In what is being described as an ambush, Senator Tom Coburn (R-OK) has successfully forced a vote (next Tuesday, June 14) on legislation that would, upon July 1, terminate the ethanol tax credit and corresponding tariff. A back of the envelope calculation suggests it would save approximately $3 billion in the remainder of 2011.

According to the article, Coburn is cautiously optimistic that he has 60 votes. Politico gets it right, this is a big deal regardless if it passes:

Regardless of whether the underlining economic development legislation gets through the Senate and House and to the president’s desk, a vote on Coburn’s amendment could be a major symbolic vote.

Ethanol backers have been looking to try to stave off such moves by working behind the scenes on ways to quickly move off of the blender tax credit and transition to federal assistance for blender pumps and other infrastructure to grow the market base for ethanol and other biofuels.

Even if he gets the necessary votes in the Senate, it seems unlikely that both the House passes similar legislation that President Obama then signs. However, if this gets a significant number of votes, it could spell doom for the future of the industry. A repudiation of tax incentives for ethanol will certainly limit the industry’s ability to lobby for infrastructure assistance, which they have successfully framed as ending the subsidies. Of course, re-directing the current subsidies into money for blender pumps and ethanol pipelines is not in any form an “end” to the subsidies.

The industry, caught off guard, is angry:

The RFA statement from President and CEO Bob Dinneen is as follows:

“This is the same kind of political gamesmanship that nations like Iran and Venezuela are exercising to keep consumer energy prices artificially high and Americans addicted to oil.  If this were truly about sound policy and concerns over energy tax subsidies, then this amendment would include efforts to repeal the billions of taxpayer dollars oil and other mature energy industries receive each year while posting tens of billions of dollars in profits quarterly.  As few observers give this bill any chance of getting to the president’s desk, Sen. Coburn’s efforts are yet another example of oil-patch politics trumping sound national energy policy.  We encourage Sen. Coburn to lay down his arms and work with the ethanol industry to craft thoughtful and fiscally responsible legislation that allows for continued innovation and growth of domestic biofuel production and use without pushing the industry off a cliff.

“Ethanol is the only alternative to imported oil available today and the only technology keeping money out of bank accounts in Caracas and Tehran. Pulling the rug out from under a still maturing industry would force consumers to pay more at the pump, do nothing to mitigate impacts of rising food prices resulting from exorbitant oil prices, and jeopardize the commercialization of promising new ethanol and biofuels technologies. This is an amendment meant with an eye toward reelection, not deficit reduction.”

Despite their doom-saying, the industry will not be pushed off a cliff. Federal law still requires the production of something like 10 billion gallons of ethanol per year. It is telling that they refer to themselves as a still maturing industry, over 30 years after they began receiving subsidies, and given that they are now receiving tax credits for ethanol that is being exported to Brazil.