A bipartisan trio of senators announced Thursday that they have reached an agreement on a way to end ethanol subsidies immediately.

Sens. Dianne Feinstein (D-Calif.), Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) told Senate leaders that their proposal would repeal the 45-cent ethanol blender credit at the end of July, saving $2 billion through the end of the year.

It would also end a tariff of 54 cents a gallon on foreign ethanolthis month. But it would extend a tax credit for green biofuels production for three years, expanding it to include fuels made from algae.

The lawmakers said the deal would cut $1.33 billion from the federal debt over the next six months, while investing $668 million in new energy technologies.

The group recommended inserting their ethanol measure into the debt-reduction package being negotiated by the White House and Congressional leaders in a deal to raise the nation’s legal borrowing limit by Aug. 2.

While the Senate voted last month to eliminate ethanol subsidies, the provision was tied to a bill that has stalled. Since then, Democrats have challenged Senate Republicans who backed the measure a few weeks ago to agree to include such savings in the debt negotiations.

Senate Republicans have been hesitant and have balked at President Obama’s insistence that a debt-reduction deal that includes major spending cuts should also raise new revenues by closing tax loopholes and ending subsidies.

The bipartisan proposal may signal new flexibility about including ethanol subsidies in the debt talks.