The battle over federal support for ethanol has begun in the United States Congress as 17 senators opposed an extension of ethanol tariffs and subsidies beyond its mandated expiration at the end of this year.
In a letter to senate majority leader Harry Reid and minority leader Mitch McConnell, the senators said extending the Volumetric Ethanol Excise Tax Credit and the tariff on imported ethanol were “fiscally irresponsible and environmentally unwise.” Senators Dianne Feinstein of California and Jon Kyl of Arizona led the bipartisan coalition. Currently, the law provides oil refiners, blenders and retailers of gasoline a 45 cent tax credit for each gallon of ethanol blended into their gasoline.
The senators called attention to the amount government would be required to spend if the ethanol subsidy is allowed to last beyond 2010. The senators said if the current subsidy is extended for five years, the Federal Treasury would pay oil companies at least $31 billion to use 69 billion gallons of corn ethanol. But the Federal Renewable Fuels Standard already requires them to use that much, the senators argued.
The senators also opposed the 54 cent-per-gallon tariff currently imposed on imported ethanol, saying the policy actually makes the United States more dependent on foreign oil. The senators said the tariff is nine cents per gallon higher than the ethanol subsidy it supposedly offsets. They said the lack of parity puts imported ethanol at a competitive disadvantage against imported oil.