US senators launch bill easing ethanol incentives

* Bill seen more industry-friendly than Feinstein measure

* Links ethanol tax credit to crude oil price in 2013

* Grassley bill may "have legs" - analyst

WASHINGTON, - U.S. senators from farm
states introduced legislation on Wednesday that would modify
subsidies for the ethanol industry instead of abruptly ending
them as would a bill proposed by other senators.

The new bill, introduced by Senator Charles Grassley from
Iowa, would extend for two years the tax credit for ethanol
makers, which, along with a tariff on imported ethanol, is set
to expire at the end of the year.

But the measure, which has seven bipartisan co-sponsors,
would reduce the current 45-cents a gallon credit, which is
estimated to cost $6 billion a year. The credit is increasingly
unpopular in a Congress looking to cut costs.

In 2012 the credit would fall to 20 cents per gallon and in
2013 to 15 cents per gallon.

After 2013, the credit would be linked to the price of oil.
If oil in New York were over $50 a barrel, the credit would be
24 cents. It would fall 6 cents for every $10 rise in crude
until the credit is wiped out at $90 a barrel.

"With this bill, ethanol has taken the lead in looking
forward," Grassley said in a release.

Analysts said the bill could satisfy Grassley's fellow
Republicans looking to cut costs, and is consistent with the
Obama administration's desire to reform the incentives.

"This bill could get a serious look in Congress and may
even have legs if it gets full support from industry," said
Mark McMinimy, an agribusiness analyst at MF Global's
Washington Research Group.

On Tuesday, a bipartisan group of seven senators led by
Dianne Feinstein and Tom Coburn, introduced a bill to end
immediately the subsidies and the tariff on imports, saying the
government can no longer afford to pay the benefits.
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INDUSTRY GROUPS HAPPY WITH GRASSLEY

The ethanol industry, which uses corn to make the
alternative fuel, is lobbying hard for continued support for
the sector which has wide support in farm states and by its
lawmakers. Industry groups support Grassley's bill.

"We think it's a smart policy that allows the industry to
evolve while it addresses the budget concerns of some on
Capitol Hill," said Matt Hartwig, a spokesman for the Renewable
Fuels Association, an industry group.

"The variable credit provides the ethanol market stability
against the volatility of oil markets."

Tom Bius, chief executive of Growth Energy, another
industry group, also praised the effort. "Restructuring the
current ethanol tax credits is something that Growth Energy
recommended to Congress over a year ago and Sen. Grassley's
efforts are a key part of our proposal to create a fair and
open marketplace," he said in a release.

Hartwig said Feinstein's bill to end subsidies abruptly
would push the ethanol industry "off a cliff". It would lead to
plant closures and job losses because it would cut the
incentive immediately rather than gradually, he said.

The Grassley bill would also provide incentives to help the
ethanol industry transform with new infrastructure to get
biofuels to market. So-called blender pumps which allow
customers to chose the blend of ethanol they want in their cars
would benefit.

source: reuters