The ethanol industry would hang onto $232 million in federal subsidies over three years under a compromise agreement to abolish the Volumetric Ethanol Excise Tax Credit (VEETC), the blender’s credit that has been costing the federal treasury billions of dollar a year, as well as a protective tariff on imported ethanol. The compromise was recommended by three U.S. Senators: Dianne Feinstein (D-CA), who has been leading efforts to get rid of the subsidies, and ethanol backers Amy Klobuchar (D-MN) and John Thune (R-SD).

A coalition of poultry and livestock groups including the National Chicken Council quickly cast doubt on the agreement.

“We appreciate the work done by Senator Dianne Feinstein in her effort to end the VEETC and tariff,” the coalition statement said.  “However, the resulting compromise still provides new federal funds for corn-based ethanol, money that would be better spent reducing the deficit or encouraging the development of energy sources that do not compete with feed needs.”  Also joining in the statement were the American Meat Institute, California Dairies, Inc., National Cattlemen’s Beef Association, National Meat Association, National Pork Producers Council, and National Turkey Federation.

Feinstein and Senator Tom Coburn (R-OK) won a 73-27 vote in the Senate last month to abolish the blender’s credit and tariff outright, but the bill to which their amendment was attached subsequently failed to pass.  Feinstein made it clear that the agreement with Klobuchar and Thune was the only way to end VEETC and the tariff promptly.  VEETC is scheduled to expire at the end of the year anyway, but the ethanol industry has been campaigning to extend it.

Under the agreement, which has yet to be voted on, VEETC and the tariff will end on July 31, saving the federal treasury about $2 billion for the balance of the year, but a package of biofuels tax subsidies will be extended for three years.  Of these, approximately $125 million will be available to filling stations that install blender pumps with at least two levels of ethanol.  Tax credits will also be available for electricity charging stations and natural gas fueling stations.  In addition, some $308 million will be available for companies that produce biofuels from cellulosic sources, the definition of which would be extended to include algae.

Smaller ethanol producers will be eligible for $107 million in tax credits, bringing the tax subsidies ticketed for conventional (corn-based) ethanol to $232 million, about one-third of the total $668 million in biofuels tax credits extended in the agreement. Overall, the deal would leave about $1.3 billion in tax revenue to be attributed to deficit reduction.

“This agreement is the best chance to repeal the ethanol subsidy, and it’s the best chance to achieve real deficit reduction,” Feinstein said.  “Absent this agreement, taxpayers stand to lose $1.33 billion–that was the bottom line for me.  Every month that passes without repeal costs taxpayers $400 million. After years of fighting, there is simply no guarantee a full repeal would be signed into law.” “I believe this bipartisan agreement should be included in the deficit reduction package that will likely accompany a vote on raising the debt limit, and I hope the president will consider that approach,” she added.