Bush budget doesn't alter ethanol import tariff

WASHINGTON Mon Feb 4, 2008 9:44pm GMT

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WASHINGTON (Reuters) - The Bush administration did not propose any changes to the expiring U.S. ethanol import tariff in its new 2009 government budget that was sent to Congress on Monday, an Energy Department spokeswoman said.

The spokesperson said while the 54-cent-a-gallon tariff is set to expire at the end of December during the 2009 budget year, which begins this October 1, the administration will have discussions with lawmakers later this year on what should be done with the tariff.

The tariff is designed to protect U.S. corn-based ethanol makers from cheaper imports, mainly from Brazil which makes its ethanol from sugar.

Energy Secretary Sam Bodman had hinted last week while speaking at the U.S. Chamber of Commerce that he favored eliminating or cutting back the tariff and that the administration would address the issue in its new 2009 budget.

"I would just say I think that there are advantages to having had the kind of both subsidies and tariffs that have helped protect this industry. I believe that, the best I can tell, this industry is pretty close to being able to stand on its own," Bodman said at the time.

U.S. ethanol blenders get a separate 51-cent-a-gallon tax credit that runs through 2010.

"I think it's very important that we pursue a policy which gives the U.S. industry appropriate time and protection to develop," Deputy Energy Secretary Clay Sell told reporters at a briefing on the Energy Department's new budget.

"We'll look forward to having those discussions with the Congress, as we always do, as the appropriate policy when the tariff expires," he said.

Brazil's sugar cane sector was disappointed the administration did not use the new budget to modify the U.S. ethanol import tariff.

"The continuing ethanol tariff runs counter to America's open and fair trade rhetoric," said Marcos Jank, president of the Brazilian Cane Sugar Industry.

"It is shocking that developed countries such as the United States continue to tax renewable biofuels from reliable democratic partners while encouraging tariff-free imports of petroleum from unstable regions of the world," he said.

However, the Renewable Fuels Association, which represents U.S. ethanol producers, said the import tariff is needed to encourage investment in the U.S. to develop cellulosic ethanol made from wood chips, switchgrass and other farm and forest waste.

"By removing the tariff ... you will cool the kind of investment you have seen in the industry," said RFA spokesman Matt Hartwig.

(Reporting by Tom Doggett; Editing by Russell Blinch and Christian Wiessner)

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