U.S. farm group: Install pumps, end ethanol credit

ATLANTA (Reuters) - Congress should transform the $6 billion a year ethanol tax credit into a program that underwrites the installation of "blender" pumps and pipelines so biofuels are more widely available, the largest U.S. farm group said on Tuesday.

The 45-cent a gallon tax credit, which goes to gasoline blenders, expires at the end of this year. Congress voted for the one-year extension last month amid arguments whether to end the tax credit altogether or to reform biofuels supports.

Ethanol trade groups are divided on the shape of biofuel supports. One of them, Growth Energy, would end the credit in favor of more biofuel pumps at filling stations and pipelines to supply them.

Until now, the 6-million member American Farm Bureau Federation supported the tax credit as well as blender pumps, which can dispense fuel that is up to 85 percent ethanol. Delegates voted to change policy to emphasize biofuel infrastructure and to discontinue the tax credit.

"The whole discussion has been evolving within the industry and within Congress," said AFBF president Bob Stallman. He said it might be easier to defend a program that expanded the biofuel network. "Frankly, our members have said that's a good idea for us to make that transition."

Opponents say the tax credit is a wasteful subsidy that diverts corn into biofuel plants and drives up the cost of livestock feed and, indirectly, food prices. Nearly 40 percent of this year's corn crop will be used in making ethanol. The industry is concentrated in the Midwest, where ethanol is popular as a creator of rural jobs and boost to farm income.

Growth Energy hailed the change in position, saying, "It's the right direction if we are going to create jobs and strengthen national security."

The 370 delegates voted to discontinue the ethanol credit and use current funds "to invest in the installation of a blender pump network for ethanol and biodiesel" with a transition from the credit to the infrastructure program.

Delegates also backed extension of the $1 a gallon biodiesel tax credit and for the government to share the cost with farmers who plant grasses or other biomass crops. Grass and woody biomass are supposed to succeed corn as the major feedstock for ethanol.

Federal programs are moving slower than planned in bringing biomass plants into production.

A Reuter straw poll at the convention on Sunday found a majority of the 436 respondents want Congress to extend the ethanol tax credit, while a quarter could accept at least some cuts to the controversial subsidy. But there was interest in shifting some of the money into infrastructure.

With budget cuts looming in Washington, delegates listed a half-a-dozen acceptable paths to take when farm law is overhauled in 2012. Illinois Farm Bureau president Phil Nelson said delegates "put a menu together" that can be pared to fit the funding available after budget fights are over.

Delegates called for a strong farm safety net but did not mention renewal of a disaster-relief fund. A potential challenge to the $5 billion a year "direct payment" program fizzled. The payments are popular with wheat, cotton and rice growers. Critics say the money would be better spent in programs that help farmers through hard times.

A day before delegates met, Agriculture Secretary Tom Vilsack said during a speech to AFBF members that cuts were possible.

"When you're dealing with having to reduce deficits, we're going to have to make difficult choices," said Vilsack.

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