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During oil bashing, ethanol takes a punch

On Thursday members of the Senate Finance Committee asked executives from the nation’s top five oil companies why they shouldn’t give up $2 billion a year in tax credits to help trim the federal deficit. And, although high gas prices and oil company profits were in the media spotlight, another fuel that gets tax credits – ethanol – didn’t escape the panel’s attention.
Near the end of a morning-long session, Senator Ron Wyden (D-OR) asked H. Lamar McKay, president of BP America, why oil companies should get up to $6 billion a year in tax credits to blend ethanol into gasoline.
McKay, who earlier had pointed out that BP is one of the largest blenders of ethanol, explained that the tax credit was introduced as an incentive to use the biofuel before Congress mandated that oil companies sell increasing amounts of renewable fuels each year.
“We’re not opposed to that transitional incentive being phased out,” McKay told Wyden, adding that another tax credit for advanced biofuels still is needed.
A bill introduced by Senator Robert Menendez (D-NJ) to end some of the tax credits used by the five largest oil companies doesn’t do that. But other members of the Senate, led by Oklahoma Republican Tom Coburn and California Democrat, Dianne Feinstein, are leading an effort to end the Volumetric Ethanol Excise Tax Credit, or VEETC, by July. And even ethanol’s strongest supporters, led by Senators Chuck Grassley (R-IA) and Kent Conrad (D-ND), have introduced a bill that would cut the current 45¢ per gallon VEETC to a 20¢ credit next year that phases into a credit that would vary according to the price of oil.
Thursday’s hearing was at times partisan, with Republicans accusing the Democrats of putting on a dog and pony show over a bill that wouldn’t lower gasoline prices and might raise them. And Menendez demanded an apology from  ConocoPhillips CEO James Mulva for a press release that called his bill “un-American.”  And the oil industry leaders said they were being unfairly singled out with legislation that would drive investment in oil production offshore.
Even the industry’s critics on the panel indicated that they might not have the votes to get the Menendez bill through the Senate. Some Democrats from oil states oppose it, as well as most Republicans.
Senator Jay Rockefeller (D-WA) seemed to acknowledge that when he told the oil industry leaders, “You never loose. You’ve never lost. You always prevail. You always prevail in the halls of Congress,” Rockefeller said. Yet, the oil industry leaders are out of touch with the American people, he said.
After the hearing another ethanol supporter who isn’t on the Finance Committee, Senator Tom Harkin (D-IA), was asked if he supported the Menendez bill. “The short answer is yes,” Harkin said, adding that some of the savings ought to be used to develop renewable forms of energy. asked Harkin if it’s possible that Congress may not repeal oil industry tax credits and go ahead with ending ethanol’s VEETC.
“Is it a possibility, with the present makeup of the Congress? Yes it is,” Harkin said.
Harkin said he has also thought that VEETC could be phased out and he has several times introduced legislation to shift some of that support to building ways for ethanol to reach a larger market. Harkin also is a co-sponsor of the Grassley-Conrad bill that keeps smaller tax credits for ethanol over the next five years.
“To continue the oil and natural gas tax incentives and take away the ethanol incentives would be the wrong thing to do,” he said.

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