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Senators Feinstein, Kyl Lead Bipartisan Letter Calling for Ethanol Tariffs and S

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FOR IMMEDIATE RELEASE:

Tuesday, November 30, 2010

 

 

Senators Feinstein, Kyl Lead Bipartisan Letter Calling for Ethanol Tariffs and Subsidies to Expire

 

 

 

Washington, D.C. – U.S. Senators Dianne Feinstein (D-Calif.) and Jon Kyl (R-Ariz.) today joined a strong bipartisan coalition of Senators calling for an end to tariffs and subsidies supporting ethanol.

 

In a letter sent to Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell, 17 Senators expressed their lack of support for extending the current 54-cent-per-gallon tariff on ethanol imports and the 45-cent-per-gallon subsidy for blending ethanol into gasoline. Both provisions expire at the end of this year under current law.

 

Senators Feinstein and Kyl have worked for many years to reduce or eliminate the tariff on ethanol imports, and are cosponsors of the Imported Ethanol Parity Act (S. 622).

 

The letter calls the tariff and subsidies “fiscally irresponsible and environmentally unwise,” pointing out their extension would increase the country’s dependence on foreign oil.

 

Following is the full text of the letter:

 

November 30, 2010

 

The Honorable Harry Reid                        The Honorable Mitch McConnell

522 Hart Senate Office Building                361A Russell Senate Office Building

Washington DC, 20510                              Washington DC, 20510

 

          Dear Majority Leader Reid and Minority Leader McConnell:

 

          We are writing to make you aware that we do not support an extension of either the 54 cent-per-gallon tariff on ethanol imports or the 45 cent-per-gallon subsidy for blending ethanol into gasoline.  These provisions are fiscally irresponsible and environmentally unwise, and their extension would make our country more dependent on foreign oil.

 

          Subsidizing blending ethanol into gasoline is fiscally indefensible.  If the current subsidy is extended for five years, the Federal Treasury would pay oil companies at least $31 billion to use 69 billion gallons of corn ethanol that the Federal Renewable Fuels Standard already requires them to use.  We cannot afford to pay industry for following the law.

 

          The tariff on ethanol makes our country more dependent on foreign oil.  The tariff is nine cents per gallon higher than the ethanol subsidy it supposedly offsets, and this lack of parity puts imported ethanol at a competitive disadvantage against imported oil.  This discourages transportation fuel imports from Brazil, India, Australia, and other sugar producing countries, and leads to more oil and gasoline imports from OPEC countries that enter the United States tariff-free.  Eliminating or reducing the ethanol tariff would diversify our fuel supply, replace oil imports from OPEC countries with ethanol from our allies, and expand our trade relationships with democratic states.

 

          The data overwhelmingly demonstrate that the costs of the current ethanol subsidy and tariff far outweigh the benefits.  According to a July 2010 study by the Congressional Budget Office, ethanol tax credits cost taxpayers $1.78 for each gallon of gasoline consumption reduced, and $750 for each metric ton of carbon dioxide equivalent emissions reduced.  The Center for Agricultural and Rural Development at Iowa State University recently estimated that a one-year extension of the ethanol subsidy and tariff would lead to only 427 additional direct domestic jobs at a cost of almost $6 billion, or roughly $14 million of taxpayer money per job.

 

          Historically our government has helped a product compete in one of three ways: subsidize it, protect it from competition, or require its use.  We understand that ethanol may be the only product receiving all three forms of support from the U.S. government at this time. 

 

          Eliminating or reducing ethanol subsidies and trade barriers are important steps we can take to reduce the budget deficit, improve the environment, and lessen our reliance on imported oil.  We look forward to working with you on responsible energy tax policy.

 

          Sincerely,

         

          Dianne Feinstein, United States Senator

          Jon Kyl, United States Senator, United States Senator

          Jack Reed, United States Senator

          Richard Burr, United States Senator

          Benjamin Cardin, United States Senator

          Mike Enzi, United States Senator

          Jim Webb, United States Senator

          Bob Bennett, United States Senator

          Barbara Boxer, United States Senator

          John McCain, United States Senator

          Sheldon Whitehouse, United States Senator

          Tom Coburn, United States Senator

          Susan Collins, United States Senator

          Bob Corker, United States Senator

          Jeanne Shaheen, United States Senator

          Mark Warner, United States Senator

          Chris Coons, United States Senator

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Keep it civil..that all I ask..

 

 

 

I support ending the VEETC on Additive Blends.. E10  .. caveat.. and instead moving "some" of that Money to high blend product/blending and high blend (E30,E40, ..E85) infrastructure..ie blender pumps

 

 

If Growth Energy cannot get their proposal through to move some of the credits over to high blends ..then maybe removing the Tariff may be needed ..to help with price spreads..to ensure high blend Market demand is high  ?

 

I do NOT like the Idea of importing ethanol ..but can see some usefulness out of it..considering corn ethanol seems to have no issue in exporting

 

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Doesn't make much sense does it? To offer blender credit for government blend requirement portion. Upon startup it made sense to offset some of the expense required for new hardware. This may be a good rationale to continue offering blender credit for those new pumps; to help pay off required equipment to expand ethanol market. I suspect mostly the blender credit was a compromise, a bone to throw petrol as they new these laws would outrage them.  The law does empower a competitor upon your turf at your market loss.

 

Nice when the credit was passed through to save consumer dollars, but no guarantee of that and that is horribly inefficient method. Meaning the IRS spends 30% of collected tax money on operational and enforcement costs. Then add up the conformance cost to business and government department operation cost to run program, well no wonder an inefficient use of money. Funneling money through the typical fed system with operation control and enforcement is popular nowadays. Wish we would demand more cost effective alternatives to that. Guess people get scared when not having a bureaucrat in charge, i.e. gas station 2 cent break on sales tax until 50% of new pump cost recovered. Gas stations to keep the required documentation/books with the normal penalty (criminal law) for cheats. Is this too easy?

 

Listening to the ag report on radio, the advanced biofuel requirement can only be met per sugar cane ethanol imports. Corn ethanol continues surpass production requirements and advanced biofuel continues to postpone production requirements. Funny how the regs specifically limit corn ethanol to 15b gallons max 2015 per 2007 EISA Act. Eventually, most ethanol to be produced from non food material.  Field corn is the solitary culprit to limit. Is this a little silly? Meaning corn starch mostly a steer and cow feed not directly human food. Corn is popular animal feed as supply is so great and cost so low, but nothing scared about corn. Other starches can be substituted for feed. Appears the demand supply curve is swaying to better use of corn. We do ourselves an economic injustice to artificially award winner /loser status as some business got bent out of shape when losing their economic advantage. Reminds me of the southern plantations who wanted to sidestep open market free labor costs. Not good. While this in no way is comparable injustice it does illustrate business desire to run to central control to empower themselves away from open market competition.  Corn starch not particularly a healthy diet for bovines and results in bad fat meat. We need to keep these animals away from starch. So, why is grass not food? Meaning they feed grass to cows, same with corn stalks. Also, some cellulosic ethanol process have a bonus of producing food. Food byproduct has higher profit margin and highly prized upon processors. We need not forget the ethanol processing of corn produces a co product of feed, a higher quality feed.

 

International farmers hate cheap U.S. corn as it puts them out of profitable business. Isn’t it better to avoid dumping cheap corn on the poor and instead stimulate their own production? You see it is always better (modern day) to provide businesses accurate info of markets and let them work valuable resources to best use. Fed elites have no special powers of omnipotence. The vast sum of societal thinking minds willing to risk their resources do a better job upon predicting future. Let corn markets find their true worth and use.  Maybe grain should replace the strategic supply of oil since corn nowadays so valuable upon energy and commercial products, even plastics.

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I'd have to say that I agree with Dan here on the ending the blenders credit for "additive blends" (e10 and below)...  but maintaining the blenders credit on mid level blends (e20-e50) and high level blends (e70-e85).

 

The additive blends have become nothing more then a subsidy for the petroleum companies who don't need it and may or may not pass this on at all to the consumers!

 

The mid/high level blends should be maintained as these can be used to help offset the cost of upgrading this infrastructure, and to help keep the cost of this fuel down for the consumer.

 

As for the tariff, I don't think we need it.  We don't have a distributed production of ethanol across the country, and for some places, it would make more seance to have it shipped in by tanker from Brazil, then by rail from Iowa.  With the current market for ethanol and sugar in Brazil, I don't think that they are exporting all that much, or at that much less then it is being produced for here from corn...  these things change with the weather and market though.

 

Removing the tariff though may help keep the price from ethanol spiking as much, which is good for the consumer.

 

It may also help keep corn from spiking as much, as corn speculators can't run up the price of corn, knowing that the ethanol market will spike with out any imported competition... in theory that is...

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The VEETC is 45 cents and a gallon of ethanol costs somewhere around 2 dollars so the subsidy is around 25% of the value of a gallon of ethanol. Ending that in a sudden manner would surely have a negative effect on the industry. I have no problem with ending it or transitioning to something else but it needs to be done in a gradual manner so that the industry can adapt.

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The VEETC is 45 cents and a gallon of ethanol costs somewhere around 2 dollars so the subsidy is around 25% of the value of a gallon of ethanol. Ending that in a sudden manner would surely have a negative effect on the industry. I have no problem with ending it or transitioning to something else but it needs to be done in a gradual manner so that the industry can adapt.

 

Agreed- I do not think any of us would relish seeing E85 go UP 31.5 cents Jan 1 and E10 only 4.5 cents (and do not try to tell me that corn/ethanol will fall that much on Jan 1 or even Mar 1 to fix this). Gradual is better. Ideally E10 would lose it and higher blends get cut to say 25- 30 cents with further scaling beyond-BUT- do you think for a minute that oil companies would stand for only their competitor product to be helped?

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The VEETC is 45 cents and a gallon of ethanol costs somewhere around 2 dollars so the subsidy is around 25% of the value of a gallon of ethanol. Ending that in a sudden manner would surely have a negative effect on the industry. I have no problem with ending it or transitioning to something else but it needs to be done in a gradual manner so that the industry can adapt.

 

Agreed- I do not think any of us would relish seeing E85 go UP 31.5 cents Jan 1 and E10 only 4.5 cents (and do not try to tell me that corn/ethanol will fall that much on Jan 1 or even Mar 1 to fix this). Gradual is better. Ideally E10 would lose it and higher blends get cut to say 25- 30 cents with further scaling beyond-BUT- do you think for a minute that oil companies would stand for only their competitor product to be helped?

 

Yeah ..from all the talk it certainly appears that will be the path..a transitional ending of the VEETC..

 

last I heard was 30 cents next year..who knows what they will finally agree on but I think it is extremely important that Growth Energy continues to be active in pushing their "Plan" so the higher blends dont end up taking the brunt of the VEETC  repeal..

 

The message to the Politicians should be that additive ethanol (E10) gets 98% of the blenders credit... roughly 5.8 Billion a Year

.High Blends ethanol used as alternative fuel like E85 roughly 2%.. 200 million..

 

Point out again and again that the Auto Industry has 50% of production FFV in just over  a year..the High Blend HAS to be available

 

Those that want to repeal the VEETC..surely the other side can get them to compromise and accept say 4 Billion BACK to the Taxpayers in Cash and in return 2 Billion To expanding Ethanol as a Alternative Fuel..E85 and other high blends..  (Blender pumps and blenders credit..preferable at the retail location)

 

 

 

 

 

 

 

 

 

 

 

 

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