June 25, 1997

WASHINGTON (Reuter) : The U.S. ethanol subsidy was
saved from any immediate cuts Tuesday but its nemesis in the House
of Representatives still aimed to eliminate incentives for the
alternative fuel in 2000.

Ethanol proponents said they were optimistic Congress would
decide ultimately to extend the ethanol tax break past its
scheduled end in 2000. At the moment, they said, future of the
fueltax break still was clouded.

``When you look down the road, there's still an assumption of
elimination'' in the tax bill awaiting a House vote, said Ellen
Dougherty of the National Corn Growers Association, an ethanol
backer.

Longtime ethanol foe Bill Archer, Rep.Texas, chairman of the
Ways and Means Committee, said earlier in the day he would
drop language from his committee's tax bill for an immediate
reduction of 0.3 cents per gallon in the 5.4cent fuel tax break
given to ethanol.

``The question is what happens after 2000,'' American Farm
Bureau Federation president Dean Kleckner told reporters. ``It
does look now like we'll have the ethanol tax break at least to the
year 2000.''

During a news conference, Archer rejected suggestion the change
was made in order to assure farmstate Republicans would vote
for the bill.

A spokesman for Representive Jim Nussle, Iowa Republican and
leader of a proethanol group of lawmakers, said Archer's changes
would make the bill more attractive. Nussle voted against the bill
in committee.

``I believe Chairman Archer realized he (Nussle) wasn't alone,''the
spokesman said.

The Senate Finance Committee voted last week to extend the tax
break for ethanol to 2007 but to gradually reduce it. The subsidy
would be 5.3 cents in 2001, 5.2 cents in 2002 and 2003 and 5.1 in
following years.

House Speaker Newt Gingrich, a Georgia Republican, parried
questions about extending the subsidies past 2000.

``I support the ethanol tax getting through this week,'' Gingrich
said. ``I mean, I don't think we need any great longrange planning
right now. We are committed to taking out the provision which
would have killed the ethanol tax. That is a substantial victoryfor
the people who care about the ethanol tax.

``I've been a consistent supporter of it, and I think this year, on
this bill, we are winning a significant victory. And I don't seeany
point in answering hypothetical questions about a future that
hasn't occurred yet.''

Archer says the ethanol tax break is wasteful and encourages
industrial use of a valuable food. Proponents say ethanol reduces
U.S. reliance on oil imports and boosts farm income. About 5
percent of the U.S. corn crop is used to produce ethanol.

REUTER@

[Copyright 1997, Reuters]