US Congress passes bill extending tariff on ethanol imports

Washington (Platts)--11Dec2006

The US Senate early Saturday extended through January 1, 2009, a
secondary tariff of 54 cents/gal on ethanol imports into the US.

The measure, which was part of an omnibus tax bill passed in the waning
hours of the 109th Congress, passed US House last Friday, and is now on its
way to President Bush for his signature.

The legislation included a provision opening 8 million acres in the
eastern-central Gulf of Mexico to new oil and gas leasing.

The 54-cent secondary tariff on ethanol imports is designed to offset the
51 cent/gal blender's credit that is applied to ethanol no matter its country
of origin. The US ethanol industry said that removing the tariff offset, which
was set to expire on October 1, 2007, would have had dire consequences for the
industry.

"Removing this tariff offset would have paved the way for US dollars to
be wired to Brazil, with American taxpayers subsidizing already-subsidized
foreign ethanol," American Coalition for Ethanol vice president Brian Jennings
said in a statement.

He also said that allowing the tariff to lapse would have indicated to
lenders and investors that the US was abandoning its commitment to the US
ethanol industry.

"Such a move would have sharply curtailed the growth of an American
renewable fuels industry that has the potential for enormous benefits to the
nation's economy, environment and energy security," Jennings said.

Last April, when US gasoline prices were spiking as the industry was
removing MTBE from gasoline supplies and replacing it with ethanol, several
lawmakers suggested removing the tariff, in hopes that more ethanol from
abroad would be made available, thereby cutting gasoline prices. Since then,
gasoline prices have moderated, muting such calls.

Congress has supported growing the US ethanol industry as a way to trim
US reliance on foreign oil.

Last year, as part of the Energy Policy Act, Congress passed a renewable
fuels standard requiring the use of 7.5 billion gallons of renewable fuels by
2012. US renewable fuel production is well on its way to meeting the
requirement. Currently, nationwide there are 109 ethanol facilities that
produce 5.2 billion gallons of ethanol with 53 additional plants under
construction and seven that are expanding.

The bill on the way to the President also provides a new incentive for
ethanol plants which use cellulosic feedstocks. New cellulosic ethanol
facilities placed into service by January 1, 2013 will receive a provision for
a 50% accelerated depreciation allowance.

--Cathy Landry, cathy_landry@platts.com

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