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ACE Leader Urges President Bush Not to Suspend Ethanol Tariff

Date Posted: May 5, 2006

Washington, DC--The American Coaliltion of Ethanol (ACE) May 5 reminded the public and lawmakers that suspending the ethanol tariff would be knee-jerk reaction and a not solution to solving the current gas price problem.

In a letter sent to President Bush and key Congressional leaders, ACE Executive Vice President Brian Jennings urged leaders not to repeal the secondary tariff on U.S. ethanol imports.

The following is Jenning's letter dated, May 5, 2006:

"Dear Mr. President:

"On behalf of the American Coalition for Ethanol (ACE), I am writing to thank you for your ongoing support of ethanol as a cost-effective, homegrown, and clean alternative to fossil fuelbased gasoline.

"I am also writing to express our strong opposition to any plan by Congress to temporarily or permanently suspend the secondary tariff on the importation of ethanol and request that the Administration vigorously oppose any such effort in Congress.

"ACE is the “grassroots voice of the U.S. ethanol industry” representing more than 1000 members across the U.S., including ethanol producers, farmers, commodity and agriculture organizations, and businesses and individuals supportive of increased U.S. ethanol production and use.

"We recognize Congress and the Administration feel an urgent need to take action in response to soaring gasoline pump prices.

"However, repealing the secondary tariff on U.S. ethanol imports is unnecessary, burdensome to taxpayers, and shifts attention from the primary factors causing pain at the pump: crude oil prices exceeding a record $70 per barrel and diminished gasoline refining capacity.

"We are disappointed that some have distorted the facts by suggesting that lifting the secondary tariff on ethanol imports will somehow significantly increase fuel supplies and reduce prices.

"As top oil company executives and the United States Department of Energy have confirmed, ethanol supplies are adequate to meet the demand created by the removal of methyl tertiary butyl ether (MTBE) from the transportation fuels market.

"Had oil companies not felt confident that the production of ethanol would sufficiently replace MTBE during this transition, they would not have chosen to abandon MTBE, since there is no federal requirement compelling them to do so.

"Today, nearly 100 U.S. ethanol biorefineries have the capacity to produce 4.6 billion gallons of ethanol.

"With more than 30 ethanol plants under construction, nearly a dozen plants being expanded, and 25 scheduled to begin operations in 2006, the domestic industry is poised to add well over 2 billion gallons of production capacity in the next 12 to 24 months.

"Lifting the import duty would substantially undermine efforts to finance and construct these new plants, depriving the U.S. of an opportunity to grow its own ethanol industry.

"The result would be foregone jobs, tax revenue, economic development, and energy security.

"Furthermore, at a time when Americans are paying near-record prices for gasoline, relaxing the secondary tariff would place even greater financial hardship on them because U.S. taxpayer dollars would be used to support the production of foreign ethanol that is already heavily subsidized in Brazil.

"The federal government has wisely chosen to help spur the growth of the domestic ethanol industry in part through tax incentives such as the 51 cent blender’s credit.

"While this tax credit is available to all ethanol used in the U.S. no matter the country of origin, the primary function of the 54 cent secondary tariff is to protect U.S. taxpayers by offsetting the benefit of that tax credit for foreign produced ethanol.

"Additionally, lifting the tariff is unnecessary because a mechanism is in place to safeguard U.S. taxpayer investment in the domestic ethanol industry while allowing for the importation of a certain amount of ethanol duty-free.

"Under the Caribbean Basin Initiative (CBI), up to 7 percent of the domestic market of ethanol can be imported duty-free on an annual basis.

"Already this year, ethanol from Brazil has moved without limits into the U.S. through the CBI.

"Given this opportunity for significant volumes of ethanol to flow into the U.S. duty-free, there is no need to lift the tariff.

"Finally, as you have noted, the U.S. is addicted to oil, and the only genuine cure is to seek alternatives to foreign oil.

"At a time when the U.S. is finally reducing its dangerous reliance on foreign oil through the growth of the domestic ethanol industry, suspending the secondary tariff on ethanol imports would take the steam out of an important economic engine in the U.S. and merely substitute one foreign dependence for another.

"We can break our addiction by dramatically increasing the production, distribution, and end-use of ethanol in the U.S., and we look forward to working with you to achieve that goal.

"Thanks again for your leadership on ethanol."

The letter was also sent to Dennis Hastert, Nancy Pelosi, Bill Frist, Harry Reid, William Thomas, Charles Rangel, Charles Grassley, and Max Baucus.

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