Friday, June 17, 2011

Senate ethanol vote: symbolic or something more?

Two days after rejecting US Sen. Thomas A. Coburn’s (R-Okla.) amendment aimed at ending federal fuel ethanol subsidies, the Senate adopted one proposed by Dianne Feinstein (D-Calif.) and Coburn which would phase the tax credit out by 73 to 27 votes. The June 16 vote was more symbolic than significant since the bill which was involved won’t likely to become law. But it happened nevertheless.

There were few surprises in this vote. Members from agricultural states voted against it, just as members from oil and gas producing states oppose efforts to end federal tax provisions which that industry considers necessary for its economic well-being. “We should be having this debate in the context of a comprehensive energy plan,” Charles E. Grassley (R-Iowa), a member of the Agriculture, Nutrition and Forestry Committee, said during floor debate.

“Nearly every type of energy gets some market-distorting subsidy from the federal government,” he continued. “An honest energy debate should include ethanol, oil, natural gas, hydropower, wind, solar, biomass, and probably a lot of other alternative energies I don’t think of right now. By discussing it in the context of an overall energy policy instead of singling out ethanol right now, we would then be able to make sure we have a level playing field for all forms of energy because the government shouldn’t be choosing between petroleum and alternative energy, as an example.”

But Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) said that while he preferred to let the subsidy expire at the end of 2011 instead of ending it immediately, he voted for the amendment to make clear that he wants the 2004 Volumetric Ethanol Excise Tax Credit to end. Refiners who blend ethanol into gasoline, not ethanol producers, claim the 45¢ credit for each gallon of ethanol they blend into gasoline, he explained. It costs the federal government an estimated $5-6 billion/year in taxes, he added. Many people consider the 2005 and 2007 federal renewable fuel standards more effective tools in increasing domestic ethanol production, Bingaman said.

Ethanol advocacy groups quickly pointed out that the Senate also defeated an amendment proposed by John McCain (R-Ariz.) to prevent federal investment in ethanol blending pumps or storage facilities by 59 to 41 votes. “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,” the Renewable Fuels Association said in a June 16 statement. “Lawmakers must now pivot to fact-based, comprehensive discussions about diversifying America’s fuel markets and weakening the grip of OPEC and other nations over our economy and energy security.”

Oil and gas industry associations did not issue formal comments, probably because they were preoccupied with trying to increase access to federally-controlled domestic resources or trying to get the US Department of State to make a decision about the Keystone XL crude oil pipeline project’s cross-border permit. But they also couldn’t have missed that several supporters of the Feinstein-Coburn ethanol amendment said during floor debate that it’s also time to end federal tax incentives for oil and gas.


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