Trade Only Today

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I’ve always admired NMMA president Thom Dammrich who, long ago, was among the first to call the production of ethanol nothing but a “great scam!” So, he’s likely grinning, as I am, at the vote last week in the U.S. Senate on an amendment that indicates a majority (73-27) of its members have had an epiphany and see its time to end taxpayer subsidies to ethanol blenders.

Let’s face it, corn-based ethanol has long been supported and defended for nothing more than narrow political reasons. It has actually been produced since the Energy Policy Act of 1978 included a 40 cents per gallon subsidy (now 45 cents). But the truth is ethanol has never been a legitimate answer to any energy questions. Why, even Al Gore admits his support of ethanol was just pandering for Iowa votes. Moreover, the fact that last year the EPA approved the ethanol producers’ petition to increase E10 to E15, while ignoring enormous, credible opposition from a myriad of industries including ours, is evidence enough that politics keeps playing out.

You gotta hand it to Growth Energy, a lobby for 54 ethanol manufacturers, for getting EPA approval of E15. Early on, they even acknowledged their goal was not a cleaner environment or reducing dependence on foreign oil. Ethanol does neither. They were just losing money making E10. Growth Energy intensely lobbied the administration and got the 50 percent increase.

But, alas, is ethanol finally losing its mojo? Will this Senate action end the problems our boating customers currently face from E10 while eliminating the future debacle from E15 including inadequate pump labels, misfueling accidents and more? Probably not. The Senate vote may prove only symbolic since the White House threatens to veto a repeal of the subsidy (heaven forbid any voter in Iowa should get pissed-off and the president is also from a big corn producer - Illinois.) Further, the economic development bill this amendment is attached to is expected to face an uphill battle.

Interestingly, as we recognize the absurdity of ethanol in this country, we’re not alone. Global criticism is mounting over subsidies for corn-based ethanol. Last week, for example, the World Bank joined other international organizations, like the G-30, in calling on governments to stop their ethanol subsidies because they are driving up food prices. We’re forcing food stock into gas tanks, for what? Ethanol does nothing to improve fuel efficiency or make cars run better. It doesn’t even help the environment, says Princeton University. It’s bad for boats, lawnmowers, you-name-it small engines, older cars and especially the poor (food costs).

So, what should happen now? First, Congress should be pushed to go through with repeal of this $6 billion annual subsidy. That would force the White House to reject the majority will, an interesting political scenario. Failing that, the “Volumetric Ethanol Excise Tax Credit” as it’s called, which includes a 54 cents/gal tariff on imported ethanol and the 45 cents/gal tax credit for blenders, will expire this Dec. 31. Congress should reject any attempts to renew it. Fearing that possibility, the ethanol blenders are reportedly already lobbying for “some new support” if the subsidy ends.

Next, Congress should overturn the EPA’s blatantly political decision to allow E15. Interestingly, the House of Representatives voted 283-128 last week to prevent any Agriculture Department funding for tanks and blender pumps that the ethanol industry wants so stations can sell the higher ethanol blends.

Finally, Congress should modify the “Energy Independence and Security Act of 2007” in which President George W. Bush and Congress required ethanol producers to deliver at least 15 billion gallons per year of corn ethanol by 2015, and an additional 16 billion gallons of ethanol made from cellulosic feedstocks by 2022. Last year, corn ethanol blenders turned out about 12.5 billion gallons.

Please note: I said should – not would!

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