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Ethanol tax credit to end

By Staff | Jul 8, 2011

WASHINGTON – Senate negotiators on Thursday announced a final deal that ends a 45-cent-per-gallon tax credit for ethanol by the month’s end. The measure now goes to the House of Representatives, where the nation’s formidable farm lobby is expected to fight to keep its major provisions intact.

Under the Senate compromise, the ethanol tax credit now goes off the books on July 31 instead of Dec. 31. But instead of using roughly $2 billion that would have gone to ethanol refineries during those five months entirely for deficit reduction, the Senate bill allocates $1.3 billion to deficit reduction and uses $668 million to pay for service station blender pumps that distribute ethanol, ethanol storage tanks, plug-ins for electric cars, natural gas development and efforts to produce ethanol from sources other than corn.

For ethanol plants and the corn growers who stock them, the news was disappointing but not unexpected, given a recent overwhelming Senate vote to immediately end the 45-cent-per-gallon credit. The announcement of the compromise included statements of support from the Minnesota Farm Bureau and the Minnesota Farmers Union.

Brian Jennings of the American Coalition for Ethanol called the deal “the art of the possible.”

Sen. Amy Klobuchar, D-Minn., co-authored three other pieces of legislation that aimed to phase out the credit over four or five years. That will not happen.

Also, the $668 million going to pay for blender pumps and other renewable fuel efforts is $300 million less than what Klobuchar sought.

“We had $1 billion going for deficit reduction (and $1 billion going for renewable energy initiatives),” Klobuchar told the Star Tribune on Thursday. The compromise represents what Klobuchar called “shared sacrifice.”

“Do I think we’re going to have to explain it to people?” Klobuchar asked. “Yes, because it was so complicated. But was that a reason to walk away from it and just let the tax credit end? No. It was the best thing to do for our state and for our country.”

Klobuchar said the ethanol industry’s willingness to give up its subsidies should serve as an example for other energy industries, especially the petroleum industry, whose tax subsidies dwarf ethanol’s.

“I hope this puts tremendous pressure on the oil industry,” Klobuchar said. “You have a relatively small industry like biofuels putting two-thirds of its remaining tax breaks on the table (for deficit reduction). Why doesn’t oil do that with its tax breaks as well?”


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