Three senators have reached a deal to repeal the $6 billion per year ethanol tax credit by the end of July, an agreement that must still be passed by Congress, Senator Dianne Feinstein said.
The loss of the subsidy could add extra costs for refiners like Valero Energy Corp and Marathon Oil Corp but is unlikely to reduce demand for corn because government mandates require increasing amounts of the corn-based fuel until 2015.
The deal would reduce the federal deficit by $1.33 billion and invest $668 million in technologies that could help get biofuels to market, Feinstein said in a release
“This agreement is the best chance to repeal the ethanol subsidy, and it’s the best chance to achieve real deficit reduction,” said Feinstein, who is from California.
Feinstein made the deal with Senators John Thune from South Dakota, and Amy Klobuchar from Minnesota, who are both ethanol backers.
Feinstein won a symbolic vote in the Senate, 73-27, on June 16 to end the payments on July 1.
The path for the deal to become law is still uncertain. It could be attached to a bill or become part of wider measure to raise the federal debt limit.
The deal focuses on ending the 45-cent per gallon blenders’ credit by the end of the month. It would also kill the tariff on ethanol by the end of the month which is added to imports mostly fromBrazil.
Ethanol producers and industry groups have supported a deal that would end the tax credit, but direct some money to ethanol industry infrastructure, such as advanced pumps at gasoline stations that would allow drivers to select their own blends of ethanol, and for pipelines.
Ethanol producers have also taken heart in the fact thatU.S.mandates for grain-based ethanol require increasing amounts of the fuel until 2015.
