* Cut in ethanol subsidy, tariff would save $2 billion
* High import tariff discourages ethanol from Brazil
* Cost savings used for deficit, manufacturing tax credit
* Ethanol cut would be rejection of tax-bill element
(adds comments from ethanol groups, analyst))
By Tom Doggett and Charles Abbott
WASHINGTON, Dec 13 U.S. Senator Dianne
Feinstein on Monday sought to add an amendment to a massive tax
bill with a measure that would cut the ethanol tax credit and
import tariff to 36 cents a gallon each -- a huge cut in
biofuels support rates.
The current U.S. ethanol tax credit of 45 cents and the
import tariff of 54 cents would be extended through 2011 under
the tax bill. They will expire on Dec. 31 unless the House and
Senate agree to renew them.
"Reducing the ethanol subsidies and trade barriers proposed
in this legislation would substantially reduce the cost of this
bill to the American taxpayer, while allowing the Senate to
support the vitally important development of our manufacturing
sector," Feinstein said in a letter to Senate Majority Leader
Harry Reid and Republican Leader Mitch McConnell.
Her amendment would also cut the 10-cent-per-gallon tax
credit that goes to small ethanol producers to 8 cents.
Six senators co-signed Feinstein's proposal. That is down
from the 16 senators who joined her in a letter to Senate
leaders two weeks ago in favor of letting the supports expire.
The tax package survived a Senate test vote on Monday
afternoon, which will allow debate to begin. Reid will announce
which amendments, if any, will be considered on the bill.
"It won't be a disaster" if subsidies are reduced, said
analyst Mark McMinimy of MF Global's Washington Research Group
but it would be a startling rejection of a closed-door decision
among senators to keep rates at the current level.
Feinstein said the cost of extending the current ethanol
tax credit for another year would total about $5.3 billion, as
federal law already requires 12.6 billion gallons (57.3 billion
liters) of ethanol to be produced during 2011.
"We cannot afford to pay industry for following the law,"
she wrote to Senate leaders.
Feinstein also said the import tariff makes the U.S. more
reliant on foreign oil from OPEC, because it discourages
ethanol imports from Brazil, Australia and India.
"Currently, the federal government intervenes in the
ethanol industry in three ways: requiring ethanol be blended in
gasoline, providing a substantial subsidy and slapping tariffs
on foreign ethanol imports, making us more dependent on foreign
oil. This is bad policy and must be fixed," she said in an
earlier statement to Reuters.
Feinstein said the $2 billion that would be saved by
lowering ethanol assistance could be used to reduce the deficit
and extend the advanced manufacturing tax credit.
Ethanol trade groups opposed scaling back their government
help. Iowa Sen Charles Grassley said renewable fuels "are a
part of a balanced program" along with oil industry subsidies
and energy conservation to reduce reliance on foreign oil.
"The president and congressional leaders have worked to put
together a very carefully negotiated bill. It would be unwise
to attempt at this point to rewrite it -- particularly a green
jobs provision certain to help Rust Belt and Midwestern regions
where jobs are scarce," said Stephanie Dreyer, spokeswoman for
The Renewable Fuels Association pointed out the U.S. sends
more money to OPEC and other oil producing nations in just one
week than would be spent during all of 2011 in ethanol
subsidies. "Claiming the use of ethanol increase our reliance
on imported oil defies logic," said spokesman Matt Hartwig.
Seventeen U.S. representatives said in a letter last Friday
to House leaders "it is time to end or significantly reduce the
subsidy for corn ethanol and the tariff on imported ethanol."
They said they would support advanced biofuels that meet
food and fuel needs. Advanced biofuels would include ethanol
made from cellulose, found in woody plants, grasses and crop
A 2007 law sets an annual targets for use of renewable
motor fuels, reaching 36 billion gallons in 2022, the bulk of
it from advanced biofuels.
(Reporting by Tom Doggett, Charles Abbott and Richard Cowan;
Editing by Marguerita Choy and Sofina Mirza-Reid)