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Senate votes overwhelmingly to kill ethanol subsidy
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. Most of the subsidy’s support came from Midwest senators.

The vote was largely symbolic in that the House is expected to reject the provision because tax measures are supposed to originate in the House, not in the Senate. But the sweeping defeat was a powerful indication of how the industry’s once legendary political clout on Capitol Hill has all but disappeared because of  the federal deficit and concerns about the impact of the biofuel on food prices and the environment. The subsidy and tariff are due to expire at the end of the year and the industry is trying to continue some kind of subsidy after that  to go with the annual usage mandates that require refiners  to add ethanol to gasoline. The mandate rises each year until 2015 before leveling off at 15 billion gallons.

“We’re ready to repeal unnecessary subsidies because we have a big deficit to address,” the Senate Finance Committee chairman, Montana Democrat  Max Baucus, said after the vote. His committee has jurisdiction over the subsidy.

Sen. Lamar Alexander, R-Tenn., said that the rising cost of food is a sleeper issue around the country and that the vote to kill the ethanol subsidy was a “vote to lower food prices and to lower the national debt.”

The industry has been on the defensive to such an extent that it’s backing a bill introduced by Sen. Amy Klobuchar, D-Minn., and John Thune, R-S.D., that would repeal the 45-cent subsidy July 1 and devote $1 billion of the savings to deficit reduction. The bill also would create a new subsidy tied to the price of oil and underwrite the cost of installing new ethanol pumps at service stations. Linking the subsidy to oil prices is designed to protect the ethanol industry when oil prices fall and refiners have less incentive to use the biofuel.

Today’s vote was a dramatic reversal from Tuesday when the Senate voted to preserve the subsidy after Democratic leaders objected to the method that Sen. Tom Coburn, R-Okla., forced the issue onto the floor. At the time, Coburn aides estimated that he had 60 to 65 votes against the subsidy. As it turned out, he had more than that.

“The best way for ethanol to survive is for it to stand on its own two feet, without subsidies, and us spending money that we don’t have,” said a leading critic of the industry, Sen. Tom Coburn, R-Okla.

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