McCain measure would stop aid for U.S. ethanol pumps

WASHINGTON Wed Oct 19, 2011 12:38pm EDT

WASHINGTON (Reuters) - Senator John McCain offered an amendment on Tuesday to an agriculture bill that would prevent the government from subsidizing new service station pumps that would boost the sale of ethanol for motor vehicles.

McCain's amendment would prevent the federal government from funding so-called "blenders' pumps" in the 2012 agriculture appropriations bill, which could be voted on as soon as later on Tuesday.

"In these tight economic times when we are asking families to do more with less, we should not be subsidizing gas pumps at retail gas stations," Brian Rogers, a spokesman for the Arizona Republican, said. "The ethanol industry needs to prove it can prosper on its own and quit asking for taxpayer handouts."

The corn ethanol industry and oil companies that mix the fuel into gasoline will likely lose $6 billion a year in subsidies when a blenders' tax credit expires at the end of the year.

Ethanol producers say the pumps, which allow consumers to choose their own blends of ethanol in gasoline, would increase sales to drivers of cars that are specially built to accept higher levels of the fuel. Car makers are expected to make far more of the so-called "flex fuel" cars in coming years.

The producers slammed the amendment. "The McCain amendment would smother the only initiative we have to provide consumers the power to choose their fuel, and it gives OPEC the green light to tighten its grip on our economy at the worst possible time," said Growth Energy CEO Tom Buis.

But a watchdog group said the ethanol industry has gotten enough government incentives.

The Taxpayers for Common Sense urged senators to support the amendment, saying Congress has been subsidizing the corn-based ethanol industry since the late 1970s. "After 33 years, it's time to let the ethanol industry stand on its own."

(Reporting by Timothy Gardner; Editing by Andrea Evans)

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Comments (1)
Bill_USA wrote:
Senator McCain, (Arizona) has introduced an amendment to the bill which is being considered to fund the USDA’s Flex Fuel Pump initiative, which is intended to kill the Blender’s Pump initiative altogether. Such a step – defunding of the Blender’s Pump Initiative is another example of moronic, short-sighted, politics which is destructive of this country’s efforts to achieve a modicum of energy security as well as a more complete and effective use of ethanol to reduce GHG emissions from the light vehicle sector right now, as well as in the short to medium term. I urge all Senators to stop this astoundingly irresponsible, anti-Energy security amendment from being accepted.

We are currently faced with relentlessly rising oil prices which already are undermining critical efforts to achieve greater growth in the Gross Domestic Product. Each $10 increase in the price of oil costs us 0.2% to 0.3% in lost GDP. Ethanol, in supplying 10% of our fuel supply for the light vehicle sector, is lowering the price of gas at least 15% (Francisco Blanch, May 2008, Wall Street Journal) and as much as 30% (Iowa State University study, 2011). In so doing, ethanol is increasing our GDP by from .3% to 1.1%. In terms of dollars, ethanol is increasing our GDP from $42 Billion to $154 Billion each year. This is the effect of ethanol on GDP through ethanol’s impact (lowering 15% to 30%) of the price of oil.

There is also the addition to GDP by producing the ethanol in the U.S. and reducing the imports of oil – which is a direct subtraction to Gross National Product (to achieve Gross Domestic Product) to be considered. Producing ethanol domestically adds about $95 Billion to our GDP (using 2010 average Oil prices).
(see: https://sites.google.com/site/ethanolinfoscientific/Ethanol_GDP_impact.xls?attredirects=0 ).

Note, this is in addition to the increase to GDP by ethanol’s impact on the price of imported oil (above). So the total positive impact on our GDP from ethanol production and use is to increase GDP from $137 Billion to $250 Billion.

Of all the approaches we have investigated or are pursuing ETHANOL USE IS THE ONLY ONE THAT IS PROVIDING ENHANCED ENERGY SECURITY IN THE PRESENT AND WILL CONTINUE TO PROVIDE SUCH IN THE NEAR FUTURE. It will take decades for electric cars to make an appreciable impact on oil consumption. In that time, oil prices will rise by an amount nobody is prepared to predict. Recent developments, known collectively as the Arab Spring, have added another factor of uncertainty to our energy security. Rather than reducing the utility of ethanol, we should be striving enhance ethanol’s effectiveness (such as by adding as many blenders pumps as possible for the foreseeable future) to whatever degree is technically feasible (such as by adding 50,000 to 100,000 blender’s pumps per year for the next five to ten years).

If we do not make the most effective use of ethanol that we can now and in the near future, the rising price of oil will reduce our economic growth and adversely impact our adoption of electric cars (with depressed economic growth & chronically elevated unemployment we will find it even harder to see the more expensive green technologies become more widely adopted.

No one technology, by itself, is going to give us the energy security and GHG reductions we need. We will need to employ any and all technologies available to us to achieve the energy security and progress against Global Warming we must realize.

While cutting funding for installation of Blender’s Pumps may please the Big Oil companies, it would mark a level of stupidity in public policy that staggers the imagination.

Oct 19, 2011 4:36pm EDT  --  Report as abuse
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