Ethanol foes in Washington prepare another strike

Sen. Chuck Grassley is facing a major showdown with Senate colleagues who want to end the ethanol tax break he has long championed.

Sens. Tom Coburn, R-Okla., and Ben Cardin, D-Md., hope to scrap the 45-cents-per-gallon credit that refiners and fuel blenders receive for each gallon of ethanol they purchase and mix into gasoline. The subsidy costs the federal government $6 billion a year, and Coburn and Cardin want to end it through an amendment to a small business bill the Senate will debate this week.

“The ethanol tax credit is bad economic policy, bad energy policy and bad environmental policy,” Coburn said.

But to Robert Petersen, who grows corn on 450 acres near Walcott, federal subsidies to the ethanol industry have helped support the price of corn and other grains.

“I know there are some who are unfriendly to ethanol, but they don't live in rural areas,” he said.

Support on Capitol Hill for ethanol is weakening as environmentalists have become increasingly critical of this renewable fuel and budget hawks look for ways to save tax dollars.

Sentiment against ethanol is so high that Grassley said he doesn't want to force his Senate colleagues to take sides on the issue right now.

“This needs to come up at a time we're discussing energy ... and we can make sure ethanol continues to be viable,” he said.

The ethanol tax credit was due to expire at the end of 2010, and Grassley fought hard to have it renewed for another year.

He said he's going to try to persuade Coburn to drop his effort to end the credit before then. If that doesn't work, Grassley plans to resort to a parliamentary tactic that would require 60 votes for Coburn's legislation to pass.

Grassley said he believes Coburn has only 55 votes in the 100-member Senate.

But other lawmakers are targeting ethanol, too.

Sen. Barbara Feinstein, D-Calif., has renewed a campaign she began in the last Congress to eliminate the tax break. She said it isn't needed because ethanol benefits from a “triple crown” of government protection.

“It is mandated by law, it is protected by tariffs and companies are paid by the federal government to use it,” she said.

But Renewable Fuel Association spokesman Matt Hartwig said the anti-ethanol coalition is not concerned about taxpayers, but rather has a vested interest in an end to ethanol.

Hartwig said the coalition includes oil companies, big livestock producers like Tyson's and Smithfield who compete with ethanol for feed corn, food manufacturers and environmentalists who once championed the biofuel.

Tea Party supporters also have joined the group as they put all government subsidies “under a microscope,” Hartwig said.

But the end of the tax break would have a great impact on Iowa, home to 41 ethanol refineries that produce nearly 3.7 billion gallons of fuel each year.

Hartwig said a fuel association study conducted last year determined that elimination of the ethanol tax break would force two out of every five ethanol refineries to close.

He called efforts to eliminate the ethanol credit “frivolous and shortsighted.”

“If Senator Coburn is truly crusading against wasteful government spending, he would introduce an amendment to end oil subsidies. Let's have a discussion about all subsidies,” Hartwig said.

One indication that it may be politically impossible to keep protecting the tax credit is that the ethanol industry is willing to renegotiate it.

“We're absolutely open to transforming the tax incentive,” Hartwig said.

Others also are open to compromise.

Jessie McKinney, spokeswoman for Archer Daniels Midland, which has ethanol refining facilities in Cedar Rapids and Clinton, said the ethanol tax credit has helped the industry grow.

“But with the (tax credit) expiring at the end of the year, we are working with Congress and the administration to help develop strategies for next year and beyond,” McKinney said. “There are many ideas on the table, and we support a vigorous debate and review of all options.”

-By Ana Radelat, Capitol News Connection