Proposal to End Ethanol Pump Subsidies Dies in Senate

PMAA joins Coalition for E85

John McCain

WASHINGTON -- 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, reported Reuters. The measure, proposed by U.S. Senator John McCain (R-Ariz.) 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% (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, the news agency said. Ethanol has been blamed for raising prices for food and livestock feed.

Most gasoline sold in the United States is a mix of 10% ethanol, although the Environmental Protection Agency (EPA) has approved 15% 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, fewer than 2,500 of the nation's 167,800 gas stations offered E85 fuel.

Separately, the Petroleum Marketers Association of America (PMAA) has joined the Coalition for E85 to protect members that have installed E85 pumps, stop a multi-million dollar tax hike on consumers and enhance U.S. energy independence, it said.

"If we don't enable E85 to compete with gasoline, we could see the entire flex-fuel industry disappear," said Dan Gilligan, PMAA president. "Our members, automakers and nine million American drivers have invested in E85 infrastructure and flex-fuel vehicles [FFVs]. With E85 so close to self-sustainability, these investments must be protected."

Other alternative fuels such as compressed natural gas, propane and hydrogen receive a 50-cent per gallon tax credit as part of the Alternative Fuel Credit. E85 should be included in this group, even if federal subsidies for more diluted ethanol blends expire, the group said.

The Coalition for E85 is an alliance of retailers, producers, equipment manufacturers, automobile manufacturers and others supporting E85.

PMAA members represent wholesaler and retailers of gasoline, diesel, heating oil, lubricants and renewable fuels. PMAA marketers own 60,000 retail fuel outlets and supply fuels to 40,000 independent outlets.

If the current tax credit for all ethanol fuels expires, millions of FFV drivers will pay as much as 38 cents more per gallon for E85, said PMAA. Small businesses that have invested more than $100 million in E85 infrastructure will close their pumps, it added.

E85 provides a platform for advanced biofuels, including next-generation ethanol nonfood sources such as farming byproducts, algae biomass and household waste. Without the E85 system, the federal government's investment in the development and commercialization of next-generation biofuels may be wasted, said PMAA.

In addition to PMAA, the Coalition for E85 includes Propel Fuels, Protec, Clean Fuels Development Coalition, Pearson Fuels, AMERigreen, Petro Serve USA, multiple ethanol industry associations, pump and tank companies and individual E85 retailers.