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Ethanol investors tell congress incentives still necessary

Bankers and analysts told US lawmakers that ethanol remains risky for investors and that both Wall Street and local founders will need government incentives to sustain the biofuel's growth.

Rising plant capacity and falling shares of ethanol companies are making new projects more difficult to finance, analysts told a House Agriculture subcommittee. Lawmakers, meanwhile, said they want to make sure small, local investors are part of the next wave of biofuels development: „cellulosic” fuel made from farm waste, grasses and wood.

Maintaining the current 51 cents a gallon tax credit for blenders of ethanol and the 54 cent tariff on ethanol imports will help maintain the predictability investors need, especially those outside rural America, Doug Stark, president of Farm Credit Services of America in Omaha, Nebraska, said at the hearing. „Although ethanol has generated tremendous interest from Wall Street and other non-rural investors, that interest can evaporate quickly when the economics of the industry change,” he said.

Yesterday's hearing was one of several held recently in Washington to examine the development of ethanol, made mostly from corn in the US, a central part of President George W. Bush's goal of 35 billion gallons of renewable fuels by 2017. Current ethanol capacity is 5.6 billion, according to the Renewable Fuels Association. (Bloomberg)