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Senate sidetracks move to repeal tax breaks for ethanol producers

Wednesday, June 15, 2011

WASHINGTON -- The Senate refused to kill a $5 billion annual subsidy for ethanol on Tuesday, backing continued government aid for a Farm Belt-based industry over deficit reduction in an era of record red ink.

The 40-59 vote, far short of the 60 needed to advance the measure, reflected regional as well as partisan differences, a split among Republicans -- and anything but the final word on the issue.

Supporters of continued federal spending for ethanol argued it is a leading source of alternative fuel and is needed to reduce U.S. 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 Monday, when the measure was debated at length.

Grassley's state leads the nation both in harvesting corn and blending it into alternative fuel. Other leading ethanol-producing states are Nebraska, Illinois, Minnesota, South Dakota and Indiana, and all senators from them opposed an end to the subsidy, regardless of political party.

Ethanol is blended with gasoline, and subsidized at 45 cents a gallon, with an additional 10 cents for small producers. These tax breaks long have been supported as a way to reduce oil imports by politicians in both parties, emphatically so for many who campaign across Iowa every four years in the state's kickoff presidential caucuses.

But a new emphasis on deficit reduction, particularly among Republicans aligned with tea party activists, has contributed to a shift in the political landscape.

As a result, with the current subsidy scheduled to expire at the end of the year, Grassley and other farm state lawmakers support alternative legislation to reduce the tax break without eliminating it for several more years.


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