By Tom Doggett and Charles Abbott
WASHINGTON (Reuters) - Senator Dianne Feinstein said on Monday she will offer an amendment to a massive tax bill to cut the ethanol tax credit and import tariff to 36 cents a gallon each.
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.
"I intend to file an amendment to the tax bill today that would lower the ethanol subsidy and tariff to 36 cents per gallon," Feinstein told Reuters in an email statement.
Her amendment would also cut the 10-cent-per-gallon tax credit that goes to small ethanol producers to 8 cents.
Senate Majority Leader Harry Reid and Republican Leader Mitch McConnell have not said which amendments will be debated on the bill. A test vote on the package was scheduled for Monday afternoon.
In a draft copy of a letter, Feinstein was expected to send 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 reliant on foreign oil from OPEC, because it discourages ethanol imports from Brazil, Australia and India.
"Currently, the federal government intervenes in the ethanol industry in three ways: requiring ethanol be blended in gasoline, providing a substantial subsidy and slapping tariffs on foreign ethanol imports, making us more dependent on foreign oil. This is bad policy and must be fixed," she said in her statement.
Feinstein said the $2 billion that would be saved by lowering ethanol assistance could be used to reduce the deficit and extend the advanced manufacturing tax credit.
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)