WASHINGTON A bipartisan group of U.S. senators called for an end to a tariff on ethanol imports and subsidies to ethanol blenders on Tuesday, saying the program is too expensive and increases dependency on foreign oil.
The ethanol industry is fighting to have a lame-duck Congress extend the tariff and subsidy for blending ethanol into gasoline before they expire at the end of December.
However, 17 senators said it was time for the subsidies to end as Congress tries to rein in federal spending.
"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," the lawmakers said in a joint letter to Senate Democratic Majority Leader Harry Reid and Senate Republican Minority Leader Mitch McConnell.
The letter was circulated by Democrat Dianne Feinstein and Republican Jon Kyl.
If the current subsidy of 45 cents per gallon for blending ethanol into gasoline were extended for five years, about $31 billion would be paid to oil companies, the lawmakers said. "The provisions are fiscally irresponsible," they said.
The lawmakers slammed the 54-cent tariff on each gallon of imported ethanol, saying it discourages fuel imports from Brazil, India and Australia which make ethanol from sugar and leads to more gasoline imports from OPEC countries that do not have to pay a U.S. tariff.
Ethanol producers strongly disagreed.
The Renewable Fuels Association trade group said domestic ethanol production returns to federal tax coffers billions of dollars more than the cost of the subsidies and the ethanol industry helps support 400,000 jobs.
The group said the separate import tariff offsets the value of a 45-cent tax credit and prevents U.S. taxpayers from subsidizing foreign ethanol producers.
The ethanol industry believes it will be easier to extend the tax break and tariff during the "lame duck" session if Congress extends expiring income-tax cuts implemented by former President George W. Bush.
President Barack Obama said on Tuesday he still disagreed with Republicans on whether to extend the Bush-era tax cuts for the wealthiest Americans, but the two sides agreed to negotiate a deal in the coming days.
The industry also worries that it will be harder to extend ethanol tax incentives in the next Congress, when Republicans will control the House of Representatives and may seek to scale back subsidies to help balance the federal budget.
Tuesday's letter follows comments last week from Senate Republicans Tom Coburn and Jim DeMint, who is close with the budget-minded Tea Party Republicans, to scale back ethanol subsidies.
Separately, a coalition of nearly 60 groups wrote to Congressional leaders on Monday urging that the ethanol tax breaks not be extended.
Ethanol groups are seeking a short-term extension of the tax credit, perhaps at a lower rate, as part of longer-term reforms that would reduce the cost of incentives.
(Editing by Dale Hudson)