Tags: Ethanol | subsidy

Analysis: Ethanol's Clout in US Govt to Ensure Subsidy Deal

Monday, 20 Jun 2011 05:56 PM

 

  Comment  |
   Contact  |
  Print  
|  A   A  
  Copy Shortlink
WASHINGTON — Big Ethanol has enough clout in Congress and in the Obama administration to keep growing with U.S. government support, even though decades of large tax credits may be winding down.

Amid pressure to cut yawning U.S. deficit and debt, the Senate voted overwhelmingly late last week to repeal subsidies for the ethanol industry, first won in 1978, that now cost tax payers about $6 billion a year.

With Capitol Hill's focus on austerity and recent high prices for corn, the main feedstock for U.S. ethanol, being blamed by some for helping to boost food prices, the biofuel's subsidies are now under the microscope like never before.

Calls to reduce the subsidies could increase, as lawmakers try to reach a debt-reduction deal by July 1. But, that does not mean the industry will be abandoned by government.

"We're not going to go cold turkey," predicted Dan Glickman, U.S. agriculture secretary during the Clinton era.

"The subsidies will be phased down, but not eliminated."

Ethanol, which is produced in 28 states and provides 400,000 jobs, is too entrenched in the U.S. economy to be left without government help, he added.

The Senate's vote was mostly symbolic, as it was attached to a bill that does not have companion legislation in the House.

Sen. Diane Feinstein, the California Democrat who sponsored the bill, is working with Sens. Amy Klobuchar, a Minnesota Democrat, and John Thune, a South Dakota Republican, on a compromise measure that would phase down subsidies for ethanol, rather than cut them altogether.

"There's sufficient interest and support in the Senate to prevent the complete repeal of ethanol subsidies," said Byron Dorgan, a former senator from North Dakota and a co-chair of the Bipartisan Policy Center's Energy Project.

Senate Democrats up for reelection next year in ethanol producing states could feel pressure to work out some kind of legislative deal.

"The room for compromise is very much there," said Kevin Book, an analyst at ClearView Energy Partners in Washington.

Glickman pointed to the country's failure to develop anything besides ethanol as oil's prime alternative as another key reason why Congress and the Obama administration will work to ensure biofuels get some sort of subsidies. They could come in the shape of incentives for infrastructure to help ethanol get to market.

Biofuels have long been part of President Barack Obama's plan to start weaning the country off imports of foreign oil. The White House issued a statement after the vote, saying it was against full repeal of the subsidies, indicating it could use veto power if the measure advances in Congress.

The industry has signaled it supports moving from an outright 45-cent tax credit that blenders get for mixing every gallon of ethanol into the country's gasoline toward support for infrastructure to get the fuel to consumers.

Such support could come in the form of subsidies for advanced pumps at filling stations, loan aid for pipelines, or assistance for farmers to grow, store and transport advanced non-corn feedstocks. The so-called blender pumps could help push more ethanol to market after the government recently approved E15, gasoline with 15 percent ethanol, for newer vehicles.

"Market access is number one," Jeff Broin, CEO of privately held POET, the largest ethanol maker in the world, told Reuters.

POET is a member of Growth Energy, which has pushed for trading blenders' credits and for breaks on infrastructure.

Infrastructure improvements could also benefit large agriculture company Archer Daniels Midland , oil refiner Valero Energy Corp, and ethanol pure plays like Green Plains Renewables .

There are also moves to reduce the blenders' credit and tie it to the price of crude oil. In a bill sponsored by Senator Charles Grassley, the blenders' credit would be linked to the price of oil by 2013. It would be wiped out when crude oil trades above $90 a barrel, but blenders would get as much as 24 cents a gallon if it fell to $50 a barrel.

"These are serious ongoing negotiations," said Klobuchar. "We know that there is support for phasing out the current ethanol tax credits, the question is when and how."


© 2014 Thomson/Reuters. All rights reserved.

  Comment  |
   Contact  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

GOP's Tom Cotton Thanks Troops for Sacrifices on Thanksgiving Day

Thursday, 27 Nov 2014 09:22 AM

Senator-elect Tom Cotton delivered the GOP's weekly address on Thanksgiving Day, thanking the military for its sacrifice . . .

Gallup: Only 27% of Working-Class Whites Support Obama

Thursday, 27 Nov 2014 08:33 AM

And 41 percent of white college graduates approve of President Obama's job performance , the largest gap between working . . .

East Coast Storm Hampers Thanksgiving Travel

Thursday, 27 Nov 2014 08:06 AM

A blast of rain and snow along the East Coast snarled traffic and disrupted flights for millions of Americans at the sta . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved