U.S. bill to cut ethanol tariff going nowhere fast

NEW YORK, June 6 Sat Jun 7, 2008 12:25am IST

NEW YORK, June 6 (Reuters) - A new Senate bill to cut the U.S. tariff on ethanol imports has little chance of clearing Congress as there is not much time left on the legislative clock and it is too hot a political issue to take up in an election year, congressional aides say.

Senators Dianne Feinstein, a California Democrat, and Judd Gregg, a New Hampshire Republican, introduced legislation this week to lower the tariff to bring it in line with U.S. ethanol blending subsidies, which a recently enacted farm bill lowered to 45 cents per gallon from 51 cents per gallon.

The bill would cut import tariffs to 45 cents per gallon from the current level of 54 cents per gallon, and require Congress to lower tariffs again if blending subsidies are cut even further.

The bill has been referred to the Senate Finance Committee, where it is likely to sit.

The panel's chairman, Democrat Max Baucus, has previously said he is against cutting the ethanol import tariff. In addition, Baucus would not normally put a priority on legislation sponsored by lawmakers who are not members of his finance committee, as is the case with Feinstein and Gregg.

The top Republican on the finance committee, Chuck Grassley, opposes the bill, an aide to the senator said.

Grassley said earlier this week that Brazil and other countries can export more than 452 million gallons of ethanol duty-free to the United States this year under a special trade agreement with Caribbean nations, but that threshold has yet to be met.

"Until Brazil and other countries take full advantage of their existing ability to ship ethanol duty-free to the U.S. market, we shouldn't even discuss providing them with yet more duty-free access," Grassley said.

Many energy experts say the import tariff should be reduced, or ended altogether, because the United States will need more foreign supplies to meet a federal law requiring higher ethanol use every year.

U.S. refiners have to blend 9 billion gallons of ethanol with gasoline this year. Those volumes will slowly increase to 36 billion gallons by 2022.

The biggest obstacle to cutting the import tariff is the strong opposition from farm state lawmakers. Most U.S. ethanol is made from corn. Trying to deal with an issue that is not seen as a vote-getter in an election year is deemed politically unwise.

"I'd be surprised," responded one congressional aide when asked if the bill will move forward.

In addition, Congress is already working on a tight schedule and there is not much time to debate controversial issues like cutting the import tariff.

"There are so many other things that have to get done," an aide said. (Reporting by Tom Doggett, editing by Matthew Lewis)

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