Iowa, national ethanol groups respond to Coburn-Feinstein

BY EDDIE KIRSCH | JUNE 23, 2011 7:20 AM

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U.S. senators boast eliminating ethanol subsidies would save $3 billion — but not all parties are thrilled.

The reactions come after a 73-27 Senate vote in favor of the Coburn-Feinstein amendment — which would remove a 45-cent-per-gallon tax subsidy for ethanol and a 54-cent-per-gallon ethanol-import tariff.

“Today’s vote was a major victory for taxpayers and a positive step toward a serious deficit-reduction agreement, which is our only hope of averting a debt crisis …” Sen. Tom Coburn, R-Okla, said last week. “In light of today’s lopsided vote, I urge my colleagues in the House to eliminate this wasteful earmark and tariff at their earliest opportunity.”

However, Alexandra Krasov, the communications director for Rep. Bruce Braley, D-Iowa, said an amendment that has to do with appropriating funds must actually start in the House and then move to the Senate. Therefore, there is little chance that the amendment will pass.

“People are [voting for the amendment] for political reason,” she said. “People are trying to get a cut by their name.”

However, a statement released by Iowa Corn indicates there may be a compromise that will reduce ethanol tax credits.

“Feinstein will likely work on a compromise with Sens. John Thune, R-S.D., and Amy Klobuchar, D-Minn., who would like to reduce ethanol tax credits using a variable Volumetric Ethanol Excise Tax Credit,” the statement said.

Monte Shaw, the executive director of the Iowa Renewable Fuels Association, said his group is not against a discussion about U.S. fuel policy as long as other energy sources, such as petroleum, are on the table as well.

“You think that the most profitable industry in the history of the world would be able to stand on its own two feet,” Shaw said. “ What we would like is a truly free market in which the consumers can choose whatever fuel they want.”

Shaw said the vote on the Coburn Amendment, in tandem with a vote that rejected an amendment put forth by Sen. John McCain, R-Ariz., to end federal funding for installation of ethanol pumps and storage tanks, signals that the Senate wants to rethink the ethanol program, not remove it.

“It’s clear that they don’t want to just walk away from ethanol,” Shaw said. “There is a desire to reform ethanol policy, but hopefully, to bring more choice to consumers.”

Krasov said ethanol brings the cost of gas down by 80 cents per gallon.

“If gas is 80 cents higher than it is now, we are talking about completely unsustainable levels,” she said.

And any increase in gas has a further effect on other economies, Krasov said. Fuel factors into transportation costs, which means higher costs for goods such as food.

“Food on the grocery shelves doesn’t magically appear,” she said. “They have to be carried in by trucks.”

Jon Dogget, the vice president of public policy for the National Corn Growers Association, said it is difficult to speculate about how dependent the ethanol industry in on the subsidy. However, it is likely that the most inefficiently run plants would be hit the hardest.

“Ethanol plants are like any other business,” Dogget said. “It would depend on the particular situation and the particular plant.”

He said that although the Coburn-Feinstein amendment may not be realized, it may be the start of a larger debate.

“We have a whole new Congress because of the deficit and because of the election,” Doggett said. “This country is having an existential discussion about the role of the federal government in numerous industries. This is the beginning of a very serious discussion we are going to have.”

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