NCGA Opposes Efforts to Remove Ethanol Import Tariff (5-10-06)

The National Corn Growers Association (NCGA) today came out in opposition to efforts to remove the import tariff on ethanol. In a letter to House and Senate leadership, NCGA along with the Renewable Fuels Association and the American Farm Bureau Federation urged officials to oppose efforts to remove the import tariff, stating removal will neither boost ethanol supplies or lower gas prices. 

The secondary tariff is an offset to the tax incentive gasoline refiners receive for every gallon of ethanol they blend, regardless of the ethanol’s origin.  Removing the tariff would mean ethanol producers in Brazil, for instance, would have access to American taxpayer dollars. 

NCGA First Vice President Ken McCauley said NCGA opposes lifting the tariff because it offsets the blender’s credit. “Ethanol can be imported and is being imported into the country. Lifting this tariff will not decrease the price seen at the gasoline pump. However, eliminating the tariff will negatively impact a growing U.S. ethanol industry.”

The letter emphasized current U.S. ethanol production is more than enough to meet the estimated 130,000 barrels per day (b/d) needed to replace MTBE.  More than 302,000 b/d are produced in the United States by 97 ethanol biorefineries. More than 2.2 billion gallons of additional production capacity is expected to come online within the next 18 months from the 44 plants under construction. The United States is on track to produce 4.5 billion gallons of ethanol this year.

Finally, the coalition noted that removing the tariff would have a “chilling affect on the financial markets as well.”  With growing investment from Wall Street and Main Street in corn-to-ethanol and interest in cellulosic ethanol production rising, removing the tariff would send a “devastating signal to financial markets.”

Meanwhile, on Capitol Hill, senators and representatives are engaging each other on recently introduced legislation regarding the tariff. “NCGA believes the tariff needs to remain in place. We are appreciative of the many statements Sen. Dick Durbin (R-Ill.) has made recently, from his appearance on ‘Meet the Press’ to the recently sent Dear Colleague letter that reiterates his strong support on keeping the secondary tariff on imported ethanol,” McCauley said. “Sen. Durbin sees the negative impact lifting the tariff would mean as it pertains to jobs, the economy and the future of a growing ethanol industry both in Illinois and nationwide.”
 
Rep. Jerry Weller (R-Ill.) also joined his colleagues in sending a letter to President George W. Bush supporting the tariff. The letter emphasizes that if the tariff is removed, uncertainty would result in the U.S. ethanol industry and send the wrong message to investors.
 
The opposing position, coming from Sens. Jon Kyl (R-Ariz.) and Dianne Feinstein (D-Calif.) who recently introduced legislation that would lift the ethanol import tariff, is shortsighted, according to NCGA.

“They are of the understanding that suspending the tariff on ethanol will ease the gas prices at the pump,” McCauley said. “The prices consumers are paying are due to record oil prices and the temporary strain refiners are feeling in the transition to ethanol.”

To read the coalition letter in its entirety, click here.
Click here to read the Durbin and Weller letters.