Senate ethanol battle heats up with dueling bills

A bipartisan group of farm-state senators floated plans Wednesday to slowly phase out ethanol tax subsidies, a measure that surfaced a day after a separate bipartisan coalition introduced new plans to kill the incentives almost immediately.

Senate Budget Committee Chairman Kent Conrad (D-N.D.) and Sen. Chuck Grassley (R-Iowa) — along with half-dozen other lawmakers — introduced a plan that would extend the ethanol blenders’ credit through 2016 but cut the level.

The 45-cent-per-gallon credit that refiners and fuel blenders receive for each gallon of ethanol purchased and mixed into gasoline is currently slated to expire at year’s end. 

The new plan, according to Grassley’s office, would cut the credit to 20 cents in 2012 and 15 cents in 2013, and from there it would float or vanish — depending on crude oil prices.

“When crude oil is more than $90 a barrel, there will be no blenders’ credit. When crude oil is $50 and below, the blenders’ credit will be 30 cents. The rate will vary when the price of crude is between $50 and $90 a barrel,” according to Grassley’s office.

The bill would also extend through 2016 tax credits for installing ethanol infrastructure at gas stations, but modify them somewhat.

Credits for cellulosic ethanol producers and the depreciation allowance for cellulosic biofuel plant property would also remain through 2016, while the import tariff would continue at reduced levels.

“Affordable energy is a major concern for Americans, and Congress needs to keep energy security on the front burner. Now more than ever, it’s time to ramp up production of traditional energy sources here at home and to expand alternative fuels and renewable energy sources,” Grassley said in a statement on the bill, which also drew praise from ethanol industry trade groups.

The other sponsors are Sens. Tom Harkin (D-Iowa), Mike Johanns (R-Neb.), Amy Klobuchar (D-Minn.), Al Franken (D-Minn.), Tim Johnson (D-S.D.) and Ben Nelson (D-Neb.).

The bill comes a day after ethanol opponents Sens. Dianne Feinstein (D-Calif.) and Tom Coburn (R-Okla.) united around a bill to end the blenders’ credit and the import tariff. They had previously offered competing plans. Co-sponsors include Sens. Ben Cardin (D-Md.) and Richard Burr (R-N.C.).

Feinstein argues the ethanol industry is awash in billions of dollars in unnecessary subsidies.

“Ethanol subsidies and tariffs sap our budget, they’re bad for the environment, and they increase our dependence on foreign oil. It’s time we end subsidies that we cannot afford and tariffs that increase gas prices,” she said in a statement Tuesday.

Feinstein’s office argues the blenders’ credit is unneeded given the national renewable fuels mandate ensures a market, and that the tariff increases reliance on oil imports by raising the price of imported ethanol.