U.S. Senators Urge Colleagues to Eliminate Ethanol Tax Credit

Seventeen U.S. senators from both parties said they want to end government incentives supporting the ethanol industry.

Senators Dianne Feinstein, a Democrat from California, Jon Kyl, a Republican from Arizona, and 15 colleagues wrote a letter to Senate Majority Leader Harry Reid and Minority leader Mitch McConnell to urge halting the "fiscally irresponsible and environmentally unwise" tax credit and tariff.

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

The 45-cent tax credit provided to refiners for each gallon of ethanol blended into gasoline and a 54-cent tariff slapped on Brazilian imports expire at the end of this year. Production of biodiesel has ground to a near halt since its $1-a-gallon incentive expired last year, according to the National Biodiesel Board, an industry trade group.

U.S. refiners are required to use 12 billion gallons of renewable fuels such as ethanol this year and 15 billion gallons by 2015 under a 2007 energy law.

Eliminating the tax credit will erase federal revenue and lead to higher unemployment, the Renewable Fuels Association in Washington said in an e-mailed statement.

“Calling for the elimination of investment in domestic ethanol production may seem penny-wise, but is extraordinarily pound-foolish,” the industry’s primary trade group said.

U.S. ethanol production averaged 891,000 barrels a day in the week ended Nov. 19, according to the Energy Department, down 0.5 percent from a record 895,000 barrels the previous week.

Poet LLC, based in Sioux Falls, South Dakota, is the largest U.S. ethanol producer, followed by Decatur, Illinois- based Archer Daniels Midland Co.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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