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Wednesday, June 15, 2011

Ethanol subsidy remains in the cross hairs; allies file a repeal bill with an alternaitve

The ethanol subsidy was temporarily spared in a Senate vote Tuesday as opponents of the subsidy got only "40 of the 60 votes needed to cut off debate on a proposal to abolish the tax credit immediately," Philip Brasher of the Des Moines Register reports. However, opponents of the subsidy could get a chance to vote again as early as the end of next week.

Democratic leaders have agreed to allow a new vote because as many as 20 Democrats who voted against the subsidy "objected to the vote on procedural grounds," Brasher reports. Senate Majority Leader and Democratic Sen. Harry Reid of Nevada, objected to Oklahoma Republican Sen. Tom Coburn's forced scheduling of Tuesday's vote.

The new vote will include an alternative bill by industry allies "that would repeal the 45-cent subsidy July 1 and devote $1 billion of the savings to deficit reduction," Brasher reports. The bill includes a new subsidy to protect the ethanol industry against a decline in biofuel interest by refiners from oil prices dropping and government financial assistance to install new ethanol pumps at service stations.

Next week's votes "are still likely to be largely symbolic, because the House is expected to object to a tax-related measure originating in the Senate," Brasher writes. "But the votes will put senators on record on the issue, and lawmakers are reluctant to switch sides once they have taken a position."

This has the ethanol industry concerned. "Having 40 votes in favor of immediate repeal of the subsidy was a bad sign for the ethanol industry," analysts with Clear View Partners wrote. "That should leave little doubt about congressional will to spend on energy subsidies of any kind in the current fiscal environment." (Read more)

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