including biofuels, and also improving our efficiency, our fuel efficiency. And as part of our overall strategy, we would like to see reform that would reduce costs in terms of the subsidy in question here, but not -- we were not -- we did not support the full repeal."

 

    The Renewable Fuels Association (RFA) issued a statement saying, "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."

 

    Brooke Coleman, Executive Director of the Advanced Ethanol Council (AEC) dismissed the Senate passage of the amendment to end the ethanol tax credit saying it was "a distraction from a real energy discussion." She said, "This week's debate over ethanol is another case of politics over substance that once again distracts from an honest and comprehensive discussion about America's energy future. With this song and dance now over, advanced and cellulosic ethanol producers will continue to work with Senators to find common ground on a forward-looking and productive new way to promote a fuel that is already an important part of the U.S. energy portfolio and has a very bright future. We look forward to moving a proposal to the President's desk that expands the market for ethanol and expedites the commercialization of promising new ethanol technologies and fuels."

   

    The Senate also rejected by a vote of 41-59, an amendment (Amdt. 411) by Senator John McCain (R-AZ) that would have prohibited the use of Federal funds to construct ethanol blender pumps or ethanol storage facilities. RFA reacted to that defeat in a statement saying, "This vote signifies that an anti-ethanol wave in Congress isn't swelling, but rather that all this attention on ethanol was little more than political posturing. Lawmakers must now pivot to fact-based, comprehensive discussions about diversifying America's fuel markets and weakening the grip of OPEC and other nation's over our economy and energy security. American ethanol producers look forward to working in a constructive manner with lawmakers keeping an open mind about the future of American energy production. Renewable fuels like ethanol are the most effective tools we have today to reduce oil imports and prices at the pump."

    RFA issued a statement on the defeat of the McCain amendment saying, "This vote signifies that an anti-ethanol wave in Congress isn't swelling, but rather that all this attention on ethanol was little more than political posturing. Lawmakers must now pivot to fact-based, comprehensive discussions about diversifying America's fuel markets and weakening the grip of OPEC and other nation's over our economy and energy security. American ethanol producers look forward to working in a constructive manner with lawmakers keeping an open mind about the future of American energy production. Renewable fuels like ethanol are the most effective tools we have today to reduce oil imports and prices at the pump."

    On June 17, RFA issued a lengthy release entitled, "Senate Ethanol Debate: Peeling Away the Onion," attempting to explain the happenings in the Senate over the last several days. According to RFA, "For ethanol interests, the United States Senate was a cauldron of confusion this week. In rapid succession, the Senate voted to keep ethanol tax credits through the end of the year, to repeal those tax credits immediately, and then to allow federal funds to assist in the installation of ethanol refueling infrastructure like blender pumps. Pundits, ethanol advocates, and many others are now trying to make sense of what happened and where the debate goes from here."

 

    RFA President and CEO Bob Dinneen provides some insight into the votes this week and what it may or may not mean. The release indicates that the RFA "continues to support transitioning and transforming the current tax incentive and will work with lawmakers in both chambers to craft a policy that does so in a fiscally responsible and forward-looking manner to ensure America's ethanol industry continues to evolve." The posting concludes, "At the end of a crazy week, it is more clear than ever that the Senate needs and the public will demand a more thoughtful and comprehensive discussion about ethanol and energy policy. . . this week's political theatre did very little to provide answers. With a dose of common sense and the dogged commitment of Senators Klobachar, Thune, Grassley, Durbin and others, perhaps we'll have clarity soon."

 

    Julie Sibbing, director of the agriculture program for the National Wildlife Federation (NWF) praised the Congressional action and said, "With the tremendous success of Senators Coburn and Feinstein's amendment in the Senate to end the ethanol tax credit and Representative Flake's success in the House in prohibiting funding for special ethanol infrastructure, we are happy to see that Congress is finally willing to draw the line with regard to subsidizing the corn ethanol industry. This industry has been extremely damaging to the environment, causing increased soil erosion, water pollution, and loss of wildlife habitat. It is far beyond time to stop throwing money after conventional biofuels and to move on to launching the next generation of cleaner, greener bioenergy from native grasses and trees." 

    Access a release from Sen. Feinstein (click here). Access a release from Sen. Coburn (click here). Access the listing of the diverse coalition (click here). Access the White House press briefing containing Carney's response (click here). Access a release from RFA on the Feinstein amendment (click here). Access a release from AEC (click here). Access a release from RFA on the McCain amendment (click here). Access a release from NWF (click here). Access a release from RFA's Dinneen explaining the week's events (click here). Access an insider report from The Hill that attempts to explain vote reversal (click here). Access legislative details for S.782 including amendments and roll call votes (click here). [*Energy/Biofuels] (click here for information on getting the links and more information about eNewsUSA).

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