WASHINGTON - The Senate voted on Thursday to repeal the $0.45 Volumetric Ethanol Excise Tax Credit (VEETC). Sen. Dianne Feinstein (D-CA) joined with Sen. Tom Coburn (R-OK) to sponsor an amendment to an unrelated piece of legislation that would both eliminate the VEETC and repeal the ethanol tariff (currently $0.54 per gallon on imported ethanol) effective June 30 or the date of enactment.
The Feinstein-Coburn amendment passed with overwhelming support, despite a similar amendment being defeated earlier in the week due to parliamentary disputes.
A related amendment offered by Sen. John McCain (R-AZ) would have barred the use of federal funds for ethanol storage and blender pump construction projects. That amendment was rejected.
Thursday's vote indicates both a shift in the politics of motor fuels policy and the wavering support for subsidies of all kinds. Lawmakers?? support for ethanol subsidies may be waning as corn (and thus food) prices have risen, the environmental benefits of corn ethanol questioned and the country's dire budgetary situation makes it difficult to support federal subsidies.
The amendment that passed the Senate this week is unlikely to become law for several reasons. First, it was added to a piece of legislation that is unlikely to be enacted because President Obama has threatened to veto the bill. Second, the House of Representatives has not passed similar legislation. However, the bill does represent an important shift in ethanol politics, and indicates that the VEETC - in its current form - is unlikely to be renewed once it expires at the end of 2011.
NACS opposes a repeal of the VEETC before it expires at the end of the year. Many NACS members have contracts with suppliers that run through the end of the year, the price of which assumes the tax credit will remain in effect. To eliminate the credit midway through the year would increase the cost of goods sold, and generate substantial uncertainty in the market.
NACS members should contact their representatives and urge them to reject calls for immediate repeal of the VEETC. Many lawmakers do not fully appreciate the distinction between allowing the credit to expire and repealing it effective immediately. They must acknowledge this distinction.