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Lame-Duck Bailouts for Ethanol and Wind? (Here's what's being sneaked into the tax deal)
National Review ^ | 12/13/2010 | Robert Bryce

Posted on 12/13/2010 7:39:24 AM PST by SeekAndFind

Ethanol is the Frankenfuel of the energy business, a subsidy-devouring monster that cannot be killed, no matter how great the political opposition. Farm-state senators have apparently succeeded in adding an extension of the ethanol tax credit, which is scheduled to expire at the end of the year, to the tax bill now working its way through Congress.

While that news is disheartening enough, the wind-energy business — the electricity sector’s equivalent of the ethanol scam — may also be winning in its effort to garner more federal subsidies. It is pushing lame-duck legislators to extend a part of the stimulus package known as the Section 1603 tax credit, which gives cash directly to wind-project developers. But what the wind boosters really need to keep their struggling business afloat is a mandate requiring the production of renewable electricity — at least 15 percent by 2020. And some Democratic senators are pushing a bill that would do just that.

Any legislation that provides more subsidies for ethanol or wind energy in the final days of the 111th Congress will be a major loss for taxpayers, as billions of additional dollars will be lavished on sectors that cannot survive in the free market.

Both industries have a long history of subsidies. The ethanol sector began suckling at the public teat in 1978 and has never been weaned. Instead, the industry has convinced Congress to provide ever-increasing volumes of taxpayer cash on the promise that their corn-distilled elixir will drastically reduce America’s need for foreign oil.

That hasn’t happened, and it won’t. Nevertheless, in 2004, Congress enacted the 45 cent per gallon Volumetric Ethanol Excise Tax Credit, the subsidy to ethanol blenders it now seeks to extend. And in 2007, legislators decreed that U.S. motor-fuel retailers must be blending at least 15 billion gallons of ethanol per year into the nation’s gasoline supply by 2015.

The industry responded to the mandate by doubling its production capacity between 2007 and 2010. But it built too much capacity, too soon, which pushed a bushel of ethanol producers into bankruptcy. Their problem now, as one ethanol lobbyist put it, is that “we have lots of gallons of ethanol chasing too few gallons of gasoline.” In October, the EPA gave the industry a bailout of sorts, approving an increase in the amount of ethanol — a hydrophilic, corrosive, low-heat-content fuel — that can be blended into the U.S. gasoline supply from 10 percent to 15 percent.

But the ethanol producers, as usual, can’t get enough of your money, and they are working hard to assure that the fat subsidies (which now total about $7 billion per year) keep flowing. Last month, their main lobby groups — the Renewable Fuels Association, Growth Energy, and the American Coalition for Ethanol — sent a letter to congressional leaders telling them that ethanol has been “uniquely successful in reducing our dependence on foreign, imported oil.” They urged Congress to pass legislation extending the tax credit before the end of the year.

And they are likely to get that extension, despite the fact that on November 30, a bipartisan group of senators — nine Democrats and eight Republicans — declared their opposition to the continuation of the subsidies, saying they were “fiscally indefensible and environmentally unwise.” Those points are certainly true. But if you need another fact to shift your gasohol-induced anger into apoplexy, consider this: Ethanol has done nothing to cut oil imports. Between 1999 and 2009, U.S. ethanol production increased sevenfold, to more than 700,000 barrels per day. And yet, over that same time span, U.S. oil imports increased by more than 800,000 barrels per day.

While oil imports are increasing and the ethanol industry is producing too much ethanol, the wind-energy sector is being garroted by that dastardly opponent of renewable energy: competitive markets. In late October, the American Wind Energy Association announced that through the first three quarters, just 1,600 megawatts of new wind capacity was installed in the U.S., “down 72 percent versus 2009, and the lowest level since 2006.”

In a press release, the lobby group said the solution for its woes were — wait for it — more subsidies and mandates. The group’s CEO, Denise Bode, said that “the best way to galvanize the industry now will be continued tax credits and a federal benchmark of 15 percent renewables in the national electricity mix by 2020.” Bode continued, saying that those subsidies and a 15 percent renewable mandate “will send a clear signal to investors that the U.S. is open for business.”

But the market is saying that it doesn’t want the wind industry’s product. The reason: Even with the current subsidies for wind projects, natural-gas-fired generation remains a cheaper, more reliable option. That’s remarkable, given that the effective subsidy for wind-generated electricity, the $0.022 per kilowatt-hour production tax credit, amounts to $6.44 per million BTUs. By comparison, natural gas now sells on the spot market at Henry Hub, a major trading location, for less than $5 per million BTUs.

Two years ago, shortly after launching a multi-million-dollar media extravaganza aimed at promoting his “Pickens Plan,” Dallas-based billionaire T. Boone Pickens said that natural gas must cost at least $9 for wind energy to be competitive in the marketplace. (The Pickens Plan would involve subsidizing wind power and encouraging the use of natural gas — of which Pickens owns much — to fuel heavy trucks instead.) In March of this year, Pickens was still hawking wind energy, but he’d lowered his price threshold, declaring, “The place where it works best is with natural gas at $7.”

Perhaps, but Pickens and his subsidy-seeking pals have a big problem: Cheap natural gas may persist for years to come. Last month, the International Energy Agency’s chief economist, Fatih Birol, said that the world is oversupplied and he predicted that “the gas glut will be with us ten more years.” The abundance of natural gas, which is largely due to the gas industry’s newfound prowess at unlocking galaxies of methane from shale beds, has some wind-industry insiders predicting that new U.S. wind-generation installations will fall again, by as much as 50 percent, in 2011.

Unable to compete in the free market, the wind industry’s only near-term hope is an ethanol-style mandate. And if given that mandate, perpetual ethanol-style subsidies will surely ensue. Congress, please, just say no.

– Robert Bryce is a senior fellow at the Manhattan Institute. His latest book is Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future.


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: corn; earmarks; ethanol; farmpimps; pork; subsidy; taxdeal; wind

1 posted on 12/13/2010 7:39:27 AM PST by SeekAndFind
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To: steelyourfaith

Ping.


2 posted on 12/13/2010 7:40:50 AM PST by Army Air Corps (Four fried chickens and a coke)
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To: SeekAndFind

It’s gonna take more than one election cycle to take back our party to its roots and force the RINOS into third-party status.


3 posted on 12/13/2010 7:41:22 AM PST by Matchett-PI (Trent Lott on Tea Party candidates: "As soon as they get here, we need to co-opt them" 7/19/10)
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To: Matchett-PI

Considering how long it took to get where we are, indeed, it will take a few cycles to wash this elitist, know-better filth out of power.


4 posted on 12/13/2010 7:42:53 AM PST by MrB (The difference between a (de)humanist and a Satanist is that the latter knows who he's working for.)
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To: Matchett-PI

It is extremely interesting that some very conservative lawmakers are for the ethanol tax breaks.


5 posted on 12/13/2010 7:43:07 AM PST by Conservativegreatgrandma
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To: Conservativegreatgrandma
It is extremely interesting that some very conservative lawmakers are for the ethanol tax breaks.

It is extremely interesting that some very "conservative" lawmakers are for the ethanol tax breaks.

(You left out necessary punctuation here.)

6 posted on 12/13/2010 7:47:48 AM PST by madprof98 ("moritur et ridet" - salvianus)
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To: SeekAndFind

H.L. Mencken
First printed in the American Mercury, March, 1924.

….LET the farmer, so far as I am concerned, be damned forevermore. To Hell with him, and bad luck to him. He is a tedious fraud and ignoramus, a cheap rogue and hypocrite, the eternal Jack of the human pack. He deserves all that he ever suffers under our economic system, and more. Any city man, not insane, who sheds tears for him is shedding tears of the crocodile.

No more grasping, selfish and dishonest mammal, indeed, is known to students of the Anthropoidea. When the going is good for him he robs the rest of us up to the extreme limit of our endurance; when the going is bad be comes bawling for help out of the public till. Has anyone ever heard of a farmer making any sacrifice of his own interests, however slight, to the common good? Has anyone ever heard of a farmer practising or advocating any political idea that was not absolutely self-seeking–that was not, in fact, deliberately designed to loot the rest of us to his gain? Greenbackism, free silver, the government guarantee of prices, bonuses, all the complex fiscal imbecilities of the cow State John Baptists–these are the contributions of the virtuous husbandmen to American political theory. There has never been a time, in good seasons or bad, when his hands were not itching for more; there has never been a time when he was not ready to support any charlatan, however grotesque, who promised to get it for him. Only one issue ever fetches him, and that is the issue of his own profit. He must be promised something definite and valuable, to be paid to him alone, or he is off after some other mountebank. He simply cannot imagine himself as a citizen of a commonwealth, in duty bound to give as well as take; he can imagine himself only as getting all and giving nothing.

Yet we are asked to venerate this prehensile moron as the Ur-burgher, the citizen par excellence, the foundation-stone of the state! And why? Because he produces something that all of us must have–that we must get somehow on penalty of death. And how do we get it from him? By submitting helplessly to his unconscionable blackmailing by paying him, not under any rule of reason, but in proportion to his roguery and incompetence, and hence to the direness of our need. I doubt that the human race, as a whole, would submit to that sort of high-jacking, year in and year out, from any other necessary class of men. But the farmers carry it on incessantly, without challenge or reprisal, and the only thing that keeps them from reducing us, at intervals, to actual famine is their own imbecile knavery. They are all willing and eager to pillage us by starving us, but they can’t do it because they can’t resist attempts to swindle each other. Recall, for example, the case of the cottongrowers in the South. Back in the 1920’s they agreed among themselves to cut down the cotton acreage in order to inflate the price–and instantly every party to the agreement began planting more cotton in order to profit by the abstinence of his neighbors. That abstinence being wholly imaginary, the price of cotton fell instead of going up –and then the entire pack of scoundrels began demanding assistance from the national treasury–in brief, began demanding that the rest of us indemnify them for the failure of their plot to blackmail us.

The same demand is made sempiternally by the wheat farmers of the Middle West. It is the theory of the zanies who perform at Washington that a grower of wheat devotes himself to that banal art in a philanthropic and patriotic spirit–that he plants and harvests his crop in order that the folks of the cities may not go without bread. It is the plain fact that he raises wheat because it takes less labor than any other crop–because it enables him, after working no more than sixty days a year, to loaf the rest of the twelve months. If wheat-raising could be taken out of the hands of such lazy fellahin and organized as the production of iron or cement is organized, the price might be reduced by two-thirds, and still leave a large profit for entrepreneurs. But what would become of the farmers? Well, what rational man gives a hoot? If wheat went to $10 a bushel tomorrow, and all the workmen of the cities became slaves in name as well as in fact, no farmer in this grand land of freedom would consent voluntarily to a reduction of as much as 1/8 of a cent a bushel. “The greatest wolves,” said E. W. Howe, a graduate of the farm, “are the farmers who bring produce to town to sell.” Wolves? Let us not insult Canis lupus I move the substitution of Hyæna hyæna.


7 posted on 12/13/2010 8:00:55 AM PST by Leisler (They always lie, and have for so much and for so long, that they no longer know what about.)
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To: SeekAndFind

Reagan once said something to the effect that,”there is nothing that is closer to eternal life than a government program.” True True True.


8 posted on 12/13/2010 8:05:27 AM PST by Don Corleone ("Oil the gun..eat the cannolis. Take it to the Mattress.")
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To: madprof98
Yea, it would seem that way BUT I know some of these guys and they are truly conservative. I don't get it either but I"m trying to keep an open mind about this just because of those I know who are for it. It must not be as black and white as we see it.

Frankly, I think all of this "sustaining" energy is a scam and in Iowa we have all of it going. We have these expensive windmills everywhere and of course, we all know about the ethanol breaks.

I wish they'd concentrate more on what ND can supply in the way of fossil fuels. We'd all be better off.

9 posted on 12/13/2010 8:07:23 AM PST by Conservativegreatgrandma
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To: Conservativegreatgrandma

It’s due to our lousy farm policy that encourages overproduction. Ethanol may suck, but $2 corn rotting in bins sucks even worse for the economy.

We need to focus on broad spectrum added value ag technology and refining for our farm policy. Do that and the ethanol problem goes away.


10 posted on 12/13/2010 8:08:45 AM PST by Free Vulcan (The battle isn't over. Hold their feet to the fire.)
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To: Matchett-PI

You got that right. They think because they were able to squeak Reid and Murkowski through it’s back to business as usual. The bloodletting will have to be even worse next time so they get the message.


11 posted on 12/13/2010 8:09:17 AM PST by Buckeye McFrog
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To: MrB

speaking of which.....somebody PLEASE tell John Boehner that he needs to go and Google “Edmund Muskie”...


12 posted on 12/13/2010 8:11:01 AM PST by Buckeye McFrog
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To: Conservativegreatgrandma

They are nothing short of being just plain whores.

There is nothing in the greater good for the country about ethanol. It is an expensive, wasteful, low energy content, machinery destroying, resource wasting fuel and should be forgotten about. There are much better alternatives that have languished because they don’t favor the ethanol related lobby of farm groups and agribusiness like Cargill, ADM and Monsanto. Include a handfull of farm equipment manufacturers in there plus aggressive tax credits for new farm equipment and you have ETHANOL. There is a lot of building going on in the farm belt, new barns and houses all funded by the ethanol subsidy. I don’t mind farmers making money but I do mind it being by way of tax created routes. Just another house of cards to buy votes with your money.

yippee.


13 posted on 12/13/2010 8:17:16 AM PST by Sequoyah101 (Half of the population is below average)
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To: SeekAndFind

Maybe Congress should issue war bonds again. This time the $ goes to fund bio-fuel research and ecokooks can put their money where their big mouths are.

All the patiotic farmers could invest and become overnight millionaires.


14 posted on 12/13/2010 8:26:10 AM PST by WOBBLY BOB ( "I don't want the majority if we don't stand for something"- Jim Demint)
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To: Conservativegreatgrandma

Interesting is not quite the word, the word should be enlightening that is one sees exactly what the two party DC style political machine is: A criminal enterprise.


15 posted on 12/13/2010 8:34:14 AM PST by Mouton
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To: SeekAndFind

More re; wind at this thread...
http://www.freerepublic.com/focus/f-news/2641340/posts

...As reported by MSNBC, top Democratic fundraisers, union supporters and lobbyists with links to the Obama White House are behind a proposed wind farm in Texas that stands to get $450 million in stimulus money. This would be fairly routine but for the fact that A-Power Energy Generation Systems, a Chinese supplier of wind turbines, would operate the farm and its turbines would be built in China. The Chinese are also bringing some financing of their own to the project...


16 posted on 12/13/2010 8:41:23 AM PST by IM2MAD
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To: SeekAndFind
I heard somewhere that one new nuke power plant in California could replace all the output of all the wind farms that pollute California. Don't know if true or not but my bet it would.
17 posted on 12/13/2010 9:03:09 AM PST by Logical me
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To: SeekAndFind

Interesting the Rats and RINO’s understand that if you subsidize ethanol you will get more ethanol but they can’t seem to make the connection with welfare and unemployment.


18 posted on 12/13/2010 9:07:31 AM PST by IamConservative (Never kick a fresh turd on a hot day. - Truman)
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To: Logical me

RE: I heard somewhere that one new nuke power plant in California could replace all the output of all the wind farms that pollute California.


One nuke plant will not only produce non-polluting energy, but will have enough power to supply the electricity of millions of homes.

The problem we have is this — WE DON’T HAVE THE COLLECTIVE WILLS TO BUILD NEW ONES.

Heck, we can’t even bury our waste in a God-forsaken extinct volcano site in the Nevada desert close to 100 miles from Las Vegas without some group being uo in arms and some members of Congress fighting against it.


19 posted on 12/13/2010 9:09:48 AM PST by SeekAndFind
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To: SeekAndFind

20 posted on 12/13/2010 9:10:22 AM PST by paulycy (Demand Constitutionality. Save America From Bankruptcy.)
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To: Leisler

And he wrote that just before the rise of agribusiness and corporate farming. The guys getting the subsidies these days dont wear overalls and drive trucks. They wear armani suits and drive rolls royces. H. L. must be shouting “I told you so”! from his grave.


21 posted on 12/13/2010 10:36:20 AM PST by Delacon ("The urge to save humanity is almost always a false front for the urge to rule." H. L. Mencken)
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To: Army Air Corps; Normandy; Whenifhow; TenthAmendmentChampion; Clive; scripter; Darnright; WL-law; ...
Thanx Army Air Corps !

 


Beam me to Planet Gore !

22 posted on 12/13/2010 12:48:24 PM PST by steelyourfaith (ObamaCare Death Panels: a Final Solution to the looming Social Security crisis ?)
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To: SeekAndFind

Is it too late to volunteer for that mission to start life on Mars?


23 posted on 12/13/2010 12:59:56 PM PST by pke
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