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Senate moves to lower ethanol tax breaks

– The Senate on Thursday approved an amendment that would end tax credits for ethanol that refiners blend into motor fuel.

In a 73-27 vote, the Senate backed an amendment by Sen. Dianne Feinstein, D-Calif., to the Public Works and Economic Development Act, though the House would still need to approve a comparable measure before it could be signed into law.

The Feinstein amendment would abruptly eliminate the tax credits, which cost the federal government about $6 billion a year, on July 1. The credits currently provide 46 cents a gallon to refiners. The amendment would also eliminate the 51-cent-a-gallon protective tariffs that discourage imports.

The vote came just two days after the Senate rejected a bid by Sen. Tom Coburn, R-Okla., to end the ethanol tax credit. That vote was seen as a test of Democrats’ loyalty to Senate Majority Leader Harry Reid, D-Nev., and of Republicans’ fealty to a no-tax pledge when measured against cutting a government subsidy. But Coburn mustered just 40 votes, nearly all of them Republican, as Democrats withheld their support for what they said were procedural reasons.

More than 200 ethanol refineries operate in the United States, most of them in major corn-growing states. Indiana has 13 production sites, including Green Plains Renewable Energy in Bluffton and Poet Biorefining in North Manchester. Only five states have more ethanol refining operations, according to the Renewable Fuels Association.

Indiana produces more than 800 million gallons of ethanol a year, the fuel association says, and the U.S. output is 13.5 billion gallons a year.

Supporters of the ethanol tax credit say it helps corn growers while reducing American reliance on petroleum imports. The U.S. ethanol industry produces about 900,000 barrels a day. Because ethanol has about two-thirds of the energy content that gasoline does, the output cuts U.S. oil imports by about 600,000 barrels a day.

But critics say the tax credit is a burden on taxpayers and food consumers alike and that the nation cannot afford it in a time of big budget deficits.

“Senators scored a win for the public and for the environment by voting to end this $6 billion giveaway,” Kate McMahon, biofuels campaign coordinator at Friends of the Earth, said in a statement.

The Renewable Fuels Association said in a statement, “We are disappointed in the shortsightedness of this vote, particularly as this same body voted less than one month ago to preserve billions of dollars in taxpayer handouts to the oil industry.” The RFA, which represents the nation’s ethanol distilleries, added that since “the underlying bill to which this amendment is attached is unlikely to make it to the president’s desk, this vote was a freebie with no real consequences.”