Ethanol deal would end subsidies

Ed Tibbetts of the Quad-City Times reports on an apparent deal to end ethanol subsidies as we know them:

Key lawmakers in the U.S. Senate said today they have reached an agreement to end two major ethanol supports by the end of the month but devote nearly $700 million to helping to develop next-generation biofuels.

The lawmakers praised the deal, saying it would cut the deficit and lower dependence on foreign oil. A major renewable fuels group, however, said although the deal represented a model of bipartisan cooperation, it expressed concerns about capping support for cellulosic ethanol.

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The bipartisan deal announced this morning would end the 45-cent-a-gallon credit that goes to blenders using ethanol by the end of July. It also would end the 54-cent-a-gallon fee levied on imported ethanol on July 31. That will be a boon to Brazil's ethanol industry.

This seems like a decent deal. It's become clear in recent weeks that the subsidy/tarriff was toast. The only question was how soon, and how would the savings be used. The answer isvery soon, but money for research is good news.

Here's Sen. Grassley's take:

“All things considered, it's good news that an agreement was reached that salvages some of the effort to reduce America's dependence on foreign oil. I wish it would have included a more robust investment in alternative fuel infrastructure and cellulosic ethanol. Overall, the fact that this happened in a vacuum, rather than in an even-handed debate over all energy tax incentives, will always be a raw deal, especially for taxpayers and renewable fuel producers,” Grassley said.

Still, not being a scientific expert on renewable fuels, I'm not sure how much research $700 million buys. The industry may have a legitimate bconcern. But it's also possible the next generation will be arriving sooner than later.

Also annonced today, from Radio Iowa:

Federal officials are extending a $105 million loan guarantee for a new ethanol plant in Emmetsburg that will make the fuel out of corn cobs, stalks, leaves and husks.

“This is an important step in our effort to move away from a debate of food-versus-fuel by using corn cobs and other agriculture waste material,” says U.S. Ag Secretary Tom Vilsack.

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POET, the company that's launching the project, says up to 200 people will work on the plant's construction, which will begin in August. Vilsack calls the project a huge milestone in producing ethanol from the entire plant rather than just the corn kernel.