U.S. Agriculture Secretary Tom Vilsack said Wednesday that he endorses an ethanol industry proposal to scale back its nearly $6 billion annual federal subsidy and redirect some of the money to renewable energy research and incentives for gas stations to dispense a range of ethanol blends.
Vilsack, in an interview with Star Tribune reporters and editorial writers, said it would be a mistake for Congress simply to eliminate the 45-cent-per-gallon federal ethanol credit like it did with the a biodiesel credit in 2009.
"When the biodiesel tax credit was allowed to expire, we lost 50 percent of production capacity immediately -- 12,000 jobs were lost," Vilsack said.
The same thing could happen with the ethanol subsidy, which is set to expire this year unless Congress acts, he said.
"The one thing you don't want to do when the economy is fragile ... is to take steps that actually discourage employment," said Vilsack, who added that he generally supports proposals by Growth Energy, an ethanol industry trade group, and Sen. Amy Klobuchar, D-Minn., to reduce and redirect ethanol subsidies.
Vilsack said such a plan should happen over four to five years. Some of the money -- he didn't say how much -- should be shifted to explore alternatives to corn ethanol, efforts to increase the number of cars that run on higher ethanol blends and incentives for gas stations to add blender pumps to sell such fuel.
During his visit to Minnesota, Vilsack also stopped at the Inver Grove Heights headquarters of CHS Inc., whose Cenex gas stations account for more than half of the 70 stations in the state with blender pumps.
Blender pumps allow customers to purchase any percentage of ethanol and gasoline. The pumps mix the two fuels from separate underground tanks on the fly, allowing customers to choose the standard E-10, or E-15 and higher blends. Gas stations with standard pumps usually can offer E-10 only, in regular or premium, and sometimes midgrade.
The new pumps can cost $25,000 to $100,000 to install, which is why just 285 of the nation's 170,000 gas stations have them, according to Growth Energy. More than half of those stations are in Minnesota and South Dakota.
Vilsack said offering ethanol choices more widely would give the industry a better chance to compete against gasoline without the federal credit, he said.
In a first step to promote blender pumps, the Agriculture Department recently began offering gas stations incentives under an existing $70 million program. Redirecting ethanol subsidies could result in hundreds of millions of dollars to promote the nation's pump changeover, Vilsack said.
Separately, Vilsack announced Tuesday that up to $10 million in federal aid will help landowners in Minnesota and the Dakotas restore wetlands to reduce flooding and increase wildlife habitat in the Red River Valley.
David Shaffer • 612-673-7090