“There is no real justification for the subsidy for the blend on ethanol,” Cardin said. The subsidy does not help corn growers, but rather contributes to the profits of oil companies, he said.
Should the bill become law, the short-term impact on corn growers would be relatively small, said John Urbanchuk, technical director at Cardno ENTRIX, an environmental and natural resources consulting firm. But the long-term effect on ethanol demand could be substantial, he said.
The bill, which is co-sponsored by Republican Sen. Tom Coburn of Oklahoma, comes on the heels of a report by the U.S. Government Accountability Office last week saying the VEETC subsidy cost $5.4 billion in 2010. The report indicated the measure could cost $6.75 billion in forgone revenue in 2015.
“We’re looking for ways to save money,” Cardin said. “I think this is way you can save several billion dollars to help balance the budget.”
A demand for ethanol would remain without the VEETC because of the Renewable Fuel Standard, which requires minimum volumes of biofuels like ethanol in transportation fuels, according to the GAO report.
“Importantly, the fuel standard is now at a level high enough to ensure that a market for domestic ethanol production exists in the absence of the ethanol tax credit and may soon itself be at a level beyond what can be consumed by the nation’s existing vehicle infrastructure,” the report stated.
Growth Energy, an organization advocating for ethanol production and use, issued a statement condemning the bill.
“The ethanol industry is fully prepared to reform and reduce the cost of current tax programs,” said CEO Tom Buisin in a statement released Thursday. “I would suggest Sens. Coburn and Cardin introduce legislation requiring the oil industry to do the same. ”
Urbanchuk said a repeal of the tax credit could create another unintended consequence: an increase in the already-growing investment in foreign ethanol production.
“We’ll end up, instead of being a net exporter, perhaps being a net importer of ethanol again,” he said.
Cardin acknowledged opposition but remained confident in his objectives for the legislation.
“There could be some regional controversy because people identify it with corn, but I really think when people look at it they’ll see that this is not really an issue about the corn industry,” Cardin said. “It’s really an issue about removing a subsidy that’s no longer needed.”
– By Capital News Service’s Laura E. Lee