Farm Bill conference committee expected to vote this week; biodiesel tax break gone; ethanol tariff extended to 2010

April 30, 2008

In Washington, a vote by the US House and Senate conference committee on the Farm Bill is expected this week, with an expectation that the bill will contain a reduced 45 cents per gallon ethanol subsidy and a $1.01 per gallon subsidy for cellulosic ethanol. Tax credits for biodiesel were removed from the bill, and the tariff on Brazilian ethanol is extended through 2010.

The bill contains $900 million for biofuels development, $900 million for nutrition programs aimed to offset higher food prices, while land stewardship programs would received an additional $4 billion, and specialized crops $1.35 billion.

Negotiations over the stalled Farm Bill had put existing ethanol incentives in peril earlier this month, according to House Agriculture Committee chairman Collin Peterson. The chairman said that, in order to offset $9.5 billion in increased spending, Senate negotiators had proposed a $0.05 per gallon cut in the ethanol blender tax credit and reductions in other incentives for a total of $1.226 billion in ethanol support cuts.

Earlier this month, the US House of Representatives had voted to extend the existing Farm Bill until April 25 to give lawmakers more time to resolve differences between the House and Senate versions of the new Farm Bill, which includes tax breaks and incentives for biofuels. President Bush has stated that he will not sign legislation extending the current Farm Bill for another year.

The Farm Bill was passed by the Senate in the fall, while the House version passed in July. Senate Agriculture Committee chairman Tom Harkin said the bill would earmark $1.3 billion for biofuels over the next five years.

The Senate passed an overall funding measure on October 5, but the Agriculture Committee under committee chairman Tom Harkin had been working on specific program allocations until November, which include ethanol tax credits and next-generation biofuel investments. The Senate finance committee previously proposed cutting the ethanol tax credit to 46 cents per gallon.

President Bush has raised the threat of a Farm Bill veto, the first since 1956, over subsidies. Among those in hot dispute is the Brazilian ethanol tariff, which protects US ethanol producers but creates higher prices in the US and retards US ethanol demand growth.