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By Felicia Sonmez

A bipartisan group of House members is calling for the elimination of ethanol subsidies as a deadline for renewing the tax credit looms at the end of the month.

In a letter to House Speaker John Boehner (R-Ohio) and Minority Leader Nancy Pelosi (D-Calif.) on Friday, 73 House members of both parties urged the leaders to “allow ethanol subsidies set to expire to do just that and to resist calls to expand or create new ethanol subsidies in the eleventh hour.”

Both the 45-cent-per-gallon tax subsidy for ethanol blenders and the 54-cent-per-gallon tariff on ethanol imports were renewed as part of the tax package approved by Congress during last year’s lame-duck session.

But support for the annual tax credit appears to be on the wane, as 34 Senate Republicans and six members of the Democratic caucus in June voted in favor of a measure sponsored by Sen. Tom Coburn (R-Okla.) to do away with the subsidy. While the measure fell short of passage, the fact that nearly three-dozen Republicans voted in favor of it was considered a symbolic turning point in the broader debate over tax reform.

Shortly after that vote, Sen. Lamar Alexander (R-Tenn.) said that he was planning to introduce legislation that would do away with a variety of energy tax subsidies.

In their letter, the House members wrote that the ethanol tax credit and import tariff “were not permanent in nature for a reason.”

“Congress anticipated the ethanol industry one day being sufficiently mature to stand on its own,” the lawmakers wrote. “It is difficult to make the argument that this day has not arrived. With widespread concern across a spectrum of issues including anti-hunger, fiscal, environmental, agricultural, good governance, and others, extending a billion dollar ethanol tax credit would appear out of the question and the prohibitive import tariff should be allowed to expire as well.”

The letter from the 73 House members – who range from Rep. Peter Welch (D-Vt.) on the left to Rep. Jeff Flake (R-Ariz.) on the right — comes as both chambers are working toward an end-of-the-year compromise on extending a number of tax provisions including the payroll tax holiday, which thus far has been the focal point of the debate between the parties.

The full text of the letter is below.

December 9, 2011

Dear Speaker Boehner and Minority Leader Pelosi:

As the first session of the 112th Congress comes to a close, we urge you to allow ethanol subsidies set to expire to do just that and to resist calls to expand or create new ethanol subsidies in the eleventh hour.

The ethanol industry has benefited from a tax credit incentivizing production, an import tariff shielding it from competition, and a renewable fuels mandate creating demand. Both the volumetric ethanol excise tax credit and the prohibitive import tariff are set to expire at the end of this year. These benefits were not permanent in nature for a reason. Congress anticipated the ethanol industry one day being sufficiently mature to stand on its own. It is difficult to make the argument that this day has not arrived. With widespread concern across a spectrum of issues including anti-hunger, fiscal, environmental, agricultural, good governance, and others, extending a billion dollar ethanol tax credit would appear out of the question and the prohibitive import tariff should be allowed to expire as well.

In addition, we urge you to oppose efforts to create new or expand existing subsidies that benefit the ethanol industry in the waning days of this session. For example, there has been the suggestion that the renewable fuels standard be revised to allow corn-based fuels to qualify as an advanced biofuel. Taxpayers deserve to have the future of federal ethanol policy fully vetted under regular order, an opportunity that is unlikely in the last days of the session.

Original Article

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By William Pentland

In 2000, the United States produced 1.6 billion gallons of ethanol. By 2009, U.S. production of ethanol had expanded by a factor of nearly seven to 10.8 billion gallons, according to the U.S. Department of Energy.

This 9-billion-gallon increase in corn-based ethanol production resulted from a combination of rising gasoline prices and a suite of Federal bioenergy policies.

In the U.S., corn is the primary feedstock used to produce ethanol.

Between 2000 and 2009, U.S. corn production increased from 9.9 billion bushels to 13.1 billion bushels, while harvested corn increased from 72.4 million acres to 79.6 million acres, according to the National Agricultural Statistics Service. A significant portion of this change occurred between 2006 and 2008.

In “The Ethanol Decade,” the U.S. Department of Agriculture considered how farms expanded corn acreage over the past decade, especially during the years between 2006 and 2008.

The study evaluates how farmers altered land-use practices in response to increased demand for corn. The findings:

“. . . partially support previous predictions about the indirect impacts of bioenergy policies; the largest source for new corn acreage was farms that grew primarily soybeans in 2006. However, there has not been a net decrease in soybean acreage. Reduced acreage of other crops and increased harvested acreage have been important sources for the simultaneous expansion of corn and soybean production. Several sources for corn (and soybean) acreage expansion—increases in double cropping, conversion of uncultivated hay, and reductions in cotton acreage—could have unintended consequences that differ from those suggested by earlier simulation studies.”

Farm-level data reveal that the simultaneous net expansion of corn and soybean acreage resulted from a reduction in cotton acreage, a shift from uncultivated hay to cropland and the expansion of double cropping (which refers to consecutively producing two crops of either like or unlike commodities on the same land within the same year).

The growing demand for corn resulting from bullish bioenergy policies created complex changes in national cropping patterns.  Here a few of those changes identified by the USDA’s analysis:

* Farms specializing in soybeans in 2006 accounted for most of the increase in corn acreage;

* Farms shifting from other crops into soybeans offset the shift from soybeans to corn; and

* Some farms reduced corn acreage, while other farms expanded soybean and corn acreage simultaneously.

* Since 2006, corn production expansion resulted from increases in corn acreage.

Original Article