Senate Ethanol Debate:  Peeling Away the Onion

Posted on: June 17, 2011 in Agriculture, E15, Energy, Ethanol, Jobs, Oil, OPEC, Tariff , USDA, VEETC

If there is one thing for certain in Washington, it is that nothing is ever as it seems. 

That has certainly been the case this week with three votes on ethanol that would leave the uninitiated fairly confused about where the US Senate actually stands with regard to ethanol.  On Tuesday, the Senate voted 59-40 against an amendment to eliminate the ethanol tax incentive program.  On Thursday, the Senate reversed itself, voting 73-27 in support of the very same amendment.  Then, just a half hour later, the Senate defeated another anti-ethanol amendment that would have restricted federal funding for blender pumps.  Huh?  Make up your minds!

The fact is there are distinct messages in each vote, and support or opposition to ethanol isn’t necessarily at the heart of any of them.

The Tuesday vote was about process.  Senators were justifiably frustrated by the parliamentary gymnastics Senator Coburn used to bring his amendment to the floor.  The amendment was not germane to the underlying bill.  It was going to be subject to a constitutional challenge because it was a revenue title not originating in the House of Representatives.  And, the Senator took the unusual step of filing for cloture on an amendment, rather than the underlying bill, and he did so himself, despite tradition dictating that is a privilege reserved for  the Leadership.   Many senators resented the aggressive tactics used to hijack the Senate floor in pursuit of Senator Coburn’s transparently Big Oil agenda.

In any case, the vote on the Coburn amendment Tuesday was certainly not about fiscal responsibility.  That fact was made clear when it was revealed every one of the 16 Senators signing the cloture petition had voted just a month earlier to preserve tax breaks for oil companies.  (Also interesting, those senators supporting the Coburn amendment received more than $24 million in campaign contributions from lobbies opposed to renewable fuels.)

Thursday’s vote on the Feinstein amendment was even more confounding.  The amendment similarly sought to eliminate a tax incentive that even the industry agrees needs to be reformed.  It was a free vote to demonstrate one’s fiscal resolve.  Some were even characterizing their vote in support of the amendment as a vote in favor of reform.  Indeed, even the amendment’s sponsor, Senator Feinstein, acknowledged during debate she is working with ethanol advocates on a compromise for transitioning the ethanol tax incentive, thus signaling a vote on her amendment would accelerate reform.

Peel the onion back a bit further, however, and it becomes clear that the undercurrent for the Feinstein amendment was the growing battle over the debt ceiling and budget cuts.  For many Democrats, the vote on the Feinstein amendment was an opportunity to get Republicans on record as supporting the repeal of tax incentives (i.e., oil company subsidies) and raising taxes as a means of deficit reduction.  In fact, following the vote Senate Leader Harry Reid stated, “With Republicans endorsing our position that we can cut the deficit by cutting spending that occurs through the tax code, I hope they will join Democrats in eliminating taxpayer giveaways to big oil companies that are raking in record profits.”

Look for Senate floor action on oil company tax breaks again real soon.  Indeed, why shouldn’t those be on the table?  Why is it that the only tax incentive some in the Senate are prepared to repeal are those that support farmers and ethanol?  As Senator Grassley noted during debate, “what’s good for the goose is good for the gander.” And once started, it will be difficult to slow the “cut tax cut” train.  Already, Senator Alexander has suggested looking at wind tax preferences if we’re going to look at oil tax breaks.  Choo, choo!

The final vote on Senator McCain’s amendment to prevent any federal funds to be used for blender pumps underscores the reality that political support for ethanol is not eroding, even while support for energy tax incentives is clearly under scrutiny.  By a vote of 59-41, the Senate made clear that efforts of USDA Secretary Tom Vilsack to promote the distribution of blender pumps can and should continue.  That makes sense, because if this nation is ever to break its dependence on imported petroleum, consumers must have a choice at the pump.

At the end of a crazy week, it is more clear than ever that the Senate needs and the public will demand a more thoughtful and comprehensive discussion about ethanol and energy policy.  How are we going to stimulate investments in next generation technologies?  How can we assure that small businesses that sell gasoline have the resources to invest in the infrastructure necessary to grow the biofuels market?  And how can we assure that OPEC can’t manipulate the market to the detriment of American ethanol and protect the investment the taxpayer has made in this important industry? 

These are the questions that must be answered.  And this week’s political theatre did very little to provide answers.  With a dose of common sense and the dogged commitment of Senators Klobachar, Thune, Grassley, Durbin and others, perhaps we’ll have clarity soon.

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