Credit Rep. Jeff Fortenberry for devising a smart and thoughtful way to reduce subsidies for the production of ethanol.
His proposal not only would save money, but it also would provide incentives that would increase the availability and convenience of renewable fuels for consumers.
Fortenberry, a member of the House Agriculture Committee, introduced his proposal recently as Congress is considering a variety of ideas for reshaping ethanol subsidies. House Ways and Means Chairman Sandy Levin, D-Mich., for example, has proposed cutting the fuel blenders credit to 36 cents per gallon from 45 cents per gallon.
Many people, even those in the ethanol industry, think cuts in ethanol subsidies are inevitable this year because of burgeoning federal budget deficits.
The ethanol industry has been heavily dependent on subsidies since the industry began about three decades ago. Nebraska has been a major beneficiary, with 24 plants located in the state and ranking second in the nation in production capacity.
Recently, however, a study by the Congressional Budget Office suggested that the ethanol industry will continue growing without the subsidy because Congress now has mandated that the fuel industry add ethanol to gasoline. The current renewable fuel standard is 12.95 billion gallons. The amount is scheduled to increase annually through 2015.
Under Fortenberry's proposal, the current 45-cent-per-gallon subsidy would be eliminated for the amount of ethanol required under the renewable fuel standard. The subsidy would remain in place for grain-based ethanol produced in excess of the federal mandate.
Fortenberry's proposal would save $5.67 billion, according to an analysis by economists Ernie Goss of Creighton University and Bruce Babcock of Iowa State University.
Importantly, the bill would require manufacturers to provide a greater number of flex-fuel vehicles and provide incentives for companies to provide consumers with more pumps capable of providing a variety of ethanol blends, including the E-85 blend that is 85 percent ethanol. Subsidies also would be available for ethanol storage tanks.
Subsidies also would be maintained for development of cellulosic ethanol, which is made from materials such as cornstalks and switchgrass, rather than kernels of corn. Research shows that cellulosic ethanol can provide a much greater return on the amount of energy expended in production than ethanol made from corn kernels.
At a time when it's become obvious that the ethanol industry no longer can continue business as usual, Fortenberry's ideas deserve support. They could help the country improve its financial condition while making progress toward national energy goals.