Senators introduce bills to repeal, modify blenders credit

By Kris Bevill | March 10, 2011

Congress lobbed its latest jab at the ethanol industry March 9 when two Republican senators introduced legislation which, if passed, would immediately repeal the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit, commonly referred to as the blenders credit. The bill was introduced by Sens. Tom Coburn, R-Okla., and Ben Cardin, D-Md., who said repealing the “costly and ineffective” credit would reduce the annual national budget by $6 billion.

“The ethanol tax credit is bad economic policy, bad energy policy and bad environmental policy,” Coburn stated. “I’m hopeful my colleagues on both sides of the aisle will take a stand against business-as-usual special interest giveaways and eliminate this wastefuel and harmful subsidy.”

Cardin said eliminating the blenders credit should be part of an attempt to balance the federal budget, equating the blenders credit with calls to eliminate oil subsidies. “Cutting yet another subsidy to big oil that is making big profits is smart policy,” he said. “Rather than underwriting ethanol subsidies that are causing food prices to skyrocket, we should be supporting American innovation in more sustainable alternative fuels the results of which will help create jobs, lower energy costs and strengthen our national security.”

The Renewable Fuels Association and Growth Energy immediately responded to the bill’s introduction by pointing out that ethanol plays a key role in reducing the United States’ dependency on foreign oil. Both groups called upon senators to focus their efforts on reforming subsidies provided directly to the oil industry. “If recharging our economy is a top fiscal and economic priority for these senators then Job One should be redirecting the $1 billion a day we spend on foreign oil back into the U.S. economy,” RFA President and CEO Bob Dinneen stated. “Ethanol is part of the solution, not the problem.”

Anti-ethanol groups heralded the Coburn-Cardin proposal, however, citing a recent Congressional Budget Office report that found the blenders credit is unnecessary as reason to eliminate the subsidy. A coalition of 34 groups sent a letter to the senators, claiming that rescinding the blenders credit immediately would save taxpayers $4 billion this year.

Sen. Dianne Feinstein, D-Calif., presented another option for blenders credit reform on March 9. Her bill would immediately repeal the blenders credit for corn ethanol and reduce the 54-cent-per-gallon import tariff on ethanol to 45 cents. Feinstein’s proposal would allow advanced biofuels to continue to qualify for the 45-cent blenders credit. “By lowering the import tariff to match the non-corn ethanol credit, we allow refiners to purchase cheaper, environmentally friendly ethanol from foreign sources while at the same time preventing foreign producers from benefitting from U.S. subsidies,” Feinstein stated.

Growth Energy said the ethanol industry is committed to reforming and reducing the cost of current tax programs, but the group does not support Feinstein’s proposal. “This does nothing to help our nation reduce its dependence on foreign oil,” Growth Energy CEO Tom Buis stated. “The U.S. ethanol industry produces the equivalent of a million barrels of oil a day and we are the second largest supplier of fuel to our nation. The production of first generation biofuels is today’s fuel that can help our nation reduce its dependence on foreign oil, create jobs here in America and improve our environment.”