June 13, 2011 / 10:38 PM / 8 years ago

REFILE-PREVIEW-Tight US Senate vote seen on ethanol subsidy

 (Refiles to correct spelling of DeMint in paragraph 18)
 * Ending ethanol subsidies to provoke close fight
 * Congress looking to reduce spending, ethanol targeted
 * Ethanol supporters warn gasoline costs will rise
 By Tom Doggett
 WASHINGTON, June 13 (Reuters) - The U.S. ethanol industry's
subsidies expire at the end of this year but the battle in
Congress over whether to eliminate them -- amid efforts to cut
the budget and lower food costs -- has come six months early.
 The U.S. Senate is scheduled to vote on Tuesday on a
proposal from Republican Senator Tom Coburn to end the federal
ethanol tax credit and the tariff on ethanol imports.
 Lawmakers, who face fierce opposition from farm state
lawmakers and the ethanol lobby, will consider adding an
ethanol subsidy-busting amendment to another bill.
 The vote comes as U.S. lawmakers are looking for ways to
cut spending and as criticism mounts globally over subsidies
for corn-based ethanol, blamed by some for pushing up food
 Last week, 10 international organizations including the
World Bank called on governments to scrap ethanol subsidies on
the grounds they were driving up world food prices.
 The fact that most U.S. ethanol is made from corn,
livestock producers say, has pushed up their feeding costs, in
turn raising food prices paid by households. Environmentalists
also complain the fuel is hardly green because of the energy
intensity of modern industrial farming.
 The Coburn amendment is targeting the 45 cents that the
government gives refiners for every gallon of ethanol they
blend with gasoline.
 Also proposed for a cut is the tariff wall that protects
the U.S. industry from ethanol imports, such as the much
cheaper sugar-based ethanol from Brazil. Ethanol imports are
slapped with a tariff of 54 cents per gallon.
 If enacted, the amendment would save $3 billion for the
rest of this year and $6 billion annually.
 "Eliminating the ethanol tax earmark and tariff would be a
big step toward restoring fiscal sanity in Washington," Coburn
said. "Ethanol is bad economic policy, bad energy policy and
bad environmental policy."
 Under Senate rules, the amendment will need the support of
60 of the chamber's 100 members to block a filibuster of the
proposal. The vote is expected to be close.
 "We don't want to cut our way out of a job opportunity,"
said Agriculture Secretary Tom Vilsack, defending biofuels in a
speech at the National Press Club. He said the ethanol industry
created thousands of rural jobs and boosted farm income.
 Vilsack said lawmakers should tread carefully on any
revisions, adding that "it's fairly clear" the import tariff
will end eventually. Asked whether he was telephoning senators
about the Coburn amendment, Vilsack said: "I don't need to."
 Ethanol producers slammed Coburn's proposal, saying it
would raise gasoline prices and make the United States more
dependent on oil imports.
 The industry cites a report from the Center for Agriculture
and Rural Development, an Iowa State University research group,
that found ethanol reduced the price of gasoline by 89 cents a
gallon last year.
 Bob Dinneen, president of the Renewable Fuels Association,
said if Coburn's amendment were really about concerns over
energy tax subsidies, then it would also repeal about $2
billion a year in tax breaks for the biggest oil companies.
 "Removing the ethanol tax incentives without reforming the
transportation fuels market would effectively raise gas prices
and only perpetuate our addiction to foreign oil by limiting
consumer choice at the pump," the Growth Energy ethanol trade
group said in a letter to its supporters, urging them to let
Congress know they opposed Coburn's amendment.
 Republican Senator Jim DeMint said he would vote for
Coburn's amendment.
 "Americans are being forced to subsidize corn ethanol that
drives up the cost of gas, lowers gas mileage, harms automobile
engines, releases carcinogens into the air, and drives up food
prices which harms the poor," he said.
 Even if the amendment passes, the underlying bill would
have a hard time clearing the Senate. The measure would also
have to make it through the House of Representatives, where
there are many farm state lawmakers that back ethanol.
 The legislation would face opposition from President Barack
Obama, who wants to reform and reduce ethanol subsidies and
would not likely sign a bill that quickly eliminates them. The
ethanol industry also supports reforming the subsidies.
 Republican Senator Charles Grassley and fellow Democrat
Kent Conrad have introduced legislation to continue the blender
tax credit and import tariff at much lower rates for five
 (Additional reporting by Charles Abbott; Editing by Russell
Blinch and Dale Hudson)                            

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