Sens Amy Klobuchar (D-Minn.), John Thune (R-S.D.) and Dianne Feinstein (D-Calif.), reached a bi-partisan agreement to end the current ethanol tax incentive or VEET by July 31, while other ethanol-related tax credits would be extended for a limited time.
The idea is gaining traction and reaction. Deficit reduction and budgetary requirements are helping the cause. Under the proposed timeline, ending the 45 cent-per-gallon VEET would allocate about $1.33 billion to deficit reduction, while the rest would go toward infrastructure and cellulosic ethanol investments.
The trio sent a letter to leaders of both parties on Thursday outlining the compromise agreement and asking for “their assistance in moving it through Congress before we adjourn.” They did not ask that it be included in the deficit discussion, however, that’s the only bill that would likely move through on such a fast-pace timeline.
The House and the Obama administration would have to embrace the Senators’ compromise as well.
There is $2 billion left for ethanol subsides for this year, of which $1.3 could be applied to deficit reduction, with $668 million moved to clean energy, including cellulosic ethanol. It also would eliminate the tariff on imported ethanol.
This new deal comes a less than a month after the Senate voted 73 to 27 to repeal the ethanol subsidies, which cost about $5.4 billion annually. However, that amendment is attached to a bill renewing a federal economic development program, and its fate is uncertain. In fact, there’s strong believe that measure will die or fail.
The National Journal reports, Senate finance ranking member Chuck Grassley (R-Iowa), acknowledged the political realities on Thursday. “Considering a vote where we only had [27 senators] for continuing ethanol subsidy, anything we can do to build infrastructure we better be satisfied with and move ahead,” Grassley said.
Critics say ethanol subsidies are no longer needed for an industry that is already supported by a congressional requirement that refiners blend 36 billion gallons of biofuels into auto fuel by 2022.
As that criticism grew, Klobuchar and other farm-state members worked with the ethanol industry to find alternate ways to spur production without spending as much taxpayer money. "The better thing to do is to end it (VEET) now and go on a more prudent course going forward," Klobuchar says.
In response to Thursday’s developments, the Renewable Fuels Association stated, “This bipartisan effort to find common ground is the kind of sensible policy making American voters desperately want from their elected leaders…Walking away from investments made in America’s ethanol industry cold turkey would jeopardize the future of biofuel production in America, including stifling the progress of advanced and cellulosic ethanol technologies.
“A particularly important part of this agreement is the commitment to continue the evolution of the industry to new technologies and new feedstocks for cellulosic ethanol. We are pleased the agreement recognizes the importance of cellulosic ethanol by committing $305 million to this effort. However, we are concerned that capping cellulosic ethanol development sends the wrong signal and we will continue to work with the Congress and the Obama Administration to address this anomaly in as this process continues.”
“This is not the perfect compromise, but it does demonstrate the willingness of American ethanol producers and advocates to do their part to address budget concerns while not sacrificing the progress and evolution of the industry. I would challenge other industries to step up to the plate in the same manner. The status quo of American energy and tax policy simply won’t work.”
National Farmers Union President Roger Johnson issued the following statement regarding the Klobuchar, Thune and Feinstein agreement, citing the senators for “creating a sensible plan to reduce the deficit and continue investing in renewable fuel infrastructure. NFU has long maintained that such investments are necessary in order to ensure that ethanol is on a level playing field with oil and to provide consumers greater choice at the pump.
“The agreement also extends the tax credit for cellulosic biofuels through 2015, which is critical to ensuring long-term investments in the next generation of renewable fuels. We must make sure that next generation biofuels are properly funded so we can continue down the path of energy independence.”
He cited the need to reduce the deficit, “Agriculture, like other sectors, must do its part to help put our country back on sound financial footing. This is just one of many ways in which agriculture is helping to decrease the deficit.”
National Corn Growers Association President Bart Schott released the following statement in response to the bipartisan compromise, “NCGA is grateful to Senators Thune and Klobuchar for the hard work and dedication they have put in to reaching a final deal. There are many positive components of this compromise that are important to the ethanol industry and rural America. The final compromise reflects both the importance of the ethanol industry to achieve energy independence and the need for fiscal responsibility. The ethanol industry continues to have a positive impact on all parts of America, and we are committed to working with Congress on steps that can move the ethanol industry and the nation’s economy forward.
“At the same time, we call on Congress to level the playing field when it comes to energy policy. Unlike the oil and gas industries, ethanol has been proactively working to reform tax policy affecting the industry and secure a safety net while reducing the overall cost to the federal government.”