The new days: the boost of Ethanol

You don't need a crystal ball to see a ramp-up in government support for ethanol coming down the pike. Just look at who's in charge of next year's doozy of a farm bill.

The reauthorization of the massive 2002 bill is likely to dominate the next session of Congress, and it will have a whole section set aside just for energy.

Already, ethanol producers benefit from a constellation of government supports, including a tariff on imported ethanol, subsidies for growing corn and blending the fuel, crop insurance and a guaranteed market: The Energy Act of 2005 required refiners to ramp up ethanol use from 2.5 billion gallons last year to 7.5 billion gallons by 2012.

Now, the farm bill may lavish even more on the industry.

Turning the farm bill into a bonanza for ethanol and other biofuels is smart politics for the Democrats, who would be wise to court voters in red states if they want to hold onto Congress. It will also garner the support of Republican lawmakers from farm states and President George W. Bush, who seem equally glossy-eyed over biofuels.
But there will be brush-back from places that don't have a stake in ethanol, and this is where the refining industry will focus its influence.

A hike of the blending subsidy, currently set at 51 cents per gallon of ethanol, or any new support for ethanol producers would be fair game. Environmentalists, for one, are eager to see ethanol plants, which are powered on natural gas or coal, switch to renewables such as wind.

With the Iraq War and entitlements busting the budget, it seems far-fetched that such a windfall would go to an industry that has already gotten so much. But, as any ethanol booster will tell you, Wall Street's support of ethanol would dry up in a flash without all the government support.