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Moving toward less ag spending

DANIEL LOOKER 06/16/2011 @ 6:12pm Business Editor

Thursday the Senate voted to kill ethanol’s tax credit but refused, by a vote of 41 to 59, to pass an amendment from Senator John McCain (R-AZ) that would prevent the USDA from spending funds on blender pumps for ethanol.
 
The House of Representatives, however, took the opposite approach to blender pumps in its $125.5 billion agriculture appropriations bill that was also passed Thursday.
 
Neither the ag appropriations bill nor the Senate’s Public Works and Development Act, which includes the anti-ethanol measure, are law yet. Thursday The White House and Agriculture Secretary Tom Vilsack repeated their opposition to ending the ethanol tax credit immediately.
 
Yet, these events hint at much less money being available for programs for crop farmers when the 2012 Farm Bill is written. And even deeper cuts could be coming out of the closed-door negotiations on deficit cutting being led by Vice President Joe Biden.
 
“We need reforms and a smarter biofuels program, but simply cutting off support for the industry isn’t the right approach,” Vilsack said in a statement after the vote.  “Therefore, we oppose a straight repeal of the Volumetric Ethanol Excise Tax Credit (VEETC) and efforts to block biofuels infrastructure programs.”
 
Jeff Broin, the CEO of POET, the nation’s largest ethanol producer, found a positive way to view today’s events. “By voting to repeal the ethanol tax credit, while preserving USDA’s funding for flex pumps, the Senate came close to a reform package supported by the ethanol industry,” Broin said.  “With enough flex pumps to give consumers true choice at the pump, ethanol can compete directly with gasoline. But while the USDA program is a good first step, it doesn’t go far enough.”
 
Broin and other ethanol backers support a bill offered by Senators John Thune (R-SD) and Amy Klobuchar (D-MN) that would cut the deficit by $1 billion and abandon the blenders credit, unless oil prices fall. Savings from that bill would pay for spending even more on blender pumps and financing an ethanol pipeline.
 
But what the Senate did Thursday simply eliminates the entire ethanol tax credit of 45 cents a gallon, cutting $3 billion from the deficit and leaving nothing for an expanded program to build infrastructure.
 
Chris Thorne,  a spokesman for the ethanol lobbying group, Growth Energy, told Agriculture.com that the Thune-Klobuchar bill still has a chance, since it has been introduced as separate legislation, not an amendment to another bill.
 
But the ethanol interests have a lot of selling to do to get that passed before the credit expires on December 31.
 
They’re not likely to convince the Environmental Working Group.  
 
"The Senate has put American taxpayers and our soil and water ahead of special interests and the corn ethanol lobby," said Sheila Karpf, a legislative and policy analyst at the lobbying group.
 
In theory, making things tougher for the ethanol industry might lower incentives to plant corn, but those corn farmers who want to participate in conservation programs will find a lot less help if the House ag appropriations bill survives  negotiations with the Senate on a final spending bill.
 
Conservation programs were a big loser in Thursday’s vote in the House, according to Ferd Hoefner, a lobbyist with the National Sustainable Agriculture Coalition.
 
Hoefner said the bill cuts another $1 billion from spending on conservation programs, after cutting about $500 million in the appropriations bill for this year.

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