Senate won't ax ethanol subsidies

06/15/2011 12:07 AM

08/08/2014 10:04 AM

WASHINGTON — Farm belt senators, including those from Kansas, rode to the rescue of the $5 billion annual subsidy for ethanol on Tuesday, at least temporarily rejecting sacrificing it to deficit reduction.

On a 40-59 vote, the Senate rejected a move to end ethanol subsidies. The vote reflected regional differences and split Republicans.

The measure would have immediately ended the 45-cent tax credit per gallon of ethanol. That subsidy goes to companies that mix wholesale fuel for automobiles.

The idea behind the subsidy is to spur demand for ethanol by lowering its cost for wholesalers relative to gasoline, although the federal government allows only 10 percent of gasoline to be replaced by ethanol.

Opponents said the subsidy is a bad idea in tight economic times.

"We continue to spend money that we don't have on things that we don't need," said Sen. Tom Coburn, R-Okla., a prominent deficit hawk who led the effort to eliminate the subsidy immediately.

Farm state senators overwhelmingly voted against the Coburn amendment. They said ethanol is a way of reducing dependence on foreign oil.

"With conflicts in the Middle East and crude oil priced at more than $100 a barrel, we should be on the same side. Why would anyone prefer less domestic energy production?" Sen. Chuck Grassley, R-Iowa, said on Monday, when the measure was debated at length.

Pat Roberts, R-Kan., said Tuesday he voted against the measure to avoid an abrupt change for a large employer in the state.

Congress, he said, must come back to the issue at the end of 2011 when the ethanol tax credit is set to expire. This gives Congress time to deliberate the issue.

"We don't have to take a Lizzy Borden ax to it and that's the end of it," he said.

Sen. Jerry Moran, R-Kan., also voted against the amendment.

Some farm state senators are backing a measure to keep part of the subsidy to encourage gas stations to install ethanol blender pumps, in the hopes that more drivers would put high ethanol blends into their vehicles.

Ethanol tax breaks long have been supported by both parties, but a new emphasis on deficit reduction, particularly among Republicans aligned with tea party activists, has shifted the political landscape.

House deficit hawks are likely to seek to cut or eliminate the subsidy, and the issue may come up in deficit reduction talks led by Vice President Joe Biden.

Additionally, shortly after Coburn's legislation was blocked, Senate Majority Leader Harry Reid, D-Nev., announced he would schedule additional votes on the fate of the subsidy at the end of next week.

Coburn's pre-emptive move forced a quick choice.

White House spokesman Clark Stevens said President Obama opposed the elimination of the subsidy but was "open to new approaches that meet today's challenges and save taxpayers money."

For Republicans, the choice was complicated by opposition from Grover Norquist, the head of Americans for Tax Reform and an inflexible opponent of tax increases.

Because the subsidy isn't scheduled to expire until the end of 2011, he said Coburn's legislation to end it immediately amounted to a tax increase.

The Oklahoman disagreed, as did other deficit hawks who said the vote marked a chance to go on record for spending cuts.

"It seems to me to be a pretty easy one" to cut, said Sen. Jeff Sessions, R-Ala., who said he had supported the subsidy in the past but had switched his position because of the growing national debt.

Sen. Pat Toomey, R-Pa., elected to his first term last fall, said the current program was "extremely inefficient. It is a waste of taxpayer money."

But Sen. John Thune, R-S.D., said ethanol takes the place of 445 million barrels of oil annually. "That is the equivalent of $34 billion that we don't send overseas," he said.

Thune and Sen. Amy Klobuchar, D-Minn., like Grassley, are sponsors of an alternative measure.

In all, 33 Republicans sided with Coburn, several of them first-termers elected with the support of tea party voters eager to cut federal spending.

Another 12 GOP senators opposed the legislation, all from farm states.

Among Democrats, five voted to kill the subsidy. Another 46 voted to retain it, but some said their votes reflected an unhappiness that Coburn had decided to force a vote rather than a long-term commitment to the program itself.

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