The Ethanol Subsidy Debate (Update)

 Original post 12/5 ---Updated 12/6, 12/7, 12/8, 12/9, 12/10, 12/13, 12/14

As expected, the ethanol subsidy is under attack in Congress as the end-of-year expiration date for tax credits and import tariffs approaches.

Earlier this week, a bipartisan group of 17 senators sent a letter to Congressional leaders calling for an end to both. The group argued that the tax credit is not needed since the Renewable Fuels Standard (a provision of the US Energy Policy Act of 2005) mandates the production of nearly 14 billion gallons of ethanol in 2011. The senators also said they believe the tariff discourages ethanol imports from sugar-producing countries and instead increases petroleum imports from OPEC countries that enter the United States tariff-free, making the U.S. more dependent on foreign oil rather than less as the domestic ethanol supporters maintain.

Senate Budget Chairman Kent Conrad, D-N.D., and Senate Finance Committee ranking member Charles Grassley, R-Iowa quickly responded with a letter of their own defending both the tax credit and the import tariff. The two senators argued that, in light of the $730 million currently spent per day by the U.S. on imported petroleum, it would be imprudent to neglect the only alternative available to foreign oil. Their letter also cited the unemployment likely to occur within the ethanol industy without continued government support.

A compromise was proposed later in the week by Max Baucus, R-Mont., chairman of the Senate Budget Committee, who introduced a bill that would extend the tax credits for a year but reduce the level of the credits from the current 45 cents a gallon to 36 cents a gallon. In addition, the Baucus proposal would extend the 54-cent tariff through 2011. The provisions are part of a larger bill that includes incentives for wind and solar power and other alternative energy technology.

A vote on the matter is likely before the holiday recess, but, of course, there's political hay to be made before the ethanol football is put back on the shelf. Stay tuned.

UPDATES

12/6

Senate Blocks Baucus Bill That Would Extend Tax Cuts For Renewable Energy Development http://nawindpower.com/e107_plugins/content/content.php?content.6988

Bipartisan Groups Want to End Ethanol Subsidy and Save Taxpayers Billions http://www.reuters.com/article/idUS282059664620101206?pageNumber=1

Ethanol Declines After Senate Rejects Bill to Extend Tax Credits
http://www.bloomberg.com/news/2010-12-06/ethanol-declines-after-senate-rejects-bill-to-extend-tax-credits.html

Lame-duck deliberations may include VEETC
http://www.ethanolproducer.com/takingstalk/post.jsp?blogPostID=112

12/7

Federal ethanol, biodiesel credits extended
http://www.siouxcityjournal.com/business/energy/article_1205c376-022a-11e0-886e-001cc4c002e0.html

Tax deal includes ethanol, biodiesel credits
http://www.agriculture.com/news/policy/tax-deal-includes-ethol-biodiesel_4-ar12652

Grassley: Tax deal includes biofuel subsidies
http://blogs.desmoinesregister.com/dmr/index.php/2010/12/07/tax-deal-includes-biofuel-subsidies/

12/8

U.S. ethanol subsidy part of tax deal: trade group
http://www.reuters.com/article/idUSTRE6B74PU20101208

Brazilian lobby threatens trade war over US ethanol tariff
http://www.brighterenergy.org/20481/news/bioenergy/brazilian-sugarcane-firms-threaten-trade-war-over-ethanol-tariff/

No decision yet on ethanol subsidy rate: Sen. Conrad
http://www.reuters.com/article/idUSTRE6B75JV20101208

Wasting tax dollars on ethanol
http://www.washingtonpost.com/wp-dyn/content/article/2010/12/08/AR2010120805821.html

Good energy subsidies, and bad
http://www.nytimes.com/2010/12/09/opinion/09thu3.html?src=twrhp

12/9

Tax Bill to Extend Ethanol Subsidy
http://www.nacsonline.com/NACS/News/Daily/Pages/ND1209101.aspx

Ethanol subsidy deal may come Thursday: trade group
http://uk.reuters.com/article/idUKTRE6B74PU20101209

Senators: Ethanol credits are extended in tax deal
http://thehill.com/blogs/e2-wire/677-e2-wire/132895-senators-ethanol-credits-extended-in-tax-package

Senators add ethanol credit to tax bill
http://www.politico.com/news/stories/1210/46191.html

Lower rate for ethanol credit likely
http://www.agriculture.com/news/lower-rate-f-ethol-credit-likely_1-ar12682

2nd UPDATE: Sen Feinstein: Ethanol Tax Credit Included In Tax Compromise

http://in.advfn.com/news_2nd-UPDATE-Sen-Feinstein-Ethanol-Tax-Credit-Included-In-Tax-Compromise_45594523.html

12/10

Grassley: Deal struck to extend ethanol subsidy

http://www.desmoinesregister.com/article/20101210/BUSINESS01/12100334/1001/NEWS/Grassley-Deal-struck-to-extend-ethanol-subsidy

Senate tax bill extends ethanol credit, tariff

http://www.reuters.com/article/idUSTRE6B74PU20101210

Time for Congress to end its ethanol addiction
http://thehill.com/blogs/congress-blog/politics/133145-time-for-congress-to-end-its-ethanol-addiction

12/13

Subsidy fight may be tougher in '11
http://www.desmoinesregister.com/article/20101211/BUSINESS01/12110316/1029/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+desmoinesregister%2FBusiness+(DesMoinesRegister.com+-+BUSINESS)&utm_content=Google+Reader

12/14

Sen. Grassley defends ethanol tax credit
http://domesticfuel.com/2010/12/14/sen-grassley-defends-ethanol-tax-credit/