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Senators Strike Ethanol Subsidy Deal Senators Strike Ethanol Subsidy Deal

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Homepage / ENERGY

Senators Strike Ethanol Subsidy Deal

Sen. John Thune, R-S.D.(Chip Somodevilla/Getty Images)

photo of Amy Harder
July 7, 2011

The ethanol industry might be hanging by a thread after a bipartisan trio of senators reached a deal Thursday reforming federal support of biofuels. The most obvious legislative vehicle for the package is the deficit package, but its inclusion there remains unclear as the broader talks remain deadlocked over tax increases.

The senators, Republican Policy Committee Chairman John Thune, R-S.D., Amy Klobuchar, D-Minn., and Dianne Feinstein, D-Calif., sent a letter on Thursday to leaders in both parties alerting them to the deal, which would go into effect at the beginning of August, and asking for “their assistance in moving this agreement through Congress before we adjourn.” They fell short of requesting that it be part of the deficit talks, even though that’s the only potential bill that may move through Congress and get President Obama’s signature anytime soon.

“I think it’s the only vehicle for it,” Feinstein said. “This has to move quickly because it’s effective August 1 and I don’t know any other way.” The longer they wait, the less money there will be to put toward deficit reduction or anything else.

 

The compromise would divert two-thirds of the remaining $2 billion of ethanol subsidies from this year to deficit reduction and the rest to clean-energy technologies. That amounts to $1.33 billion going toward the deficit and $668 million to clean energy, including cellulosic ethanol. It would eliminate the subsidy that goes mainly toward the corn-ethanol industry and the tariff on imported ethanol. That represents a major blow to a sector that has had a powerful grip on the Senate, given the influence of farm-state constituents in most presidential elections.

While the deal is a symbolic victory for the trio of senators and the biofuels industry, it still gives significantly less support to the biofuels industry than an earlier measure introduced by Finance ranking member Chuck Grassley, R-Iowa. That’s a sign the politics of the deficit are trumping even farm-state politics. The deal comes a little less than a month after the Senate voted 73-27 to repeal the subsidies, which cost about $5.4 billion a year.

Grassley, whose state produces the most ethanol in the country, acknowledged the political realities on Thursday.

“Considering a vote where we only had [27 senators] for continuing ethanol subsidy, anything we can do to build infrastructure we better be satisfied with and move ahead,” Grassley said. Grassley was among that small portion of members who voted to keep the subsidies.

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