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Future of ethanol looks cloudy in Congress

Washington D.C. — The ethanol industry has had many friends in Congress over the years who have given it preferential treatment. But a key vote last week in the U.S. Senate suggests a tight federal budget is making those friends more scarce.

A subsidy known as the ethanol blender credit has drawn the ire of lawmakers. The credit gives oil companies 45 cents a gallon to blend ethanol with gasoline and adds up to more than $5 billion a year.

Senators voted 73-27 to eliminate that subsidy, although the underlying bill that amendment was attached to was filibustered and did not pass.

Ethanol supporters downplayed the vote and the amendment, which was sponsored by Sens. Tom Coburn (R-OK) and Dianne Feinstein (D-CA).

"Last week's activity in the Senate was little more than theater and it wasn't particularly good theater at that," said Matthew Hartwig, spokesman for the Renewable Fuels Association, one of three ethanol trade groups.

But ethanol critics, such as Sheila Karpf at the non-profit Environmental Working Group, were elated.

"I think it means that the ethanol lobby, their clout is waning and political support is wavering a little bit," Karpf said.

The ethanol industry said the tax credit helped make ethanol-blended fuels cheaper at the pump. Farmers and ethanol producers profited because of higher demand for the corn-based fuel.

WANING SUPPORT

Many in the industry saw the writing on the wall and supported an end to the tax credit, hoping that it could be phased out over several years.

For DFL Senator Amy Klobuchar, the industry's attitude is helpful as she negotiates with Coburn and Feinstein to retain some government support for the industry.

"I keep emphasizing to people, even people who aren't fans of biofuel, this industry has been willing to come up to the plate," Klobuchar said. "I'd love to see oil do this."

Klobuchar has co-sponsored a bill with Sen. John Thune (R-SD) to end the blender credit but instead give $1.5 billion worth of tax credits for ethanol infrastructure, such as gas stations that install pumps that can mix greater quantities of ethanol with gasoline.

Their legislation would also include more tax breaks for cellulosic ethanol made from switchgrass and other alternatives to corn. Klobuchar also said it could include assistance for gas stations that install electric car charging stations.

MinnPost - Cityscape: We're slaves to cheap gasoline

Every president since Richard Nixon has promised to wean us from our foreign-oil habit, but none has dared to do what needs to be done, which is, as columnist Thomas Friedman never tires of pointing out, to raise the gas tax to a level that would promote conservation and bring American lifestyles more in line with those in the rest of the advanced world. I used to think that a higher gas tax was a no-brainer. But since the onset of the economic troubles in 2008, I've come to appreciate the anxiety that rising gas prices bring. People feel as if their jobs and livelihoods are hanging by a thread and that employers are looking for any excuse (including higher gas prices) to cut the line. More than that, the fear is palpable that higher prices at the pump will drive higher prices for everything else while incomes continue to stagnate.

Then there's the fundamental truth about cheap gasoline. As pathetic as it sounds, it represents freedom. We have built this country on the enduring myth of the frontier. Cheap gas is our open range. It lets us drive where we want, when we want, and as much as we want. Even pious urbanists like me secretly enjoy the personal liberty that cheap gas provides. Cheap gas is so important to Americans that we're willing to lie for it and die for it. We deceive ourselves all the time about why we're involved in bloody foreign adventures in Iraq, Afghanistan and now Libya. If you drill that well deep enough, you'll find oil. It was our presence in Saudi Arabia that first drew the attention of Osama bin Laden and his murderous pack. We weren't in Saudi for the sunshine. Connecting these dots doesn't make for a flattering portrait of the American consumer; the oil companies have us where they want us, and we're eternally grateful for it. We pay just enough at the pump to earn them ridiculous profits, but not enough to break our habit. There's no talk in Congress about weaning us; there's talk only of finding a bigger spigot to keep us happy. State and federal gasoline taxes at current levels won't be able to sustain the maintenance and new construction of major roadways for much longer. Transportation finance experts are exploring a shift to mileage-based fees for a number of reasons. One is that hybrid vehicles and other mpg advances are lowering revenue yields. Efficient vehicles add to road damage and congestion yet don't pay their fair share of upkeep and expansion.

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