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Favor ethanol: House, Senate energy bills go to conference

A congressional conference committee now must reconcile House and Senate versions of an energy package that for six long weeks of tedious wrangling often seemed stalled in both chambers.

The thorny issue at either end of the Capitol has been look-alike provisions for tax incentives for energy production and conservation. The contentious debate has often been around proposals for congressional-level reconfirmation of a “renewable fuels” standard and continuation of a reformulated gasoline (RFG) oxygenate requirement.

The requirement has been in place since passage of the Clean Air Act.

The pro-RFG stance and the renewable fuels provisions are expected to greatly expand use and availability of grain-based ethanol. The energy measures go to the conference committee with those provisions intact.

Passage in the Senate followed an unexpected tradeoff of some farm interests. Sen. Tom Daschle, the Democratic leader from South Dakota, an RFG-ethanol sponsor, agreed to shut down debate on the energy bill and to allow a vote by June 28 on a proposal to make permanent the repeal of the federal estate tax.

Some farm groups, especially Midwest farmers, who have supported the ethanol provision, have often been just as vocal in opposing repeal of the estate tax. The repeal would lapse at the end of 2010 without congressional action.

Some of the nation's smaller farmers, or “family farmers,” have said they would prefer to let the 2001 repeal of the estate tax die. They and others have cited the cost of the repeal, and the smaller farmers have claimed the repeal has never benefited them so much as large cotton growers in the South.

After senators voted to block the Bush administration's initiative for increased oil drilling on Alaska's Arctic North Slope, the oil industry unexpectedly joined in an improbable coalition of farm interests and environmentalists to support the push for ethanol and a renewable fuel standard.

Observers have said oil's support was likely a hedge. “Big oil” could not be blamed if increased ethanol use resulted in higher gasoline prices at the pumps.

That fear had been the biggest stumbling block for ethanol in both houses. Lawmakers from California and New York, the biggest gasoline-consuming states, have said prices on both coasts would jump because ethanol and ethanol-blended fuels could not be delivered from corn-producing areas to either coast quickly enough and large enough supplies. The inevitable result, they have claimed, would be higher prices in the nation's largest markets.

Corn is the primary source for ethanol. The renewable fuels standard, and the continued federal ban on methyl tertiary butyl ether (MTBE) would triple the amount of ethanol in the nation's gasoline supply by 2012.

Sen. Charles E. Schumer, D-N.Y., argued that the requirement for increased use of ethanol in the nation's gasoline supply would lead to increased gasoline prices on the East and West coasts.

State officials and congressional delegations on both coasts have been opposed to required oxygenates of any kind and, especially, to ethanol.

The Clean Air Act mandates smog-inhibiting fuel additives in the nation's largest cities, including many, like Chicago, closer to corn producing areas.

In Senate debate, Daschle said Schumer's presumption of hiked gasoline prices was “just not accurate.” The senators voted 86-13 to shut off debate.

The National Corn Growers had earlier released a study, sponsored by NCG and other groups, that showed that, in addition to other benefits of expanded ethanol use, the ethanol industry and existing infrastructures would allow the ethanol industry to provide regular, adequate delivery of ethanol to both coasts.

Ethanol-processing facilities are largely farmer-owned.

The tax package in the energy legislation involves $14.1 billion in tax incentives over the next decade to promote conservation and encourage production of new sources of fuel. Sen. Max Baucus, D-Mont., said the incentives would “help on the margin to wean us” from imported oil.

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