[Congressional Record Volume 149, Number 128 (Wednesday, September 17, 2003)]
[Extensions of Remarks]
[Pages E1841-E1842]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   INTRODUCING THE RENEWABLE FUELS AND TRANSPORTATION INFRASTRUCTURE 
                        ENHANCEMENT ACT OF 2003

                                 ______
                                 

                         HON. JAMES L. OBERSTAR

                              of minnesota

                    in the house of representatives

                     Wednesday, September 17, 2003

  Mr. OBERSTAR. Mr. Speaker, I join the gentleman from Missouri, [Mr. 
Hulshof], and my distinguished colleagues, in introducing the Renewable 
Fuels and Transportation Infrastructure Enhancement Act of 2003. A 
companion bill entitled, the Volumetric Ethanol Excise Tax Credit Act 
of 2003, has already been introduced in the Other Body.
  I have long been a supporter of ethanol, which blended with gasoline, 
results in a cleaner automotive fuel that reduces harmful vehicle 
emissions. In addition, ethanol is generally made from corn; it is 
produced domestically; and it provides our farmers with an additional 
market for their goods. Further, and perhaps most importantly, the 
production and use of ethanol and other alcohol-blended fuels help 
reduce our country's debilitating dependency on foreign oil.
  Ethanol production has increased steadily over the past several 
years. Today, there are 68 ethanol production facilities in 20 states. 
In 2002, these facilities produced 2.13 billion gallons of ethanol--a 
45 percent production increase within the last three years. And there 
are proposals currently pending in the Conference Committee on the 
Energy bill to increase that production amount to 5 billion gallons of 
ethanol over the next decade. These ethanol successes are due in large 
part to the various tax incentives that encourage ethanol production 
and use.
  To promote the use of ethanol-blended and other alcohol-blended 
fuels, these fuels are taxed at a lower rate than gasoline. It appears, 
however, that we have become a victim of our own success. As the 
production and use of ethanol has increased, it has had a deleterious 
effect on the Highway Trust Fund. Without the change authorized by this 
legislation, the current system is projected to cost the Highway Trust 
Fund more than $2 billion in fiscal year 2004 and more than $25.7 
billion over the next ten years.
  This bill provides the needed ``ethanol fix.'' By providing an 
alternative tax credit system to the current system of reduced excise 
taxes for gasohol, the bill continues to encourage the production and 
use of ethanol, while at the same time protecting the revenues of the 
Highway Trust Fund.
  Currently, ethanol-blended fuel receives a partial exemption from 
excise taxes. The current excise tax on gasoline is 18.4 cents per 
gallon. In contrast, ethanol- and other alcohol-blended fuel (10-
percent blend) receive a 5.2-cent exemption from this tax. As a result, 
the excise tax on these fuels is 13.2 cents per gallon. Tax receipts 
deposited into the Highway Trust Fund are further reduced because 2.5 
cents of that 13.2 cents is transferred to the General Fund. This 
combination of a partial excise tax exemption and transfer of 2.5 cents 
into the General Fund severely reduce the amount of funds coming into 
the Highway Trust Fund, challenging our ability to provide necessary 
maintenance and improvement to our Nation's highways and bridges.
  Not only does the current system of taxation have a detrimental 
effect on the Highway Trust Fund, but it also disproportionately hurts 
those states--mostly the Midwestern states--that are the largest 
producers and consumers of ethanol. The minimum guarantee formula is 
based in part on a state's contributions to the Highway Trust Fund. 
Because states that use large amounts of ethanol under the current 
system contribute less to the Highway Trust Fund than states that use 
comparable amounts of gasoline, the states' apportionments are 
comparably reduced.

  This bill addresses these issues by eliminating the current reduced 
excise tax rate for alcohol-blended fuels and introducing a tax credit 
for ethanol- and other alcohol-blended fuels. Under this proposal, 
alcohol-blended fuels would be taxed at the same rate as gasoline (18.4 
cents per gallon), however producers of these fuels would receive a tax 
credit of 52 cents per gallon. Amounts claimed for the tax credit would 
be deducted against General Fund revenues--not Highway Trust Fund 
revenues. Therefore, the bill continues to provide alcohol-blended fuel 
producers with the same economic incentives they have under the current 
tax system, while protecting the receipts of the Highway Trust Fund. 
The bill also eliminates the 2.5-cent tax transfer to the General Fund 
and directs all tax revenue on these fuels to the Highway Trust Fund.
  Further, the bill introduces a credit for biodiesel fuels. Like 
ethanol, biodiesel is derived from farm products, most often soybeans. 
Although biodiesel provides many of the same benefits as ethanol, there 
currently are no tax incentives for the production and use of biodiesel 
fuels. This bill would remedy that omission by instituting a 50-cent 
credit for producers of biodiesel fuel. Accordingly, under the bill, 
biodiesel fuel would be taxed at the same rate as diesel fuel (24.4 
cents per gallon), but producers of the fuel would be eligible to 
receive a tax credit of 50 cents per gallon of biodiesel fuel.
  By substituting these tax credits for the current scheme of varying 
rates of excise taxes, this bill establishes a simpler, more 
straightforward approach to providing important incentives for the 
production and use of ethanol and biodiesel fuels. At the same time, it 
protects the revenues of the Highway Trust Fund. Highway Trust Fund 
revenues are dedicated revenues that go directly to pay for the 
maintenance and improvement of our Nation's highway system. At a time 
when we should be investing more funds in the improvement of Nation's 
highways--funds that will improve safety and reduce congestion--we can 
not afford Highway Trust Fund revenues to be adversely effected by the 
current system of varying excise tax rates.
  As we move forward in crafting the successor to the landmark 
Transportation Equity Act for the 21st Century legislation, this bill 
is particularly important to ensure that those states at the forefront 
of producing and promoting the use of these cleaner, alternative fuels 
are not punished by receiving reduced highway funds from the Highway 
Trust Fund, and to ensure that the Highway Trust Fund continues to 
receive the funds necessary to maintaining and improving our Nation's 
highway system.

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