Senate votes against VEETC, supports blender pump spending

By Kris Bevill | June 16, 2011

The U.S. Senate held its second vote of the week on an amendment to repeal the 45-cent-per-gallon Volumetric Ethanol Excise Tax Credit and the 54-cent ethanol import tariff on June 16, this time approving the measure by a vote of 73-27. Senators defeated an identical amendment earlier in the week in response to the political process used one of the amendment’s authors, Tom Coburn, R-Okla., in order to bring the amendment to vote. Co-author Dianne Feinstein, D-Calif., stated prior to the initial vote that she expected it to fail merely because of the procedure used to bring it to the floor and said she believed there would be enough votes to pass it otherwise. Her prediction proved true, to the disappointment of ethanol industry representatives, who quickly brushed off the loss as insignificant and said the amendment has little chance of becoming law.

“We are disappointed in the shortsightedness of this vote, particularly as this same body voted less than one month ago to preserve billions of dollars in taxpayer handouts to the oil industry,” the Renewable Fuels Association said in a statement. “As the underlying bill to which this amendment is attached is unlikely to make it to the president’s desk, this vote was a freebie with no real consequences.”

American Coalition for Ethanol Executive Vice President Brian Jennings said the Senate’s decision is disappointing even though the bill containing the amendment has “no chance” of being passed by the House of Representatives. “We are disappointed senators are willing to reward Big Oil for shamelessly hoarding subsidies, but are willing to penalize the biofuels industry, especially when we’ve voluntarily offered to sacrifice part of the existing tax credit for deficit reduction,” he stated.

Growth Energy also touched on the hypocrisy of retaining petroleum subsidies while slashing ethanol subsidies in its reaction to the Senate’s vote. “The Senate missed an enormous opportunity to take real action on deficit reduction and energy policy when it failed to put oil subsidies and giveaways to the same test as ethanol,” CEO Tom Buis said. “Instead, senators turned a blind eye to the hidden costs of oil, and chose to waste time on an amendment that can be tossed out on constitutional test.”

Senators debated the amendment for much of the day prior to the vote. Ben Cardin, D-Md., credited the poultry industry in his state for alerting him to issues related to ethanol production and blamed ethanol for rising food costs. He also said he believes the repeal of VEETC will do nothing to impact consumption because the renewable fuel standard will still be in place to mandate ethanol’s use. “It does not make sense to continue giving billions of dollars to a robust and thriving industry that the American consumers do not see the benefit of,” he stated. Tom Harkin, D-Iowa, and Dan Coats, R-Ind., delivered passionate statements in defense of ethanol, pointing to its role in displacing foreign oil and creating jobs as reasons to continue to support it. However, they agreed that the program is in need of reform.

Feinstein said she understands why Midwestern senators support ethanol and reiterated her willingness to work with pro-ethanol senators to reach compromise. “I give you my word that we will continue to try to see if we can bring both sides together,” she said. “This has become far harder than I had anticipated. We are relatively close to a compromise. Whether Sen. Coburn will accept it or not, I don’t know, but I know these discussions are ongoing and all I can do is pledge you my best effort to try to get something that satisfies everybody.”

Secretary of Agriculture Tom Vilsack condemned the Senate for voting against a measure of support for biofuels, which he said play a key role in the Obama administration’s goal of reducing oil imports by one-third by 2025. “The administration supports efforts currently underway in the Senate to reform and modernize tax incentives and other programs that support biofuels,” he said in a statement. “However, today’s amendments are not reforms and are ill advised. We need reforms and a smarter biofuels program, but simply cutting off support for the industry isn’t the right approach.”

Some analysts have stated the only true beneficiaries of VEETC are corn growers. The National Corn Growers Association said it was severely disappointed in the Senate vote over VEETC and said politics were allowed to get in the way of policy. “Today the Senate voted against rural America and domestic, renewable energy, and in favor of more foreign oil,” NCGA President Bart Schott said. “Sen. Feinstein has unfairly hit at the heart of an important agricultural industry while remaining unified with subsidy-laden Big Oil.”

Immediately following the VEETC vote, the Senate voted on an amendment introduced by John McCain, R-Ariz., to bar federal funds from being used for blender pump infrastructure. Prior to the vote, McCain took the floor to ask his colleagues for support, stating that $20 billion could be saved by approving his amendment. “It’s time to say enough is enough,” he said. “This industry has been collecting corporate welfare for far too long. Lobbyists now want American tax payers to pay for the construction of pumps and holding tanks at retail fueling stations.”

Other senators didn’t appear to feel as strongly about the cost of blender pump support, defeating McCain’s amendment by a vote of 59-41. The McCain amendment was also introduced to the Economic Development Act so would also have been unlikely to become law if approved, but the vote was significant in that it offered the first look at the level of support for biofuels infrastructure in the Senate. The ethanol industry is currently working feverishly to rally support for a bill introduced by Sens. John Thune, R-S.D., and Amy Klobuchar, D-Minn., which would reduce VEETC in exchange for infrastructure funding, and ethanol groups said today’s vote shows support for that option. “It’s a positive sign the Senate is willing to support blender pumps to ensure consumer fuel choice,” Jennings said. “We are reasonably confident that the final reform package will include incentives for blender pumps.”

“This vote signifies that an anti-ethanol wave in Congress isn’t swelling, but rather that all this attention on ethanol was little more than political posturing,” the RFA stated, noting that the House of Representatives passed a bill including a provision to ban the USDA from funding biofuels infrastructure, but said the bill will likely not pass the Senate. “It remains our hope that lawmakers on both sides of the Capitol will now take up a serious conversation about American energy policy,” the group stated. “Any discussion must include domestically produced renewable fuels like ethanol.”

Any discussion about energy policy will also have to include oil companies, and they have expressed dissatisfaction with the Senate’s vote regarding blender pump funding. The National Petrochemical & Refiners Association called the vote a missed opportunity and said the expansion of blender pumps could lead to increased instances of misfueling with E15. “This could lead to engine damage in many of the cars on the road today, as well as damage to the engines of boats, chain saws and lawnmowers,” the NPRA stated. “Funding blender pump construction will only increase the probability of harm to consumer safety, vehicles and engines.”

There is no doubt that the petroleum and ethanol industries will be equally busy in Washington in the coming weeks as they prepare for a vote on the Thune-Klobuchar bill. It is unclear when a vote can be expected, but the bill proposes reducing VEETC beginning July 1.