WASHINGTON — Senators have reached a compromise on a controversial plan to cut tax subsidies for ethanol production.
The deal will end a 45-cent per gallon tax credit and 54-cent per gallon import tariff at the end of July, instead of their scheduled expiration in December. The measure would save nearly $2 billion and steers $1.3 billion of that to deficit reduction and the remaining $668 million to extending a series of renewable fuel production tax credits. Minnesota Sen. Amy Klobuchar was among those negotiating the deal.
The Senate voted to end the tax credit and tariff three weeks ago despite protests from senators that represent ethanol-producing states, including Minnesota. All of the savings from that bill would have gone to paying down the deficit. The bill passed under the pretense that a bipartisan group of senators would negotiate a solution to the issue.
At the time, Klobuchar and South Dakota Republican John Thune had proposed an alternative plan that would have ended the subsidy (but not the tariff) and direct $1 billion to deficit reduction and $1.5 billion to renewable fuel infrastructure investments and tax credits.
Among the tax credits preserved in the negotiated plan are those for the installation of ethanol pumps at fuel stations and a 7-cent per gallon tax credit for ethanol producers whose capacity is less than 60 million gallons a year.
The plan had drawn support from some in the ethanol industry, which Klobuchar’s office touted today.
“This agreement is important to making sure our farmers can continue to develop the homegrown energy sources that strengthen our rural communities and provide a better quality of life for the people who live and work in them,” Minnesota Farm Bureau President Kevin Paap said in a statement released by Klobuchar’s office.
Minnesota Corn Growers Association President Tim Gerlach said the state’s ethanol producers had anticipated the end of the tax credit, but had hoped for a slower phase-out or a variable credit system that would have provided tax credits based on ethanol’s market price.
But Gerlach credited Klobuchar for working hard to hatch a deal with ethanol opponents.
“It is perplexing to me how visceral the reaction has been to ethanol from some quarters,” he told MinnPost.
There are 21 ethanol plants in Minnesota, producing more than 1.1 billion gallons of ethanol each year, Gerlach said. It’s one of the 10 biggest ethanol-producing states in the country.
Devin Henry can be reached at email@example.com.