Battle Over Extension of $31Bn Corn Ethanol Subsidy Heats Up

Both sides use mounting frustration over America’s oil dependence to sway the public

Ethanol lobbyists are bumping up against a new wave of resistance in Washington as green groups crank up pressure on Congress to let a multi-billion dollar tax credit for corn-based ethanol expire at the end of the year.

Four of the nation's largest environmental organizations took out a one-page ad in Congress Daily pleading with lawmakers to block a push to extend the subsidy for five more years. It is part of an ongoing campaign launched by the groups six months ago.

The Volumetric Ethanol Excise Tax Credit (VEETC), also known as the "blender's credit," gives oil companies $0.45 for each gallon of pure ethanol they blend with gasoline. The credit went into effect in 2005 under the Bush administration's American Jobs Creation Act of 2004.

The Natural Resources Defense Council, the Union of Concerned Scientists, Friends of the Earth and the Clean Air Task Force had sharp words for supporters of the controversial perk, calling it "nothing more than a further endorsement of industrial agriculture and another handout to one of the most profitable industries in the world: Big Oil."

Ending it altogether may be tough to achieve, however.

In April, Sens. Charles Grassley (R-Iowa) and Kent Conrad (D-N.D.) introduced legislation that would safeguard the subsidy, after a nearly identical bill passed the House in March. At that same time, Growth Energy, a lobby group, launched a first-ever $2.5 million television ad campaign aimed at changing corn ethanol's battered image to being cleaner and safer than oil.

Environmental groups say the tax credit has funneled $21 billion into oil firms. And if it gets extended, $31 billion more will flow between 2011 and 2015. There will be "no pollution reductions" and "no energy security," the newspaper ad said.

Both Sides Tap into Big Oil Frustration

The campaign's anti-oil message might appeal to voters who have begun to question whether propping up the super majors makes sense for the nation's future. Indeed, a new CBS/ New York Times poll in the wake of the Gulf of Mexico oil spill shows that nine in 10 Americans from both parties think the U.S. needs an entirely new energy direction.

But as the crisis nears the three-month mark, ethanol supporters have been aggressively touting biofuels as the solution. "No beaches have been closed due to ethanol spills," one of the Growth Energy ads states.

Geoff Cooper, vice president of research at the Renewable Fuels Association, a trade group, said there is a "fair amount of spin" in the claim that only Big Oil benefits from the VEETC billions. "Some portion of the tax credit" is being distributed to ethanol producers and blenders, he told SolveClimate.

For opponents, the tax credit's focus on corn is another big cause for worry. Corn ethanol fails to make a dent in greenhouse gas emissions, can cause food price spikes and diverts federal dollars away from other alternative energy sources, such as cellulosic biofuels, and solar and wind energy, they argue.

Though the VEETC does not favor one biofuel feedstock over another – corn, sugar and plant-based fuels all qualify – much of it would end up upholding the status quo, Kate McMahon, a campaigner for Friends of the Earth, said.

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source: solveclimate