Center for Advanced BioEnergy Research, University of Illinois at Urbana-Champaign

Friday, July 8, 2011

Senate deal would axe $6 billion ethanol tax credit

By Timothy Gardner
WASHINGTON Thu Jul 7, 2011 1:46pm EDT

WASHINGTON (Reuters) - Three senators reached a deal on Thursday to repeal the $6 billion per year ethanol tax credit by the end of July, an agreement that must still be passed by Congress.

The loss of the subsidy could add extra costs for ethanol blenders such as Valero Energy Corp and Marathon Oil Corp, but it is unlikely to reduce demand for corn.

"This agreement is the best chance to repeal the ethanol subsidy, and it's the best chance to achieve real deficit reduction," said Senator Dianne Feinstein from California, who made the deal with senators John Thune from South Dakota, and Amy Klobuchar from Minnesota.

Government mandates require increasing amounts of the corn-based fuel until 2015. The ethanol industry uses some 40 percent of the U.S. corn crop to make the alternative motor fuel.

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