Bodman sees no '06 ethanol tariff waiver

By Timothy Gardner

NEW YORK (Reuters) - U.S. Energy Secretary Sam Bodman said on Tuesday he does not expect Congress this year to approve a temporary waiver of the tariff on imports from Brazil of ethanol, a gasoline additive increasingly being used in U.S. cars.

"I don't see it happening this year," Bodman said at the Reuters Global Energy Summit in New York. "I don't see it at this point in time as something that is commanding a lot of attention on the (Capitol) Hill."

U.S. ethanol prices have risen to record highs of about $3.00 per gallon in recent weeks as producers struggle to keep up with demand. The United States is boosting ethanol production to meet growing demand for gasoline and to replace gasoline additive MTBE, which pollutes water supplies. U.S. farmers make ethanol mainly from corn.

Brazil has taken an early lead in ethanol production, which it makes mainly from sugar cane. About 20 percent of its transport fuel comes from ethanol.

Some analysts and politicians, including U.S. Rep. Joe Barton of Texas -- Republican chairman of the House Energy and Commerce Committee -- have said that a temporary waiver of the 54-cent-a-gallon tariff on imports of the fuel from Brazil could help mitigate potential supply hiccups in the United States as it ramps up production.

The 2005 Energy Bill guaranteed 7.5 billion gallons a year of ethanol would be used in the United States by 2012. The U.S. now produces about 4.5 billion gallons annually and an additional 2 billion gallons of plant capacity is under construction.

In Washington, Agriculture Secretary Mike Johanns said on Tuesday that the ramping up of U.S. ethanol production was going well. "I think the growth in ethanol in terms of supply comes from our markets here in the United States," he said at a World Bank conference.

"I believe that's where you're going to see the greatest growth in the amount of ethanol that is available for use in motor vehicles."

Earlier this spring, filling stations in Virginia, Chicago and New York struggled to obtain supplies of reformulated gasoline containing ethanol which caused local price spikes.

Ethanol is difficult to transport in pipelines as it can absorb water, so much of it has to be trucked or sent by rail to gasoline blenders.

Bodman said some small problems with ethanol in Houston persist, but that the worst of the U.S. supply crimps from the transition was over.

"We now have a system in place, and barring some issue that I have not anticipated, I think we're probably in reasonably good shape," Bodman said.

Earlier this month House Majority Leader John Boehner, an Ohio Republican, said he would not push legislation to reduce the U.S. tariff on ethanol imports. The move was seen as a big win for U.S. farmers.

(Additional reporting by Sophie Walker in Washington)