UpdateUS Senate defeats effort to kill corn ethanol subsidy

14 June 2011 21:21  [Source: ICIS news]

US Senate defeats subsidy kill bill(adds updates throughout)

WASHINGTON (ICIS)--The US Senate on Tuesday rejected an amendment that would have ended the $6bn (€4bn) annual taxpayer subsidy for corn ethanol, a move hailed by biofuel industry officials who also urged broader federal support for ethanol distribution.

In a procedural vote, the Senate turned back a bipartisan measure to kill the 45 cents/gal ethanol subsidy, formally known as the Volumetric Ethanol Excise Tax (VEETC), effective 1 July this year.

Along with a 54 cents/gal tariff on US imports of foreign ethanol, the ethanol use subsidy is scheduled to expire at the end of this year, unless extended by further congressional action.

Only 40 senators voted in support of the subsidy-killing measure, but 60 votes were needed to end debate on the amendment and move it forward for a vote on its merits.

The Renewable Fuels Association (RFA) welcomed the Senate vote, saying that the tally demonstrated that “there is a lack of appetite” in the Senate for ending federal support for corn-based ethanol.

Supporters of the subsidy-kill measure - including a number of environmental groups - had argued that federal taxpayer funding for corn ethanol was bad policy on economic, energy and environmental grounds.

But the subsidy is highly popular among corn-growing states of the US midwest, making it difficult for opponents of the subsidy to put together the 60 votes needed in the 100-seat Senate to advance controversial issues.

Corn is the predominant crop in seven midwestern states and is a major crop in six others, meaning that as many as 26 senators would be predisposed to defend federal programmes and subsidies that favour corn.

The subsidy kill bill apparently lost support as the vote neared because of another ethanol bill that drew some backers away.

That bill, the Ethanol Reform and Deficit Reduction Act (S-1185), would reduce the current ethanol consumption subsidy in order to shift federal tax incentives to retail gasoline vendors who install ethanol blender pumps.

The subsidy reform bill was introduced on Monday as support for the subsidy kill bill appeared to be growing. 

The authors of the proposed reform bill envision more than 50,000 blender pumps being installed nationwide through the diverted subsidy. That would make higher ethanol fuel blends more readily available to consumers - a chief goal of RFA and other biofuel advocates.

The ethanol subsidy reform bill also would extend current tax incentives for research and development work toward a hoped-for breakthrough for commercial production using non-food cellulosic feedstocks.

With Senate defeat of the subsidy kill bill, the RFA urged Congress to approve the reform measure and redirect federal tax support to downstream distribution infrastructure for ethanol.

That bill has yet to be scheduled for a Senate vote.

($1 = €0.69)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

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