By KEVIN WALKER
Michigan Correspondent

WASHINGTON, D.C. — A bill introduced last week in the U.S. Senate could fundamentally alter the way ethanol is subsidized by the federal government.
The bill, known as the Ethanol Reform and Deficit Reduction Act, was introduced by Sens. John Thune (R-S.D.) and Amy Klobuchar (D-Minn.). It would change the current ethanol tax subsidy, the Volumetric Ethanol Excise Tax Credit (VEETC), to a variable tax credit tied to the price of oil.

It would also make available money saved by the change to expand the ethanol fueling infrastructure. Specifically, the bill calls for 53,000 more ethanol blender pumps. The Renewable Fuels Assoc. (RFA) says this is what’s needed to help meet the goals of the federal Renewable Fuel Standard.

The bill would also continue current tax breaks for cellulosic ethanol technologies, which is a chemical process to make ethanol out of feedstocks other than corn grain. If passed, the bill would take effect July 1.

“This is thoughtful, responsible legislation that addresses the need for sound budget policy with progressive and innovative strategies for creating jobs and ending America’s addiction to imported oil,” said RFA CEO Bob Dineen. “This bipartisan, forward-looking approach stands in stark contrast to other Senate gimmicks that would seek to end America’s efforts to replace imported oil with domestically-produced renewable fuels like ethanol.

“America’s entire ethanol industry stands in support of this effort and is proud to work with these Senate leaders to proactively offer responsible reform ideas, and seek to see this bill become law through following the proper legislative process.”

Sponsors of the bill include Sens. Charles Grassley (R-Iowa), Tom Harkin (D-Iowa), Mike Johanns (R-Neb.) and several others.

As Dineen’s comments suggest, ethanol has its foes as well as friends. At about the same time as Thune’s and Klobuchar’s legislation was being introduced, Sen. Tom Coburn (R-Okla.) introduced an amendment to a bill that would repeal the VEETC. The Coburn-Feinstein (Dianne, D-Calif.) amendment went down to defeat by a vote of 59-40, but it’s believed this was because of political considerations.

Later in the week the same amendment was attached to the legislation again and was approved by a vote of 73-27; however, it’s not clear the legislation will ever become law.

“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,” Coburn said. “An overwhelming bipartisan majority of senators embraced pro-growth tax reform while rejecting the parochial politics that so often paralyze the Senate.

“The best way to reduce our crushing $14.3 trillion debt is by reducing wasteful spending a billion dollars at a time. This amendment saves taxpayers $3 billion. 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.”

While corn growers are in favor of the VEETC because it helps create more demand for their crop, some food and agriculture groups continue to support repeal. These include the American Meat Institute, National Chicken Council, Milk Producers Council, Grocery Manufacturers Assoc. and others. They authored a letter last week supporting the Coburn amendment.

“The undersigned diverse group of business associations, hunger and development organizations, agricultural groups, environmental groups, budget hawks, grassroots groups and free marketers (support the amendment) which would end 30 years of tax credits for conventional ethanol and end the tariff on imported ethanol on July 1st,” the letter reads.

Also last week, a proposal from Sen. John McCain (R-Ariz.) to ban federal funding of certain ethanol pumps and storage facilities was defeated.