WASHINGTON (Reuters) - Senator Dianne Feinstein will try to offer an amendment to a massive tax bill to cut the ethanol tax credit and import tariff to 36 cents a gallon each, a congressional source told Reuters on Monday.
The current U.S. ethanol tax credit of 45 cents and the import tariff of 54 cents would be extended through 2011 under the tax bill. They will expire on December 31 unless the House and Senate agree to renew the biofuels supports.
Senate Majority Leader Harry Reid and Republican Leader Mitch McConnell have not said how amendments will be handled on the bill. A test vote on the package was scheduled for Monday afternoon.
In a draft copy of a letter Feinstein was preparing to send to Reid and McConnell, she said the cost of extending the current ethanol tax credit for another year would be about $5.3 billion, as federal law already requires 12.6 billion gallons (57.3 billion liters) of ethanol to be produced during 2011.
"We cannot afford to pay industry for following the law," Feinstein said in the letter, a copy of which was obtained by Reuters.
Feinstein also said the import tariff makes the U.S. more dependent on foreign oil from OPEC, because it discourages ethanol imports from Brazil, Australia and India.
"Reducing the ethanol subsidies and trade barriers proposed in this legislation would substantially reduce the cost of this bill to the American taxpayer, while allowing the Senate to support the vitally important development of our manufacturing sector," she said.
Seventeen U.S. representatives said in a letter last Friday to House leaders "it is time to end or significantly reduce the subsidy for corn ethanol and the tariff on imported ethanol."
They said they would support advanced biofuels that meet food and fuel needs. Advanced biofuels would include ethanol made from cellulose, found in woody plants, grasses and crop debris.
A 2007 law sets an annual targets for use of renewable motor fuels, reaching 36 billion gallons in 2022, the bulk of it from advanced biofuels.
(Reporting by Tom Doggett, Charles Abbott and Richard Cowan; Editing by Marguerita Choy)