Ethanol-dependent towns fret over possible loss of subsidies

A cornfield stretches toward the Guardian Energy plant in Janesville, Minn., one of many ethanol plants in the Midwest. 

Minneapolis Star Tribune

A cornfield stretches toward the Guardian Energy plant in Janesville, Minn., one of many ethanol plants in the Midwest. 

CLAREMONT, Minn. — The white plume still billows from the smokestack at the ethanol plant off the highway here, and the 18-wheelers still screech to a stop at the corn unloading station.

Nothing is visibly different these days at the Al-Corn plant, one of Minnesota's oldest ethanol makers — except that an era of nearly unwavering government support for the industry seems to be over.

"I had a feeling this was coming," said local corn farmer John Fosness of this month's lopsided but largely symbolic vote in the U.S. Senate to immediately kill ethanol subsidies.

Though the subsidy-killer measure is part of a broader bill not expected to be approved, $6 billion in federal ethanol incentives are certain to be scaled back as Congress and the Obama administration confront the federal deficit. That has significant implications in Midwestern states that are top ethanol producers.

Fosness, who sold his stake in the farmer-owned plant last year, said he understands that the government needs to reduce spending and is resigned to it. "Congress is getting the message from the public," he said.

Yet others are not as accepting in Claremont, population 650, where the ethanol plant is the largest employer.

"Why don't they start cutting big subsidies to Big Oil?" asked farmer Michael Berg, who still owns shares in the local plant.

Even if the subsidies go away, the plant in Claremont, 80 miles south of the Minneapolis area, is expected to keep running.

Completed in 1996, it employs 33, buys corn from its 500 farmer-owners and has turned a profit for them. Two years ago, a joint venture it has with five other ethanol makers purchased a larger, bankrupt plant in Janesville, Minn., 40 miles to the west. "I don't see a fatal effect," chief executive officer Randall Doyal said of the potential loss of ethanol incentives, including a small-producer tax credit worth $1.5 million annually to the Claremont plant. "It is going to pinch, probably, but I don't know."

The pinch may not be too painful. Economists say U.S. demand for ethanol is driven by federal requirements to blend it with gasoline, which are not slated for elimination.

Ethanol-dependent towns fret over possible loss of subsidies 06/25/11 [Last modified: Friday, June 24, 2011 9:15pm]

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