US bio-ethanol sector warns against Senate vote to kill subsidy

14 June 2011 17:32  [Source: ICIS news]

WASHINGTON (ICIS)--US bio-ethanol industry officials on Tuesday warned that an impending US Senate vote to kill the corn ethanol tax subsidy would destabilise the nation’s biofuels industry and jeopardise hoped-for development of cellulosic ethanol.

Corn ethanol interests have been scrambling since last week to build opposition to a Senate vote that would end a 30-year federal tax subsidy for refiners’ use of the biofuel in US blended gasolines.

A bipartisan measure cosponsored by Senators Tom Coburn (Republican-Oklahoma) and Dianne Feinstein (Democrat-California) to kill the ethanol subsidy is attached as an amendment to a larger bill, the Economic Development Revitalization Act, that is pending in the Senate.

In a Senate floor vote expected later on Tuesday, senators are to decide whether to end debate on the Coburn-Feinstein amendment and attach it to the larger bill - or reject the subsidy-killing measure.

If approved, the amendment would end the 45 cents/gal subsidy, formally known as the Volumetric Ethanol Excise Tax (VEETC), on 1 July this year. It also would revoke a 54 cents/gal tariff on US imports of foreign bio-ethanol.

Coburn, Feinstein and others in Congress argue that the ethanol subsidy “is bad economic policy, bad energy policy and bad environmental policy”.

Eliminating the subsidy would save taxpayers some $6bn (€4bn) annually.

Coburn has the support of a number of environmental groups who argue that the subsidy is a waste of taxpayer funds because corn ethanol offers no real environmental benefit when the energy and emissions involved in producing it are counted.

But Bob Dinneen, president of ethanol trade group Renewable Fuels Association (RFA), charged that killing the ethanol subsidy would be unfair at a time when other tax breaks benefit US petroleum production and conventional gasoline refining.

He warned that killing the ethanol subsidy would amount to “pulling the rug out from under a still maturing industry”.

Industry observers suggest that the US corn ethanol sector could collapse without the federal subsidy, which is paid to refiners for every gallon of ethanol they blend into the nation’s fuel supplies.

Dinneen’s group and the Advanced Ethanol Council (AEC) also argued that killing the subsidy would jeopardise research and development work toward a hoped-for breakthrough in commercial production of non-feed cellulosic feedstocks for ethanol.

($1 = €0.69)

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By: Joe Kamalick
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