Ethanol Takes a Shot in the Senate

Ethanol's federal tax break and protective tarrif took a strong, though symbollic, haymaker in the U.S. Senate this afternoon. From the Register:

In a stunning defeat for the ethanol industry, the Senate voted 73-27 to kill the subsidy the biofuel has had for three decades. The defeat was bipartisan. Thirty-three Republicans joined 38 Democrats and two independents in voting to terminate the 45-cent-per-gallon tax credit on July 1 along with the 54-cent tariff on imported ethanol.

The margin is striking, to be sure, although it's unlikely the House will pick up the Senate's corn knife. But, finally, something Democrats and Republicans can agree on. The Hill notes that the bipartisan vote may put repeal on the table for deficit reduction/debt ceiling talks.

Politico called it a split decision, because a deal remains possible:

After the vote, Feinstein and Coburn indicated that talks would resume Thursday with ethanol supporters Sens. Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) on a deal that could reach the president's desk.Some ethanol supporters have proposed immediately ending the blender tax credit - but also expanding and extending federal help for blender pumps and other infrastructure.

Some ethanol supporters have proposed immediately ending the blender tax credit - but also expanding and extending federal help for blender pumps and other infrastructure.

As I've said before, I think at least a portion of the $6 billion that goes for this break would be better used finding renewable fuels beyond corn-based ethanol. It is time to find something that's price competitive and doesn't gobble food crops. With a federal usage mandate in place, losing the tax break wouldn't be a death blow. A gradual phase out, as backed by Sen. Grassley, Pawlenty etc. is probably the most responsible route.

But it looks like the industry is mobilizing for a fight. From The Iowa Republican:

WASHINGTON-POET, LLC, the world's largest ethanol producer, secured approval from the Federal Election Commission Wednesday for an innovative fundraising push that will allow it to raise campaign funds directly from corn farmers in Iowa and other Midwestern states.The Sioux Falls, S.D.-based company sought the FEC's blessing, formally known as an advisory opinion, which will allow the company's political action committee to collect funds from corn farmers by deducting a portion of money from corn sales contracts.

POET has seven plants in Iowa.

The Sioux Falls, S.D.-based company sought the FEC's blessing, formally known as an advisory opinion, which will allow the company's political action committee to collect funds from corn farmers by deducting a portion of money from corn sales contracts.