1 April 2011

USDA head defends ethanol subsidies

Gradual end of subsidy reasonable, if savings to be redirected to expand ethanol infrastructure

U.S. Agriculture Secretary Tom Vilsack called congressional efforts to eliminate ethanol subsidies “a job killer” that also would hurt the nation’s ability to become energy-independent.

In an interview Thursday with reporters, Vilsack, Energy Secretary Steven Chu and Transportation Secretary Ray LaHood reiterated President Obama’s plan that calls for cutting oil imports by a third by 2025. A key part of his program would be increased reliance on biofuels, including corn-based ethanol, which Vilsack said would spur the building of dozens more biorefineries and create as many as 1 million jobs.

That’s why the administration opposes a bipartisan proposal, led by Oklahoma Republican Sen. Tom Coburn, to eliminate a $6 billion annual subsidy for ethanol known as the Volumetric Ethanol Excise Tax Credit (VEETC). Coburn, who calls the subsidy “corporate welfare,” is trying to attach the measure to a small-business bill being debated this week in the Senate.

Vilsack, the Democratic former governor of corn-rich Iowa, said a gradual end of the subsidy is reasonable, particularly if the savings could be redirected to expand ethanol infrastructure such as additional blender pumps, pipelines and flexible-fuel vehicles. But he said Coburn’s proposal to abruptly end the 45-cent-per-gallon federal subsidy is a bad idea.

“In an economy where we’re still searching for job growth, the last thing we should do is discourage an industry that’s helping to create jobs,” Vilsack said. “I think it’s a job killer.”

Ethanol advocates often tout the industry’s importance in creating employment in rural America, helping farmers stay on their land by providing them with extra income, and supplying the nation with a clean fuel alternative to oil.

A coalition of groups, including grocers, engine manufacturers, environmentalists and oil interests, oppose increased use of ethanol, saying it would drive up food prices, hurt car performance and worsen pollution as fields are plowed over to boost corn production.

Sheila Karpf, legislative and policy analyst with the Environmental Working Group, a Washington D.C.,-based advocacy group that opposes ethanol subsidies, said job growth projections made by both the administration and industry are “outrageously inflated.”

She also cites a 2009 report by the Government Accountability Office that says the VEETC subsidy “may no longer be needed to stimulate conventional corn ethanol production because the domestic industry has matured, its processing is well understood, and its capacity already is near the effective (Renewable Fuels Standard) limit of 15 billion gallons per year for conventional ethanol.”

Last year, 13.2 billion gallons of ethanol were produced.

Chu said there are many ways to achieve energy independence but biofuels must be in the mix or else the prospect of $5 per gallon gas will be more than a threat.

Source: ArgusLeader.com, 2011-04-01.

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