WASHINGTON (Reuters) - A proposal that would have stopped subsidies for new gas station pumps to boost ethanol sales failed to make it into the Senate’s version of the U.S. Agriculture Department’s fiscal 2012 budget on Wednesday.
The measure, proposed by Senator John McCain as a way to trim federal spending, would have prevented the USDA from offering grants and loans for rural gas stations to install “blender pumps.”
The pumps let consumers to blend gasoline with up to 85 percent (E85) ethanol for cars designed to handle the higher levels.
But McCain withdrew his amendment before the Senate could vote on whether to attach it to the agriculture appropriations bill. No reason was provided.
The House version of the bill has a similar provision that would prevent the USDA from spending money on blender pumps. Lawmakers from the House and Senate will have to negotiate the issue when they finalize funding for the USDA for fiscal 2012.
The Senate version of the bill proposes $4.5 million for the USDA program that would fund the pumps, among other rural energy efforts, while the House approved $2.3 million for the energy program — with the proviso money not go for pumps.
Funding for blender pumps is important for ethanol makers like Archer Daniels Midland, Green Plains Renewable Energy Inc and privately owned Poet, who see the lack of ethanol infrastructure as a limiting factor for growing the market for the corn-based fuel additive.
Ethanol makers expect to lose a tax credit worth $6 billion per year at the end of 2011, and have said government subsidies for infrastructure would help make up for that loss.
The tax credit has been in place since 1978 and has long been supported by lawmakers from farm states who wanted to help grow demand for corn.
But the subsidies have become controversial as corn prices rose to recent record levels. Ethanol has been blamed for raising prices for food and livestock feed.
Most gasoline sold in the United States is a mix of 10 percent ethanol, although the Environmental Protection Agency has approved 15 percent blends for newer models of cars and trucks.
In April, Agriculture Secretary Tom Vilsack said the administration wants to install 10,000 flexible fuel pumps nationwide in the next five years.
At the time, less than 2,500 of the nation’s 167,800 gas stations offered E85 fuel.
Reporting by Roberta Rampton and Rachelle Younglai; Editing by Gary Hill