[Congressional Record Volume 148, Number 46 (Tuesday, April 23, 2002)]
[Senate]
[Pages S3120-S3142]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  NATIONAL LABORATORIES PARTNERSHIP IMPROVEMENT ACT OF 2001--Continued


              Modification of Submitted Amendment No. 3274

  Mr. REID. Mr. President, Senator Landrieu has timely filed an 
amendment, No. 3274, but there was a typographical error on page 2, I 
am told. This has been reviewed by the minority, and they have no 
problem with our doing this. I ask consent this be allowed.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, I suggest the absence of a quorum and ask 
unanimous consent the time be charged equally against both sides.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Who yields time?


         Amendment No. 3257 To Amendment No. 2917, As Modified

  Mr. MURKOWSKI. Mr. President, I ask unanimous consent that amendment 
No. 3257 be modified with the change that is at the desk, the amendment 
be agreed to, and the motion to reconsider be laid upon the table.

[[Page S3121]]

  Mr. REID. Mr. President, this has been cleared by Senator Bingaman.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 3257), as modified, is as follows:

       At the appropriate place insert the following

     SEC.  . CREDIT FOR PRODUCTION OF ALASKA NATURAL GAS.

       (a) In General.--Subpart D of part IV of sub-chapter A of 
     chapter 1 (relating to business related credits), as amended 
     by this Act, is amended by adding at the end the following 
     new section:

     ``SEC. 45M. ALASKA NATURAL GAS.

       ``(a) In General.--For purposes of section 38, the Alaska 
     natural gas credit of any taxpayer for any taxable year is 
     the credit amount per 1,000,000 Btu of Alaska natural gas 
     entering any intake or tie-in point which was derived from an 
     area of the state of Alaska lying north of 64 degrees North 
     latitude, which is attributable to the taxpayer and sold by 
     or on behalf of the taxpayer to an unrelated person during 
     such taxable year (within the meaning of section 45).
       ``(b) Credit Amount.--For purposes of this section--
       ``(1) In general.--The credit amount per 1,000,000 Btu of 
     Alaska natural gal entering any intake or tie-in point which 
     was derived from an area of the state of Alaska lying north 
     of 64 degrees North latitude (determined in United States 
     dollars), is the excess of--
       ``(A) $3.25, over
       ``(B) the average monthly price at the AECO C Hub in 
     Alberta, Canada, for Alaska natural gas for the month in 
     which occurs the date of such entering.
       ``(2) Inflation adjustment.--In the case of any taxable 
     year beginning in a calendar year after the first calendar 
     year ending after the date described in subsection (g)(1), 
     the dollar amount contained in paragraph (1)(A) shall be 
     increased to an amount equal to such dollar amount multiplied 
     by the inflation adjustment factor for such calendar year 
     (determined under section 43(b)(3)(B) by substituting `the 
     calendar year ending before the date described in section 
     45M(g)(1)' for `1990').
       ``(c) Alaska Natural Gas.--For purposes of this section, 
     the term `Alaska natural gas' means natural gas entering any 
     intake or tie-in point which was derived from an area of the 
     state of Alaska lying north of 64 degrees North latitude 
     produced in compliance with the applicable State of Federal 
     pollution prevention, control, and permit requirements from 
     the area generally known as the North Slope of Alaska 
     (including the continental shelf thereof within the meaning 
     of section 638(1)), determined without regard to the area of 
     the Alaska National Wildlife Refuge (including the 
     continental shelf thereof within the meaning of section 
     638(1)).
       ``(d) Recapture.--
       ``(1) In general.--With respect to each 1,000,000 Btu of 
     Alaska natural gas entering any intake or tie-in point which 
     was derived from an area of the state of Alaska lying north 
     of 64 degrees North latitude after the date which is 3 years 
     after the date described in subsection (g)(1), if the average 
     monthly price described in subsection (b)(1)(B) exceeds 150 
     percent of the amount described in subsection (b)(1)(A) for 
     the month in which occurs the date of such entering, the 
     taxpayer's tax under this chapter for the taxable year shall 
     be increased by an amount equal to the lesser or--
       ``(A) such excess, or
       ``(B) the aggregate decrease in the credits allowed under 
     section 38 for all prior taxable years which would have 
     resulted if the Alaska natural gas credit received by the 
     taxpayer for such years had been zero.
       ``(2) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (1) only with respect to credits 
     allowed by reason of this section which were used to reduce 
     tax liability. In the case of credits not so used to reduce 
     tax liability, the carryforwards and carrybacks under section 
     39 shall be appropriately adjusted.
       ``(B) No credits against tax.--Any increase in tax under 
     this subsection shall not be treated as a tax imposed by this 
     chapter for purposes of determining the amount of any credit 
     under this chapter or for purposes of section 55.
       ``(e) Application of Rules.--For purposes of this section, 
     rules similar to the rules of paragraphs (3), (4), and (5) of 
     section 45(d) shall apply.
       ``(f) No Double Benefit.--The amount of any deduction or 
     other credit allowable under this chapter for any fuel taken 
     into account in computing the amount of the credit determined 
     under subsection (a) shall be reduced by the amount of such 
     credit attributable to such fuel.
       ``(g) Application of Section.--This section shall apply to 
     Alaska natural gas entering any intake or tie-in point which 
     was derived from an area of the state of Alaska lying north 
     of 64 degrees North latitude for the period--
       ``(1) beginning with the later of--
       ``(A) January 1, 2010, or
       ``(B) the initial date for the interstate transportation of 
     such Alaska natural gas, and
       ``(2) except with respect to subsection (d), ending with 
     the date which is 15 years after the date described in 
     paragraph (1).''.
       (b) Credit Treated as Business Credit.--Section 38(b), as 
     amended by this Act, is amended by striking ``plus'' at the 
     end of paragraph (22), by striking the period at the end of 
     paragraph (23) and inserting ``, plus'', and by adding at the 
     end the following new paragraph: ``(24) the Alaska natural 
     gas credit determined under section 45M(a).''.
       (c) Allowing Credit Against Entire Regular Tax and Minimum 
     Tax.--
       (1) In general.--Subsection (c) of section 38 (relating to 
     limitation based on amount of tax), as amended by this Act, 
     is amended by redesignating paragraph (5) as paragraph (6) 
     and by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) Special rules for Alaska natural gas credit.--
       ``(A) In general.--In the case of the Alaska natural gas 
     credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--
       ``(I) the amounts in subparagraphs (A) and (B) thereof 
     shall be treated as being zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the Alaska 
     natural gas credit).
       ``(B) Alaska natural gas credit.--For purposes of this 
     subsection, the term `Alaska natural gas credit' means the 
     credit allowable under subsection (a) by reason of section 
     45M(a).''.
       (2) Conforming amendments.--Subclause (II) of section 
     38(c)(2)(A)(ii), as amended by this Act, subclause (II) of 
     section 38(c)(3)(A)(ii), as amended by this Act, and 
     subclause (II) of section 38(c)(4)(A)(ii), as added by this 
     Act, are each amended by inserting ``or the Alaska natural 
     gas credit'' after ``producer credit''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by adding at the end the following new item:

``Sec. 45M. Alaska natural gas.''.

                             Cloture Motion

  The PRESIDING OFFICER. Under the previous order, pursuant to rule 
XXII, the Chair lays before the Senate the pending cloture motion, 
which the clerk will state.
  The assistant legislative clerk read as follows:

                             Cloture Motion

       We, the undersigned Senators, in accordance with the 
     provisions of rule XXII of the Standing Rules of the Senate, 
     hereby move to bring to a close the debate on the Daschle/
     Bingaman substitute amendment No. 2917 for Calendar No. 65, 
     S. 517, a bill to authorize funding for the Department of 
     Energy and for other purposes:
         Jeff Bingaman, Jean Carnahan, Edward Kennedy, Patty 
           Murray, Mary Landrieu, Byron L. Dorgan, Robert 
           Torricelli, Bill Nelson, John Breaux, Tom Carper, Tim 
           Johnson, Hillary R. Clinton, Jon Corzine, John 
           Rockefeller, Daniel Inouye, Max Baucus, Harry Reid, 
           Maria Cantwell.

  The PRESIDING OFFICER. By unanimous consent, the mandatory quorum 
call is waived.
  The question is, Is it the sense of the Senate that debate on 
amendment No. 2917 to S. 517, a bill to authorize funding the 
Department of Energy to enhance its mission areas through technology 
transfer and partnerships for fiscal years 2002 through 2006, and for 
other purposes, shall be brought to a close?
  The yeas and nays are required under the rule. The clerk will call 
the roll.
  The assistant legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from North Carolina (Mr. 
Helms) is necessarily absent.
  The yeas and nays resulted--yeas 86, nays 13, as follows:

                      [Rollcall Vote No. 77 Leg.]

                                YEAS--86

     Akaka
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Carnahan
     Carper
     Chafee
     Cleland
     Cochran
     Collins
     Conrad
     Corzine
     Craig
     Crapo
     Daschle
     Dayton
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Edwards
     Ensign
     Enzi
     Fitzgerald
     Frist
     Gramm
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Hollings
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Landrieu
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McConnell
     Mikulski
     Miller
     Murkowski
     Nelson (FL)
     Nelson (NE)
     Nickles
     Reid
     Roberts
     Rockefeller
     Santorum
     Sarbanes
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Voinovich
     Warner
     Wellstone

                                NAYS--13

     Boxer
     Cantwell
     Clinton
     Feingold
     Feinstein
     Graham

[[Page S3122]]


     Kyl
     McCain
     Murray
     Reed
     Schumer
     Stabenow
     Wyden

                             NOT VOTING--1

       
     Helms
       
  The PRESIDING OFFICER. On this vote, the yeas are 86, the nays are 
13. Three-fifths of the Senators duly chosen and sworn having voted in 
the affirmative, the motion is agreed to.
  The PRESIDING OFFICER. The Senator from New York.


                Amendment No. 3030 to Amendment No. 2917

  Mr. SCHUMER. Mr. President, I ask unanimous consent that the 
amendment now pending be laid aside, and I call up amendment No. 3030 
and ask for its immediate consideration.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SCHUMER. Mr. President, I further ask unanimous consent that 
following debate on the amendment, the Senate proceed to a rollcall 
vote on the amendment.
  Mr. LOTT. I object.
  Mr. SCHUMER. I withdraw that request.
  The PRESIDING OFFICER. The request is withdrawn.
  The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from New York [Mr. Schumer], for himself and 
     Mrs. Feinstein, proposes an amendment numbered 3030 to 
     amendment No. 2917.

  Mr. SCHUMER. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To strike the section establishing a renewable fuel content 
                  requirement for motor vehicle fuel)

       Beginning on page 186, strike line 9 and all that follows 
     through page 205, line 8.
       On page 236, strike lines 7 through 9 and insert the 
     following:

     is amended--
       (1) by redesignating subsection (o) as subsection (p); and
       (2) by inserting after subsection (n) the following:
       ``(o) Analyses of Motor Vehicle Fuel Changes''.

  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Mr. President, this is an amendment on which we have had 
some discussion. It is the amendment to strike the ethanol mandate, the 
ethanol gas tax, from the energy bill.
  Once again, I want to let my colleagues know how much I understand 
those who are for this amendment, their desire to do it, and I 
particularly want to let people know how much I respect our majority 
leader, Tom Daschle, and how painful it is for me to oppose him on 
something about which I know he cares very much.
  He is a principled, compassionate, and an extraordinary public 
servant. He is a friend to the people of my State and the whole 
country, and I thought long and hard about this but felt compelled to 
speak out about it.
  The ethanol mandate in this bill is something we have not seen in 
many years. It is one of those provisions that sort of starts out 
quietly, sometimes passes this body and the other body, and becomes 
law. There are these types of provisions that come up every so often 
without much debate, and then a year or two later there is an outcry in 
the Nation. We all come back and say to one another: How the heck did 
this thing pass? How did it pass with so little debate? How did it pass 
with such detrimental requirements to such a large percentage of our 
population?
  It happened on the catastrophic illness bill about 10 years ago. It 
happened on the S&L bill about 20 years ago when we allowed S&Ls to 
take people's hard-earned money and invest it in almost anything they 
wanted. Each of these amendments, as this one, has the potential to 
sort of breeze right through the legislative process, be signed into 
law because it seems all the special interests that want it are lined 
up behind it, and only after it becomes law is there a public outcry. I 
believe that will happen with this amendment, and I ask my colleagues 
to be very careful before they vote for it because what this mandate 
provision does, above all, by requiring that every State use ethanol or 
buy ethanol credits for their gasoline, whether they need it or not, is 
it will raise gasoline prices. It is like a gas tax in every State of 
the Union, a minimum of 4 cents to 10 cents, and probably at certain 
times much more than that.
  If we look at the States, those on the east coast and the west coast 
are more affected--I have a chart with maps--and even States in the 
heartland will be affected as well.

  Why are we doing this? We know we want to keep the air clean, but the 
refiners tell us ethanol is not the only way to proceed. Many 
environmental leaders say ethanol is at best a neutral proposition; it 
sometimes will reduce carbon in the air but will increase smog. At the 
same time, we are saying as to those additives that cause trouble and 
might pollute the ground, you cannot sue those who put them there.
  This provision is a combination. It is almost a bewitching brew of 
cats and dogs that leads to trouble for the American people.
  I have gone over in my previous talks what this amendment does and 
why it has come about, but let me say that every one of us wants to see 
the air clean, every one of us wants to see no backsliding in the clean 
air provisions, and every one of us believes there are a number of ways 
to do it. In some States in the Middle West, ethanol is probably the 
best way to do it, but in many States on the coasts, in the heartland, 
and in the Rocky Mountain areas, ethanol is more expensive, less 
environmentally useful, and a needless mandate.
  Let me again read the names of some of the States where the price of 
gasoline will go up a lot. This is a study that is conservative and 
that does not deal with spikes. In Arizona, it will go up 7.6 cents; in 
California, 9.6 cents; in Connecticut, 9.7 cents; Delaware, 9.7; 
Illinois, 7.3; Kentucky, 5.4; Maryland, 9.1 cents; Massachusetts, 9.7 
cents; Missouri, 5.6 cents; New Hampshire, 8.4 cents; New Jersey, 9.1 
cents; New York, 7.1 cents; Pennsylvania, 5.5 cents; Rhode Island, 9.7 
cents; Texas, 5.7 cents; Virginia, 7.2 cents; Wisconsin, 5.5 cents; and 
in all the other States it goes up 4 cents.
  Some of our colleagues say this is necessary in the Middle West. They 
tried to pass a mandate in Nebraska and in Iowa. In both cases it was 
defeated. The legislative bodies of those States, which will do a lot 
better under ethanol mandates than New York, California, Texas or 
Florida, defeated it, and yet we have the temerity to impose it on 
every State in the Union.
  Many of my colleagues on the other side advocate free market 
policies. I have rarely seen a greater deviation from free market 
policies than this proposal. As somebody said to me, first the 
Government subsidizes ethanol and then mandates that everybody use it. 
That sounds more like something out of the Soviet Union than out of the 
United States of America.
  I, too, want to help corn farmers, and my voting record shows it, but 
this is going to be trickle down for the farmers. As we have mentioned 
before, Archer Daniels Midland controls 41 percent of the ethanol 
market. If the mandate is tripled, which is what we do, there will be 
price spikes and somebody with monopoly power--as has Archer Daniels 
Midland or Coke--will be able to raise the prices through the roof. 
Remember the California electricity crisis where someone had a virtual 
monopoly on a necessity? They raised the price. That is what is going 
to happen if we pass this ethanol mandate.
  I am going to yield for a few minutes and let my colleague from 
California join in. But the bottom line is simple: There are better 
ways to clean the air for most parts of the country. This is expensive, 
it is a mandate, it will raise our gasoline prices, and it is so 
antithetical to free market policies, I find it hard to believe we are 
going to pass it.
  I reserve the remainder of my time.
  The PRESIDING OFFICER (Mr. Carper). The Senator from California.
  Mrs. FEINSTEIN. Mr. President, I rise to support the amendment of 
Senator Schumer, which is to remove the so-called renewable fuels part 
of the energy bill.
  I am a member of the Energy Committee. You can imagine my 
consternation when I find a bill that is put together in the dark of 
night with this renewable fuels requirement that has had no hearing, no 
comment, no opportunity for the Energy Committee to take a good look at 
it.
  This is a bill that adds to a subsidy of 53 cents a gallon on ethanol 
under existing law, it mandates a tripling of the

[[Page S3123]]

ethanol use in the next 10 years throughout the Nation, this is in 
addition to protective tariffs of 54 cents a gallon in existing law, so 
no nation that might be able to produce it more cheaply has no chance 
of exporting it economically into the United States. It is protect, 
protect, protect.
  It has been said that this is a massive transfer of wealth out of 
some States into other States. I deeply believe all of that is true.
  Only 1.77 billion gallons of ethanol were produced in 2001. The 
Senate bill requires 5 billion gallons by 2012. Alone, California, the 
largest State in the Union, is forced to use 2.68 billion gallons of 
ethanol it does not need. It doesn't need this ethanol to clean the air 
because California has reformulated fuel and can meet the clean air 
standards at all times except for winter months in the southern 
California-Los Angeles market. Then it uses ethanol.
  This chart very clearly indicates the situation. I have shown this 
before. Here, the blue is what my State would use of ethanol to meet 
clean air standards. This is what this mandate requires that the State 
either use or pay for. That is not good public policy. It is not good 
public policy because the State doesn't need it.
  Additionally, the California Energy Commission has said this action 
will create a 5-percent to 10-percent shortfall in California's 
gasoline--a 5-percent to 10-percent shortfall.
  Our refiners are at 98 percent of capacity, so how do we refine 
enough gasoline to meet the need? We do not. This means a gas tax.
  It is estimated by some that it could even lead to gas prices of $4 
per gallon. Senator Schumer has said it is 10 cents a gallon additional 
for California, New York and other States. If you put two tankfuls in 
your car a week, figure out what that costs in terms of an additional 
tax that every motorist will be paying.
  Since 98 percent of the ethanol production is based in the Midwest, 
States outside the Corn Belt have severe infrastructure and ethanol 
supply problems. This is the reason we do: You cannot put ethanol in a 
pipeline. You have to barge it, truck it, or rail it in. We will have 
to rail in 2.68 billion gallons of ethanol that California does not 
need. The infrastructure is not presently there for it.
  We have talked about the high market concentration, the fact that one 
company controls 41 percent of the ethanol production and that eight 
companies together control 71 percent. Some articles have been written 
said this is what creates a massive transfer of wealth: 70 percent of 
the dividends in this package go to the ethanol producers; only 30 
percent go to the actual corn farmers.
  Ethanol also has a mixed environmental impact. Let me tell you why. 
Ethanol helps retard carbon monoxide, but ethanol also produces more 
nitrogen oxide emissions. So the NOX, which produces smog 
pollution, is actually greater as a product of ethanol.

  In a State like California that has been very concerned about 
pollution, this is only going to do one thing: it is going to increase 
smog in the State of California.
  Additionally, ethanol enables the separation of the components of 
gasoline; therefore, benzene, for example, which is in gasoline and 
which is carcinogenic, can separate from gasoline. So if there is a 
leak, then benzene is one of the additives that leaks. All of the 
reports say it enables gasoline leaks to travel farther and faster, 
once it is released.
  Important in all of this to those of us who care about transit and 
highway funding is something that is really interesting. We presently 
put into the Highway Trust Fund about 18 cents a gallon. Since ethanol 
is only taxed at 13 cents a gallon the Highway Trust Fund will lose at 
least $7 billion. So this lessens the highway trust fund for everybody 
who looks to that fund for dollars for buses, for dollars for highways, 
for dollars for transportation systems. There will be at least $7 
billion less according to CRS.
  Let me read what the boilermakers say about that. The International 
Union of Boilermakers have written:

       Simply put, for each $1 billion the Trust Fund loses, 
     America loses almost 42,000 jobs. . . . And that is a 
     resource we cannot renew. It is our understanding that by 
     mandating the use of ethanol, this legislation is encouraging 
     the market penetration of ethanol, undermining America's 
     infrastructure and America's environment.

  The bottom line in this letter is that this ethanol mandate is a 
dangerous approach and is going to result in dramatic job loss.
  Also, ethanol is not necessarily a renewable fuel, despite what 
everyone says. There are a number of scientific reports that have found 
it takes more energy to make ethanol than it saves. It actually takes 
70 percent more energy to produce ethanol than it saves.
  So the bottom line is that this is a bad deal. This deal is even made 
worse by the fact that despite these environmental considerations, 
nobody will be able to sue. There is a safe harbor provision, so no one 
can sue if the environment is damaged or the public health is damaged.

  Here we have a bill that on top of the ethanol subsidies, it cuts the 
highway trust fund, it mandates an increase in the gas tax, and it 
benefits mainly producers in the Midwest. It is, in my view, a bad 
addition to this energy bill. Frankly, I think it is so bad that I am 
very pleased to support Senator Schumer's amendment which would remove 
this renewable fuels requirement from the bill, permit an oxygenate 
waiver but remove the ethanol from the bill.
  I don't quite know how we defeat this. I wish to read from a Wall 
Street Journal editorial that ran last week:

       If consumers think the federal gas tax is ugly, this new 
     ethanol tax will give them shudders. Moving ethanol to places 
     outside the Midwest involves big shipping fees, or building 
     new capacity. Refiners also face costs in adding ethanol to 
     their products. According to independent consultant Hart 
     Downstream Energy Services, the mandate would cost consumers 
     an extra annual $8.4 billion at the pump the first 5 years. 
     New York and California would see gas prices rise by 7 cents 
     to 10 cents a gallon. . . .
       And that doesn't take into account inevitable price spikes. 
     There simply isn't enough corn in all of Iowa to meet new 
     ethanol demands. Last year the ethanol industry produced only 
     1.7 billion gallons. The Daschle mandate would require it to 
     increase production by more than 35 percent in a mere 3 
     years.
       That is a tall order for any industry, much less one that 
     relies on Mother Nature. Some estimates are that a shortage 
     could double gas prices.

  Why are we doing this? Why does this bill have to be so greedy? Why 
does it need to triple ethanol use? Nobody really knows what it does to 
the environment. Why triple it? How is a good energy bill going to be 
viewed, if it triples something about which there is great uncertainty 
and many States don't need to use it? The west coast and the east coast 
don't have the infrastructure to absorb it, let alone a $7 billion cut 
in the highway trust fund.
  Cut the highway trust fund and Californians are forced to pay higher 
gas taxes, and have less money to build the roads, highways, and 
transportation systems they need, let alone cut 300,000 jobs 
nationwide.
  I will admit that the ethanol lobby is a tough lobby. About a year 
ago, I was trying to negotiate in my office. I invited most of the 
California refiners, oil companies, the corn growers, and the renewable 
fuels associations. I thought we had worked out something. Then, the 
renewable fuels people backed off the table. Now they come back greedy.
  What they have done--and let us call a spade a spade--is essentially 
quieted the refineries by promising them in this bill protection 
against liability, so that nobody can sue an oil company if the ethanol 
causes gasoline to separate, as it does, and benzene leaks, and people 
are adversely impacted. They cannot sue. The gasoline companies--
because they told me this--wanted this protection against liability. If 
they had the protection against liability, they would reluctantly 
go along with this package.

  That is not good energy policy. How is it good energy policy to 
triple something that has mixed environmental impact, at best? How is 
it good energy policy to increase gas prices? How is it good energy 
policy to take $7 billion out of the highway trust fund, cost 300,000 
jobs, and cut funding to the transportation system, the highways, and 
the roads that this country needs? How is that good energy policy?
  To mandate a tripling of the fuel, then saying they are credits, but 
if you do not use them, you pay for them. This is on top of 
fundamentally protecting the Midwest corn industry by

[[Page S3124]]

putting a 54-cent-a-gallon tariff on any imported ethanol to keep it 
out of the country because it might cost the motorists less, how is 
that good energy policy?
  Somebody come and tell me.
  California would top the list in the amount of transit dollars lost 
because of the ethanol mandate. Maybe nobody cares about California, 
but Senator Boxer and I do.
  I would like to reference an article that mentions the big losers.
  California is a big loser. It loses $905 million from the highway 
trust fund over 9 years.
  Texas is a big loser. It loses $750 million from the highway trust 
fund.
  New York is a big loser. It loses $493 million that could be used for 
subways, for buses, and for transit systems.
  Pennsylvania is a big loser. It loses $446 million.
  Florida is a big loser. It loses $436 million from the highway trust 
fund.
  Illinois: $337 million from the highway trust fund.
  Ohio: $336 million from the highway trust fund.
  Georgia: $333 million from the highway trust fund.
  Michigan: $312 million from the Highway Trust Fund.
  And New Jersey, the last State that is a big loser, loses $262 
million from the highway trust fund.
  Mr. SCHUMER. Mr. President, if the Senator will yield for a question, 
the Senator is saying that in those States we are going to charge the 
motorists more, but at the same time, because all roads lead to 
ethanol, we are going to give them less money for their highway trust 
fund. So they pay more for gasoline, but, unlike even the gasoline tax 
that doesn't go to road building, the effect of this amendment is to 
take money out of road building.
  Mr. FEINSTEIN. That is exactly correct, because of the subsidy on 
ethanol, usually 18 cents a gallon, which goes into the highway trust 
fund. With ethanol, it drops to 13 cents a gallon. That is a $7 billion 
take from the highway trust fund over the years of this bill.
  Mr. SCHUMER. I thank the Senator from California.
  Mrs. FEINSTEIN. I thank the Senator from New York.
  How is this a good provision for the energy bill? How does it even 
justify the rest of the energy bill? I don't think it does.
  How can you cost States this enormous amount? How can you force a 
tripling of ethanol when you don't know all of the environmental 
effects? How can you force it when you know the effect is increasing 
NOx which increases smog? How is that good legislation?

  It may well be that some ethanol is good. The problem is tripling it. 
It is forcing ethanol where it isn't needed. It is forcing ethanol with 
a potential deterrent to health, to the environment, and to the highway 
trust fund.
  I have a dramatic difference of opinion with respect to this bill. I 
believe that any shortfall in supply, because of manipulation, which we 
know is possible because just a small number of producers control the 
market--this is Enron redux; therefore, they will have unusual market 
control over price--will be exacerbated because the State will be 
reliant on ethanol coming from another region.
  According to a recent report issued by the GAO, 98 percent of ethanol 
production is located just in the Midwest. I don't have a problem if 
the Midwest wants to use it; that is fine with me. The problem is as a 
matter of public policy pushing it here and pushing it there where 
States don't need it.
  As you can see, if you can't pipe it, you have to truck it or barge 
it or rail it. Where is the infrastructure? How do you get these 
billions of additional gallons required to California? What if some of 
the plants aren't built?
  With the electricity crisis in California, it is very interesting; 
there were a number of new electricity generating facilities that were 
going to come online. The economy dipped. Some of them aren't built. 
Companies have financial reverses, and they don't build.
  What is to say that is not going to happen with ethanol? Who is to 
say that all of the facilities the ethanol supporters believe will be 
there will actually be there?
  Who is to say there will not be price spikes? Who is going to say 
there is not going to be an increase in the gas tax? Who is to say we 
are not going to lose $7 billion from the highway trust fund and that 
that is not going to result in 300,000 less jobs in this country? How 
is that good public policy?
  I think it is unconscionable public policy. It is selfish public 
policy. It is parochial public policy to the nth degree.
  I must tell you, to me, this ethanol mandate overcomes everything 
else in the bill because I do not know any driver--California has some 
of the longest commutes in the Nation. Drivers sometimes fill their 
tanks three times a week. Some of our drivers travel 2\1/2\ hours in 
the morning and 2\1/2\ hours in the evening from the Central Valley to 
the coast to work.
  What does that do to the price of gas? It is a huge tax increase. It 
would be hundreds of dollars a year at 10 cents a gallon. So nobody 
should think that you are not voting for a tax hike when you vote for 
this bill.
  I think that I have covered it except I want, just once again, to 
repeat these losses for States. We have 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 
States that are big losers as to the highway trust fund: California, 
Texas, New York, Pennsylvania, Florida, Illinois, Ohio, Georgia, 
Michigan, and New Jersey. As the distinguished Senator from New York 
has said, they are going to be forced to pay higher gas prices, to lose 
money for the trust fund, to put something in their gasoline that they 
do not need that increases pollution and may well have a detrimental 
environmental effect.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. NELSON of Nebraska. Mr. President, ordinarily I am in agreement 
with my esteemed colleague from California and certainly with my 
esteemed friend and colleague from New York, but this is one occasion 
where I could not be in more opposition to what was said and to the 
positions which are being held.
  Earlier this morning, I vented my frustration over the continuing 
attacks against ethanol and other biofuels that extend back almost a 
quarter of a century. In many instances, opponents simply have said 
that the marketplace will not permit the price to go to the bottom 
cost. Opponents have said this will actually create a challenge and 
increase gasoline prices at the pump. But the information being 
provided just simply isn't accurate.
  The RFS and the biorefinery concept will actually lead to the 
construction of many of the biorefineries now being planned in 
locations indicated by the red dots on this map I have. It is not 
simply concentrated within the Midwestern States, as has been 
suggested. This may be where it began, but, as in so many things, where 
things end does not always depend on where they began. This is a 
perfect example. I think Delaware is close to being included in part of 
that because biomass of all kinds, as well as animal waste, can be 
utilized in the development of ethanol and other fuels.
  I would like to move away from some of the negative things that have 
been said about ethanol to something which I think is more positive and 
provides some information. The RFS will not increase the cost of 
ethanol from 4 to 50 cents more than ethanol-free gasoline. Depending 
on which statistic is being provided, you simply have to ask this 
question: Which cost analysis do you believe?

  A consulting firm, working for the Oxygenated Fuels Association, 
whose members produce and market MTBE, 70 percent of which is 
imported--and the defeat of the RFS will keep MTBE markets alive--says 
it will increase the cost $4 to $9.75 per gallon. Do you believe those 
figures or do you believe the Department of Energy's Energy Information 
Administration material which says the increase, at the most, is 
between a half a cent and 1 cent per gallon.
  If you do not believe our Department of Energy's Energy Information 
Administration calculation and cost estimate, then let's just go to 
marketplace reality, because that is where we will end up in any event.
  Twenty years' experience in Nebraska, 1 cent less than ethanol-free 
gasoline at the pump; 10 years' experience in Minnesota, 8 cents less 
than gasoline at the wholesale level; 1.5 years' experience in 
California, there is no essential difference to the public; 10 years' 
experience nationwide, no essential difference to the public.

[[Page S3125]]

  The question is, which numbers do you believe? It is always about 
that when you come to projections.
  Furthermore, the availability of ethanol blends has been shown to 
actually drive down the price of all gasoline as a result of market 
forces. If you take a look at the wholesale price of regular gasoline 
versus ethanol, as shown on the chart, you can see that ethanol, as 
indicated by the green line on this chart--and on one or so occasions 
spiked above regular gasoline, such as back in 1992--continues to trail 
regular gasoline at the wholesale price, as you see the amount of 
experience that we have had over this 12- or 10-year period.
  If you go to the next chart and take a look at the retail price of 
motor gasoline versus ethanol, you can see that that is a similar trend 
factor, so that ethanol has trended a lower cost than ethanol-free 
gasoline or, if you will, regular gasoline.
  So the question is, in many instances, which numbers do you believe? 
If you do not believe the Department of Energy's Energy Information 
Administration, and you want to believe another organization, that is 
fine, but what I think you should do, ultimately, is look at the 
marketplace reality of what has, in fact, happened to the price of 
ethanol.
  Further, as evidenced by these graphs, the cost of ethanol has been 
at or below the cost of gasoline. That cost advantage for ethanol has 
become more pronounced in recent months and is now nearly 30 cents a 
gallon lower than gasoline at the wholesale level.
  This is the principal reason we cannot delay implementation of the 
RFS. The smaller, newer ethanol producers urgently need fair market 
prices.
  Furthermore, ethanol production capacity by the end of 2002 is 
expected to be 2.3 billion gallons, the level required by the RFS in 
2004. There will not be any shortages.
  For those who have suggested that somehow we will not be able to 
produce enough ethanol to meet the standards and requirements, the 
facts, once again--the marketplace reality and the production reality--
just do not show that.
  The bottom line is that history and realistic projections show that 
ethanol will be the least cost option for refiners to extend supplies 
and meet octane needs.
  Now, it also takes much less fossil-fuel energy to produce ethanol 
than it contains in a renewable form; and, consequently, there are 
major energy security benefits from its production and use. Biodiesel 
and cellulosic ethanol are even much better.
  If you take a look at the net energy balance of corn ethanol, it 
increased from 1.24 percent in 1995 to 1.34 percent in the year 2000. 
Since then--you can follow the chart--higher corn yields per acre and 
new technologies used to convert corn to ethanol have further improved 
the net energy savings or the net energy balance.
  So if you really take a look at the production of ethanol, it now 
consumes much less nonrenewable oil as the ethanol replaces. The latest 
U.S. Department of Agriculture report demonstrates that ethanol 
production actually has this positive balance that we have displayed on 
this chart. The bulk of the energy used in fertilizing the crops and to 
power ethanol production plants comes from natural gas or 
coal. Additionally, with farmers using more ethanol and biodiesel in 
their vehicles, the use of fossil fuels to produce biofuels could 
actually approach zero. The bottom line: Ethanol and other biofuels are 
America's best bet in cutting imports and advancing national and energy 
security. Everybody seems to be in agreement, we need to have less 
reliance on foreign oil.

  Homeland security also benefits because biorefineries will be much 
smaller than oil refineries and far more distributed, as the first 
chart demonstrated. We don't have the same concern about concentration 
when we talk about biorefineries and spreading the biorefinery concept 
across our Nation, with positive effects for energy security as well as 
for homeland security.
  Additives to gasoline such as aromatics and alkylates to replace MTBE 
and ethanol are not better and less expensive. Some have suggested that 
what we ought to do is find another way to go. We ought to find other 
additives, and they actually are best. When lead was phased out of 
gasoline in the early 1980s, the ethanol industry was hopeful that 
refiners would turn to ethanol to gain needed octane. Instead, they 
turned to aromatics, driving levels up to the point that they 
threatened engine performance and human health.
  The Clean Air Act amendments of 1990 actually put a cap on aromatics 
and an especially low cap on benzene, a potent carcinogen. A recent 
sampling in Nebraska revealed that in several instances aromatics in 
gasoline exceeded the cap and passed well into the danger area, 
threatening the environment and human health.
  What is not commonly known is that the other two aromatics, toluene 
and xylene, to some extent convert to benzene in the combustion 
process; therefore, both in the engine and in the catalytic converter. 
Furthermore, last week's prices demonstrate that on average the three 
aromatics I am referring to were selling about 52 cents a gallon higher 
than ethanol and again on average have an octane number about 10 points 
lower than ethanol.
  Bottom line: The aromatics are no match for ethanol in terms of cost, 
octane, human health, and the environment.
  Please recognize that the wholesale prices for aromatics on average 
last week were twice the cost of ethanol and are 10 points short in 
providing sought-after octane.
  Alkylates are a better bet. They have an octane number ranging from 
92 to 95. Ethanol has an octane number of 113. They have a valuable 
blending pressure while ethanol's blending vapor pressure requires 
compensatory action. However, alkylates are the most valuable component 
in finished gasoline, at least the value of premium gasoline. Because 
they are so valuable and so clean burning, they are husbanded by 
refiners and are in short supply and not available on the open market.
  The other alternative being offered, alkylates--bottom line--they are 
valuable and clean burning, but their octane number is lower than 
ethanol, and they are destined to be much more costly than ethanol, as 
is the case with aromatics.
  There is another point. There will be no shortages. There has been 
the suggestion that somehow we might find ourselves short on the 
production of ethanol. There won't be any shortages of ethanol and 
other biofuels in the marketplace over the next 10 years. If you take a 
look at poster No. 1, you have already seen the map showing ethanol 
plants, biofuel plants that are, first, those that are under 
construction or expansion, those that are undergoing planning, and 
those that are actually operating. By the end of this year, there will 
be surplus supplies to meet the 2004 target, and the incentives of the 
RFS will keep supplies well ahead of the requirements in the standards. 
If that proves to be wrong, there are provisions in the RFS to protect 
consumers--in other words, a backup plan if all else fails. With the 
exception of the Strategic Petroleum Reserve, there are no such 
provisions to protect consumers from rising foreign oil costs.

  Bottom line: The provisions of the RFS and biofuels provide the 
driving public with much greater protection against shortages, higher 
prices, and negative national security, as well as environmental 
consequences than MTBE, aromatics, and alkylates.
  In yet a better world, biofuels and all three of these gasoline 
components should work cooperatively to provide an optimum fuel--
optimum in considering the full spread of the Nation's needs.
  If you review the map and you review historic and current pricing 
structures, you see they not only provide assurance that there will be 
no biofuels shortages under the RFS that could drive prices up, but 
they also give evidence that it will not be the three big ethanol 
producers benefiting from the new public policies. Rather, the 
beneficiaries will be smaller producers of feedstocks and owners of 
biorefineries spread all across the country.
  Bottom line: We must in fact build a better and a new and more self-
reliant energy policy in America.
  Another point: Ethanol biodiesel and other biofuels, their incentives 
and the RFS will actually save the taxpayer money. Study after study 
has shown over the years--this is the most recent study--that biofuels 
policies, programs, and incentives are real bargains

[[Page S3126]]

to Americans and of great import to the strength of our Nation. 
Americans are the big winners with ethanol and other biofuels and even 
bigger winners when these renewable fuels have ready access to the 
transportation fuels market at fair prices.
  Some opponents of ethanol are simply wrong on their opposition. They 
have pointed out that the Iowa and Nebraska Legislatures were certainly 
trying to do something different than what we are proposing in this 
body. These were only exploratory regulatory efforts to increase the 
market for ethanol in both States and were in fact resolved in a 
positive manner that increased production and market share in Iowa and 
Nebraska. There was no effort to create a mandate but, rather, a 
standard for gasoline that would best serve the overall needs of the 
States.
  The effort, though not embodied in law, was in fact successful. 
Between our two States of Iowa and Nebraska, we have the capacity to 
produce 920 million gallons of ethanol annually--more than enough in an 
emergency to meet 20 percent of our gasoline requirements with enough 
left over to give New York and California an additional helping hand.
  By working together, we can find ways to make almost every State in 
the Union equally self-reliant when it comes to the additive to motor 
fuels gasoline. Just as the Senate passed the renewable portfolio 
standard for electricity that enjoyed the support of California and New 
York, structured to serve the overall electricity needs of the Nation, 
this standard is designed to help meet the overall transportation fuel 
needs of America.
  In terms of national energy security, we are not importing 
electricity from distant nations unfriendly to the United States. Ours 
is a liquid fuel program. Failure to support the renewable fuel 
standard in reality will mandate our Nation to continue our dangerous 
and declining path to foreign oil dependency which everyone opposes.

  In conclusion, it is clearly in the best interest of the United 
States for us to be able to pass this RFS. We in the Senate should band 
together to try to find ways that will help make the renewable fuel 
standard available for economic development and for the fuel security 
of all of our States. We need to advance a Manhattan-type project to 
ensure that we retake the world leadership in promoting biorefineries 
in order to increase energy, national and homeland security, create new 
basic industries and quality new jobs, while enhancing our environment.
  The PRESIDING OFFICER (Mr. Reed). The majority leader.
  Mr. DASCHLE. Mr. President, I compliment the distinguished Senator 
from Nebraska for an outstanding statement and for the leadership he 
has shown on this issue for some time. He has been a stalwart advocate 
and an extraordinarily clear and strong voice on this issue. I 
congratulate him and thank him for all of his effort.
  As the Senator from Nebraska has noted, there have been a number of 
myths perpetrated about methanol and ethanol that need to be addressed 
as we consider this RFS.
  I want to take a couple of minutes--I know a number of my colleagues 
are on the floor and I know each one wants to speak--to address briefly 
these myths because they need to be knocked down.
  A myth stated often enough becomes fact in the minds of many. We do 
not want these myths to become fact in the minds of our Senate 
colleagues before they have the opportunity to vote on amendments as 
critical as this one.
  One myth is that this requires States to use ethanol. This does not 
require any State to use ethanol, not one drop, and I hope Senators 
will be clear about that point. Senators have heard that so frequently 
I am sure it is soon going to become fact in the minds of some, but 
because of the credit trading provisions, because of the waiver 
provisions in this legislation, there is no requirement that States use 
ethanol. So to begin with let's clarify that myth.
  The second myth, and the one I have heard so often expressed on the 
Senate floor, is that this RFS is going to somehow increase the price 
of fuel. That assertion is made on the basis of one study done by Hart/
IRI Research. That is the one cited by all of the opponents of RFS.
  What they do not tell you is that the Hart/IRI Research organization 
is funded in large measure by the methyl tertiary butyl ether industry, 
by the MTBE industry. One-half of the revenue that is used to support 
Hart/IRI comes from Liondel Petrochemical, which is the largest 
marketer of MTBE, methyl tertiary butyl ether, and the advocate.
  This is not, let me emphasize, an independent review. This is a very 
subjective review funded by the methanol industry to destroy the 
alternative energy fuels market. Their study, of course, advocates a 
position that is just not accurate and has no basis in fact. Their 
study projects that the price would increase 4 to 10 cents a gallon, 
and it is being used by our distinguished Senators from New York and 
California. The fact is, it is just wrong.
  The Department of Energy said that the RFS requirement would mean 
less than 1 cent a gallon, nationwide one-half cent per gallon. That is 
a Department of Energy study.
  The API study, the American Petroleum Institute study, said it would 
be a one-third of a cent increase--not 4 cents, not 10 cents. One would 
think the oil companies would be opposed to this. They support it. Why 
do they support it? Because they understand this has very significant 
opportunities for us to address the oxygenate market, the alternative 
energy market, the opportunities to deal with the challenges they are 
facing without MTBE. Their report, their review, their study says it 
would be a one-third of a cent increase, not 4 cents, not 10 cents, but 
one-third of a cent.
  We have the Department of Energy and the American Petroleum Institute 
saying this will be less than a 1 cent increase in the overall cost of 
fuel.
  Let us make sure that people understand. It is a myth, I say to my 
colleagues, it is a myth and do not let anybody tell you differently. 
There is no increase, no 4-cent, no 5-cent, no 10-cent increase. Who 
should know better than the Department of Energy and the American 
Petroleum Institute?
  It is clear, Hart/IRI would lose most of its business if they could 
not sustain the position they have advocated from the very beginning in 
this very subjected, distorted, and erroneous assertion that we are 
going to see the kind of increase in cost that they have advocated and 
that is often repeated in the Senate Chamber.
  There is another myth, and the myth is that somehow if we incorporate 
the renewable fuel standard, it is going to be disruptive to the 
petroleum market.
  I will tell you what is going to be disruptive, Mr. President. What 
is going to be disruptive is if we phase out MTBE--14 States have 
already done that--if we phase out MTBE and we do not have anything in 
its place. You want to see disruption, wait until we phase out MTBE and 
there is nothing there. We have no alternative.
  If you want to talk about the abrupt disruption of supply and the 
increase in cost, I cannot think of anything that will do that more 
effectively and in a more pronounced way than to simply do what we are 
scheduled to do right now: Phase out methyl tertiary butyl ether.
  The very best thing we can do for the consumers is to pass this bill, 
to pass this standard to allow this gradual transition that this bill 
contemplates in phasing in an alternative to this disruptive approach 
that will currently be contemplated if we do not have something to 
substitute in its place.
  That is the third myth, that we are subject to disruption if the bill 
passes. I would argue just the opposite. We are subject to major 
disruptions in supply and extraordinary increases in cost if this bill 
is not in place to address those disruptions now.
  There are two more myths, and I want to talk about those. One is that 
it is ethanol that will affect this cost, and to find some alternative 
to ethanol is one that will provide the panacea. I have heard some of 
my colleagues come to the Chamber and say: We do not really need 
ethanol. The oil companies can come up with alternatives to ethanol, 
and we ought to give them the opportunity to come up with those 
alternatives without mandating that ethanol be used.
  First, a large percentage of what the oil companies are going to have 
to use is either going to be imported or domestic. We know that. There 
is no other choice. The two alternatives to ethanol, in large measure, 
are imported

[[Page S3127]]

product. We have alkylates and we have iso-octane. Both of those are 
imported. Both of those are far more expensive than ethanol. Both of 
those would cause the price hikes that our opponents continue to argue 
are the reason they oppose ethanol.
  The only domestic alternative is ethanol. The only domestic 
alternative where we can guarantee a supply is ethanol. The only 
domestic alternative where we know we are going to have some control on 
price is ethanol, if you look at DOE and API reports. So do not let 
anybody think that somehow we can import all these products and not be 
subject to dramatic increases in price. What is it about energy policy 
that would ever cause somebody to advocate more imported product is the 
answer? That is what some of our opponents are doing. I do not 
understand that.
  If they are concerned about price, if they are concerned about 
supply, if they are concerned about disruption, if they are concerned 
about all the ramifications of making sure their consumers are 
protected, the last thing they should do is depend more on imported 
product that we know is going to cost more than ethanol.
  The final myth is we do not have consumer protections in the bill. I 
am amazed some people make that assertion. They could not possibly have 
read the bill. There are a number of consumer protections beyond those 
I have already addressed.
  The first consumer protection is that DOE is required under this 
legislation to look at the ethanol market and the supply problems that 
exist. They have the opportunity written in the legislation--it is in 
writing; it is guaranteed--that the ethanol mandate will be reduced.
  The second guarantee is in subsequent years any State can apply and 
have the mandate reduced within a 90-day period, which is the day we 
have agreed to. We had a vote last week, and we acknowledged that the 
240 days is long. We are prepared to go to 90 days. DOE and the EPA 
argue they would like to have more time, but we are going to insist 
they do it within 90 days so States can see their mandate reduced if 
they can demonstrate there is going to be some concern for disruption.
  Then we have what I said at the beginning, the credit trading 
provisions. Any refinery that uses more ethanol can trade the credits 
generated from the use of additional ethanol to those refineries that 
do not use ethanol or that come in at a lower level than what the 
mandate requires.
  We have credit trading, the waiver, and the overall review that is 
stipulated in the bill requiring EPA to reduce the mandate if 
disruptions can be proved.
  We offered, I might also say, another year prior to the 
implementation of the legislation, in exchange for banning MTBE on 
schedule, and at least to date our opponents have rejected that offer. 
That would have been a fourth consumer protection I thought would have 
sufficed in meeting some of their concerns, but they chose not to take 
that offer. It stands as we proposed it, and clearly Senators would 
have an opportunity to avail themselves of that offer if they chose to 
do it.
  There have been a number of myths, and I am disappointed the myths 
continue to be perpetrated without an adequate response. We are going 
to continue to respond to those myths and try to knock them down and 
clarify the record so all Senators are very clear about what these 
alternatives are prior to the time they have a chance to vote.
  Mr. SCHUMER. Will the majority leader yield?
  Mr. DASCHLE. I am happy to yield to the Senator.
  Mr. SCHUMER. I would like to ask my colleague a question.
  Mr. REID. Will the Senator yield for a unanimous consent request? 
Under the rule, I have 1 hour of time postcloture. While the majority 
leader is in the Chamber, I ask unanimous consent that 55 minutes of my 
hour be given to the Senator from New York, Mr. Schumer.
  The PRESIDING OFFICER. The Senator from Nevada may yield that time to 
the majority leader or the manager but not directly to another Senator, 
absent unanimous consent.
  Mr. BINGAMAN. Mr. President, I ask unanimous consent that 55 minutes 
from the time of the Senator from Nevada be yielded to the Senator from 
New York.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SCHUMER. Mr. President, I had asked my colleague from South 
Dakota to yield for a question. Before I ask him a question, I 
reiterate what I said at the beginning of my speech, how much I respect 
him, his leadership, his integrity, and his fighting for all of us. It 
is such a difficult job to be majority leader, and no one in all the 
years I have been a legislator has done it better than the Senator from 
South Dakota. So it pains me to stand up and oppose him and ask him 
questions.
  The only question I have is the following, and that is, let us--I do 
not know what the truth is. I hear from my refiners that they could do 
this a lot more cheaply. I hear from my refiners that bringing ethanol 
over, whether it be from overseas or from the heartland of America, 
will raise the price dramatically. So I guess the only question I ask 
my colleague is: If it is going to be cheaper with ethanol than any 
other method, either the alkylates or the reformulation of gasoline or 
anything else, why not let the market determine it? Because what if we 
are wrong in this bill and the price does begin to go through the roof, 
through a price spike, where my constituents would not be happy to wait 
90 days, 3 months, as the price goes up so much, or not through a price 
spike but just because there is a shortage of ethanol and the market 
goes up?
  I think ethanol is going to do very well once the oxygenate 
requirement and MTBE is eliminated anyway. The ethanol market is going 
to get better. It has to. So I guess my question to my friend--and I 
really mean this, ``my friend,'' not just in the legislative parlance--
is, Why can't we let the market determine it? Why mandate it instead? 
Because the thrust of his argument is that ethanol is better--and maybe 
it is--and if it is, our argument does not mean much but then 
the market would have New York, California, and all these other States 
buy ethanol.

  Mr. DASCHLE. Mr. President, the Senator from New York asks a very 
good question. My answer would be the same as I am sure he responded to 
Senator Levin about CAFE. Senator Levin said: Why not let the market 
work on CAFE? A lot of other Senators said: Why not let the market work 
on CAFE? I think the Senator disagreed, for good reason, because if we 
set goals oftentimes, as a country working within government and within 
the industry, we achieve them. Oftentimes, without the role of some 
goal-setting, we never achieve anything beyond where we are today. We 
did with CAFE in the past. I think we can do that with ethanol now. 
This is a goal, just as the Senator supported CAFE as a goal. We failed 
on that. I hope in this case we can achieve it.
  The Senator understandably is concerned about price hikes. As I said 
a moment ago, if we are concerned about price hikes, I think we ought 
to be concerned about what happens when we phase out MTBE in a vacuum, 
because that is where we are going to get price hikes. We are going to 
get serious price hikes when we start relying on these imported 
products for which we are not certain of supply and we are certainly 
not certain of price.
  As we phase in the RFS, we have an opportunity to do three things: 
First, require that DOE look at the supply and say, OK, if we need more 
time we are going to give it to you. We look at the States and we say, 
all right, if you want more time, you get an opportunity to ask us for 
a waiver and we will give it to you. And over all of that, we say 
beyond any other waiver or beyond a DOE review, we are going to say you 
can trade credits right now. You do not have to worry about any other 
decision. You can trade credits right off the bat.
  So we have three protections built into the price hike. With this, we 
have no protections built in if we do nothing.
  Mrs. FEINSTEIN. Will the majority leader yield for a question?
  Mr. DASCHLE. I am happy to yield, but I know other Senators are 
waiting patiently. I came out of turn, but I would be happy to answer 
one question.
  Mrs. FEINSTEIN. Since the majority leader attacked the points I made, 
I

[[Page S3128]]

would like to have an opportunity to respond.
  Mr. DASCHLE. The Senator will have the opportunity, but I think it 
would be preferable to do it on her own time, but I will answer one 
question.
  Mrs. FEINSTEIN. My question is, Is the Senator saying, then, that the 
credits in this bill do not say if you do not use it you have to pay 
for it?
  Mr. DASCHLE. The credits in this bill allow you to get out from under 
the mandate without any intervention from DOE or EPA or anybody else. 
You are not required, in this legislation, with the RFS, to use one 
drop of ethanol.
  Mrs. FEINSTEIN. But then do you pay for it if you do not use it under 
the credit trading provision?
  Mr. DASCHLE. Of course you pay for it, but the credits are available.
  Mrs. FEINSTEIN. So you pay the amount?
  Mr. DASCHLE. Let us put this in the proper context. You pay an 
amount, but what are you going to pay when there is no alternative to 
MTBE? How much is that going to cost? If we phase out MTBE in 
California, and they are then forced to go to alkylates or iso-octane 
and you do not know what it is going to cost, you do not know whether a 
supply is going to be available and the people of California are forced 
to pay 30 or 40 cents more per gallon because that is the only 
available supply, I say the people of California would rise up in huge 
opposition. That is, of course, the choice of each of us has to make.
  What we are saying is we have a very careful and balanced approach in 
phasing out MTBE with ethanol in a way that gives every State an 
opportunity to fashion and to tailor its response to the circumstances 
they find themselves in, with credit trading, with the waiver 
opportunity, and with the DOE review, not to mention a delay of 1 year 
in the implementation should Senators wish to afford themselves of the 
opportunity we present.
  So there are tremendous protections for each one of these States 
should the Senators or should the States choose to use them.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from California.
  Mrs. FEINSTEIN. Mr. President, I appreciate an opportunity to 
respond. The majority leader might want to listen or he might not want 
to listen. What he said might be true if one needed to use an 
oxygenate, but California does not need to use an oxygenate because it 
has a reformulated gasoline, and it has to use just a limited 
oxygenate.
  This bill forces California to use this much that it does not need, 
and a careful reading of the credit trading provision in this bill 
means you either use this ethanol or you have to pay for it.
  Let me respond to another point he made on the issue of increased gas 
prices. He said we use one study. Let me give another study. This is an 
EPA staff white paper, study of unique gasoline blends, effects on fuel 
supply and distribution and potential improvements: Replacing the RFG 
oxygenate mandate with the renewable fuel mandate will result in a 
shift of ethanol use from RFG to conventional gasoline, while ethanol 
distribution costs and blending costs should decrease. However, this 
will be offset to some extent by an increase in ethanol production 
costs. For the purpose of this study, we have assumed, based on 
previous analyses, as discussed in the cost memorandum in the docket, 
that ethanol production costs would be increased by 15 cents per gallon 
relative to today's ethanol prices. So it shows there that the cost of 
ethanol is apt to go up.
  With respect to the study that he mentioned, the Energy Information 
Administration report, that report used national averages. It does not 
adequately predict gas prices in California and other States.
  The report he referred to did not model how infrastructure problems 
and market concentration can drive prices up.
  So, what California is saying is we will not have the infrastructure 
in place, and that alone will create price spikes.
  With respect to his comment on the 90-day amendment, the majority 
leader knows I have been interested in this for a long time. A 90-day 
waiver has never, ever, by anyone, been offered to me. I will be very 
happy at the appropriate time to call up my amendment, which is a 90-
day waiver. I hope, then, that that 90-day waiver will be agreed to. 
But at no time was a 90-day waiver ever mentioned to me.
  I thank the Chair.
  The PRESIDING OFFICER. The Senator from Oklahoma.
  Mr. NICKLES. Mr. President, I think we are having a good debate. I 
think it is informative to my colleagues. I thank and compliment my 
colleague from New York, Mr. Schumer, and my colleague from California, 
Senator Feinstein, for their leadership in bringing out an amendment 
and exposing this for what it is. It will greatly increase costs, a 
couple of costs.
  I haven't heard too many people talk about what is very obvious. We 
have already agreed to an amendment that extends the ethanol subsidy in 
the Tax Code. That is just a fact. We have extended it, I believe, for 
10 years. Ethanol now receives a subsidy of 53 cents per gallon. It 
doesn't pay an excise tax that goes to the highway trust fund. That is 
already the case. That is present law. We just extended that for 10 
years.
  Presently, we are producing a little less than 2 billion gallons of 
ethanol a year. So that costs the trust fund a little over $1 billion. 
The trust fund loses that because we give ethanol the advantage over 
all other fuels. That is about $1 billion. OK, that is present law.
  What the bill does if you look on page 189 of the bill, is increase 
the ethanol mandate. Right now, we are producing about 1.9 billion 
barrels per year. It says in the year 2004 it goes to 2.3 billion. It 
doesn't sound like a lot, but that is about a 20-percent increase.
  Then, over the period of time to the year 2012 it goes to 5 billion. 
We go from 1.9 billion to 5 billion. That is a little less than a 200-
percent increase in ethanol. So ethanol gets it both ways. They have 
the subsidy, so much per gallon it doesn't pay in excise taxes that all 
other motor fuels pay, and now we are going to mandate in addition that 
subsidy: Oh, yes, now refiners, you have to make 5 billion gallons, 
which is over two times what we are making right now.
  That has a cost to it. Some people say there is a cost of an 
additional 4 cents or 5 cents a gallon. I think it probably does 
because it is more expensive to make than gasoline, probably to the 
tune of about 20 cents a gallon. But it also has a cost to the highway 
trust fund. I have heard people say when we take up the budget we are 
going to have to add billions of dollars to the highway trust fund. If 
we keep the ethanol mandate as it is, in addition to the tax subsidy, 
but increase the amount that must be produced from current law into a 
Federal mandate of a figure that I guess came from the sky--all of a 
sudden we are going to do 5 billion gallons--that means we are going to 
have to more than double the capacity of the plants we have right now.
  The highway trust fund, which is presently losing in excess of $1 
billion, is going to be losing in excess of $2.5 billion, if my quick 
math is right. If you are talking about 53 cents a gallon, and if you 
are going to make 5 billion gallons, that is over $2.5 billion that the 
highway trust fund is not going to get every year.
  I believe ethanol vehicles--and they may be just great and it may be 
a fantastic fuel, and I am not arguing that--do damage to the roads. 
The highway trust fund is to repair the roads. Whether the cars are 
running on diesel or gasoline or ethanol, those roads have to be 
maintained and repaired. We are creating a giant gap or loophole for 
the highway trust fund that is going to be ever expanding by this ever-
increasing mandate.
  My point is that I think we can have it one way or the other. We can 
probably afford one, or maybe the other, but I question both. If we 
have a tax subsidy--and I see my friend and colleague, the former 
chairman of the Finance Committee, for whom I have the greatest 
respect--the tax subsidy giving the 53 cents exclusion from the highway 
gasoline tax is already in the law, and it has been extended. Fine. 
That is one big one. But to also say we should have a mandate to more 
than double the production I think is a lot to ask. That is a lot to 
ask of the highway trust fund, which most of us want

[[Page S3129]]

to make sure we keep our highways maintained.
  We are creating a big void. We are facing a lot of highway work that 
needs to be done. But where is that money going to be coming from? For 
awhile some people said maybe we will have general revenues pick it up. 
I think there is some legitimacy in having a highway user fund, having 
users pay for highway maintenance. That is the whole purpose of having 
a gasoline tax or diesel tax; it is for highway maintenance. To take 
one particular fuel and say we are going to exclude it from a very 
significant portion of the highway tax is one thing. Now we are going 
to have a mandate that, oh, yes, you have to increase your production 
by another 160 percent. I just question whether it is affordable, 
whether it is affordable for the highway trust fund, and whether it is 
needed.
  I do not mind encouraging alternative sources of fuel. I certainly 
don't mind helping agriculture. I certainly don't mind doing anything 
that will reduce our dependency on foreign sources of fuel. But I look 
at this and I say: Wait a minute, aren't we going to far? Aren't we 
doing too much? We are doing the tax exemption. Do we really need a 
mandate that says you have to produce that much? I ask: Can we make 
this 2.3 billion gallons in the year 2004? Can we really increase 
production in all these plants in 2 years? At that point, we are at 2.3 
billion. Maybe we can. In another 8 years, can we double it? Heaven 
forbid that we let the marketplace decide which fuel we should be 
burning.
  Mr. SCHUMER. Mr. President, will my colleague from Oklahoma yield for 
a question?
  Mr. NICKLES. I am happy to yield.
  Mr. SCHUMER. I have been following his very cogent arguments. I am 
glad we are on the same side on a few issues. Hopefully, there will be 
many more.
  He made two points. I would like to ask him if I am wrong. There are 
double contradictions here. One is that we are going to raise the price 
of gasoline, as we would with the gas tax. But we are actually going to 
deplete the trust fund at the same time we lose the gas tax, whereas, 
at least the gas tax has the purpose of the user tax.
  As my friend from Oklahoma accurately stated, at least that does 
improve the fund. We get hit both ways. There is a second sort of the 
anomaly here. I haven't seen anything like it. We have a large subsidy 
for a product--I think he mentioned 53 cents a gallon; that is huge 
already for the motorist--to help the farmers. I don't know anything 
else that gets up to that extent. At the same time, we are now forcing 
people to buy it with that subsidy.
  Am I correct that those are two separate contradictions within this 
bill, two separate anomalies?
  I ask my colleague from Oklahoma, has he ever seen anything such as 
this in his years of making sure the free market policies are pursued 
for our country?
  Mr. NICKLES. I appreciate the question. I have seen something like 
it. I will allude to it. I hope we can fix it at a later date. That 
deals with the renewable portfolio standards that are also in this 
bill.
  To show you how similar they are, in that particular section of the 
bill, there is a mandate that 10 percent of the electricity be produced 
from renewable fuels. Incidentally, if you can't do that, you can buy a 
credit for 3 cents per kilowatt hour. That is the price of electricity 
in the wholesale market today. In some cases, it is a lot less than 
that. You can get out of that mandate by giving the government 3 cents 
per kilowatt hour. Wow. That is expensive. That is the equivalent of 
about a 5-percent increase in the electricity bill.
  I see this as very similar. This says: OK. Buy a lot more ethanol--up 
to 5 billion gallons--more than double what we are buying right now. 
And, oh, yes. We are going to subsidize that, too. We are going to 
mandate that you buy it and subsidize it. But consumers are going to 
pay for it. They are going to pay for it by having a shortfall in the 
highway trust fund to the tune of over $2.5 billion a year.
  Obviously, if you are exempting 3 cents a gallon and mandating that 
you manufacture 5 billion gallons, the trust fund is coming up $2.6 
billion short per year. As consumers of fuel, users of the highways are 
coming up short. That means other fuels or general revenue is going to 
have to make up the difference. It just doesn't fit.
  I happen to think there is a reason why people say, well, we need the 
53 cents per gallon to make ethanol competitive with other fuels. In 
other words, it is more expensive. I think that is obvious.
  I understand the proponents, and I respect the proponents, but they 
are saying we need the tax subsidy to make it competitive. It is more 
expensive to produce ethanol than it is gasoline. So we give them the 
tax subsidy so they can afford to do it. We are now going to mandate 
that they more than double the production. If it is more expensive to 
make, that means the price of gasohol is going to go up. I think the 
estimates of 4 or 5 cents a gallon are probably accurate. That may not 
sound like very much. It is probably about a 6-percent increase in 
gasoline costs. Consumers are going to pay for that.

  I was shocked. I didn't know until I heard Senator Feinstein mention 
that under current law there is an import fee on ethanol. I asked my 
staff. I started looking for it. Where is it? It is not in here. It is 
in current law.
  The ethanol industry has already been successful in having 
protectionism, saying we can't have ethanol imports. There is only 
domestic product. Guess what. We import a lot of gasoline. We import a 
lot of oil. We import a lot of fuel. Right now we are saying we are 
going to mandate this much more production but we are going to keep the 
protection.
  I am troubled by that. Consumers will pay. If ethanol were 
competitive, it wouldn't need a tax subsidy and it wouldn't need us 
mandating 5 billion gallons by the year 2012. It costs more to produce. 
Consumers will pay it. This bill is going to cost consumers.
  I know there are charts floating around here on the cost per gallon. 
I think 5 or 6 cents per gallon is a good estimate.
  To answer my friend's question, is there another example of that? 
Yes. It is in the renewable portfolio standard. It is a 3 cents per 
kilowatt hour credit which we mandate in this bill. Senator Breaux and 
I and others will have amendments to reduce that from 3 cents per 
kilowatt hour to 1.5 cents per kilowatt hour, which is the same amount 
the Clinton administration proposed. We will reduce the penalty--the 
tax--that is in the bill.
  This bill we have before us right now increases the price of gasoline 
because of the ethanol standard, and it increases the price of 
electricity because of the renewable portfolio standards.
  I compliment my colleagues from New York and California for trying to 
address the gasohol tax increase that will hit all consumers, all 
gasoline purchasers. Later on we will have an amendment to hopefully 
reduce the electricity penalty that is in the bill as well.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. DAYTON. I thank the Chair. I appreciate the desire of the 
Senators from New York and California to protect their States and their 
constituents.
  I think it is unfortunate that so much misinformation about ethanol 
exists today. It has been distributed and is being distributed even as 
we speak. There is so much misunderstanding about what ethanol's role 
is, and also ethanol's potential in our energy future.
  Today, the United States consumes 25 percent of all the oil that is 
produced in the world. One out of every four barrels of oil produced in 
the world is consumed in the United States.
  Given the significance of the transportation sector in this country, 
one out of every seven barrels of oil goes into American gasoline. If 
those who continue to oppose any kind of alternative have their way, 
the policy of this country is going to be basically hang on and hope--
hang on to the status quo, hang on to the present consumption of oil 
and gasoline, hang on to the present energy consumption patterns of 
this country and hope nothing changes.
  I find it disappointing that we focus on these alternatives as though 
they are somehow going to impose something more onerous and more 
expensive on the American people when, in fact, if you look 
realistically at the future, 10, 20 years from now, the most expensive 
policy for the American consumer is for us to do nothing.

[[Page S3130]]

  The notion that we will be able to continue to consume one-fourth or 
more of the world's oil production, the notion that prices will remain 
the same as today's prices, that there won't be disruptions, and to put 
ourselves in a situation where we will be faced with either supply 
disruption or price increases of major proportions, I think is putting 
our head in the sand and hoping for something that goes beyond what is 
realistic.
  Despite the efforts of the manager of this bill, basically the 
position of the Senate on this bill is to do nothing in terms of 
bringing about any real reduction in the consumption of oil and 
gasoline or the development of real alternatives. We said no to the 
CAFE standards. We said no to basically any meaningful change or 
development of any alternative. Why? Because, as the opponents say, any 
alternative, any change in our practice, involves some dislocation and 
some price increase on a temporary basis--not nearly what this 
proposes. They may involve some need to refigure our supply. Anything 
that changes the status quo, therefore, changes some aspect of this 
system that we keep treating as though it is in place and it is secure 
for years to come.
  How long, realistically, do we think we are going to be able to 
continue to have all the oil that we wish to consume, at the prices we 
are paying today, with no disruptions, and no price spikes? In fact, if 
we don't start developing alternatives, such as ethanol and other 
biofuels, we are going to guarantee that we are in the same predicament 
10 years from now or 20 years from now. I guarantee you that those 
prices will not continue to be stable.
  In Minnesota, we have been practicing an alternative for the last 5 
years mandated by the Minnesota Legislature, which is a 10-percent 
blend of ethanol in every gallon of gasoline sold in the State of 
Minnesota. That ethanol is blended. Ten percent is used by every 
vehicle that puts gasoline into its tank. It requires no change in 
engines produced by General Motors, Ford, or any other company, foreign 
or domestic.
  In fact, the engines in vehicles that use 10 percent ethanol requires 
no modification whatsoever. They have no supply problems.
  The cost of a gallon of gasoline in Minnesota today is 20 cents less 
than a gallon of gasoline in California. It is a penny more than in New 
York. It is 5 cents a gallon less in Illinois, and it is less in our 
surrounding States that don't have this mandate. That is just the 
beginning.
  My office leases a vehicle, a Chrysler Suburban, that travels around 
Minnesota. It consumes 85 percent ethanol--a fuel that is blended 85 
percent ethanol and 15 percent gasoline. That is priced 20 cents less 
than a gallon of unleaded fuel in Minnesota today--meaning 40 cents 
less than a gallon in California, 10 cents less than a gallon of 
gasoline in New York, and so on.
  Yes, this is a subsidy. Yes, this is an incentive provided to make 
the conversion to this kind of fuel. Again, if we don't provide some 
kind of incentive, we will have no alternative form of energy which is 
going to be competitive with what it is today.
  On the other hand, if we don't follow the direction in this 
legislation that we begin to make this transition to having a supply of 
ethanol that will actually not just displace MTBE--that is far too 
limited a view of the future of ethanol. Ethanol could not only 
supplant MTBE, as this legislation encourages, but also ethanol could 
supplant gasoline itself.
  As I said, right now in Minnesota, 10 percent of the gasoline has 
been supplanted by ethanol.
  That could be 20 percent if we had the supplies available that could 
be applied across this country. And 85 percent of ethanol can be used 
in 2 million vehicles across the country. Imagine what it would do 10, 
20 years from now to the energy independence of this country if we were 
using 20 percent, 40 percent, 60 percent ethanol instead of gasoline.
  As I say, these changes are not going to happen overnight. We are not 
going to be able to find ourselves in an energy crisis down the road 
and be able to make these kinds of changes immediately. If we do not 
start now, if we do not have a goal of 10 years from now reaching a 
manageable amount of product that will encourage others to get into the 
market--for example, I hear criticism that one company now controls 41 
percent of the market for ethanol in this country.
  Twenty-five years ago that same company controlled 99 percent of the 
ethanol in this country, and that number has gone down every single 
year thereafter as more and more producers have gotten into the ethanol 
market. The production concentration in that industry is diminishing. 
It will continue to diminish with or without this mandate, but it will 
certainly accelerate the reduction in concentration as more and more 
producers get into the market.
  We hear about supply difficulties and questions about supply which 
cannot be answered today for a market that will exist 10 years from 
now. But to think we are transporting oil and oil products from the 
Middle East, from South America--thousands of miles to our ports--to 
States such as California, which is now importing 75 percent of their 
MTBE by barge from Saudi Arabia, and we are saying that the supplies 
cannot be transported from the middle section of this country to either 
coast at a competitive transportation price boggles the mind and defies 
imagination.
  Furthermore, I guarantee you, with this kind of mandate, the 
agricultural sector in California, which is enormous, and the 
agricultural sector in New York, which is very substantial, will move 
to producing the kinds of crops which can then be converted into 
ethanol. I guarantee producers and refineries will sprout in those 
States and elsewhere across this country to supply this additional 
product.
  So this is not a static situation. It is a dynamic one, and one 
which--with this mandate, with this encouragement--has tremendous 
opportunity over the course of the next decade and thereafter to meet a 
significant part of our energy needs, our consumption of gasoline.
  Finally, in terms of liability protection, I happen to agree with 
those who are concerned about that. I am willing to have that stripped 
from the bill. But this amendment, as it is proposed, does not just 
deal with some of these flaws; it would eliminate the entire ethanol 
provision entirely. So if there are particular concerns, let's deal 
with those particular concerns. But I think just to wipe this out 
entirely is shortsighted and, as I say, will result in American 
consumers paying higher prices for gasoline or gasoline products.
  Finally, I wish to make one last comment on the highway trust fund. 
Again, I agree with the critics of this measure who say our actions 
will result in less dollars going into the highway trust fund. That is 
true. But anything that results in the lessening of the consumption of 
gasoline in this country results in fewer dollars going into the 
highway trust fund. If you follow that logic, then, it means, in order 
to maximize dollars going into the highway trust fund--which is 
important to Minnesota and every other State--we ought to lower the 
fuel efficiency of our vehicles, we ought to drive them more miles, and 
we should do whatever we can to burn more gasoline because that results 
in more dollars going into the highway trust fund.

  I suggest we are better off to reconsider that policy, to reconsider 
whether we want the highway trust fund to be dependent on the number of 
gallons of gasoline consumed, when we know what the effects of that are 
on our economy elsewhere.
  So I say it is better to change the policy over time, better to 
change the supplement, the funding mechanism of the highway trust fund, 
rather than sacrifice a sound alternative energy policy on that altar.
  Again, in conclusion, if we do not start this now, if we do not start 
encouraging this transition, we are going to be nowhere in 10 years, we 
are going to be nowhere in 20 years, except where we are today with our 
energy dependency. And I guarantee we will have no solution to our 
energy predicament.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Mr. President, I only intend to take 4 or 5 minutes. I 
ask unanimous consent that the Senator from Iowa be recognized 
following my remarks.
  The PRESIDING OFFICER. Is there objection?

[[Page S3131]]

  Mr. WELLSTONE. Mr. President, I certainly will not object. I see 
colleagues on the floor. I ask unanimous consent that after Senator 
Dorgan and Senator Grassley--and I gather Senator Murkowski also is 
going to speak; is that correct--and the Senator from Alaska speaks, 
that I then be recognized to speak after Senator Murkowski, in that 
order.
  The PRESIDING OFFICER. Is there objection?
  Mr. REID. Reserving the right to object, what is the order?
  The PRESIDING OFFICER. The Senator from Minnesota has requested that 
at the conclusion of Senator Dorgan's comments and Senator Grassley's 
comments and Senator Murkowski's comments, he would be recognized.
  Mr. REID. I have no objection, but I do say that we have, under 
postcloture, 30 hours. There is going to come a time--certainly we are 
not approaching it quickly--but somebody will have to move either to 
table or to set a definite time for voting on this amendment because I 
do not think it is fair to spend the whole 30 hours on this one issue.
  The PRESIDING OFFICER. Is there objection?
  The Chair hears none, and it is so ordered.
  The Senator from North Dakota.
  Mr. DORGAN. Mr. President, I will be very brief. I thank my 
colleagues.
  Let me say that some issues are less complicated than they seem, and 
this, I think, is one of those issues. The ability to take a kernel of 
corn or barley, for example, take the starch from it, break it down 
into its simple sugars, ferment it into a drop of alcohol, and use it 
to extend America's energy supply makes great sense. Being able to take 
a drop of alcohol from a kernel of corn or barley to extend America's 
energy supply, and still have the protein feedstock left to feed 
animals, also makes great sense. We will produce ethanol in substantial 
quantities. The question is not whether it will be done; the question 
is when.
  We produce a substantial amount of energy right now, but not nearly 
as much as we could from ethanol. We will, at some point, dramatically 
increase the ability to produce our own fuel. Producing renewable fuel 
that we can use for gasoline, the fuel we can use in other ways to 
extend America's energy supply, just makes sense.
  The provision in this legislation makes good sense as well. It will 
substantially increase the quantity of ethanol that is produced in our 
country, and do it more quickly than we otherwise could.
  One of my colleagues, Senator Nickles, said: Let the market decide 
these things. Well, it is interesting that the market apparently has 
decided that we should import 57 percent of our oil supply, much of it 
from Saudi Arabia. Is that a market decision that makes a lot of sense? 
Is that a market decision that puts us in peril of someday waking up in 
the morning to find out that some heinous act by a terrorist has 
interrupted the energy supply from the Saudis or the Kuwaitis, and all 
of a sudden America's economy is flat on its back? Is that a 
marketplace decision that makes good sense? No, it does not make good 
sense. So, in a number of ways, we are trying to move in different 
directions.
  This debate is about the replacement of MTBE. All of us understand 
that in various parts of the country it has been showing up in ground 
water. We understand that this has to be dealt with. And that gives 
rise to this provision in the energy bill. But this provision in the 
energy bill, in my judgment, has much more significance than just that 
issue.
  I think my colleague from Minnesota, Senator Dayton, just described 
that. It is not just about a replacement for MTBE; it is about 
additional production of energy in our country. It is about growing our 
fuel on a renewable basis year after year. It is about another market 
for family farmers who produce crops that can be turned into alcohol, 
and then use the protein feedstock later for animal feed. It just makes 
good sense for our country to do this.
  I know there are some who have some heartburn about this provision, 
and I certainly respect their views. There are some who object to 
everything that is done for the first time. I am not suggesting that is 
the case with the opponents here, but we are going to march, 
inevitably, in this direction. The question for us is: Do we do it 
sooner, or do we do it later?
  This is the time when we decide that we want additional production 
from renewable sources.
  And yes, that is ethanol. It is good for our country, for the 
environment, and for our family farmers. Frankly, it is even good for 
those who are objecting to it today.
  I hope we will reject this amendment, as we should, and continue to 
keep this provision in the bill.
  I thank my colleague from Iowa for allowing me to proceed.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, before I speak about the volume of 
misinformation we have on the renewable fuel standard, there were a 
couple statements made in the debate by the Senator from Oklahoma that 
I want to address.
  No. 1, don't assume ethanol is going to increase the cost of 
gasoline. At least in my State, you find in most cases ethanol in 
gasoline will sell for 2 cents a gallon cheaper than gasoline without 
ethanol. If that is not the case, it is the same price. Very rarely do 
you find anytime that ethanol in gasoline causes the price of that 
gasoline to be higher than gasoline without ethanol.
  The other misinformation we ought to clear up is the use of the word 
``subsidy.'' Because of the consumer tax on gasoline not being as high 
if it has ethanol in it as without ethanol, that is a lower rate of 
taxation. The subsidy, as we use it in this body, refers to money 
coming from the Federal Treasury to benefit somebody. When a consumer 
pays less tax on a gallon of gasoline because it has some ethanol in 
it, that is less tax. Do the proponents of this bill suggest we ought 
to raise the tax on gasoline because there is ethanol in it? Some of 
these Members I hear abhor the idea that there ought to be any increase 
in any tax, let alone an increase in the gasoline tax.
  Those are two things I wanted to clear up.
  Now, about this misinformation, I know my colleagues who are 
supporting this amendment are very intelligent people. I don't think 
they are purposely misleading us. There has been some propaganda spread 
by some industries in this country, and it has been picked up by some 
Members of Congress. They have lent their credibility and voice to this 
antireformulated fuels standard in a way that, quite frankly, does not 
do anybody any good. This misinformation campaign can help only two 
interests: It can help producers of MTBE, which production contaminates 
our drinking water supplies--and it does this in the States of 
California and New York; that has been very well documented; secondly, 
Middle East producers of both oil and MTBE that seek to tighten a very 
dangerous grip they have upon America's energy security.
  How does this misinformation campaign help MTBE producers? That is 
because the reformulated fuel standard includes an MTBE ban. The MTBE 
producers know that the entire reformulated fuel standard will unravel 
if they can chip away at it with some amendments.
  A broad coalition of interests helped produce this balanced 
compromise we have before us. This coalition may very well be 
unprecedented. The coalition consists of farm groups, petroleum and 
renewable fuel producers, environmental groups, and State environmental 
agencies. I had an opportunity to address a group where the American 
Petroleum Institute had one of their employees. I had to tell him, when 
I heard of their supporting this compromise, it is a good thing I had a 
good heart. Otherwise, I would have passed out as a result of it 
because they have never been with this group of people in the past. 
Here they see the need for renewable fuels as well.
  They all agreed to a compromise proposal embodied within the 
renewable fuel standard that in the past seemed impossible to 
accomplish.
  What do MTBE producers do? They get their consultant, Hart/IRI, to 
cook numbers to make it look as if requiring ethanol usage will cause 
motor fuel prices to go up by almost 10 cents a gallon. This is 
blatantly false. The truth is, according to the Energy Information 
Administration, requiring ethanol under the renewable fuel standard

[[Page S3132]]

will increase motor fuel costs, if at all, by one-half a cent to a 
penny per gallon.

  So we have had a couple Senators address this issue in a Dear 
Colleague letter. I will quote from the letter, ``MTBE Consultant 
Misleads Members on Ethanol Debate.'' Let me share with you the letter 
from Senators Johnson and Hagel. I quote:

       Senators from New York and California have distributed 
     charts and spoken on the floor, claiming that the renewable 
     fuels standard will increase consumer costs by 4-9.75 cents 
     per gallon. The source of this data is the MTBE consulting 
     firm, Hart/IRI, which claims it based its cost estimates on 
     data from the Energy Information Administration.

  Further quoting:

       [The Energy Information Administration] has completed two 
     analyses. . . . The first, found that the MTBE ban would 
     increase gasoline costs 4-10.5 cents per gallon, while the 
     renewable fuels standard could increase gasoline costs by 1 
     cent per gallon in reformulated gasoline areas, and .05 per 
     gallon overall.

  I want my colleagues to listen very carefully to the next sentence 
from this letter:

       Hart/IRI lumped these costs together and attributed . . . 
     them to the renewable fuels standard, making that provision 
     appear to be roughly ten times more expensive than it is.

  Continuing to quote:

       Since the fuels compromise bans MTBE, Hart/IRI has every 
     incentive to exaggerate and misrepresent the cost impacts on 
     the legislation. It is ironic and unfortunate that some 
     members--whose states have already banned MTBE, because it 
     has poisoned their drinking water--chose to use this MTBE 
     consulting firm's analysis rather than relying upon the 
     objective EIA numbers.

  We ought to repeat that sentence:

       It is unfortunate and ironic that some members--whose 
     states have already banned MTBE, because it has poisoned 
     their drinking water--chose to use this MTBE consulting 
     firm's analysis rather than relying upon the objective EIA 
     numbers.

  We proponents of this renewable fuels standard are trying to help 
consumers in California and New York. We are trying to reduce their 
dependence upon MTBE, because it poisons the groundwater, and oil, and 
both of those come from the Middle East. In fact, we are trying to do 
so in a manner directly advocated in 1999 by the two California 
Senators and the senior Senator from New York when the Senate approved 
Senator Boxer's resolution calling for the ban of MTBE and replacing 
the MTBE with renewable ethanol. That is what the resolution said.
  Yet today our efforts are opposed because our legislation would 
increase the use of ethanol made by farmers and ethanol producers in 
America's Middle West as opposed to getting our energy from the Middle 
East.
  Our opponents claim they are worried about supply shortages and price 
spikes. Yet how can any Member of this body be more worried about 
ethanol from the Midwest than they are about MTBE and oil from the 
Middle East? How can anyone oppose America's farmers and ethanol by 
using bogus information from an MTBE consultant. It is unbelievable, 
isn't it?
  Mr. President, what the MTBE consultant did was distort an analysis 
of banning MTBE included in an earlier proposal, not the proposal 
pending before the Senate. The Energy Information Administration did 
two analyses. The outdated one concluded that an MTBE ban under the old 
proposal would increase consumer costs by 4 to 10 cents a gallon. 
Requiring the use of ethanol under the old analysis would cost at most 
a penny a gallon.
  A second Energy Information Administration analysis was conducted, 
but this time it focused on the pending legislation. The Energy 
Information Administration concluded that banning MTBE would increase 
the cost of motor fuel by about 2 to 4 cents per gallon, and again it 
found that requiring ethanol would increase consumers' cost by less 
than one penny a gallon.
  Again, who are we to believe, the MTBE industry, which will lose if 
MTBE is banned, or the Energy Information Administration?
  Let me critique this for my colleagues with a closer look. Those who 
are offering killer amendments to this renewable fuel standard point 
out in detail, State by State, the price increases consumers will 
supposedly suffer if the renewable fuel standard is adopted.
  The bogus Hart/IRI analysis concluded, for instance, Arizona 
consumers would pay 7.6 cents more per gallon; Maryland, 9.1 cents; 
Texas, 5.7 cents; Pennsylvania, 9.1 cents; New York, 7.1 cents; 
California, 9.6 cents, and I can go through the 50 States.
  When one looks slightly below the surface and gives the Hart/IRI 
study even a moment's attention, one will see but half a cent or a 
penny of these predicted price hikes are related to the ban of MTBE and 
not the cost of requiring ethanol.
  Our renewable fuel standard opponents want us to fear price hikes, 
but they do not want us to figure out that the price hikes are driven 
by banning MTBE. Instead, the aim is to mislead us into thinking 
ethanol causes the price hikes, but by using this pro-MTBE consulting 
firm study and by subtracting the half cent or penny-cost increase 
supposedly relating to ethanol, we find that what our New York and 
California colleagues are really arguing is that if we ban MTBE, the 
cost of gasoline will go up by 8.6 cents per gallon in California and 
by 6.1 cents per gallon in New York.
  What is the logical conclusion? Isn't that simple? If we are to 
believe the studies used by our colleagues from New York and 
California, the only conclusion we can draw is they do not want to ban 
MTBE because the price of gas will go up.
  The opponents of the renewable fuel standard cannot have it both 
ways. They have to make up their minds. Either they want to ban MTBE to 
protect drinking water or they want to keep using MTBE so prices do not 
spike. The bed was made with Hart/IRI; now lay in it.
  Mr. President, surely we can put a little more care into debate so 
important as our energy security. Some of our colleagues who are 
opposing the renewable fuel standard mentioned in passing that there is 
cleaner fuel at less cost and that we do not need to use oxygenates. 
Really.
  In 1991, the California Energy Commission compared the cost of 
ethanol-blended motor fuel with motor fuel that included no oxygenates, 
neither ethanol nor MTBE. In short, the California Energy Commission 
found that nonoxygenated fuels could cost more per gallon than ethanol-
blended motor fuels.
  I note that the California Energy Commission analysis was done when 
annual ethanol production capacity stood at less than 1.7 billion 
gallons, and it was when skeptics said there would not be enough 
ethanol to replace MTBE. Today ethanol production capacity stands at 
2.3 billion gallons per year.

  I hope that settles some of the fears the Senator from Oklahoma had 
about whether we have the capacity to do it. We have unused capacity 
right now. We also have new plants coming online, and production 
capacity will increase to 2.7 billion gallons per year by the end of 
December and climb to between 3.5 billion and 4 billion gallons by the 
end of 2003.
  I suggest that given the large increase in ethanol capacity, ethanol-
blended motor fuel would be even cheaper than estimated by the 
California Energy Commission.
  Moreover, even the recent Energy Information Administration study 
concluding motor fuel could go up a penny if ethanol is required may be 
too high because it does not take into consideration the efficiencies 
of the credit trading program.
  Our California and New York colleagues argue that nonoxygenated motor 
fuel is cheaper than ethanol-blended fuel, but that contention is just 
the opposite of what the California Energy Commission reported. Our 
colleagues choose not to take their information from the California 
Energy Commission and they choose not to take their information from 
the U.S. Energy Information Administration. They would rather take 
their information from an MTBE consultant. Why would they do this? I 
wish I knew.
  I want to share another independent source of energy analysis 
produced by the Department of Energy's Office of Transportation 
Technologies. These two draft studies underscore the extreme importance 
of expanding renewable fuel use, particularly now that we aim to ban 
MTBE because it poisons our water.
  In short, these analyses conclude that alternative and replacement 
fuels leverage lower prices for consumers

[[Page S3133]]

and reduce the impact of OPEC oil-producing nations.
  Mr. President, I ask unanimous consent that these two economic 
analyses of the benefits of replacing gasoline with alternative fuels 
be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 Oil Price Benefits of Increasing Replacement/Alternative Fuel Market 
  Share, Draft Analysis, Office of Transportation Technologies, U.S. 
                          Department of Energy

       Increasing the market share of alternative and replacement 
     transportation fuels would have significant energy security 
     and oil market benefits for the United States. Some of these 
     benefits will occur even if use of the fuels is induced by 
     regulations, subsidies, or demonstration programs. Additional 
     energy security benefits would be generated if the fuels are 
     competitive with petroleum fuels in at least some market 
     segments.
       Competitive alternative and replacement fuels produce 
     energy security benefits in two principal ways:
       First, by reducing the quantity of petroleum consumed and 
     imported, they reduce the vulnerability of the economy to oil 
     price shocks.
       Second, by increasing the price-responsiveness of oil 
     demand, they reduce the market power of the OPEC cartel, 
     making it more difficult for OPEC to raise prices and the 
     sustain those price increases.
       Today alternative and replacement fuels account for 3.6 
     percent of total U.S. gasoline demand. The majority of this 
     is blending stocks used in gasoline. Methyl tertiary butyl 
     ether, MTBE, which is predominately derived from natural gas, 
     comprises 2.6 percent of gasoline demand. Ethanol produced 
     from renewable energy sources, which is primarily blended 
     into gasoline, comprises 0.7 percent of gasoline demand. The 
     use of MTBE is driven by clean air requirements, while 
     ethanol use is subsidized by a partial exemption from motor 
     fuel excise taxes. Alternatives to petroleum-based fuels, 
     such as propane, compressed natural gas, alcohols, 
     electricity and biodiesel comprise only 0.3 percent of total 
     U.S. gasoline use.
       Even these modest levels of alternative and replacement 
     fuel uses are providing some energy security benefits. In a 
     very preliminary, draft market simulation of world oil 
     markets, we have estimated the world oil price impacts of 
     U.S. alternative and replacement fuel use. The following 
     results were obtained.
       The present 3.6 percent market share of alternative/
     replacement fuels produces an approximately $1.00/barrel 
     reduction in oil prices from what they would be if 
     alternative/replacement fuels were not used at all. At 
     current U.S. oil consumption levels of 6.8 billion barrels, 
     this level of alternative/replacement fuel use results in a 
     savings of approximately $7 billion on an annual basis.
       If the U.S. were to achieve the 10 percent replacement fuel 
     goal of the Energy Policy Act of 1992, oil prices could be 
     reduced by approximately $3.00/barrel. At current U.S. oil 
     consumption levels of 6.8 billion barrels, this level of 
     alternative/replacement fuel use would result in a savings of 
     approximately $20 billion on an annual basis.
                                  ____


  The Impacts of Alternative and Replacement Fuel Use on Oil Prices--
                                 Draft

                          (By David L. Greene)

       This memorandum presents estimates of the long-run oil 
     market benefits of increased use of alternative and 
     replacement fuels by highway vehicles in the United States. 
     No attempt is made to estimate the costs of increasing use of 
     alternative energy sources. Potential benefits in the event 
     of possible future oil price shocks are not addressed. Nor 
     are likely environmental benefits considered. Current use of 
     alternative and replacement fuels is estimated to reduce 
     total U.S. petroleum costs by about $1.3 billion per year 
     (about $0.29 per barrel). Cumulative savings from 1992 to 
     2000 are estimated to be $9 billion. Increasing alternative 
     and replacement fuel use to 10% of motor fuel use by 2010 is 
     estimated to increase oil market benefits to $6 billion per 
     year ($0.68/bbl), for a 2000-2010 cumulative savings of $35 
     billion. These estimates were made using a very simple model 
     of world oil markets and are contingent on the assumption 
     that historical and projected OPEC production levels do not 
     change.


        Oil Market Benefits of Alternative and Replacement Fuels

       Displacing petroleum with alternative and replacement 
     transportation fuels helps hold down petroleum prices in two 
     ways. First, reducing the demand for petroleum makes it 
     harder for OPEC to raise oil prices. Although the actual 
     impact will depend on precisely how OPEC responds, a 
     reasonable rule of thumb is that a 1% decrease in U.S. 
     petroleum demand will reduce world oil price by about 0.5%, 
     in the long-run. Short-run (1 year or less) impacts would be 
     even greater, due to the short-run inelasticity of oil supply 
     and demand. The Energy Information Administration offers the 
     following as a rule of thumb for short-run supply reductions.
       ``For every one million barrel per day (1 MMBD) of oil 
     disputed, world oil prices could increase by $3-5 barrel.'' 
     http://www.eia.doe.gov/emeu/security/rule.html
       Demand reductions would have the exact opposite effect, 
     assuming OPEC took no action to cut back production in 
     response. One MMBD would be about 5% of U.S. oil consumption, 
     whereas $3-5 per barrel would be a 15-25% price increase, if 
     oil cost $20 per barrel, suggesting a short-run elasticity 
     about ten times as large as the long-run elasticity. This 
     leads us to the second oil price benefit of alternative and 
     replacement fuel use, the potential for increased price 
     elasticity in case of a supply disruption.
       The existence of an alternative source of liquid fuels 
     supply can also increase the elasticity of oil demand by 
     providing a potential substitute for oil in the event of a 
     price shock caused by a sudden reduction in supply. It is 
     precisely the inelasticity of oil demand and supply that 
     makes price shocks possible. Increasing the elasticity of 
     demand mitigates the impact of a supply shortage on 
     prices.


               estimating the long-run oil price benefits

       The long-run oil market benefit of alternative and 
     replacement fuels can be approximately estimated by a simple 
     simulation model of the world oil market. The model is 
     comprised of two demand equations and two supply equations 
     representing U.S. and Rest-of-World, and a assumed level of 
     OPEC output. All supply and demand equations are linear and 
     depend on current price and lagged quantity. A year-specific 
     constant term is used to calibrate the equations to exactly 
     match the 2000 Annual Energy Outlook Reference Case 
     projections. Since the equations are linear, elasticity 
     increases with increasing oil price and decreases with 
     increasing oil demand. Representative elasticities are shown 
     in table 1 for the U.S. and ROW at various oil prices and 
     1998 quantities.

                            TABLE 1.--LONG-RUN PRICE ELASTICITIES OF WORLD OIL MODEL
----------------------------------------------------------------------------------------------------------------
                                                                     U.S.        U.S.
                                                                    demand      supply    ROW demand  ROW supply
----------------------------------------------------------------------------------------------------------------
MMBD............................................................      19.41        8.96       58.32       36.00
Price Slopes....................................................      -0.329       0.138      -0.966       0.376
 
                                              ELASTICITY ESTIMATES
Oil Price:
    $10.........................................................      -0.17        0.15       -0.17        0.10
    $20.........................................................      -0.34        0.31       -0.33        0.20
    $30.........................................................      -0.51        0.46       -0.50        0.31
    $40.........................................................      -0.68        0.61       -0.66        0.41
    $50.........................................................      -0.85        0.77       -0.83        0.51
----------------------------------------------------------------------------------------------------------------

       The historical data and the 2000 AEO projections reflect 
     the current levels of alternative and replacement fuel use. 
     The impact on oil prices is therefore best answered by 
     answering the question, how much would prices rise if there 
     were no alternative and replacement fuel use? This 
     counterfactual analysis also requires an assumption about 
     OPEC behavior. It is assumed that there is no change in OPEC 
     behavior. In other words, oil supply by OPEC is held constant 
     at historical and AEO 2000 projected levels. Given the 
     relatively small amounts of alternative and replacement fuel 
     use, this assumption seems quite reasonable. Of course, in 
     reality OPEC could increase or decrease output. By increasing 
     output, OPEC would lower prices further, increasing the oil 
     market benefits. If OPEC cut production, say enough to 
     restore oil price to the prior levels, there would still be 
     oil market benefits, though they would be more difficult to 
     quantify. First, at lower production levels OPEC would have a 
     smaller market share and thus less market power than before. 
     This would make it more difficult for OPEC to create a price 
     shock, to raise prices further, and to maintain discipline 
     among its members. Second, the loss of wealth by the U.S. 
     economy due to monopoly pricing would be reduced, because 
     the U.S. would be consuming less imported oil. Thus, if 
     OPEC reacted to increased U.S. alternative and replacement 
     fuel use by further production cutbacks to restore the 
     price level, the nature and magnitude of oil market 
     benefits might change, but there would still be 
     significant benefits.
       Two alternative ``what if'' scenarios were analyzed: (1) 
     what if there had been no alternative or replacement fuel use 
     after 1991? 2) what if, starting in 2001, alternative and 
     replacement fuel use increased to 10% of U.S. motor fuel use 
     by 2010? Actual U.S. alternative and replacement fuel use is 
     shown in table 2. Alternative fuel use increased from 230 
     million gallons of gasoline equivalent in 1992 to 341 million 
     gallons in 1999, with usage of 368 million gallons projected 
     for 2000. Replacement fuel use increased from 2,106 million 
     gallons in 1992 to 4,311 million gallons in 1999 with usage 
     of 4,388 projected for 2000. As a fraction of total motor 
     fuel use, alternative and replacement fuels amounted to 1.57% 
     in 1992 and comprised 2.71% in 1999.

[[Page S3134]]



                                         TABLE 2.--ESTIMATED CONSUMPTION OF VEHICLE FUELS IN THE U.S., 1992-2000
                                                        [Millions of gasoline-equivalent gallons]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                Fuel                     1992         1993         1994         1995         1996         1997         1998         1999         2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alternative........................          230          293          281          277          296          313          325          341          368
Oxygenates.........................        2,106        3,123        3,146        3,879        3,706        4,247        4,156        4,311        4,388
                                    --------------------------------------------------------------------------------------------------------------------
    Total Motor Fuel...............      134,231      135,913      140,719      144,775      148,180      151,598      156,839      159,171      163,149
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: U.S. DOE/EIA, 2000, Alternatives to Traditional Transportation Fuels 1998, table 10, http//www.eia.doe.gov/cneaf/solar.renewables/alt-trans-
fuel98/table10.html.

       The first scenario assumes that there was no alternative or 
     replacement fuel use by highway vehicles, and that petroleum 
     use (before oil market equilibration) would increase by 
     exactly the amount of actual alternative and replacement fuel 
     use. Assuming OPEC production would not have changed, new 
     world oil prices, supplies and demands were computed for the 
     higher level of oil demand. The resulting price increases are 
     modest, because the 0.14 to 0.29 million barrels per day 
     (mmbd) of U.S. alternative and replacement fuel use is small 
     relative to the 67.5 to 77.9 mmbd of world petroleum 
     consumption over the 1992-2000 period. In 1992, oil prices 
     are estimated to be $0.08/barrel higher, rising to an $0.16/
     bbl increment by 1999. Implied total oil cost savings from 
     alternative and replacement fuel use rise from $500 million 
     in 1999 to $1.3 billion by 2000, with a cumulative total 
     savings of 9.1 billion by 2000 (undiscounted 1998 dollars).
       The impacts of increasing alternative and replacement fuel 
     use to 10% of motor fuel use by 2010 are estimated in a 
     similar way. The AEO 2000 forecast includes increasing levels 
     of alternative and replacement fuel use, but the projected 
     levels are far lower than 10% of total motor fuel use. Rather 
     than create an alternative world and U.S. oil market 
     projection, it is assumed that the AEO 2000 projection 
     contains no alternative or replacement fuel use. U.S. 
     petroleum demand is then lowered by an amounts which increase 
     gradually to 10% of motor fuel demand in 2010. Motor fuel 
     demand is assumed to increase at the rate of 1.5% per year 
     from 163.15 billion gallons in 2000 to 189.34 billion gallons 
     in 2010. Thus, alternative and replacement fuel use is 
     assumed to increase from its estimated 2000 level of 4.39 
     billion gallons (0.29 mmbd) to 18.93 billion gallons (1.23 
     mmbd) in 2010. As a result of the consequent reduction in 
     U.S. oil demand, world oil prices drop by approximately 
     $0.68/bbl in 2010. The estimated cumulative savings from 2000 
     to 2010 is $35 billion.
       Neither of these estimates takes into account the potential 
     benefits of increased alternative fuel use in mitigating the 
     impacts of possible future oil price shocks, or even reducing 
     the probability of oil price shocks. The size of the 
     potential benefits would depend not only on the size and 
     frequency of future price shocks, but on how much the 
     substitution of alternatives for petroleum increased the 
     price elasticity of demand for oil. Methods for making such 
     calculations have yet to be developed. As a result, the 
     numbers presented above should be considered lower bounds, in 
     the sense that they estimate only part of the full range of 
     oil market benefits of greater use of alternative and 
     replacement fuels. Likewise, no attempt is made here to 
     estimate the costs of increasing use of substitutes for 
     petroleum.

  Mr. GRASSLEY. Mr. President, these draft reports produced by the U.S. 
Department of Energy's Office of Transportation Technologies will 
further expose inaccuracies of these contentions that renewable fuel 
standard will increase the cost of motor fuel.
  As these reports conclude, the opposite is the truth. The first draft 
is entitled ``Oil Price Benefits of Increasing Replacement/Alternative 
Fuel Market Share.'' The second draft is entitled ``The Impacts of 
Alternative and Replacement Fuel Use on Oil Prices.'' Allow me to read 
excerpts for my colleagues.
  The very first sentence of the first draft states:

       Increasing the market share of alternative and replacement 
     transportation fuels would have significant energy security 
     and oil market benefits for the United States.

  This Department of Energy analysis states further:

       First, by reducing the quantity of petroleum consumed and 
     imported, they reduce the vulnerability of the economy to oil 
     price shocks.

  The economic analysis continues with a second point. By increasing 
the price responsiveness of oil demand, they reduce the market power of 
the OPEC cartel, making it more difficult for OPEC to raise prices and 
to sustain these prices.
  It is very obvious that should be our goal--that is our goal. Do we 
not want to reduce the market power of OPEC? Do we not want to make it 
more difficult for OPEC to raise prices? Is not the object of our 
energy legislation to reduce the quantity of petroleum consumed and 
imported and to reduce the vulnerability of the economy to oil price 
shocks, particularly those caused by OPEC withdrawal of oil from the 
market?
  If the Senate approves these killer amendments that are offered by 
our New York and California colleagues, OPEC will win; America will 
lose.
  When the Department of Energy did this analysis, the market share for 
alternative replacement fuels amounted to only 3.6 percent of our motor 
fuel supply. About 2.6 percent was MTBE, about .7 was ethanol, and the 
remaining .3 came from propane, compressed natural gas, electricity, 
and others. That mere 3.6 percent, according to the Department of 
Energy analysis, leveraged a reduction of the cost of oil by $1 per 
barrel.
  The Department of Energy study concluded that by using a mere 3.6 
percent, alternative fuels saved Americans $7 billion a year. The study 
also pointed out:

       If the United States were to achieve the 10 percent 
     replacement fuel goal of the Energy Policy Act of 1992, oil 
     prices could be reduced by approximately $3 per barrel . . . 
     (with) savings of approximately $20 billion on an annual 
     basis.
  The second draft offered more conservative estimates of consumer 
savings but nevertheless stated that current alternative motor fuel use 
reduced total U.S. petroleum costs by $1.3 billion per year, and if we 
increased usage to 10 percent by 2010, we would save $6 billion a year. 
Whether it is $20 billion a year or $6 billion a year, it is saving an 
awful lot of money for the consumers of America.

  I appreciate the support of President Bush, as well as the Republican 
and Democrat leaderships in the Senate, in supporting and promoting 
renewable fuels. In addition to bipartisan unity, however, Congress 
needs to exhibit leadership that puts regional differences aside, for 
the sake of all Americans.
  I will never understand why some people are more worried about the 
farmers and ethanol producers of the American Middle West than they are 
about oil and MTBE produced from the Middle East. I will never 
understand why people use MTBE-industry-generated misinformation about 
price spikes that, if taken to its logical conclusion, would argue that 
MTBE should not be banned, that drinking water contamination is no big 
deal in California or New York. It is very baffling to me.
  I firmly believe the renewable fuel standard benefits all Americans, 
particularly including consumers in California. But even if California 
and New York do not get special treatment under this bill, would not my 
colleagues rather do something to benefit America's Midwest instead of 
doing things that continue to benefit the world's Middle East?
  The opponents of ethanol suggest it costs too much or that it should 
be taxed at a higher level. That is their complaint. They think a 
gallon of gasohol should be taxed at around 18 cents a gallon instead 
of 13 cents a gallon. They want to raise taxes on the consumer who uses 
ethanol. For some reason, however, they choose to ignore the costs of 
the status quo: Our ever-increasing vulnerability on imported oil. They 
choose to ignore the real cost of imported oil.
  Ten years ago, during debate on the Energy Policy Act of 1992, then-
Energy Committee Chairman Senator Johnston of Louisiana reported that 
the United States was subsidizing imported oil to the tune of $200 per 
barrel.
  Former Navy Secretary Lehman estimated the defense cost of protecting 
Middle East supply lines at around $40 billion a year, and we all know 
what the Persian Gulf war was about. It has been pointed out by 
numerous energy experts, including the ranking Republican of the Senate 
Energy Committee, that the Persian Gulf war was about oil.
  So I hope my colleagues from California and New York will ponder on

[[Page S3135]]

this truth: Not one of our sons or daughters who have proudly donned 
the military uniforms of the United States has ever lost his or her 
life or limb. None of our children has ever shed their blood to protect 
ethanol supply lines and the production of ethanol.
  What value might my colleagues place on that, that there has been no 
loss of life in this country and that there has been loss of life 
elsewhere protecting our oil lines? I will be in shock if we cannot all 
agree that reducing the risks to our sons and daughters, the risk of 
them losing life and limb trying to protect Middle East oil supply 
lines, is worth far more than the few cents a gallon that was 
mentioned, albeit incorrectly, as the increased cost of using renewable 
fuels.
  My New York and California colleagues used the term ``mandate'' much 
during the debate. None of us likes mandates. I, for one, did not like 
mandating sending our sons and daughters to defend Middle East oil 
supply lines.
  I heard one talk about market principles. What market principles are 
involved when supply must be protected by military escort to the tune 
of what Secretary Lehman said, $40 billion a year?
  We also hear complaints about the highway trust fund, that it does 
not collect enough revenue because gasohol is not taxed highly enough. 
One has to wonder why my colleagues are not equally upset by the fact 
that billions of dollars from the highway trust fund are diverted away 
from highway construction and instead used for mass transit subsidies 
of California and New York. Before we increase taxes on motorists, I 
suggest it makes more sense to first put a stop to this transfer of 
wealth from highway users to subsidize cities' mass transit users. At 
the same time, I wonder if our colleagues have ever considered that 
mass transit subsidies are justified for the same reason as charging 
lower taxes on gasohol.
  Are we not in both cases trying to reduce our dependence upon foreign 
oil imports? Why are subsidies to encourage mass transit ridership in 
New York and California OK, but subsidies to encourage all Americans to 
use gasohol somehow not okay?
  Ten years have passed since we took up and enacted the Energy Policy 
Act of 1992. Given the fact that our dependence upon foreign imports 
has increased substantially, I think we can agree that the Energy 
Policy Act was a dismal failure. Part of the reason we failed was that 
we let regional bickering get in the way of pulling together a 
comprehensive energy plan that is good for every American.
  We do not dare fail again, as we did in 1992, and that is why I urge 
my colleagues to defeat these anti-renewable-fuel-standard amendments 
that are before us.
  Mr. FEINGOLD. Mr. President, I rise today to oppose the amendment 
offered by the Senator from New York, Mr. Schumer, to strike the 
ethanol mandate from the fuels title and to address comments that have 
been made in opposition to the fuels title contained in the Senate 
energy bill currently before us. I want to share my perspective on the 
fuels title as a Midwestern Senator who has had a cautious record on 
extending Federal subsidies for ethanol production. But I also come to 
the floor as a Senator who represents a State that is part of the only 
market for reformulated gasoline--or RFG--that sells entirely ethanol 
blends, the Chicago-Milwaukee market, and as a Senator who supports the 
Clean Air Act. We need to make certain that there are adequate supplies 
of ethanol so that when State bans on MTBE go into effect the short 
supplies of ethanol for Chicago and Milwaukee aren't stretched even 
further. It is appropriate that we ramp up that production over time, 
as the fuels title would do.
  Despite the speculation by opponents of this title about policy 
reasons for using ethanol in reformulated gasoline, we use solely 
ethanol blended RFG in Wisconsin because of consumer preference due to 
public health concerns. Unlike other jurisdictions that continue today 
to use reformulated gas containing the additive methyl tertiary butyl 
ether, or MTBE, the citizens of the six non-attainment counties in 
Southeastern Wisconsin switched within the first month of the RFG 
program to ethanol blends.
  This consumer demand was overwhelming. The EPA Regional Office in 
Chicago and my office received thousands of calls from individuals in 
Southeastern Wisconsin during the first week of February 1995, when the 
reformulated gasoline program was first implemented nationwide. Phone 
calls to my offices were coming in at rates of dozens per hour, and 
several hundred constituents contacted me to share their experiences. 
Most callers said that reformulated gasoline containing MTBE was making 
them ill.
  The rest of the country now shares Wisconsin's concerns about MTBE's 
effect on health and the environment, and several States have acted to 
ban MTBE. These State bans on MTBE are having and will continue to have 
serious consequences for fuel markets, especially if the oxygenate 
requirements remain in place which they will unless this title passes. 
As ethanol is the second most used oxygenate, it is likely that it 
would be used to replace MTBE. But, quite simply, as even the 
proponents of this amendment acknowledge, there is not currently enough 
U.S. ethanol production capacity to meet the potential demand to 
replace the 3.8 billion gallons of MTBE used annually in reformulated 
fuel. The mandate in the energy bill seeks to create and guarantee a 
nationwide supply of ethanol to meet this new demand.
  The fuel provisions in the energy bill require a uniform phase-down 
of the use of MTBE as an additive to produce reformulated gas, remove 
the oxygen content requirement for reformulated gas, and put in place a 
nationwide renewable fuels standard--or RFS--that will phase-in 
gradually over a number of years. These provisions provide for a more 
orderly and cost-effective solution to the MTBE issue than State-by-
State action. Because individual States are banning or are considering 
banning the use of MTBE, without the action in this title, the existing 
Federal oxygenate requirement for RFG will increase the cost of 
complying with these bans and lead to an inefficient pattern of fuel-
type by State.
  In his floor statements, my colleague from New York, Senator Schumer, 
read at length the cost increases that ethanol RFG use would have on 
several States. My constituents are well aware of the 5-cent estimate 
of cost increase due to the use of reformulated fuel containing ethanol 
cited by the Senator from New York and have already paid for that 
increase and much more. And what has caused that price increase is, 
quite simply, limited supply.
  Before the start of the second phase of the reformulated gas program 
in 2000, when the reformulated fuels were required to be cleaner, 
estimates of the increased cost to produce the blend stock for ethanol-
blended RFG ranged from 2 to 4 cents per gallon, to as much as 5 to 8 
cents per gallon. In summer 2000, RFG prices in Chicago and Milwaukee 
were considerably higher than RFG prices in other areas, ranging from 
11 to 26 cents higher, in part due to the higher production cost of 
producing ethanol RFG just for this market. To decrease the potential 
for price spikes, on March 15, 2001, EPA changed its enforcement 
guidelines to allow for the blending of cleaner burning reformulated 
gasoline containing ethanol during the summer months. Nevertheless, we 
are continuing to see gas prices again increase in Wisconsin as the 
time for having summer reformulated fuels at the pump grows closer. We 
in Wisconsin see States that are banning MTBE as reaching for our small 
and limited supply of ethanol RFG. Congress must act to make certain 
that our supplies increase.
  Despite all indications that the energy bill fuels title will produce 
sufficient ethanol supplies to meet the needs of a State's banning MTBE 
and will not increase prices, the bill includes additional safeguards. 
Prior to 2004, the Department of Energy is to conduct a study to 
determine whether the bill is likely to significantly harm consumers in 
2004. If the Department determines this to be the case, then the 
Environmental Protection Agency must reduce the volume of the renewable 
fuels mandate for 2004. Also, upon petition of a State or by EPA's own 
determination, and in consultation with DOE and USDA, EPA may waive the 
renewable fuels standard, in whole or in part, if it determines the 
standard would severely harm the economy or environment of a State, a 
region, or

[[Page S3136]]

the United States, or if there is an inadequate domestic supply or 
distribution capacity to meet the requirement.
  In addition to the ethanol mandate, there are other provisions in the 
fuels title that would improve fungibility of RFG nationwide, by 
standardizing volatile organic compound--or VOC--reduction 
requirements. In practice, when combined with the energy bill's 
renewable fuels mandate, this would enable the part of Wisconsin that 
uses Federal RFG to draw on supplies of Federal RFG from other areas, 
such as St. Louis and Detroit, if necessary. The ability to rely on 
other sources of RFG is especially important when sudden supply 
shortages arise due to unexpected events, such as refinery fires or 
pipeline breakdowns, which we in Wisconsin have also experienced. The 
fuels language in the energy bill would help address this problem by 
bringing other areas that use Federal RFG in line with Wisconsin's 
blend by standardizing VOC reduction requirements nationwide.
  With State bans on the books and a continuation of the Federal RFG 
oxygen requirement, we face a serious ethanol shortfall. Consumers want 
and deserve affordable gasoline and clean air. We cannot let this bill 
go by and not do everything we can to achieve this goal. I urge my 
colleagues, even those who have concerns about ethanol, to think 
seriously about how we meet our obligations under the Clean Air Act 
without these provisions and to rethink efforts to strip this language 
from the bill.
  The PRESIDING OFFICER (Ms. Cantwell). The Senator from Nevada.
  Mr. REID. Madam President, I ask unanimous consent that the time 
until 6 p.m. today be divided with respect to Schumer amendment No. 
3030 and that the time be divided as follows: Ten minutes each under 
the control of Senators Schumer and Feinstein; 20 minutes under the 
control of Senator Wellstone; and 10 minutes under the control of 
Senator Murkowski; that at 6 p.m. today, without further intervening 
action or debate, the Senate proceed to vote in relation to the 
amendment, with no intervening amendment in order prior to the vote.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. MURKOWSKI. Madam President, I thank my good friend from Iowa for 
reminding Members we are talking about considerable expense to the 
taxpayer, providing a domestic source of energy that would ordinarily 
come from the technological advancements of looking for oil either 
offshore or on land. We already had a debate on ANWR; I will not go 
back into that.
  However, I call my colleagues' attention to a couple of realities. I 
am sympathetic to the concerns raised by the Senators from California 
and New York. I don't like mandates of any kind. I find it ironic that 
the same Senators who voted for a renewable portfolio standard argue 
against a renewable fuel standard. This forces some $88 billion in 
higher costs to consumers and forces consumers in California and New 
York to pay 3 cents per kilowatt for electricity they are not going to 
use.
  Again, I ask why they voted for the renewable portfolio standards. No 
new energy supply was created, no national security benefit. So 
although we do not like mandates, the renewable portfolio standards 
have increased our energy supply. As the Senator from Iowa said, it 
certainly enhances our national security.
  If we are not going to have the courage to develop our domestic oil 
and gas reserves in an environmentally sound manner, the only option we 
have to extend our supply is to reduce dependence on imported oil in 
provisions such as ethanol. Again, mandates I find unacceptable, but 
they are a part of the price. We simply don't have to pay for our 
failure to develop domestic resources.
  Consequently, I remain in opposition to the amendment of the Senators 
from New York and California. Different regions of the country have 
different points of view on energy, and alternative fuels are 
recognized in this body, but most Members thought any deal between the 
oil industry and the American farmers was doomed at one time. I think 
this proposal proves them wrong. I am basically opposed to gutting the 
amendment before the Senate.
  One of the things I am particularly opposed to, after a discussion of 
gasoline prices, was the issue of whose figures are right. The Energy 
Information Agency supports using those figures, addressing some of the 
amendments that are before the Senate. The point is, where did the 
report come from? We asked for it. I asked the Energy Information 
Agency to study different provisions of the bill because the Senate 
committees were denied the chance to mark up the bill in committee, as 
we have discussed previously.
  The Senate leadership and I have had strong and opposing words about 
the energy bill consideration. As for ethanol, on the other hand, I 
think we have collectively tried to do what is right for the country, 
as part of a comprehensive bill. What has driven all parties to this 
agreement is the price of gasoline.
  We want fair prices for consumers. If States ban MTBE and don't use 
ethanol, the price of gasoline is certainly going do go up. That is not 
what the ethanol part of this bill does.
  Senator Daschle and I wrote a letter asking the EIA for clarification 
on what their report said about the impact of ethanol in the MTBE 
provisions of the bill. I ask unanimous consent the letter dated April 
12 from the Department of Energy be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                         Department of Energy,

                                   Washington, DC, April 12, 2002.
     Hon. Frank H. Murkowski,
     Ranking Minority Member, Committee on Energy and Natural 
         Resources, U.S. Senate, Washington, DC.
       Dear Senator Murkowski: Enclosed is an analysis responding 
     to your and Senator Daschle's April 10, 2002, request to 
     analyze the provisions of Senate Bill 517 (The Energy Policy 
     Act of 2002) requiring a four-year phase down of the use of 
     methyl tertiary butyl ether (MTBE) and a ten-year ramp-up in 
     the amount of renewable fuels included in gasoline. Per your 
     request, we have provided results of: 1) a 14-State ban on 
     the use of MTBE based on those States that have already 
     banned the use of MTBE, 2) a Northeast State ban on MTBE in 
     2004 along with the 14-state ban which is the Reference Case 
     of this study, 3) the provisions of S. 517 requiring an MTBE 
     ban with State waivers including the provisions of the above 
     two cases, and 4) no MTBE ban, but including the renewable 
     fuel requirement. We implemented the State waiver provision 
     in S. 517 according to your instructions of assuming the 
     continual use of MTBE in gasoline at 13 percent for the 
     remaining States. This results in an effective MTBE reduction 
     of 87 percent. We did not implement the banking and trading 
     provisions of the Bill because of the complex modeling 
     required and your need for immediate results. We have found 
     from our other analyses that banking results in meeting the 
     required targets at a later date than without banking, and 
     that trading lowers the cost of the provision because it 
     allows for the least cost entities to meet the requirements 
     first. Thus, the results below should be treated as an upper 
     bound on the price impacts.
       The results indicate:
       That reformulated gasoline (RFG) prices are projected to 
     increase in 2006 by about 4 cents per gallon because of a 14 
     State ban on MTBE, by an additional 2 cents per gallon if the 
     remaining Northwest States ban MTBE (for a total of 6 cents 
     per gallon), and by an additional 2 cents per gallon if S. 
     517 is passed and the assumed States exercise the waiver 
     option (for a total of 8 cents per gallon);
       The comparable numbers for average prices of all gasoline 
     in 2006 are an increase of: about 2 cents per gallon for the 
     14-State Ban, an additional 0.5 cents per gallon when the 
     remaining Northeast States ban MTBE (total of 2.5 to 3 cents 
     per gallon), an additional 0.5 cents per gallon when the 
     State waiver provisions of S. 517 are assumed (3 to 3.5 cents 
     per gallon).
       Assuming a Renewable Fuel Standard (FTS) without an MTBE 
     ban has much less impact on prices. An RFS increases RFG 
     prices by less than 1 cent per gallon and increases the 
     average prices for all gasoline by less than 0.5 cent per 
     gallon. This is the same finding that was in our original 
     analysis.
       If you have further questions, please contact me.
           Sincerely,

                                              Mary J. Hutzler,

                                             Acting Administrator,
                                Energy Information Administration.

  Mr. MURKOWSKI. I refer to the last paragraph on the first page of 
that letter.

       The results indicate:
       That reformulated gasoline (RFG) prices are projected to 
     increase in 2006 by about 4 cents per gallon because of a 14 
     State ban on MTBE, by an additional 2 cents per gallon if the 
     remaining Northeast States bang MTBE (for a total of 6 cents 
     per gallon), and by an additional 2 cents per gallon if S. 
     517 is passed and the assumed States exercise a waiver option 
     (for total of 8 cents per gallon);

[[Page S3137]]

       Assuming a Renewable Fuel Standard (RFS) without an MTBE 
     ban has much less impact on prices.

  That is a reasonable explanation relative to the alleged costs 
associated with ethanol that is really associated with the MTBE 
provisions.
  Further, it is fair to say the farmers previously supported our 
opening of ANWR as part of the comprehensive bill. I thank them for 
that support, because the bottom line is reducing our dependence.
  I make one point, however, since I have had a long history and some 
association with charts. As we recall in the ANWR debate, we had quite 
a discussion about footprints. Let me show one chart, the footprint 
associated with ethanol. The point is, there is no free ride on 
footprints. This happens to be a chart which shows the comparison. If 
you had 2,000 acres of grain corn in an ethanol farm, you would produce 
the energy equivalent to 25 barrels a day. If you had 2,000 acres of 
ANWR production, you would be producing a million barrels of oil a day.
  As we look at the expansion of ethanol and its contribution to our 
national security in relieving us of the dependence on imported 
sources, it would take 80 million acres of farmland, or all of New 
Mexico and Connecticut, to produce as much energy as 2,000 acres of 
ANWR.
  So, there is a comparison, whether we talk of popcorn or oil. 
Obviously, there is a footprint.
  With that profound observation, I yield the floor.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. WELLSTONE. I thank the Senator from Alaska.
  Let me start not with a disclaimer but just to be clear. My State of 
Minnesota is a leader in ethanol production. We have 14 ethanol plants, 
of which 12 are owned and operated by farmer co-ops. Last year, the 
total production from Minnesota ethanol was 200 million gallons, which 
was 95 percent of our State's ethanol needs.
  After having said that, because this is so important to Minnesota, so 
important to farm country, so important to what we call greater 
Minnesota, I make some other arguments that go beyond Minnesota.
  Expanded ethanol production promises to relieve us from some of our 
dependence on foreign energy supplies. With the current cost of home 
heating oil and gasoline going up, every American knows the value of 
achieving more energy independence. Ethanol is important to achieving 
energy independence.
  Some of my colleagues say: Of course you are for ethanol, Paul, given 
you represent Minnesota. But I can make a lot of good public interest 
arguments for ethanol.
  Second, expanded ethanol production provides a clean fuel which can 
be relatively pollution-free; that is certainly not the case with oil. 
As United States negotiators hammer out agreements--I hope--over global 
climate change, we are being constantly reminded of the long-term 
environmental costs of fossil fuel use.
  We have, A, energy independence; and, B, a compelling environmental 
case. Also, because ethanol is oxygen-rich when added to gasoline, it 
burns cleaner, reducing the amount of harmful tailpipe emissions in the 
air. Fewer toxins, carcinogens enter your lungs. So better health is a 
third compelling public interest argument for ethanol. Finally, ethanol 
means rural development, bringing employment to a lot of the parts of 
our country where people are hurting the most. A recent study by 
Northwestern University concluded that nationwide, ethanol production 
boosts employment by 195,000 jobs, it improves America's balance of 
trade by $2 billion, and it adds $450 million to State tax receipts.

  There are a lot of compelling arguments that can be made. In 
Minnesota, it creates jobs for Minnesotans. In fact, Minnesota has the 
Nation's most significant cooperative--I am really proud of that--
ethanol industry owned by more than 7,000 Minnesota farm families.
  I want to go back to the argument about energy independence, and I 
will make it in a different context. The whole war on terrorism has 
renewed interest, as it should, in reducing the energy imports and 
diversifying our energy sector. Oil imports today account for 56 
percent of our oil consumption. The EIA estimates that our import 
dependency could grow to 70 percent by 2020--70 percent of our oil 
production imports by 2020. We spend more than $300 million a day for 
imported oil, with an annual cost of more than $100 billion imported 
oil.
  Alarmingly, Iraq represents the fastest growing source of United 
States oil imports, exporting 700,000 barrels per day to the United 
States. We send Saddam Hussein more than $12 million per day--$4.3 
billion annually--for his oil.
  I do not know that I need to make any more of this case. I just don't 
see the point of subsidizing terrorism through the importation of oil 
from rogue nations. American agriculture, rural America, has part of 
the answer for energy independence. As to environmental benefits, I 
will make the point again. Ethanol continues to be an important tool 
for improving air quality in our Nation's cities. Ethanol reduces all 
the criteria of pollutants--carbon monoxide, hydrocarbons, NOx, toxics, 
and particulates--all of them. The benefits are going to continue. 
Studies show that ethanol reduces emissions of carbon monoxide and 
hydrocarbons by 20 percent and particulates in the air by 40 percent.
  So there is a compelling case to make for Minnesota, a compelling 
case to make for our co-ops and family farmers. Value-added 
agriculture? You had better believe it. But a compelling case to make 
for the country: More energy independence, less dependence on Middle 
Eastern oil; in addition, much better for the environment; and some 
compelling public health reasons.
  The final point is that this renewable fuel standard will cause price 
spikes. I don't get this. The EIA, which is the independent research 
arm of the Department of Energy, released a report last week on what 
would be the price impact of this RFS standard which is before us in 
the Senate. Their analysis says that requiring renewables would add 
about one-half cent per gallon to the price of gasoline--a half a cent. 
This is not renewable fuels organizations. I am talking about the EIA, 
U.S. Energy Information Administration, the independent research arm of 
the Department of Energy. That is what we get.
  Finally, I have heard arguments that farmers do not benefit from this 
renewable fuel standard. That is simply wrong. If we use corn, 
soybeans, and other commodities grown on farms as the feedstock for 
renewable fuels such as ethanol and biodiesel, then farmers benefit, 
rural America benefits. The farmers who benefit in Minnesota are not 
monopolies. I am not talking about ADM. I am talking about farmer co-
ops.
  Companies owned by farmers are creating most of the new production in 
ethanol. I think Senator Dayton made this point earlier. Today, 61 
ethanol facilities produce more than 2.3 billion gallons of ethanol, 
and 26 percent of these facilities are farmer owned. Additionally, 
there are 14 ethanol facilities under construction, of which 11 are 
farmer owned.
  So the only thing I can tell you is that this requirement of 5 
billion gallons ethanol biodiesel, as you look to the future--I will 
say it right now. I do not want to offend anybody. I wish ADM did not 
have the control. Thank goodness it is actually less and less a 
percentage of locally owned market control, but they still have way too 
much. I am not in favor of oligopoly or monopoly. But there are a lot 
of farmer co-ops that are formed. This is very good for farm country, 
very good for family farmers, very good for economic development in our 
rural communities.
  Frankly, it is win-win-win. It is a win for energy independence, it 
is a win for public health, it is a win for the environment, it is a 
win for family farmers, and it is a win for Minnesota, the last point 
being the most important.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  The Senator from California.
  Mrs. FEINSTEIN. Madam President, I would like to sum up on behalf of 
the sponsors of this amendment. The amendment deletes this particular 
renewable fuel mandate from the bill.
  This is a tripling of ethanol. It may be fine in the Midwest where 
all the facilities that produce ethanol are located, but for those of 
us on the west coast and those of us on the east coast, it is truly 
egregious.

[[Page S3138]]

  One of the reasons it is egregious is that we don't have the 
infrastructure to really accept it. Another reason is that, for many of 
us, our gasoline is already reformulated and already meets clean air 
standards and therefore we are forced to use a specific product, 
ethanol, way in excess of what is necessary.
  Sure, we want to be relieved from the MTBE oxygenate requirement. But 
to replace it with a renewable fuels requirement that mandates a 
tripling of this additive on States that do not need it imposes some 
very substantial detriments.
  I would like to read from the letter from the Governor of California. 
I know there are a lot of people who are experts on California in this 
body, but I think the Governor's position also bears scrutiny. He 
points out that:

       While the [California Energy Commission's] Fall 2001 survey 
     indicated that there may be adequate ethanol production 
     capacity in the Midwest to meet California demand, both the 
     [California Energy Commission] and its independent experts 
     concluded that the infrastructure necessary to deliver 
     ethanol and distribute it within California is not in place. 
     Specifically, they pointed out the following problems:
       Lack of unit-train off-loading facilities for ethanol in 
     California; lack of storage tanks at distribution terminals; 
     inadequate rail and marine capacity for handling ethanol; 
     inadequate facilities to transport ethanol from marine 
     terminals to inland distribution points.
       Furthermore, the two-year delay in the decision by the 
     federal government on California's request for a waiver of 
     the oxygenate requirement has delayed completion of the 
     infrastructure changes necessary to make a successful 
     transition to ethanol within our current timeframe.

  It also goes on to point out that:

       California's Air Resources Board reformulated fuel 
     standards--so critical to California's air quality--make it 
     nearly impossible to replace gasoline with supplies from 
     other states. In 2004 and 2005, a more stringent federal 
     reformulated fuel standard begins to phase in, which will 
     make it easier to import cleaner burning gasoline from 
     other states and maintain California's strict air quality 
     standards.
  The point is, we can do a lot of this without tripling of ethanol.
  The letter goes on to point out California has:
       Limited refining capacity--California refineries have been 
     running at operating rates approaching 95 percent of their 
     nameplate capacity which, in effect, means California's 
     refineries are operating at maximum levels now. Without new 
     capacity, California cannot replace the volume lost by 
     replacing MTBE with ethanol. In 2005, the Longhorn pipeline 
     and other pipeline projects will be completed, freeing up 
     California fuel that is now being shipped to Arizona.

  The point of this is that ethanol absorbs more gasoline. It needs 
more gasoline. MTBE needs less gasoline.
  California's refining plants are at capacity. Therefore, it cannot 
refine enough gasoline to take the amount of ethanol that we are 
required to take under this bill. That is the rub. It is a kind of 
strict mandated formula all across the Nation.
  I can't believe people think this is good public policy. I can't 
believe people think the lack of flexibility in this policy is good for 
all States. Every State is in a different position with respect to 
ethanol. Some can absorb it. Some can't. Some need it. Some don't.
  It seems to me that the key is the clean air standards in the Clean 
Air Act. If you can meet those clean air standards in other ways, good 
policy would allow a State to have that capacity.
  This, in essence, is a selfish public policy. It is selfish just for 
a specific area of the United States that produces it, that has the 
plants there, that has the producers there, and, therefore, has 
adequate supply and adequate infrastructure. That is why we will move 
to delete this from the bill. Obviously, we don't expect to win it, but 
we expect to make the case. And I believe we have.
  After this amendment is considered, it will be my intent--if I need 
to wait, I will wait--to call up the 90-day waiver amendment, which 
Senator Daschle has offered, and also the amendment which would produce 
a 1-year delay in the mandate which Senator Daschle has said he is 
agreeable to, and see what happens with these two amendments.
  By and large, as somebody who has been in public life for 30 years 
now, as a lifelong Californian, to be part of a body that places my 
State in this kind of jeopardy in terms of loss of revenues from the 
highway trust fund, which is probably the most vital Federal 
appropriations we have, from a State that produces much more in taxes 
than we get back in services from the Federal Government, and to create 
a loss in the highway trust fund, and in all probability a gas tax 
hike--the Senator from Iowa particularly criticized us using a study to 
show the gas tax.
  The reason we don't agree with the Energy Information Office study is 
because the Energy Information Office study does not account for 
problems with infrastructure or market concentration as criteria in 
evaluating any impact that this would have on increased fuel prices.
  I see the Senator from New York on the floor. I know he wishes to sum 
up as well.
  Mr. SCHUMER. Madam President, I have 10 minutes. But we will finish 
ahead of time. Because not everyone used their time, I ask unanimous 
consent that the order be modified so that in addition to my 10 
minutes, the Senator from South Dakota could have 5 minutes to speak.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. JOHNSON. Madam President, I thank my colleague from New York for 
his gracious willingness to allow me to make a few remarks about this 
pending amendment.
  I rise in opposition to the amendment on the renewable fuels 
standard.
  The Senate energy bill contains a landmark renewable fuels standard 
that is an essential part of a sound national energy policy. The bill 
provides for an orderly phase-down of MTBE use, removal of the oxygen 
content requirement for reformulated gasoline--RFG--and the 
establishment of a nationwide renewable fuels standard--RFS--that will 
be phased in over the next decade. The standard has strong bipartisan 
support and is the result of long and comprehensive negotiations 
between farm groups, the American Petroleum Institute, and coastal and 
Midwestern States. It is the first time that a substantive agreement 
has been reached on an issue that will reduce our dependency on foreign 
oil and greatly improve the Nation's energy security.
  I have spoken in the past about the benefits of renewable fuels. 
These home-grown fuels will improve our energy security and provide a 
direct benefit for the agricultural economy of South Dakota and other 
rural States. The new standard is largely based on legislation that I 
introduced with Senator Chuck Hagel. The leadership of Senators Daschle 
and Bingaman resulted in the consensus legislation on this issue.
  The consensus package would ensure future growth for ethanol and 
biodiesel through the creation of a new, renewable fuels content 
standard in all motor fuel produced and used in the United States. 
Today, ethanol and biodiesel comprise less than 1 percent of all 
transportation fuel in the United States, 1.8 billion gallons is 
currently produced in the United States. The consensus package would 
require that 5 billions gallons of transportation fuel be comprised of 
renewable fuel by 2012--nearly a tripling of the current ethanol 
production.
  I don't need to convince anyone in South Dakota and other rural 
States of the benefits of ethanol to the environment and the economies 
of rural communities. We have many plants in South Dakota and more are 
being planned. These farmer-owned ethanol plants in South Dakota, and 
in neighboring States, demonstrate the hard work and commitment being 
expended to serve a growing market for clean domestic fuels.
  The new standard does not require that a single gallon of renewable 
fuel must be used in any particular State or region. Moreover, the 
language includes credit trading provisions that give refiners 
flexibility to meet the standard's requirements. In no way is this 
intended to penalize California, New York, or any other region in the 
country.
  Much has been made on the Senate floor and in the press recently 
about the possibility of additional costs that could be incurred when 
the new standard is enacted into law. I understand the concerns raised 
by the Senators from California and New York. This is a major change in 
the makeup of our transportation fuel. However, the goal of the 
agreement that has been reached

[[Page S3139]]

on this title is to phase in the renewable fuels standard in a manner 
that is fair to every region of the country.
  The ban on MTBE and the elimination the oxygenate standard are two 
changes that Californians, New Yorkers, and others have sought for 
years. The goal of this agreement is not to raise gas prices, but to 
diversify our energy infrastructure and increase the number of fuel 
options. This helps to increase our energy security, increase 
competition and reduce consumer costs of gasoline.
  Moreover, little has been made about the source of information that 
has been cited to alarm Members or about its potential impacts about 
the consequences of failing to enact these provisions. Senators from 
New York and California have distributed charts and spoken on the 
floor, claiming that the renewable fuels standard will increase 
consumer costs by 4 to 10 cents per gallon. The source of this data is 
the MTBE consulting firm, Hart/IRI, which claims it based its cost 
estimates on data from the Energy Information Administration.
  EIA has completed two analyses of the fuels provisions of S. 517. The 
first, completed in February on the original provisions of the bill, 
found that the MTBE ban could increase gasoline costs by 4 to 10 cents 
per gallon, while the renewable fuels standard could increase gasoline 
costs by 1 cent per gallon in reformulated gasoline--RFG--areas and a 
half cent per gallon overall. Hart/IRI lumped these costs together and 
attributed them solely to the use of renewable fuels, making that 
provision appear to be roughly 10 times more expensive than it is.
  The second EIA analysis on the new compromise agreement found that, 
because 14 States already have banned MTBE, the incremental costs of 
the MTBE ban in S. 517 would be only 2 to 4 cents per gallon, while the 
cost of the renewable fuels provision would be less than a penny per 
gallon in RFG areas and less than a half cent per gallon overall. The 
analysis did not consider the positive economic effects of the banking 
and trading provisions of the bill, which the American Petroleum 
Institute has said will reduce the costs to less than one-third of a 
cent per gallon.

  The difference between the Hart/IRI analysis and the EIA analysis is 
not surprising. Hart/IRI is an MTBE consultant whose business depends 
on the continued existence of the MTBE industry. Since the fuels 
compromise bans MTBE, Hart/IRI has every incentive to exaggerate and 
misrepresent the cost impacts of the legislation. It is unfortunate and 
ironic that some Members have misinterpreted the data from this 
analysis.
  The renewable fuels standard in S. 517 addresses the difficulties 
that States have encountered in meeting Federal gasoline requirements, 
while promoting the use of home-grown fuels that will reduce our 
Nation's dependency on foreign oil. Any further attempts to reduce or 
eliminate the standard should be opposed so that we can move forward 
and improve our Nation's energy security.
  The inclusion of the renewable fuels standard will result in cleaner 
air, more jobs across America, a better trade balance for the United 
States, less reliance on the politics of very troubled parts of the 
country, fewer gallons of oil imported from Saddam Hussein, and it will 
result in better prices for our farmers and overall be a major plus as 
our Nation moves in the direction of renewable fuels.
  The PRESIDING OFFICER. Who yields time?
  Mr. SCHUMER. Madam President, I believe I have 10 minutes.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. SCHUMER. Madam President, I will get into the substance of this 
amendment once again, but before I do, I alert my colleagues to one 
particular provision that is in the bill that is particularly odious, 
and that is a pretty strong accomplishment given how many pretty odious 
provisions there are in this bill. But this is the ethanol gas tax safe 
harbor provision. The chart I have shows what it says. It is adding 
insult to injury to make a deal with the petroleum industry, which has 
always opposed ethanol. They have given them a safe harbor so you 
cannot sue if an additive causes pollution of the ground water. So here 
we are.
  And I beg to disagree with my colleague from South Dakota, and 
others. This bill abolishes MTBE. The Schumer amendment does not change 
that. So anyone who likes MTBE is not going to be for either the bill 
or my amendment.
  The reason so many States have abolished MTBE--and this bill does--is 
that it pollutes, and all of a sudden we are giving the petroleum 
industry a total safe harbor exemption from being sued, even if they 
knowingly pollute. Can you imagine that?
  Senator Boxer has an amendment to get rid of that, but we do not even 
know if she will be able to offer it. Therefore, if you do not like 
this safe harbor, the one sure way of making sure that this safe harbor 
is eliminated is to vote for the Schumer amendment, which not only gets 
rid of the ethanol mandate but also this particularly odious safe 
harbor.
  I am utterly amazed that so many on my side, who believe in the right 
to sue, are going to vote to keep this particular safe harbor, all to 
subsidize ethanol.

  I guess, in a certain sense, this is a regional fight.
  I have looked at who has spoken out for the ethanol mandate and not a 
single person comes outside of this Middle West region. So if you think 
the decision is totally on the merits, just look at this chart: 98 
percent of the ethanol comes from this particular region. No wonder the 
people from the Middle West want it. Although, I will tell you this. 
When Iowa and Nebraska legislators were given a chance to mandate MTBE 
in their States, they rejected it. They rejected it because they knew 
their drivers would pay more. Even in States with so many corn farmers, 
the legislators said no. The editorial opinion throughout the States 
was against it.
  That is another thing that makes me incredulous about this amendment, 
that it is not done in the Middle West by its own States. Yet they are 
imposing it on everybody else.
  In New York, I think we are the largest producer of cabbage in the 
country. Maybe we should mandate that the rest of the country buy our 
cabbage. California is probably the biggest producer of almonds in the 
country. Maybe we should say that you have to buy almonds in the other 
49 States. By the way, if you do not want almonds, you like cashews, 
you are still going to have to buy an almond credit; so you will have 
to pay for it. Or maybe you like peaches, where South Carolina and 
Georgia and Pennsylvania lead. Maybe we should require the whole 
country to buy peaches.
  This is utterly amazing, I say to my colleagues. One region of the 
country requires everybody else to buy ethanol.
  Both my colleagues and friends from South Dakota and Minnesota argue 
this will not cost that much. If it will not cost that much, how come 
you have to mandate it? If this is so good, why do you require us to do 
it? If the market is going to work, and these other additives are more 
expensive, let it.
  Well, we think something is rotten in Denmark.
  I do not think the people here who are for this mandate believe it is 
going to be so inexpensive or they would not have done a mandate. Let 
me tell you, ethanol is going to be a more valued commodity the minute 
we ban MTBEs nationwide because it is the only other additive that is 
produced domestically.
  We believe that in New York we can reformulate our gasoline without 
an oxygenate. We are not given the chance to do that, even though it 
would be cleaner, it would be environmentally preferred, and it would 
be cheaper. There would still be plenty of other places that it would 
be in their market interest to buy ethanol.
  Also, my colleague from Oklahoma, Senator Nickles, talked about the 
highway trust fund. That is decreased. It is very hard, my colleagues, 
to think of an amendment that has bad provision after bad provision 
after bad provision.
  I guess another thing I call this amendment is the ``piling on 
provision.'' Not only do you mandate ethanol, not only do you provide a 
safe harbor for polluters, not only do you deplete the highway trust 
fund, but, to boot, you raise our gas prices 4, 5, 6, 7, 8 cents a 
gallon.
  My colleagues say this study is an MTBE-based study. We are 
abolishing

[[Page S3140]]

MTBE. Anybody who wants MTBE is not going to be for this amendment.
  My colleagues from Minnesota and South Dakota have brought up a straw 
horse. Yes, if it were MTBE or ethanol, I would guess ethanol would 
win. But there are other alternatives, and those other alternatives, in 
a classic way that a free market economy should not work but a planned, 
socialistic, fascistic economy would work are being mandated. We do not 
do that for virtually anything else.

  Do we set clean air standards? Yes. My good friend from South Dakota 
said there is a mandate on CAFE standards. That is correct. But we do 
not say the only way you can meet the CAFE standards is that you have 
to use aluminum or you have to use plastic. We set a standard and then 
let the market meet that standard.
  That is all we are asking: Set a clean air standard. Require us all 
to meet it. Get rid of polluting materials such as MTBE, but do not say 
the only road to salvation is ethanol, although I know many of my 
colleagues truly believe that.
  We always get on the floor and debate about working families. To me, 
this amendment, simply put, is: Whose side are you on? Are you on the 
side of working families who struggle and raise their gas tax 5, 6, 7, 
8, 9, 10 cents--that is during good times--and then during spikes raise 
their gas prices 25, 30, 40 cents? Are you on the side of working 
families or are you on the side of Archer Daniels Midland? Because this 
is not going to even help the farmers. It will trickle down a little 
bit, but first Archer Daniels Midland, and the other companies, take 
their vig. They decide how much the farmer gets.
  I have listened and often supported my colleagues who say the middle 
man gets all the money out of agriculture. But all of a sudden, the one 
middle man who has 41 percent of the market, Archer Daniels Midland, is 
being exalted. I would feel a lot better if every nickel here had to go 
to the farmer. It still would not be a good bill, but at least it would 
take away one of the objections.
  So this is a ``whose side are you on'' amendment? Are you on the side 
of working families or are you going to make the guy or the gal who 
makes $25,000 a year and has to drive their car 25 miles to work 
subsidize Archer Daniels Midland to a large extent, and farmers who 
make more money than them, by and large, to the rest of the 
extent? That is not fair. That is not cricket.

  This amendment is really appalling. As I have said before, if any 
proposal should have a skull and crossbones on it--beware, voter; 
beware, Senator--it is this one.
  I mentioned this before, but I want to mention it again because I 
have a feeling 2, 3 years from now my colleagues will be coming back to 
me and saying: You were right; I should have listened.
  I have seen every so often terrible amendments pass. They usually 
pass quietly. This one is passing pretty quietly. The number of us 
getting up to oppose it is small, and it wouldn't have even been 
debated had I not offered the amendment. In 1982, I think it was, Garn-
St Germain seemed sort of innocuous. There were about 25 Members of the 
House who said: You had better watch out. This is allowing banks to use 
free money. It passed. Five years later, everyone was trying to explain 
why the heck they voted for it.
  In the early 1990s, catastrophic illness: There was a mandate to help 
the few who needed help, but it was imposed on everybody else--not too 
dissimilar to this, except the people who were helped with catastrophic 
illness were a lot more worthy than the people being helped here--
mainly agribusiness. It passed. It seemed all right. It was not 
debated. Then we all rued the day.
  Madam President, I ask unanimous consent, since I don't think there 
is anyone else who wishes to speak, for 2 additional minutes to 
conclude.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. FEINSTEIN. Will the Senator yield?
  The PRESIDING OFFICER. Will the Senator from New York yield?
  Mr. SCHUMER. I ask unanimous consent that I be given 5 additional 
minutes and then I will yield.
  The PRESIDING OFFICER. Is there objection?
  Mr. SCHUMER. If the Senator from New Mexico wishes to speak, I won't 
ask for that.
  Mr. BINGAMAN. Reserving the right to object, as I understand it, the 
Senator from California continues to retain 2 minutes of her own time 
and, in addition, the Senator from New York has asked for an additional 
2 minutes of time. I ask my colleagues if that will be sufficient for 
them to conclude their remarks.
  Mr. SCHUMER. That would be great. That is fine with the Senator from 
New York.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SCHUMER. Would the Senator from California like me to use my 2 
minutes first?
  Mrs. FEINSTEIN. I would like to put some documents in the Record that 
just came over from the House.
  Mr. SCHUMER. Please.
  Mrs. FEINSTEIN. These documents were just disclosed in a House 
hearing this afternoon. They were disclosed to the FTC. What they show 
are competitors in the ethanol industry sharing bidding information to 
rig bids. One memo describes bringing European ethanol and laundering 
it through the Caribbean to avoid the tariff. These are hearings that 
are now going on in the House. I cannot, in the 5 minutes I have had 
these documents, have an opportunity to really confirm to anybody what 
they do or what they don't do. There are a number of suggestive 
comments in them, such as one company saying to the other: We are 
prepared to stop bidding should the price drop below $1.38 a gallon.
  Interestingly enough, this all concerns ethanol going into your 
State, Washington, Madam President, a few years ago.
  Whether this shows price manipulation or not, I don't know. But 
because these documents have just been made public this afternoon in 
the House, I ask unanimous consent to print them in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                  Western Ethanol Company LLC,

                                               September 29, 2000.
     To: Herbert Wolf
     From: Doug Vind
     Re: Sales Opportunity--Requires Immediate Attention/Response

       Further to our telephone conversation of today, I am 
     writing to inform you of the details of a sales opportunity 
     for LAICA's anhydrous alcohol. In order to participate in 
     this opportunity, I must hear back from you by no later than 
     close of business on Tuesday October 2.
       British Petroleum (``BP'') has scheduled an on-line reverse 
     auction to be conducted via the internet next week. They are 
     requesting pre-qualified ethanol suppliers to bid on 
     supplying product into the Ohio and Washington State markets 
     beginning November 2000 and running through January 2001. We 
     are interested in bidding to supply a portion of the volume 
     requested into Washington State. This Lot is broken into 
     partial supply percentages of 10,25,50 and 100%. The total 
     volume requested for Washington State is 9,600,000 gallons 
     over the 3 month period.
       I am specifically recommending that LAICA consider 
     committing to this reverse auction the 38,000 HL it has 
     scheduled to receive from Europe. I believe this feedstock 
     will arrive Costa Rica sometime during the month of November 
     and be available for delivery into the US in December.
       The delivery of denatured ethanol of BP into Washington 
     State can only be made by either Railcar or Barge. Direct 
     deliveries of undenatured ethanol cannot be accepted. For 
     this reason, WEC is prepared to source railcars of domestic 
     ethanol in order to supplement the volume coming from LAICA. 
     This would allow us to bid on up to 25% of the requested 
     volume, for a total of 2,400,000 gallons. We are also in 
     discussion with Man with regard to their participation for a 
     small piece of this business.
       I expect that the winning bid for the 25% volume will be 
     somewhere in the upper $1.30's to low $1.40's. We are 
     prepared to stop bidding should the price drop below $1.38 
     per gallon. As I mentioned above, the delivery mode into 
     Washington State allows for only barge or railcar. In view of 
     this, it will be necessary to first discharge and denature 
     the imported ethanol. We then will schedule a barge to 
     transport the denatured ethanol to BP's terminal in Seattle. 
     I am in the process of verifying the barging, terminaling and 
     denaturing costs but I have been given a range of $.03--$0.4 
     per gallon. I should have this information on Monday.
       I believe that the BP ``Request for Quotation'' presents a 
     very good sales opportunity for LAICA's anhydrous alcohol. 
     However, in order to participate in the on-line auction, WEC 
     needs to receive LAICA's commitment to supply the 38,000 HL. 
     We must obtain LAICA's commitment to this program by no later 
     than close of business next Tuesday.

[[Page S3141]]

       For your guidance, I have enclosed a listing of the Lots to 
     be included in the Reverse Auction. As you will notice, we 
     will be required to participate in a ``Qualifying Round'' of 
     bidding on Wednesday September 3. This will enable us to move 
     on to the competitive bidding event scheduled for Friday 
     September 5.
       I greatly appreciate your presenting this proposal to your 
     Board of Directors on Monday. I will be in my office and be 
     prepared to answer any further questions regarding this 
     matter.
           Best regards,
     Douglas Vind.
                                  ____



                                         Regent International,

                                      Brea, CA, November 20, 1995.
     To: Dick Bok, ADM Ingredients
     From: Dick Vind
       Finally received a phone call from Tuite at 3:30 PM PDT 
     USA. Jeff stated he had at last been successful in talking to 
     the Kriete's and they have agreed to split the tender with 
     us.
       Jeff's only reservation was that Kriete insisted that Man 
     be the purchaser of the tender. In order to avoid a ``show 
     down'' or bidding contest, I agreed to this request.
       Therefore, Man will be bidding on the 75,000 hl out of 
     France at a price of 5.02. I would suggest that ADM underbid 
     at a price of 4.85. This will serve as a safety net in the 
     event Man's bid is rejected for any reason. As a reminder, 
     bids are due in this Thursday, November 23.
       With regards to the sharing, I made it explicitly clear to 
     Jeff that we (ADM & Western) would be purchasing the product 
     FOB Port-la-Nouvelle from Man on a totally transparent basis. 
     We would then assume responsibility for our own shipping 
     which presumably we would be able to coordinate jointly in 
     the future.
       I would suggest you contact Tuite tomorrow at your 
     convenience to confirm and request a signed agreement between 
     both parties in order to assure compliance with this accord.
           Best regards,
     Dick.
                                  ____

                                                    June 17, 1996.
     To: Dick Bok
     From: Dick Vind
     Subject: EU Wine Alcohol Tender--Due date: June 24
       This will confirm that Archer Daniels Midland will be 
     bidding 5.9 ecu on Spanish tender (194-96) and somewhat less, 
     (say 5.75) on Italian tender (195-96).
       I assume you have discussed with Man, and that all is OK. 
     Please call if this is not the case.
       Hope all is well.
           Best regards,
     Dick.
                                  ____



                                         Regent International,

                                                   March 18, 1992.
     To: Ed Harjehausen, Archer Daniels Midland Co.
     From: Doug Vind
       Per our previous discussion, I have prepared a price and 
     cost comparison demonstrating the sensitivity of the proposed 
     bid price options and the resulting ``out turned'' finished 
     ethanol costs FOB Acajulta, El Salvador.

                          FOB COST CALCULATION
 
Bid Price (ECUs) Per Hectoliter.................     4.2     4.3     4.4
Bid Price ($ per gallon)........................   .2336   .2392   .2448
Fobbing.........................................   .1700   .1700   .1700
Ocean Freight (in)..............................   .1350   .1350   .1350
Inland Truck Freight (in).......................   .0147   .0147   .0147
Raw Material Cost...............................   .5533   .5589   .5645
Processing Costs................................   .3800   .3825   .3850
FOB Value Plant.................................   .9333   .9414   .9495
Inland Truck Freight (out)......................   .0147   .0147   .0147
FOB Cost Port (Acajulta)........................   .9480   .9561   .9642
 
                         VALUE ADDED CALCULATION
 
Direct Costs....................................   .3450   .3475   .3500
Divided by FOB Val. Plant.......................   .9333   .9414   .9495
Value Added (percent)...........................    36.9    36.9    36.9
------------------------------------------------------------------------

       Ed, as the previous example illustrates, a .1 ECU per 
     hectoliter change in our bid price results in approximately a 
     $.008 per gallon change in total FOB out turned value. For 
     purposes of this analysis, I have targeted a value added 
     percentage of 36.9%. This percentage should be adjusted to 
     reflect our mutual comfort level in order not to jeopardize 
     duty free qualifications. As one further observation, please 
     note the difference between ``processing costs'' and ``direct 
     costs''. This difference results from customs guidelines 
     limiting only certain types of costs as ``direct'' and 
     applicable to the Value Added calculation.
       Recommendation: In reviewing the three lots being offered 
     by the EC for this tender, I suggest we bid ``competitively'' 
     on lot number 77 and submit lower priced bids on lots 75 and 
     76 as ``back up'' bids in the event other potential 
     purchasers fail in their attempt to secure these two lots.
       I recommend our bid price on lot number 77 should be 4.15 
     ECUs per hectoliter. I recommend our bid price on lots number 
     75 and 76 should be 4.10 ECUs per hectoliter each.
       As you are aware, our bids must be formally submitted by 
     Friday, March 20, 1992. It will, therefore, be necessary to 
     communicate this pricing information to your office in London 
     by our close of business on Thursday.
       Please give me a call with your recommendation after you 
     have reviewed this memo.
           Regards.
                                  ____



                                           ED & F Man Alcohols

                                    London, England, May 13, 1993.
     To: Dick Vind,
     From: Jeffrey Tuite
     Regent International, Brea
     El Salvador

       On Tuesday evening I talked to the Kriets and here is what 
     was said.
       They were still keen to make a bid on these tenders. I 
     cautioned once more against this. I said that Man would be 
     able to offer a compromise wherein Man offered 1 million 
     gallons when their plant was up and running. This would come 
     from these tenders and they would buy from Man and the 
     alcohol would be supplied equally by Vind and Hogan. Ideally 
     it would be swap deal with them returning the ethanol next 
     time around. In return it was expected that they did not 
     interfere with these tenders.
       The Kriete response was that they were still very nervous 
     about being outmaneuvered and that we would block any alcohol 
     for them from the next round of June/July tenders. I said 
     that this was not the case and that if they could persuade 
     the Commission to call five lots next time we would support 
     them.
       In summary Kriete is prepared to stay away from these 
     tenders if Man can guarantee that they will get 1.4 million 
     gallons from these tenders on a straight sale basis. I said 
     that 1 million gallons was more realistic. Tony Hogan is 
     prepared to make a straight sale and feels that this commits 
     him less to Krite and there is the point that Kriet may not 
     get any alcohol to return for one reason or another. My 
     recommendation to you is to make available a straight 500,000 
     gallons sale (preferrably 750,000!) without strings and I 
     feel this will mend things.
       Can I please have your agreement to do this. I already have 
     Tony's agreement. Naturally Man will secure ADMs P Bond risk 
     for this sale.
       I talked to George Fitch in Brussels today who is suffering 
     the usual frustration one gets in Brussels. He had little to 
     add to your fax of yesterday.
       I will call you latter when I get home.
           Best Regards.
                                  ____



                                         Regent International,

                                          Brea, CA, April 6, 1994.
     To: Dick Bok
     From: Richard Vind
     Subject: CBI Tenders

                               MEMORANDUM

       I appreciate your quick response. Given the politics in the 
     EU, I agree we should prepare ``bids as usual''.
       As mentioned in our conversation this AM, I will have price 
     information for you on or before April 14.
       My travel plans now are to go to Europe the week of April 
     18. Meetings in Brussels, probably 19/20.
       I will not know my exact travel plans until probably April 
     12 so I will communicate my itinerary along with pricing 
     information prior to April 14 to your office.
           Best regards,
     Dick.
                                  ____



                             Western Petroleum Importers Inc.,

                                                    July 13, 1998.
     To: Jeff Tuite
     From: Doug Vind
       I had hoped to hear from you today regarding the situation 
     that has developed in the Northwest. You can imagine my 
     surprise and disappointment today to learn that the ``deal'' 
     I have been discussing with you for the past several weeks 
     involving the shipment out of Costa Rica and El Salvador had 
     already been concluded last week. You can also imagine my 
     embarrassment with my customer when I called them today to 
     firm up the transaction only to learn that they had been 
     offered product which I had been previously told was not 
     available.
       My current frustration with the recent sequence of events 
     is matched only by the humiliation of relying on what was 
     indicated as timely and accurate information, representing 
     that information as fact, and having my credibility at risk 
     when the ``facts'' changed.
       As you are aware, I have been actively working with your 
     office in seeking a vessel to accommodate the delivery of 
     both parcels. Because the sale was to involve a direct 
     contract between Man and the customer, I revealed the 
     targeted value for the product to you for your concurrence, 
     which you provided. Late last week I attempted to reach you 
     several times to discuss this matter but did not receive the 
     benefit of a return call. As it turns out, you had already 
     concluded this transaction but elected not to inform me. A 
     simple call would have saved me from looking foolish today.
       At this point I need to reconfirm your commitment to 
     providing the 900,000 gallons out of El Salvador in a joint 
     shipment sometime on or after mid August. As I have already 
     actively represented this volume as available for delivery, I 
     would prefer to avoid a repeat of today's confusion in the 
     event you have made other unilateral arrangements.
       Additionally, I wish to discuss this entire situation with 
     you in greater detail in order to try and understand exactly 
     how things got off track. Please call me at your soonest 
     opportunity.
                                                November 13, 1995.
      To: George Fitch
     From: Dick Vind
     Subject: DGVI ``Doublespeak''

       Please review the enclosed articles from a recent [October 
     20, 1995] issue of Agra Europe Magazine.

[[Page S3142]]

       This article seems to completely refute Alex's comments 
     made to us at our meeting of last week. Although the lead 
     paragraph is not easily readable because the fax machine 
     ``ate'' it, what it says is that The Commission is increasing 
     the amount of compulsory distillation for this coming year 
     [1995-96] versus last year [1994-95] by 137,000 HL. Although 
     small, it nonetheless is a definite increase, and shows that 
     the total amount of alcohol to be distilled via compulsory 
     distillation for the three primary countries of Italy, Spain 
     and France for this coming year will be a total of 5,400,000 
     HL.
       It must further noted that this year's total wine 
     production for these three countries is estimated to be 
     131,900,000 HL versus last year's 130,927,000 HL. With 
     compulsory distillation being 4% of the total, if you take 
     the total EU wine production of 155,400,000, this means that 
     a total of 6,216,000 HL will be available for EUstocks this 
     coming year.
       It is apparent that there will continue to be significant 
     overproduction in the EU for years to come, in that the 
     Commission's efforts to reduce production have failed.
       On a related matter, I have reviewed your memo to the CBI 
     group. Your suggestion on opening up future tenders to avoid 
     the GATT limits are troubling unless we couple it with some 
     type of end-use restriction. This is because, as you can also 
     see from the second article, notwithstanding what Tuite said 
     at the meeting, it appears that the Brazilians will be back 
     into the market in a big way next year. Unless we place some 
     type of restriction on end-use, they'll easily outbid us for 
     the entire EU output.
       What happened to our end-use language we discussed with 
     Olsen last year?
       I would appreciate your investigating these matters as soon 
     as possible and giving me the benefit of your thoughts. Also, 
     I want to report the results of my meeting with the SENPA 
     folks.
     Dick.
                                  ____



                                         Regent International,

                                      Brea, CA, November 20, 1995.
     To: Dick Bok, ADM Ingredients
     From: Dick Vind
       Finally received a phone call from Tuite at 3:30 PM PDT 
     USA. Jeff stated he had at least been successful in talking 
     to the Kriete's and they have agreed to split the tender with 
     us.
       Jeff's only reservation was that Kriete insisted that Man 
     be the purchaser of the tender. In order to avoid; ``show 
     down'' or bidding contest, I agreed to this request.
       Therefore, Man will be bidding on the 75,000 hl out of 
     France at a price of 5.02. I would suggest that ADM underbid 
     at a price of 4.85. This will serve as a safety net in the 
     event Man's bid is rejected for any reason. As a reminder, 
     bids are due in this Thursday, November 23.
       With regards to the sharing, I made it explicitly clear to 
     Jeff that we (ADM & Western) would be purchasing the product 
     FOB Port-la-Nouvelle from Man on a totally transparent basis. 
     We would then assume responsibility for our own shipping 
     which presumably we would be able to coordinate jointly in 
     the future.
       I would suggest you contact Tuite tomorrow at your 
     convenience to confirm and request a signed agreement between 
     both parties in order to assure compliance with this accord.
           Best regards,
                                                             Dick.

  Mrs. FEINSTEIN. I thank the Chair.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. I thank the Senator from California for that useful 
addition and also for her great work on this issue.
  I was concluding by saying: There will be a stampede to deny 
knowledge of this amendment, to deny knowledge of the consequences of 
this amendment, in a few short years. I wish we wouldn't have to do 
that. I urge my colleagues, if you want to subsidize ethanol--it is now 
subsidized already 53 cents a gallon; there is a tariff barrier so it 
can't be imported; no good in our society has gotten as much--do that. 
If you want to raise the subsidy a little more, do that, because then 
it is the General Treasury that is paying. But for God's sake, don't 
make the drivers of Massachusetts pay 9 cents more a gallon and the 
drivers of Rhode Island and Delaware pay 9 cents more a gallon and the 
drivers of Pennsylvania pay 6 cents more a gallon.
  That is the most regressive tax we are going to pass this year. 
Somehow, because it is coated in ethanol, that tax seems to be OK. The 
very same people who would get up on the floor and oppose taxes on any 
basis or on a regressive basis are allowing this one to go through.
  We will rue the day we support an ethanol mandate. I urge my 
colleagues to think twice before they vote and support our amendment 
which still allows the banning of MTBE, still keeps the clean air 
standard, gets rid of oxygenate, but lets each State decide the best 
route to clean the air and clean the water.
  Mandates are no good for American families. Mandates are no good for 
our economy. This is an ethanol gas tax. I urge it to be defeated.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. BINGAMAN. Madam President, how much time do I have?
  The PRESIDING OFFICER. Three and a half minutes.
  Mr. BINGAMAN. Whose time is that?
  The PRESIDING OFFICER. The time is not allocated.
  Mr. BINGAMAN. That is not time either for or in opposition?
  The PRESIDING OFFICER. That is correct.
  The Senator from Nevada.
  Mr. REID. Madam President, that time was allocated to Senator 
Wellstone. He didn't use all that time. Senator Wellstone is not here. 
Unless the Senators from New York and California want to use the time, 
I will yield back his time and we will start the vote now.
  I yield back the time of the Senator from Minnesota.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. BINGAMAN. Madam President, I move to table the amendment and ask 
for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The question is on agreeing to the motion to table amendment No. 
3030. The clerk will call the roll.
  The senior assistant bill clerk called the roll.
  Mr. NICKLES. I announce that the Senator from North Carolina (Mr. 
Helms) is necessarily absent.
  The PRESIDING OFFICER (Mr. Dayton). Are there any other Senators in 
the Chamber desiring to vote?
  The result was announced--yeas 69, nays 30, as follows:

                      [Rollcall Vote No. 78 Leg.]

                                YEAS--69

     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Carnahan
     Carper
     Chafee
     Cochran
     Collins
     Conrad
     Craig
     Crapo
     Daschle
     Dayton
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Edwards
     Feingold
     Fitzgerald
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Harkin
     Hatch
     Hutchinson
     Inhofe
     Jeffords
     Johnson
     Kerry
     Kohl
     Landrieu
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McConnell
     Mikulski
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Reid
     Roberts
     Rockefeller
     Sarbanes
     Smith (NH)
     Snowe
     Stabenow
     Stevens
     Thurmond
     Torricelli
     Voinovich
     Wellstone

                                NAYS--30

     Akaka
     Allard
     Allen
     Boxer
     Cleland
     Clinton
     Corzine
     Ensign
     Enzi
     Feinstein
     Gramm
     Hollings
     Hutchison
     Inouye
     Kennedy
     Kyl
     Leahy
     McCain
     Nickles
     Reed
     Santorum
     Schumer
     Sessions
     Shelby
     Smith (OR)
     Specter
     Thomas
     Thompson
     Warner
     Wyden

                             NOT VOTING--1

       
     Helms
       
  The motion was agreed to.
  Mr. REID. I move to reconsider the vote.
  Mr. BINGAMAN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.

                          ____________________