Letter to The Honorable Harry Reid and The Honorable Mitch McConnell

Letter

U.S. Senators Dianne Feinstein (D-Calif.) and Jon Kyl (R-Ariz.) today joined a strong bipartisan coalition of Senators calling for an end to tariffs and subsidies supporting ethanol.

In a letter sent to Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell, 17 Senators expressed their lack of support for extending the current 54-cent-per-gallon tariff on ethanol imports and the 45-cent-per-gallon subsidy for blending ethanol into gasoline. Both provisions expire at the end of this year under current law.

Senators Feinstein and Kyl have worked for many years to reduce or eliminate the tariff on ethanol imports, and are cosponsors of the Imported Ethanol Parity Act (S. 622).

The letter calls the tariff and subsidies "fiscally irresponsible and environmentally unwise," pointing out their extension would increase the country's dependence on foreign oil.

Following is the full text of the letter:

Dear Majority Leader Reid and Minority Leader McConnell:

We are writing to make you aware that we do not support an extension of either the 54 cent-per-gallon tariff on ethanol imports or the 45 cent-per-gallon subsidy for blending ethanol into gasoline. These provisions are fiscally irresponsible and environmentally unwise, and their extension would make our country more dependent on foreign oil.

Subsidizing blending ethanol into gasoline is fiscally indefensible. If the current subsidy is extended for five years, the Federal Treasury would pay oil companies at least $31 billion to use 69 billion gallons of corn ethanol that the Federal Renewable Fuels Standard already requires them to use. We cannot afford to pay industry for following the law.

The tariff on ethanol makes our country more dependent on foreign oil. The tariff is nine cents per gallon higher than the ethanol subsidy it supposedly offsets, and this lack of parity puts imported ethanol at a competitive disadvantage against imported oil. This discourages transportation fuel imports from Brazil, India, Australia, and other sugar producing countries, and leads to more oil and gasoline imports from OPEC countries that enter the United States tariff-free. Eliminating or reducing the ethanol tariff would diversify our fuel supply, replace oil imports from OPEC countries with ethanol from our allies, and expand our trade relationships with democratic states.

The data overwhelmingly demonstrate that the costs of the current ethanol subsidy and tariff far outweigh the benefits. According to a July 2010 study by the Congressional Budget Office, ethanol tax credits cost taxpayers $1.78 for each gallon of gasoline consumption reduced, and $750 for each metric ton of carbon dioxide equivalent emissions reduced. The Center for Agricultural and Rural Development at Iowa State University recently estimated that a one-year extension of the ethanol subsidy and tariff would lead to only 427 additional direct domestic jobs at a cost of almost $6 billion, or roughly $14 million of taxpayer money per job.

Historically our government has helped a product compete in one of three ways: subsidize it, protect it from competition, or require its use. We understand that ethanol may be the only product receiving all three forms of support from the U.S. government at this time.

Eliminating or reducing ethanol subsidies and trade barriers are important steps we can take to reduce the budget deficit, improve the environment, and lessen our reliance on imported oil. We look forward to working with you on responsible energy tax policy.

Sincerely,

Dianne Feinstein, United States Senator
Jon Kyl, United States Senator, United States Senator
Jack Reed, United States Senator
Richard Burr, United States Senator
Benjamin Cardin, United States Senator
Mike Enzi, United States Senator
Jim Webb, United States Senator
Bob Bennett, United States Senator
Barbara Boxer, United States Senator
John McCain, United States Senator
Sheldon Whitehouse, United States Senator
Tom Coburn, United States Senator
Susan Collins, United States Senator
Bob Corker, United States Senator
Jeanne Shaheen, United States Senator
Mark Warner, United States Senator
Chris Coons, United States Senator