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US Congress seen unlikely ending ethanol duty soon
Wed Apr 19, 2006 2:34 PM ET
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By Tom Doggett and Sophie Walker
WASHINGTON, April 19 (Reuters) - While U.S. oil refiners will rely on more ethanol imports this summer to meet their demand for the fuel additive when making gasoline, Congress is unlikely to ease ethanol import fees this year, according to U.S. ethanol and corn industry officials.

Congress already has a backlog of important bills to deal with and there's not enough time left on the legislative calendar this year to deal with any controversial legislation that would relax or eliminate U.S. ethanol duties, according to Jon Doggett, vice president of public policy at the National Corn Growers Association.

"There's a lot of things Congress isn't going to get done this year, I think this is on that list," he said.

Easing duties on Brazilian ethanol imports became a hot topic on Capitol Hill after the Energy Department forecast a domestic ethanol shortfall for surging clean fuel markets and said more imports would be needed to close the gap.

Senator Saxby Chambliss, head of the Senate Agriculture Committee, has said opening up the U.S. ethanol market is not out of the question, though not on the timetable this year.

Hill sources said this week that advocates of lifting the tariffs and opponents of doing so seem to be at a stand-off.

"The ethanol industry here is in its infancy and to undermine that by bringing in imports from other countries could be seen as hurting the investments and infrastructure that have been rapidly built in the United States to boost production," said one trade policy advisor speaking on condition of anonymity.

"We haven't heard anything specifically about any member looking to move on that," the source added. "It's safe to say they would have a fight on their hands."

Most U.S. ethanol is made from corn, which is a big income boost for farmers.

Caribbean nations are allowed to ship up to 269 million gallons of ethanol to the U.S. market this year without being slapped with the normal 54-cents-a-gallon U.S. duty and a 2.5 percent ad valorem tariff.

Brazil, which makes its ethanol from sugar cane, will also export ethanol but has to pay the U.S. fees. This offsets the 51-cents-per-gallon tax credit the United States provides for blending 10 percent ethanol into gasoline. Continued ...

© Reuters 2006. All Rights Reserved.

Bob Dinneen, president of the Renewable Fuels Association that represents U.S. ethanol producers, said reducing U.S. ethanol imports tariffs to boost supplies isn't necessary because foreign shipments of ethanol to the U.S market are already increasing.

"I don't think there will be a successful effort (in Congress) to lift the tariff," he said.

Dinneen also said ending the tariff would force U.S. taxpayers to subsidize Brazilian ethanol producers and Brazilian farmers that grow the sugar to make that country's ethanol.

U.S. oil refineries are using more ethanol to blend with gasoline as they switch from the water-polluting fuel additive MTBE. Refiners are worried they could be sued if they keeping using MTBE, which has been banned in many states.

The American Petroleum Institute, which is the trade group for big oil companies, said on Wednesday that 40 percent of the gasoline produced by U.S. refineries was blended with ethanol by the first week of April, up from 33 percent a year earlier.

© Reuters 2006. All Rights Reserved.

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