US Senate defeats Coburn Amendment: Industry reaction

In Washington, on a cloture vote in the Senate to proceed to an amendment that would end the current ethanol tax incentive immediately, Senator Coburn’s amendment lost 40-59, falling 20 votes short of the sixty votes needed to obtain cloture.

Why did the industry oppose the Coburn amendment?

Critics of biofuels have described its leaders as “living off corporate welfare.” But Genencor CEO Tjerk de Ruiter said “the [tax credit] is welcome, but we can live without it.” Qteros CEO John McCarthy opined that “I can’t think of a single important [economic] thing that would happen to the ethanol industry if the ethanol tax credit went away.”

The industry was up in arms not over the economics of the tax credit, but by the attempt by the sponsors of the amendment to hijack a year-long bipartisan, consensus-based approach to redefining the policy framework for biofuels.

Last year, when renewing the VEETC for one-year, Congressional leaders asked the industry to come back with a unified, comprehensive proposal on how to revise US renewable fuel policy, that builds on successes to date, eliminates what is no longer needed, and creates new structures to support new technologies and opportunities as the advanced biofuels begin to deploy.

It’s broadly agreed that older supports like the ethanol tax credit out to be phased out, and fairly rapidly. But nobody agrees that policy instability is a good idea. It paralyzes investment.

The industry view? “If that passes, the unintended consequence will ripple through the advanced biofuels industry like a sledgehammer,” says Qteros’ McCarthy. “The more substantive, rational thinking, and the consensus that is building among the broad groups that are greatly affected by energy policy – that’s what needs to be supported. Not populist politicians who traffic in gross oversimplifications.”

Meanwhile, the House of Representatives is expected to debate an agriculture spending bill for the fiscal year starting in October that could see funds diverted from the Biomass Crop Assistance Program—which helps advanced biofuel projects source enough biomass feedstock—a full year before it’s expected to expire in 2012. The proposed spending bill would also cut funding to the Agricultural Research Service (ARS) by up to two-thirds.

Here’s a sampler of industry and NGO reaction on the failure of the Coburn Amendment

James M. Taylor, Senior Fellow for Environmental Policy, The Heartland Institute

“Ethanol subsidies make no sense economically or environmentally. Economically, ethanol is more expensive than gasoline and delivers fewer miles per gallon. Devoting our corn crop to ethanol also drives up food prices. Environmentally, ethanol production is a tremendous drain on precious water resources. Ethanol subsidies and mandates also encourage the development of marginal crop-lands that otherwise would be left in a more natural state. With ethanol subsidies and mandates, everybody loses except the numerically small but politically powerful special interests who can game the system for their own benefit.”

Bob Dinneen, CEO, Renewable Fuels Association

“This vote demonstrates the lack of appetite for this kind of destructive policy and political gamesmanship. The Senate and the country need to focus on a comprehensive energy strategy that seeks to expand America’s ability to renewably meet its fuel needs. Initiatives like the legislation introduced by Senators Thune and Klobuchar yesterday are the exact kind of responsible policy prescriptions that will create domestic jobs and help meet the energy challenges of the 21st century. With this kind of political theater hopefully behind us, American ethanol producers are ready to work with lawmakers to ensure a robust and diverse domestic ethanol industry can develop in a fiscally responsible manner.”

Growth Energy CEO Tom Buis

“The fight is not over until we achieve real reform for the ethanol industry, but this vote sends a signal that there is a right way and a wrong way to go about it. For more than a year, Growth Energy has advocated for our Fueling Freedom plan, which would phase out the VEETC in a fiscally responsible way, while redirecting the funds toward ethanol infrastructure build out. Opening the fuels market to ethanol, through Flex Fuel pumps and Flex Fuel vehicles, would give consumers a choice at the pump and allow us to ultimately eliminate all government assistance. We applaud the Senate for blocking movement on Sen. Coburn’s short sighted amendment and opening the door for legislation like the recently introduced bill from Senators John Thune (R-SD) and Amy Klobuchar (D-MN) that will truly transform America’s energy policy to reduce our dependence on foreign oil and strengthen our nation’s economic and national security.”

Jeff Broin, POET Chairman and CEO

“The ethanol tax credit has been responsible for building America’s most successful renewable fuel into 10 percent of our gasoline supply. The decision of Congress to preserve this credit as a bridge to meaningful reform shows that America recognizes the importance of domestic, renewable fuels.

“Over the years as the tax credit has declined, we have been able to improve our efficiency and stay competitive with gasoline. Now it is time for the ethanol industry to take the next step in competing with oil. That can only happen if ethanol is allowed greater access to the fuel market.

“We must transition away from the tax credit and make a short-term investment that will reap long-term rewards. The expansion of flex pumps, dedicated ethanol pipelines and Flex Fuel Vehicles would create a competitive market between ethanol and gasoline that would lower prices at the pump.”