Grassley Asks President to Back-Off Ethanol Tariff Proposal

GRASSLEY ASKS PRESIDENT TO BACK-OFF ETHANOL TARIFF PROPOSAL

Grassley, Talent Take Lead

Sen. Chuck Grassley today sent a letter to President George Bush to challenge his recent rhetoric on lifting the tariff on imported ethanol. Grassley, sent the letter along with Sens. Jim Talent of Missouri, John Thune of South Dakota, Sam Brownback of Kansas, Kit Bond of Missouri, George Voinovich of Ohio, Norm Coleman of Minnesota, Mike DeWine of Ohio, and Pat Roberts of Kansas.

The Senators wrote, "There is no shortage of ethanol and removing the tariff on imported ethanol, even temporarily, is not the answer to solving America's rising gasoline prices. This action won't lower prices for consumers but it will do significant damage to our domestic ethanol industry. We hope you'll agree that our long term energy independence is more important than this short sighted proposal."

Grassley has been a very outspoken critic of the administration's stance on lifting the import tariff on ethanol. He has spoken to members of the administration as well as given statements on the Senate floor voicing his opposition.

Here is a copy of the entire letter.

Dear Mr. President:

Recently, you called for Congress to temporarily lift or suspend the tariff on imported ethanol. Ethanol is not the cause for America's pain at the pump, and we are opposed to efforts to remove the import tariff on ethanol.

Since the passage of the Energy Policy Act last summer, we've seen an increased demand for ethanol. As you know, refiners are choosing to remove MTBE from gasoline and replace it with clean-burning ethanol. Thankfully, ethanol production has been expanding at a remarkable rate over the past several years and there is enough domestic ethanol to meet this increased demand. Currently, ethanol bio-refineries across the nation have the capacity to produce 4.5 billion gallons annually and in the next year, ethanol capacity is expected to increase by 2.3 billion gallons. Additionally, data from the Energy Information Administration shows both ethanol production and ethanol stocks are rising steadily and current ethanol supplies account for 24 days worth of demand nationally. In light of these production statistics, it is unnecessary action that will only undermine our domestic ethanol industry.

As you know, the energy bill included a strong and robust Renewable Fuels Standard and investment in the domestic biofuels industry is growing at an amazing rate. This growth translates into new job opportunities in rural communities throughout the country. We want to improve the rural economies of our states and increase our energy independence in the United States. Lifting the import tariff on ethanol would undermine both of those goals.

Ethanol produced in Brazil and other countries can already enter the United States duty-free, up to 7 percent of U.S. consumption, under the Caribbean Basin Initiative (CBI) if such ethanol is merely dehydrated in a CBI country. Yet the 7 percent cap under CBI has never even come close to being filled. We see no reason to change our tariff structure to provide even more duty-free treatment for ethanol from Brazil and other countries as long as these countries are not taking advantage of our current laws that let them export ethanol duty-free to the U.S. market.

Moreover, other countries, like Brazil, subsidize ethanol and sugarcane production. Lifting the import tariff would only further subsidize these industries, but at the expense of American tax payers. United States gasoline refiners receive a 51 cent tax incentive for every gallon of ethanol they blend into gasoline, regardless of origin. Even imported ethanol from Brazil, for instance, qualifies for this tax incentive. Brazil has built its ethanol industry through 35 years of tax incentives, production subsidies, mandates, export enhancement, infrastructure development, debt forgiveness and currency devaluation. Foreign countries, like Brazil, do not need U.S. tax dollars to compete effectively.

There is no shortage of ethanol and removing the tariff on imported ethanol, even temporarily, is not the answer to solving America's rising gasoline prices. This action won't lower prices for consumers but it will do significant damage to our domestic ethanol industry. We hope you'll agree that our long term energy independence is more important than this short sighted proposal.

Sincerely,

Chuck Grassley
Jim Talent
John Thune
Sam Brownback
Kit Bond
George Voinovich
Norm Coleman
Mike DeWine
Pat Roberts

http://grassley.senate.gov/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=5060&Month=5&Year=2006