By Ben Geman
June 28, 2011
A trio of senators is nearing agreement on a plan to end a major ethanol tax credit and import tariff while extending incentives for next-wave biofuels.
Sen. Dianne Feinstein (D-Calif.) said Tuesday that she had reached an agreement with Sens. Amy Klobuchar (D-Minn.) and John Thune (R-S.D.), although the lawmakers say there is not yet a final deal.
“There are discussions, and Sens. Klobuchar, Thune and I have come to an agreement,” Feinstein told reporters in the Capitol Tuesday, although shortly after she noted “I think there will be agreement to this, and then we will then proceed to announce what it is.”
Feinstein said she would like the agreement, which she said would help reduce the deficit, to be part of legislation to raise the debt ceiling, citing the absence of a tax bill to serve as an obvious vehicle.
According to Feinstein — who along with Sen. Tom Coburn (R-Okla.) has led the charge to kill ethanol subsidies — the planned deal would quickly end the ethanol blenders’ credit, which is worth an estimated $6 billion annually, and the tariff.
“The [volumetric ethanol excise tax credit] is gone, the tariffs are gone, as of July 1,” she said, while noting the deal would extend incentives including credits for producing next-wave cellulosic ethanol.
Klobuchar cautioned that a final agreement is not in place. “We are still in the proposed-agreement stage,” she said, noting that negotiations continue.
An aide to Thune also said that discussions continue. “All sides continue to talk but nothing has been finalized,” said Kyle Downey, Thune’s communications director.
The Minnesota and South Dakota senators oppose plans to simply kill ethanol subsidies without including other industry assistance, and have been negotiating with Feinstein to reach a compromise.
Klobuchar said she is meeting with Thune and Feinstein later Tuesday to review a proposed agreement. She confirmed there would be “longer-term cellulosic tax credits” but said she didn't have an exact date.
Klobuchar said the money saved by killing the blender’s credit midyear — currently slated to expire at year’s end — would help pay for deficit reduction, funding for cellulosic ethanol credits and ethanol infrastructure at service stations.
“This is a way to use the existing $2.4 billion that is still out there for the rest of the year, to use a big chunk of it for the debt and then the remaining money for the cellulosic tax credit and the blender pumps,” she told reporters.
The potential agreement between the lawmakers comes roughly two weeks after the Senate voted 73-27 for a Feinstein-Coburn proposal to kill the blenders’ credit and import tariff.
Thune and Klobuchar, who are allies of ethanol producers, opposed that plan and instead floated an alternative that would kill the ethanol credit but maintain a smaller and “variable” blender’s credit for three years when oil prices are below certain levels.
The proposal they circulated this month would steer some savings from ending the credit to deficit reduction while also extending credits for cellulosic ethanol production and small ethanol producers and installing alternative fuel pumps.
Feinstein said the deal with Thune and Klobuchar would be spelled out in a letter that the three are preparing to send to President Obama, Vice President Biden and Senate Majority Leader Harry Reid (D-Nev.).
Feinstein acknowledged Tuesday that her amendment, despite the overwhelming June 16 vote, didn’t have a clear path to become law because it was attached to a wider economic development bill that was subsequently derailed.
“We won a tremendous victory in eliminating the subsidies,” Feinstein said. “But it is on a bill that was taken down and therefore isn’t going to go anywhere.”
While the blenders’ credit is slated to expire at the end of the year, Feinstein — noting that she’s looking toward the debt ceiling — stressed the importance of finding a vehicle for eliminating it well before that to realize savings.
Feinstein said Coburn isn’t signing onto the new agreement but did not provide details as to why. She said she spoke with Coburn Tuesday morning and that he indicated that “he couldn’t support it.”
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