After two attempts, Sen Tom Coburn successfully ended the ethanol subsidy this week after 30 years….of course it’s not truly over yet because the Coburn amendment was part of a larger bill that’s passage is uncertain. What looks pretty certain — even if the ethanol tax credit survives the July 1st cut off the Coburn amendment requires, it will be extremely unlikely that the tax credit would be renewed next year….as in slim or none….and slim is out of town.
The hope for the ethanol industry remains the subsidy to help build the infrastructure for distribution. The idea for the shift to an emphasis on distribution was lead by Iowa Sen Chuck Grassley, who along with other farm state members, realized the writing was on the wall and that to maintain credibility fighting against big government spending something needed to give and it seems the ethanol tax credit got the short straw….Thune also joined with Minnesota Democrat Senator Klobuchar to continue to give gov’t aide with tax credits for ethanol blender pumps, for small ethanol producers and for cellulosic biofuels along with a safety trigger if gas prices drop too low. The Thune bill has the support of many in the ethanol industry.
No question the priority of cutting gov’t spending is becoming the new normal….in fact unlike 2008, when most of the GOP presidential contenders in the Iowa supported the ethanol subsidy — now it’s pretty much down to the front runner Romney.
I’m inclined to feel that the plan to work on the distribution network is still worthwhile. Ethanol has come a long way as an industry, but it’s located in the Midwest when most of the consumers are on the coasts….and transporting ethanol is primarily by truck or train….ethanol needs a dedicated pipeline. (Construction of a pipeline linking to the Northeast has been under consideration by POET and Magellan Midstream)
If you want to compete with Big Oil — you have to be in the right market place….encouraging development of distribution networks can set up the ultimate show down…..and then let the consumer decide.
Ethanol may be the first tax credit to fall….it just shouldn’t be the last.
RCJ story Coburn
RCJ story Thune Bill