[Congressional Record Volume 151, Number 33 (Thursday, March 17, 2005)]
[Senate]
[Pages S2998-S3005]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BUNNING (for himself, Mrs. Lincoln, Mr. Lott, Mr. Bond, 
        and Mr. Chambliss):
  S. 646. A bill to amend the Internal Revenue code of 1986 to allow 
distilled spirits wholesalers a credit against income tax for their 
cost of carrying Federal excise taxes prior to the sale of the product 
bearing the tax; to the Committee on Finance.
  Mr. BUNNING. Mr. President, I rise today to introduce legislation 
that will resolve a longstanding inequity in the tax treatment of U.S. 
distilled spirits that penalizes the wholesalers, and some suppliers, 
of these products.
  Under current law, wholesalers of distilled spirits are not required 
to pay the Federal excise tax on imported spirits until after the 
product is removed from a bonded warehouse for sale to a retailer.
  In contrast, the tax on domestically produced spirits is included as 
part of the purchase price and passed on from the supplier to 
wholesaler. After factoring in the Federal excise tax (FET)--which is 
$13.50 per proof gallon--domestically produced spirits can cost 
wholesalers 40 percent more to purchase than comparable imported 
spirits.
  In some instances, wholesalers and even suppliers can carry this tax-
paid inventory for an average of 60 days before selling it to a 
retailer. Interest charges--more commonly referred to as float--
resulting from financing the Federal excise tax can be quite 
considerable.

[[Page S2999]]

  For example, at a 5 percent interest rate on the sale of 100,000 
cases of domestic spirits, a wholesaler will incur finance charges of 
$21,106.85 for loans related to underwriting the cost of paying the 
Federal excise tax. It is important to note that it is not uncommon for 
wholesalers to sell a million or more cases per year of domestic 
spirits.
  The costs associated with financing Federal excise taxes amount to a 
tax on a tax, making the effective rate of the Federal excise tax for 
domestic spirits much higher than $13.50 per proof gallon.
  The Domestic Spirits Tax Equity Act would give wholesalers and 
suppliers in bailment States a tax credit toward the cost of financing 
the FET for domestically produced products.
  I believe this legislation is fundamentally fair and will help 
protect and create jobs for the wholesale tier in Kentucky and many 
other States. This legislation, which has broad support in both 
chambers and on both sides or the aisle, has passed the Senate Finance 
Committee and the House Ways and Means Committee several times, and has 
reached the President's desk under a previous Administration. It's time 
to finally get this legislation over the goal line.
  I wish to emphasize, however, that I will reject any connection 
between a repeal of Section 5010 of the Internal Revenue Code or an 
increase in Federal taxes for distilled spirits. Tax equity for one 
tier should not be achieved by placing additional burden on other tiers 
within the same industry.

  My colleagues, Senators Lincoln, Lott and Bond join me in introducing 
this legislation, I which the Joint Tax Committee estimates would 
reduce Federal revenues by approximately $249 million over ten years. I 
understand that similar legislation will be introduced in the House of 
Representatives. I urge my colleagues to support this legislation when 
it comes before the Senate.
      By Mr. LUGAR (for himself, Mr. Harkin, Mr. Hagel, Mr. Nelson of 
        Nebraska, Mr. Grassley, Mr. Conrad, Mr. Frist, Mr. Johnson, Mr. 
        Talent, Mr. Dorgan, Mr. Coleman, Mr. Durbin, Mr. Thune, Mr. 
        Bayh, Mr. DeWine, Ms. Stabenow, Mr. Bunning, Mr. Dayton, Mr. 
        Obama, Mr. Salazar, and Mr. Bond):
  S. 650. A bill to amend the Clean Air Act to increase production and 
use of renewable fuel and to increase the energy independence of the 
United States, and for other purposes; to the Committee on Environment 
and Public Works.
  LUGAR. Mr. President, I am pleased to rise today to introduce bi-
partisan legislation to increase the security of our Nation, improve 
our environment, and add job opportunities in all 50 States in the 
union. This legislation has the strong support of 20 of my fellow 
colleagues and is the product of a great deal of bipartisan work.
  This legislation seeks to curb the negative consequences that stem 
from our Nation's insatiable appetite for oil. Oil has served America 
well and indeed has fueled a dramatic portion of this Nation's rise to 
prosperity. However, our dependence on oil carries a multitude of risks 
and costs in addition to the ever higher prices paid by Americans at 
the fuel pump.
  Oil is a magnet for conflict. The problem is simple--everyone needs 
energy, but the sources of the world's transportation fuel are 
concentrated in relatively few countries. Well over two-thirds of the 
world's remaining oil reserves lie in the Middle East.
  Energy is vital to a country's security and material well-being. A 
state unable to provide its people with adequate energy supplies or 
desiring added leverage over other people often resorts to force. 
Consider Saddam Hussein's 1990 invasion of Kuwait, driven by his desire 
to control more of the world's oil reserves, and the international 
response to that threat. The underlying goal of the U.N. force, which 
included 500,000 American troops, was to ensure continued and 
unfettered access to petroleum.
  This unwelcome dependence keeps U.S. military forces tied to the 
Persian Gulf, forces foreign policy compromises and sinks many 
developing nations into staggering debt as they struggle to pay for 
expensive dollar-denominated oil.
  The growth of economies in China and India, representing a third of 
the world's population that grows by 200,000 people per day, will bring 
greater stress on the finite supply of natural resources, refining 
capacity and distribution capability, and the consequential 
skyrocketing prices would be a destabilizing economic blow.
  In addition, oil causes environmental conflict. The possibility that 
greenhouse gases will lead to catastrophic climate change is 
substantially increased by the 40 million barrels of oil burned every 
day by vehicles. Subsequent environmental problems are often predicted 
as destabilizing factors in the form of drought, flooding or famine.
  Such political, economic and environmental trauma is preventable if 
we are on a course of developing more homegrown energy and developing 
new technology.
  That is why I have joined with my colleagues to introduce the Fuels 
Security Act of 2005. This act would more than double the current 
production of renewable fuels derived from sources available in every 
corner of the United States. More importantly, this increased 
production and use will spur investment in critical infrastructure that 
will allow for the economical use of renewable fuels by all Americans. 
Specifically, this bill would require the use of 4 billion gallons of 
renewable fuels per year in 2006 increasing to 8 billion gallons per 
year by 2012. Thereafter the requirements may be increased based on the 
nation's production and use of these fuels, as well as consideration of 
our economy and environment. While these figures may sound impressive, 
they still only represent a small portion of our nation's 
transportation fuel use of over 185 billion gallons last year.
  Some critics have argued that the production of renewable fuels 
benefits only corn and soybean farmers in the Midwest. And while I 
agree that agriculture communities will benefit, farmers will be less 
reliant upon direct government subsidy payments while encouraging land 
conservation and providing energy security for our country. 
Additionally, many farmers view their ability to produce domestic fuels 
as a matter of patriotism in defense of this nation. However, the 
current ability of U.S. grains to free us from the shackles of oil 
dependence does have its limits. This is why I have long supported 
efforts to increase the production of fuels from all parts of a plant, 
which could be grown throughout the United States.
  When I was chairman of the Agriculture, Nutrition and Forestry 
Committee, I initiated a biofuels research program to help decrease 
U.S. dependency on foreign oil. The Biomass Research and Development 
Act of 2000, which I authored and worked to pass, remains the nation's 
premier legislation guiding renewable fuels research. During a time of 
relatively low fuel prices I also co-authored ``The New Petroleum'' in 
Foreign Affairs with former CIA Director James Woolsey, extolling the 
need to accelerate the use of ethanol, especially that derived from 
cellulose, in order to stem future world conflict. It is clear from 
this research and the evolving instability in oil-rich regions of our 
world that it is time to act to enhance the use of renewable fuels.
  This legislation is an important and rational step forward in our 
nation's overall security and economic well-being. I look forward to 
working with my colleagues in the Senate in passing this bill for the 
good of the American people.
  I ask unanimous consent that the text of this bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 650

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Fuels 
     Security Act of 2005''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                      TITLE I--GENERAL PROVISIONS

Sec. 101. Renewable content of motor vehicle fuel.
Sec. 102. Federal agency ethanol-blended gasoline and biodiesel 
              purchasing requirement.
Sec. 103. Data collection.

[[Page S3000]]

                  TITLE II--FEDERAL REFORMULATED FUELS

Sec. 201. Elimination of oxygen content requirement for reformulated 
              gasoline.
Sec. 202. Public health and environmental impacts of fuels and fuel 
              additives.
Sec. 203. Analyses of motor vehicle fuel changes.
Sec. 204. Additional opt-in areas under reformulated gasoline program.
Sec. 205. Federal enforcement of State fuels requirements.
Sec. 206. Fuel system requirements harmonization study.
Sec. 207. Review of Federal procurement initiatives relating to use of 
              recycled products and fleet and transportation 
              efficiency.

                      TITLE I--GENERAL PROVISIONS

     SEC. 101. RENEWABLE CONTENT OF MOTOR VEHICLE FUEL.

       (a) In General.--Section 211 of the Clean Air Act (42 
     U.S.C. 7545) is amended--
       (1) by redesignating subsection (o) as subsection (q); and
       (2) by inserting after subsection (n) the following:
       ``(o) Renewable Fuel Program.--
       ``(1) Definitions.--In this subsection:
       ``(A) Ethanol.--
       ``(i) Cellulosic biomass ethanol.--The term `cellulosic 
     biomass ethanol' means ethanol derived from any 
     lignocellulosic or hemicellulosic matter that is available on 
     a renewable or recurring basis, including--

       ``(I) dedicated energy crops and trees;
       ``(II) wood and wood residues;
       ``(III) plants;
       ``(IV) grasses;
       ``(V) agricultural residues; and
       ``(VI) fibers.

       ``(ii) Waste derived ethanol.--The term `waste derived 
     ethanol' means ethanol derived from--

       ``(I) animal wastes, including poultry fats and poultry 
     wastes, and other waste materials; or
       ``(II) municipal solid waste.

       ``(B) Renewable fuel.--
       ``(i) In general.--The term `renewable fuel' means motor 
     vehicle fuel that--

       ``(I)(aa) is produced from grain, starch, oilseeds, or 
     other biomass; or
       ``(bb) is natural gas produced from a biogas source, 
     including a landfill, sewage waste treatment plant, feedlot, 
     or other place where decaying organic material is found; and
       ``(II) is used to replace or reduce the quantity of fossil 
     fuel present in a fuel mixture used to operate a motor 
     vehicle.

       ``(ii) Inclusion.--The term `renewable fuel' includes--

       ``(I) cellulosic biomass ethanol;
       ``(II) waste derived ethanol;
       ``(III) biodiesel (as defined in section 312(f) of the 
     Energy Policy Act of 1992 (42 U.S.C. 13220(f)); and
       ``(IV) any blending components derived from renewable fuel, 
     except that only the renewable fuel portion of any such 
     blending component shall be considered part of the applicable 
     volume under the renewable fuel program established by this 
     subsection.

       ``(C) Small refinery.--The term `small refinery' means a 
     refinery for which average aggregate daily crude oil 
     throughput for the calendar year (as determined by dividing 
     the aggregate throughput for the calendar year by the number 
     of days in the calendar year) does not exceed 75,000 barrels.
       ``(2) Renewable fuel program.--
       ``(A) In general.--
       ``(i) Regulations.--Not later than 1 year after the date of 
     enactment of this subsection, the Administrator shall 
     promulgate regulations ensuring that motor vehicle fuel sold 
     or dispensed to consumers in the contiguous United States, on 
     an annual average basis, contains the applicable volume of 
     renewable fuel specified in subparagraph (B).
       ``(ii) Compliance.--Regardless of the date of promulgation, 
     the regulations shall contain compliance provisions for 
     refiners, blenders, and importers, as appropriate, to ensure 
     that the requirements of this subsection are met, but shall 
     not restrict where renewable fuel can be used, or impose any 
     per-gallon obligation for the use of renewable fuel.
       ``(iii) No regulations.--If the Administrator does not 
     promulgate the regulations, the applicable percentage 
     referred to in paragraph (3), on a volume percentage of 
     gasoline basis, shall be 3.2 in 2006.
       ``(B) Applicable volume.--
       ``(i) Calendar years 2006 through 2012.--For the purpose of 
     subparagraph (A), the applicable volume for any of calendar 
     years 2006 through 2012 shall be determined in accordance 
     with the following table:

                 ``Applicable volume of renewable fuel

  Calendar year:                               (In billions of gallons)
    2006...........................................................4.0 
    2007...........................................................4.7 
    2008...........................................................5.4 
    2009...........................................................6.1 
    2010...........................................................6.8 
    2011...........................................................7.4 
    2012...........................................................8.0 

       ``(ii) Calendar years 2013 and thereafter.--For the purpose 
     of subparagraph (A), the applicable volume for calendar year 
     2013 and each calendar year thereafter shall be determined by 
     the Administrator, in coordination with the Secretary of 
     Energy and the Secretary of Agriculture, based on a review of 
     the implementation of the program during calendar years 2006 
     through 2012, including a review of--

       ``(I) the impact of the use of renewable fuels on the 
     environment, air quality, energy security, job creation, and 
     rural economic development; and
       ``(II) the expected annual rate of future production of 
     renewable fuels, including cellulosic ethanol.

       ``(iii) Limitation.--An increase in the applicable volume 
     for a calendar year under clause (ii) shall be not less than 
     the product obtained by multiplying--

       ``(I) the number of gallons of gasoline that the 
     Administrator estimates will be sold or introduced into 
     commerce during the calendar year; and
       ``(I) the quotient obtained by dividing--

       ``(aa) 8,000,000,000; by
       ``(bb) the number of gallons of gasoline sold or introduced 
     into commerce during calendar year 2012.
       ``(3) Applicable percentages.--
       ``(A) Provision of estimate of volumes of gasoline sales.--
     Not later than October 31 of each of calendar years 2006 
     through 2011, the Administrator of the Energy Information 
     Administration shall provide to the Administrator of the 
     Environmental Protection Agency an estimate of the volumes of 
     gasoline that will be sold or introduced into commerce in the 
     United States during the following calendar year.
       ``(B) Determination of applicable percentages.--
       ``(i) In general.--Not later than November 30 of each of 
     calendar years 2006 through 2011, based on the estimate 
     provided under subparagraph (A), the Administrator shall 
     determine and publish in the Federal Register, with respect 
     to the following calendar year, the renewable fuel obligation 
     that ensures that the requirements under paragraph (2) are 
     met.
       ``(ii) Required elements.--The renewable fuel obligation 
     determined for a calendar year under clause (i) shall--

       ``(I) be applicable to refiners, blenders, and importers, 
     as appropriate;
       ``(II) be expressed in terms of a volume percentage of 
     gasoline sold or introduced into commerce; and
       ``(III) subject to subparagraph (C)(i), consist of a single 
     applicable percentage that applies to all categories of 
     persons specified in subclause (I).

       ``(C) Adjustments.--In determining the applicable 
     percentage for a calendar year, the Administrator shall make 
     adjustments--
       ``(i) to prevent the imposition of redundant obligations to 
     any person specified in subparagraph (B)(ii)(I); and
       ``(ii) to account for the use of renewable fuel during the 
     previous calendar year by small refineries that are exempt 
     under paragraph (11).
       ``(4) Equivalency.--For the purpose of paragraph (2), 1 
     gallon of either cellulosic biomass ethanol or waste derived 
     ethanol shall be considered to be the equivalent of 2.5 
     gallons of renewable fuel.
       ``(5) Credit program.--
       ``(A) Regulations.--The regulations promulgated to carry 
     out this subsection shall provide for--
       ``(i) the generation of an appropriate amount of credits by 
     any person that refines, blends, or imports gasoline that 
     contains a quantity of renewable fuel that is greater than 
     the quantity required under paragraph (2);
       ``(ii) the generation of an appropriate amount of credits 
     for biodiesel fuel; and
       ``(iii) if a small refinery notifies the Administrator that 
     the small refinery waives the exemption provided by this 
     subsection, the generation of credits by the small refinery 
     beginning in the year following the notification.
       ``(B) Use of credits.--A person that generates credits 
     under subparagraph (A) may use the credits, or transfer all 
     or a portion of the credits to another person, for the 
     purpose of complying with paragraph (2).
       ``(C) Life of credits.--A credit generated under this 
     paragraph shall be valid to demonstrate compliance for the 
     calendar year in which the credit was generated.
       ``(D) Inability to purchase sufficient credits.--The 
     regulations promulgated to carry out this subsection shall 
     include provisions permitting any person that is unable to 
     generate or purchase sufficient credits to meet the 
     requirement under paragraph (2) to carry forward a renewables 
     deficit if, for the calendar year following the year in which 
     the renewables deficit is created--
       ``(i) the person achieves compliance with the renewables 
     requirement under paragraph (2); and
       ``(ii) generates or purchases additional renewables credits 
     to offset the renewables deficit of the preceding year.
       ``(6) Seasonal variations in renewable fuel use.--
       ``(A) Study.--For each of calendar years 2006 through 2012, 
     the Administrator of the Energy Information Administration 
     shall conduct a study of renewable fuels blending to 
     determine whether there are excessive seasonal variations in 
     the use of renewable fuels.
       ``(B) Regulation of excessive seasonal variations.--If, for 
     any calendar year, the Administrator of the Energy 
     Information Administration, based on the study under 
     subparagraph (A), makes the determinations specified in 
     subparagraph (C), the Administrator shall promulgate 
     regulations to ensure that 35 percent or more of the quantity

[[Page S3001]]

     of renewable fuels necessary to meet the requirements under 
     paragraph (2) is used during each of the periods specified in 
     subparagraph (D) of each subsequent calendar year.
       ``(C) Determinations.--The determinations referred to in 
     subparagraph (B) are that--
       ``(i) less than 35 percent of the quantity of renewable 
     fuels necessary to meet the requirements under paragraph (2) 
     has been used during 1 of the periods specified in 
     subparagraph (D) of the calendar year;
       ``(ii) a pattern of excessive seasonal variation described 
     in clause (i) will continue in subsequent calendar years; and
       ``(iii) promulgating regulations or other requirements to 
     impose a 35 percent or more seasonal use of renewable fuels 
     will not prevent or interfere with the attainment of national 
     ambient air quality standards or significantly increase the 
     price of motor fuels to the consumer.
       ``(D) Periods.--The 2 periods referred to in this paragraph 
     are--
       ``(i) April through September; and
       ``(ii) January through March and October through December.
       ``(E) Exclusions.--Renewable fuels blended or consumed in 
     2006 in a State that has received a waiver under section 
     209(b) shall not be included in the study under subparagraph 
     (A).
       ``(7) Waivers.--
       ``(A) In general.--The Administrator, in consultation with 
     the Secretary of Agriculture and the Secretary of Energy, may 
     waive the requirements under paragraph (2), in whole or in 
     part, on a petition by 1 or more States by reducing the 
     national quantity of renewable fuel required under this 
     subsection--
       ``(i) based on a determination by the Administrator, after 
     public notice and opportunity for comment, that 
     implementation of the requirement would severely harm the 
     economy or environment of a State, a region, or the United 
     States; or
       ``(ii) based on a determination by the Administrator, after 
     public notice and opportunity for comment, that there is an 
     inadequate domestic supply to meet the requirement.
       ``(B) Petitions for waivers.--Not later than 90 days after 
     the date on which a petition is received by the Administrator 
     under subparagraph (A), the Administrator, in consultation 
     with the Secretary of Agriculture and the Secretary of 
     Energy, shall approve or disapprove the petition.
       ``(C) Termination of waivers.--A waiver granted under 
     subparagraph (A) shall terminate on the date that is 1 year 
     after the date on which the waiver was granted, but may be 
     renewed by the Administrator, after consultation with the 
     Secretary of Agriculture and the Secretary of Energy.
       ``(8) Small refineries.--
       ``(A) In general.--Paragraph (2) shall not apply to small 
     refineries until the first calendar year beginning more than 
     5 years after the first year set forth in the table in 
     paragraph (2)(B)(i).
       ``(B) Study.--Not later than December 31, 2008, the 
     Secretary of Energy shall complete for the Administrator a 
     study to determine whether the requirements under paragraph 
     (2) would impose a disproportionate economic hardship on 
     small refineries.
       ``(C) Small refineries and economic hardship.--For any 
     small refinery that the Secretary of Energy determines would 
     experience a disproportionate economic hardship, the 
     Administrator shall extend the small refinery exemption for 
     the small refinery for not less than 2 additional years.
       ``(D) Economic hardship.--
       ``(i) Extension of exemption.--A small refinery may at any 
     time petition the Administrator for an extension of the 
     exemption from the requirements under paragraph (2) for the 
     reason of disproportionate economic hardship.
       ``(ii) Evaluation.--In evaluating a hardship petition, the 
     Administrator, in consultation with the Secretary of Energy, 
     shall consider the findings of the study in addition to other 
     economic factors.
       ``(iii) Deadline for action on petitions.--The 
     Administrator shall act on any petition submitted by a small 
     refinery for a hardship exemption not later than 90 days 
     after the receipt of the petition.
       ``(E) Credit program.--Paragraph (6)(A)(iii) shall apply to 
     each small refinery that waives an exemption under this 
     paragraph.
       ``(F) Opt-in for small refiners.--A small refinery shall be 
     subject to paragraph (2) if the small refinery notifies the 
     Administrator that the small refinery waives the exemption 
     under subparagraph (C).''.
       (b) Penalties and enforcement.--Section 211(d) of the Clean 
     Air Act (42 U.S.C. 7545(d)) is amended--
       (1) in paragraph (1)--
       (A) in the first sentence, by striking ``or (n)'' and 
     inserting ``(n), or (o)'' each place it appears; and
       (B) in the second sentence, by striking ``or (m)'' and 
     inserting ``(m), or (o)''; and
       (2) in the first sentence of paragraph (2), by striking 
     ``and (n)'' and inserting ``(n), and (o)'' each place it 
     appears.

     SEC. 102. FEDERAL AGENCY ETHANOL-BLENDED GASOLINE AND 
                   BIODIESEL PURCHASING REQUIREMENT.

       Title III of the Energy Policy Act of 1992 is amended by 
     striking section 306 (42 U.S.C. 13215) and inserting the 
     following:

     ``SEC. 306. FEDERAL AGENCY ETHANOL-BLENDED GASOLINE AND 
                   BIODIESEL PURCHASING REQUIREMENT.

       ``(a) Ethanol-Blended Gasoline.--The head of each Federal 
     agency shall ensure that, in areas in which ethanol-blended 
     gasoline is reasonably available at a generally competitive 
     price, the Federal agency purchases ethanol-blended gasoline 
     containing at least 10 percent ethanol rather than 
     nonethanol-blended gasoline, for use in vehicles used by the 
     agency that use gasoline.
       ``(b) Biodiesel.--
       ``(1) Definition of biodiesel.--In this subsection, the 
     term `biodiesel' has the meaning given the term in section 
     312(f).
       ``(2) Requirement.--The head of each Federal agency shall 
     ensure that the Federal agency purchases, for use in fueling 
     fleet vehicles that use diesel fuel used by the Federal 
     agency at the location at which fleet vehicles of the Federal 
     agency are centrally fueled, in areas in which the biodiesel-
     blended diesel fuel described in subparagraphs (A) and (B) is 
     available at a generally competitive price--
       ``(A) as of the date that is 5 years after the date of 
     enactment of this paragraph, biodiesel-blended diesel fuel 
     that contains at least 2 percent biodiesel, rather than 
     nonbiodiesel-blended diesel fuel; and
       ``(B) as of the date that is 10 years after the date of 
     enactment of this paragraph, biodiesel-blended diesel fuel 
     that contains at least 20 percent biodiesel, rather than 
     nonbiodiesel-blended diesel fuel.
       ``(3) Requirement of Federal Law.--The provisions of this 
     subsection shall not be considered a requirement of Federal 
     law for the purposes of section 312.
       ``(c) Exemption.--This section does not apply to fuel used 
     in vehicles excluded from the definition of `fleet' by 
     subparagraphs (A) through (H) of section 301(9).''.

     SEC. 103. DATA COLLECTION.

       Section 205 of the Department of Energy Organization Act 
     (42 U.S.C. 7135) is amended by adding at the end the 
     following:
       ``(m)(1) In order to improve the ability to evaluate the 
     effectiveness of the renewable fuels mandate of the United 
     States, the Administrator shall conduct and publish the 
     results of a survey of renewable fuels demand in the motor 
     vehicle fuels market in the United States monthly, and in a 
     manner designed to protect the confidentiality of individual 
     responses.
       ``(2) In conducting the survey, the Administrator shall 
     collect information both on a national and regional basis, 
     including--
       ``(A) information on--
       ``(i) the quantity of renewable fuels produced;
       ``(ii) the quantity of renewable fuels blended;
       ``(iii) the quantity of renewable fuels imported; and
       ``(iv) the quantity of renewable fuels demanded; and
       ``(B) market price data.''.

                  TITLE II--FEDERAL REFORMULATED FUELS

     SEC. 201. ELIMINATION OF OXYGEN CONTENT REQUIREMENT FOR 
                   REFORMULATED GASOLINE.

       (a) Elimination.--
       (1) In general.--Section 211(k) of the Clean Air Act (42 
     U.S.C. 7545(k)) is amended--
       (A) in paragraph (2)--
       (i) in the second sentence of subparagraph (A), by striking 
     ``(including the oxygen content requirement contained in 
     subparagraph (B))'';
       (ii) by striking subparagraph (B); and
       (iii) by redesignating subparagraphs (C) and (D) as 
     subparagraphs (B) and (C), respectively;
       (B) in paragraph (3)(A), by striking clause (v); and
       (C) in paragraph (7)--
       (i) in subparagraph (A)--

       (I) by striking clause (i); and
       (II) by redesignating clauses (ii) and (iii) as clauses (i) 
     and (ii), respectively; and

       (ii) in subparagraph (C)--

       (I) by striking clause (ii); and
       (II) by redesignating clause (iii) as clause (ii).

       (2) Effective date.--The amendments made by paragraph (1) 
     take effect on the date that is 1 year after the date of 
     enactment of this Act, except that the amendments shall take 
     effect upon that date of enactment in any State that has 
     received a waiver under section 209(b) of the Clean Air Act 
     (42 U.S.C. 7543(b)).
       (b) Maintenance of Toxic Air Pollutant Emission 
     Reductions.--Section 211(k)(1) of the Clean Air Act (42 
     U.S.C. 7545(k)(1)) is amended--
       (1) by striking ``Within 1 year after the enactment of the 
     Clean Air Act Amendments of 1990,'' and inserting the 
     following:
       ``(A) In general.--Not later than November 15, 1991,''; and
       (2) by adding at the end the following:
       ``(B) Maintenance of toxic air pollutant emissions 
     reductions from reformulated gasoline.--
       ``(i) Definition of padd.--In this subparagraph, the term 
     `PADD' means a Petroleum Administration for Defense District.
       ``(ii) Regulations regarding emissions of toxic air 
     pollutants.--Not later than 270 days after the date of 
     enactment of this subparagraph, the Administrator shall 
     establish, for each refinery or importer, standards for toxic 
     air pollutants from use of the reformulated gasoline produced 
     or distributed by the refinery or importer that maintain the 
     reduction of the average annual aggregate emissions of toxic 
     air pollutants for reformulated gasoline produced or 
     distributed by the refinery or importer during calendar years

[[Page S3002]]

     2001 and 2002, determined on the basis of data collected by 
     the Administrator with respect to the refinery or importer.
       ``(iii) Standards applicable to specific refineries or 
     importers.--

       ``(I) Applicability of standards.--For any calendar year, 
     the standards applicable to a refinery or importer under 
     clause (ii) shall apply to the quantity of gasoline produced 
     or distributed by the refinery or importer in the calendar 
     year only to the extent that the quantity is less than or 
     equal to the average annual quantity of reformulated gasoline 
     produced or distributed by the refinery or importer during 
     calendar years 2001 and 2002.
       ``(II) Applicability of other standards.--For any calendar 
     year, the quantity of gasoline produced or distributed by a 
     refinery or importer that is in excess of the quantity 
     subject to subclause (I) shall be subject to standards for 
     toxic air pollutants promulgated under subparagraph (A) and 
     paragraph (3)(B).

       ``(iv) Credit program.--The Administrator shall provide for 
     the granting and use of credits for emissions of toxic air 
     pollutants in the same manner as provided in paragraph (7).
       ``(v) Regional protection of toxics reduction baselines.--

       ``(I) In general.--Not later than 60 days after the date of 
     enactment of this subparagraph, and not later than April 1 of 
     each calendar year that begins after that date of enactment, 
     the Administrator shall publish in the Federal Register a 
     report that specifies, with respect to the previous calendar 
     year--

       ``(aa) the quantity of reformulated gasoline produced that 
     is in excess of the average annual quantity of reformulated 
     gasoline produced in 2001 and 2002; and
       ``(bb) the reduction of the average annual aggregate 
     emissions of toxic air pollutants in each PADD, based on 
     retail survey data or data from other appropriate sources.

       ``(II) Effect of failure to maintain aggregate toxics 
     reductions.--If, in any calendar year, the reduction of the 
     average annual aggregate emissions of toxic air pollutants in 
     a PADD fails to meet or exceed the reduction of the average 
     annual aggregate emissions of toxic air pollutants in the 
     PADD in calendar years 2001 and 2002, the Administrator, not 
     later than 90 days after the date of publication of the 
     report for the calendar year under subclause (I), shall--

       ``(aa) identify, to the maximum extent practicable, the 
     reasons for the failure, including the sources, volumes, and 
     characteristics of reformulated gasoline that contributed to 
     the failure; and
       ``(bb) promulgate revisions to the regulations promulgated 
     under clause (ii), to take effect not earlier than 180 days 
     but not later than 270 days after the date of promulgation, 
     to provide that, notwithstanding clause (iii)(II), all 
     reformulated gasoline produced or distributed at each 
     refinery or importer shall meet the standards applicable 
     under clause (ii) not later than April 1 of the year 
     following the report under this subclause and for subsequent 
     years.
       ``(vi) Regulations to control hazardous air pollutants from 
     motor vehicles and motor vehicle fuels.--Not later than July 
     1, 2006, the Administrator shall promulgate final regulations 
     to control hazardous air pollutants from motor vehicles and 
     motor vehicle fuels, as provided for in section 80.1045 of 
     title 40, Code of Federal Regulations (as in effect on the 
     date of enactment of this subparagraph).''.
       (c) Consolidation in Reformulated Gasoline Regulations.--
     Not later than 180 days after the date of enactment of this 
     Act, the Administrator of the Environmental Protection Agency 
     shall revise the reformulated gasoline regulations under 
     subpart D of part 80 of title 40, Code of Federal Regulations 
     (or any successor regulations), to consolidate the 
     regulations applicable to VOC-Control Regions 1 and 2 under 
     section 80.41 of that title by eliminating the less stringent 
     requirements applicable to gasoline designated for VOC-
     Control Region 2 and instead applying the more stringent 
     requirements applicable to gasoline designated for VOC-
     Control Region 1.
       (d) Authority of Administrator.--Nothing in this section 
     affects or prejudices any legal claim or action with respect 
     to regulations promulgated by the Administrator of the 
     Environmental Protection Agency before the date of enactment 
     of this Act regarding--
       (1) emissions of toxic air pollutants from motor vehicles; 
     or
       (2) the adjustment of standards applicable to a specific 
     refinery or importer made under the prior regulations.
       (e) Determination Regarding a State Petition.--Section 
     211(k) of the Clean Air Act (42 U.S.C. 7545(k)) is amended by 
     inserting after paragraph (10) the following:
       ``(11) Determination regarding a state petition.--
       ``(A) In general.--Notwithstanding any other provision of 
     this section, not later than 30 days after the date of 
     enactment of this paragraph, the Administrator shall 
     determine the adequacy of any petition received from a 
     Governor of a State to exempt gasoline sold in that State 
     from the requirements under paragraph (2)(B).
       ``(B) Approval.--If a determination under subparagraph (A) 
     is not made by the date that is 30 days after the date of 
     enactment of this paragraph, the petition shall be considered 
     to be approved.''.

     SEC. 202. PUBLIC HEALTH AND ENVIRONMENTAL IMPACTS OF FUELS 
                   AND FUEL ADDITIVES.

       Section 211(b) of the Clean Air Act (42 U.S.C. 7545(b)) is 
     amended--
       (1) in paragraph (2)--
       (A) by striking ``may also'' and inserting ``shall, on a 
     regular basis,''; and
       (B) by striking subparagraph (A) and inserting the 
     following:
       ``(A) to conduct tests to determine potential public health 
     and environmental effects of the fuel or additive (including 
     carcinogenic, teratogenic, or mutagenic effects); and''; and
       (2) by adding at the end the following:
       ``(4) Study on certain fuel additives and blendstocks.--
       ``(A) In general.--Not later than 2 years after the date of 
     enactment of this paragraph, the Administrator shall--
       ``(i) conduct a study on the effects on public health, air 
     quality, and water resources of increased use of, and the 
     feasibility of using as substitutes for methyl tertiary butyl 
     ether in gasoline--

       ``(I) ethyl tertiary butyl ether;
       ``(II) tertiary amyl methyl ether;
       ``(III) di-isopropyl ether;
       ``(IV) tertiary butyl alcohol;
       ``(V) other ethers and heavy alcohols, as determined by the 
     Administrator;
       ``(VI) ethanol;
       ``(VII) iso-octane; and
       ``(VIII) alkylates;

       ``(ii) conduct a study on the effects on public health, air 
     quality, and water resources of the adjustment for ethanol-
     blended reformulated gasoline to the VOC performance 
     requirements otherwise applicable under sections 211(k)(1) 
     and 211(k)(3); and
       ``(iii) submit to the Committee on Environment and Public 
     Works of the Senate and the Committee on Energy and Commerce 
     of the House of Representatives a report describing the 
     results of these studies.
       ``(B) Contracts for study.--In carrying out this paragraph, 
     the Administrator may enter into one or more contracts with 
     nongovernmental entities including but not limited to 
     National Energy Laboratories and institutions of higher 
     education (as defined in section 101 of the Higher Education 
     Act of 1965 (20 U.S.C. 1001)).''.

     SEC. 203. ANALYSES OF MOTOR VEHICLE FUEL CHANGES.

       Section 211 of the Clean Air Act (42 U.S.C. 7545) is 
     amended by inserting after subsection (o) (as added by 
     section 101(a)(2)) the following:
       ``(p) Analyses of Motor Vehicle Fuel Changes and Emissions 
     Model.--
       ``(1) Anti-backsliding analysis.--
       ``(A) Draft analysis.--Not later than 4 years after the 
     date of enactment of this subsection, the Administrator shall 
     publish for public comment a draft analysis of the changes in 
     emissions of air pollutants and air quality due to the use of 
     motor vehicle fuel and fuel additives resulting from 
     implementation of the amendments made by the Fuels Security 
     Act of 2005.
       ``(B) Final analysis.--After providing a reasonable 
     opportunity for comment, but not later than 5 years after the 
     date of enactment of this paragraph, the Administrator shall 
     publish the analysis in final form.
       ``(2) Emissions model.--For the purposes of this 
     subsection, as soon as the necessary data are available, the 
     Administrator shall develop and finalize an emissions model 
     that reasonably reflects the effects of gasoline 
     characteristics or components on emissions from vehicles in 
     the motor vehicle fleet during calendar year 2005.''.

     SEC. 204. ADDITIONAL OPT-IN AREAS UNDER REFORMULATED GASOLINE 
                   PROGRAM.

       Section 211(k)(6) of the Clean Air Act (42 U.S.C. 
     7545(k)(6)) is amended--
       (1) by striking ``(6) Opt-in areas.--(A) Upon'' and 
     inserting the following:
       ``(6) Opt-in areas.--
       ``(A) Classified areas.--
       ``(i) In general.--Upon'';
       (2) in subparagraph (B), by striking ``(B) If'' and 
     inserting the following:
       ``(ii) Effect of insufficient domestic capacity to produce 
     reformulated gasoline.--If'';
       (3) in subparagraph (A)(ii) (as redesignated by paragraph 
     (2))--
       (A) in the first sentence, by striking ``subparagraph (A)'' 
     and inserting ``clause (i)''; and
       (B) in the second sentence, by striking ``this paragraph'' 
     and inserting ``this subparagraph''; and
       (4) by adding at the end the following:
       ``(B) Ozone transport region.--
       ``(i) Application of prohibition.--

       ``(I) In general.--In addition to the provisions of 
     subparagraph (A), upon the application of the Governor of a 
     State in the ozone transport region established by section 
     184(a), the Administrator, not later than 180 days after the 
     date of receipt of the application, shall apply the 
     prohibition specified in paragraph (5) to any area in the 
     State (other than an area classified as a marginal, moderate, 
     serious, or severe ozone nonattainment area under subpart 2 
     of part D of title I) unless the Administrator determines 
     under clause (iii) that there is insufficient capacity to 
     supply reformulated gasoline.
       ``(II) Publication of application.--As soon as practicable 
     after the date of receipt of an application under subclause 
     (I), the Administrator shall publish the application in the 
     Federal Register.

       ``(ii) Period of applicability.--Under clause (i), the 
     prohibition specified in paragraph (5) shall apply in a 
     State--

[[Page S3003]]

       ``(I) commencing as soon as practicable but not later than 
     2 years after the date of approval by the Administrator of 
     the application of the Governor of the State; and
       ``(II) ending not earlier than 4 years after the 
     commencement date determined under subclause (I).

       ``(iii) Extension of commencement date based on 
     insufficient capacity.--

       ``(I) In general.--If, after receipt of an application from 
     a Governor of a State under clause (i), the Administrator 
     determines, on the Administrator's own motion or on petition 
     of any person, after consultation with the Secretary of 
     Energy, that there is insufficient capacity to supply 
     reformulated gasoline, the Administrator, by regulation--

       ``(aa) shall extend the commencement date with respect to 
     the State under clause (ii)(I) for not more than 1 year; and
       ``(bb) may renew the extension under item (aa) for 2 
     additional periods, each of which shall not exceed 1 year.

       ``(II) Deadline for action on petitions.--The Administrator 
     shall act on any petition submitted under subclause (I) not 
     later than 180 days after the date of receipt of the 
     petition.''.

     SEC. 205. FEDERAL ENFORCEMENT OF STATE FUELS REQUIREMENTS.

       Section 211(c)(4)(C) of the Clean Air Act (42 U.S.C. 
     7545(c)(4)(C)) is amended--
       (1) by striking ``(C) A State'' and inserting the 
     following:
       ``(C) Authority of state to control fuels and fuel 
     additives for reasons of necessity.--
       ``(i) In general.--A State''; and
       (2) by adding at the end the following:
       ``(ii) Enforcement by the administrator.--In any case in 
     which a State prescribes and enforces a control or 
     prohibition under clause (i), the Administrator, at the 
     request of the State, shall enforce the control or 
     prohibition as if the control or prohibition had been adopted 
     under the other provisions of this section.''.

     SEC. 206. FUEL SYSTEM REQUIREMENTS HARMONIZATION STUDY.

       (a) Study.--
       (1) In general.--The Administrator of the Environmental 
     Protection Agency and the Secretary of Energy shall jointly 
     conduct a study of Federal, State, and local requirements 
     concerning motor vehicle fuels, including--
       (A) requirements relating to reformulated gasoline, 
     volatility (measured in Reid vapor pressure), oxygenated 
     fuel, and diesel fuel; and
       (B) other requirements that vary from State to State, 
     region to region, or locality to locality.
       (2) Required elements.--The study shall assess--
       (A) the effect of the variety of requirements described in 
     paragraph (1) on the supply, quality, and price of motor 
     vehicle fuels available to the consumer;
       (B) the effect of the requirements described in paragraph 
     (1) on achievement of--
       (i) national, regional, and local air quality standards and 
     goals; and
       (ii) related environmental and public health protection 
     standards and goals;
       (C) the effect of Federal, State, and local motor vehicle 
     fuel regulations, including multiple motor vehicle fuel 
     requirements, on--
       (i) domestic refineries;
       (ii) the fuel distribution system; and
       (iii) industry investment in new capacity;
       (D) the effect of the requirements described in paragraph 
     (1) on emissions from vehicles, refineries, and fuel handling 
     facilities;
       (E) the feasibility of developing national or regional 
     motor vehicle fuel slates for the 48 contiguous States that, 
     while protecting and improving air quality at the national, 
     regional, and local levels, could--
       (i) enhance flexibility in the fuel distribution 
     infrastructure and improve fuel fungibility;
       (ii) reduce price volatility and costs to consumers and 
     producers;
       (iii) provide increased liquidity to the gasoline market; 
     and
       (iv) enhance fuel quality, consistency, and supply; and
       (F) the feasibility of providing incentives, and the need 
     for the development of national standards necessary, to 
     promote cleaner burning motor vehicle fuel.
       (b) Report.--
       (1) In general.--Not later than June 1, 2006, the 
     Administrator of the Environmental Protection Agency and the 
     Secretary of Energy shall submit to Congress a report on the 
     results of the study conducted under subsection (a).
       (2) Recommendations.--
       (A) In general.--The report shall contain recommendations 
     for legislative and administrative actions that may be 
     taken--
       (i) to improve air quality;
       (ii) to reduce costs to consumers and producers; and
       (iii) to increase supply liquidity.
       (B) Required considerations.--The recommendations under 
     subparagraph (A) shall take into account the need to provide 
     advance notice of required modifications to refinery and fuel 
     distribution systems in order to ensure an adequate supply of 
     motor vehicle fuel in all States.
       (3) Consultation.--In developing the report, the 
     Administrator of the Environmental Protection Agency and the 
     Secretary of Energy shall consult with--
       (A) the Governors of the States;
       (B) automobile manufacturers;
       (C) motor vehicle fuel producers and distributors; and
       (D) the public.

     SEC. 207. REVIEW OF FEDERAL PROCUREMENT INITIATIVES RELATING 
                   TO USE OF RECYCLED PRODUCTS AND FLEET AND 
                   TRANSPORTATION EFFICIENCY.

       Not later than 180 days after the date of enactment of this 
     Act, the Administrator of General Services shall submit to 
     Congress a report that details efforts by each Federal agency 
     to implement the procurement policies specified in Executive 
     Order No. 13101 (63 Fed. Reg. 49643; relating to governmental 
     use of recycled products) and Executive Order No. 13149 (65 
     Fed. Reg. 24607; relating to Federal fleet and transportation 
     efficiency).

     SEC. 208. REPORT ON RENEWABLE MOTOR FUEL.

       Not later than January 1, 2007, the Secretary of Energy and 
     the Secretary of Agriculture shall jointly prepare and submit 
     to Congress a report containing recommendations for 
     achieving, by January 1, 2025, at least 25 percent renewable 
     fuel content (calculated on an average annual basis) for all 
     gasoline sold or introduced into commerce in the United 
     States.


                       FUELS SECURITY ACT OF 2005

  Mr. HARKIN. Mr. President, today, along with my colleague, Senator 
Lugar, and a bipartisan coalition of 19 other Senators, am introducing 
important legislation to set an ambitious Renewable Fuels Standard for 
this country. This legislation will more than double the amount of 
ethanol and biodiesel in the Nation's fuel supply to at least 8 billion 
gallons a year by 2012. It firmly commits our Nation to clean sources 
of domestic energy, and is a bold step toward energy security, a strong 
rural economy, and a healthier environment.
  We have a growing problem of energy supplies and prices in this 
country. Today, 97 percent of our transportation fuel comes from oil, 
nearly two-thirds of which is from foreign sources.
  This heavy dependence on petroleum undermines our energy security. It 
wreaks havoc on consumers, with record high prices now for gasoline. It 
costs jobs--27,000 lost U.S. jobs for every $1 billion in imported 
oil--and threatens our environment. A full one-third of greenhouse 
gases now come from vehicle emissions.
  We have a choice. We can stand by and fuel our addiction to foreign 
oil, or we can make an aggressive shift toward clean, domestic 
renewable fuels like ethanol and biodiesel.
  In the 108th Congress, we approved an RFS of 5 billion gallons a year 
by 2012. At the time, this represented a strong push for renewable 
fuels. But since that time, renewable fuels production in this country 
has grown dramatically. Domestic ethanol production grew 21 percent in 
2004 to 3.4 billion gallons, helping to buffer rising crude oil prices.
  The Environment and Public Works Committee, recognizing this success, 
reported yesterday a modestly increased RFS of 6 billion gallons a year 
by 2012. I applaud this step forward, but we can do more. The Energy 
Future Coalition has said that ``increased production of domestic 
renewable fuels is the single most important step the United States 
could take to reduce its dependence on foreign oil,'' and I agree.
  Our Nation already has the capacity to produce nearly 4 billion 
gallons of ethanol a year, almost a third of it in Iowa. The biofuels 
industry's output is on track to surpass even our ambitious target of 8 
billion gallons a year by 2012. Several studies further indicate that 
renewable fuels could provide more than 25 percent of our 
transportation fuel by 2025. Our bill will ensure that market demand 
for these fuels grows accordingly.
  Many of the biofuels plants that will be built will be farmer-owned, 
bringing tremendous added value to our rural economies. For example, 
according to a recent study, each typical ethanol plant built in the 
United States creates 700 jobs, expands the local economic base by over 
$140 million, and increases the local corn price by 5 to 10 cents a 
bushel. Iowa's ethanol plants are expected to contribute $4 billion 
annually to our state's economy once all are in production. This RFS is 
expected to create over 200,000 new jobs nationwide, add nearly $200 
billion to our GDP, and do more to reduce foreign oil dependence than 
all of the oil in the Alaska National Wildlife Refuge could possibly 
do.
  This legislation has built-in flexibility through a system of 
tradable credits for refiners who exceed their minimum requirement. It 
takes strong

[[Page S3004]]

measures to protect air and water quality, and it rewards production of 
second-generation biofuels such as cellulosic ethanol that promise 
tremendous value to farmers, consumers and the environment.
  For these reasons, our bill has generated strong support from a broad 
range of interests. I have here a letter endorsing our bill signed by 
more than a dozen groups, including the Iowa Renewable Fuels 
Association, the National Renewable Fuels Association, the Energy 
Future Coalition, the National Farmers Union, the National Corn Growers 
Association, the American Farm Bureau Federation, the American Soybean 
Association, the American Coalition for Ethanol, and many others.
  Farmers and biofuel producers are ready to lead our Nation toward a 
future based on renewable energy. I sincerely hope that Congress and 
the administration will get behind commonsense energy policy and 
support this ambitious RFS. I ask unanimous consent that the text of 
the bill, along with the letter, be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                   March 17, 2005.
     Re the Fuels Agreement and the Renewable Fuels Standard.
     The Hon. Bill Frist,
     U.S. Senate Majority Leader,
     Washington, DC.
     The Hon. Harry Reid,
     U.S. Senate Minority Leader,
     Washington, DC.
       Dear Majority Leader Frist and Minority Leader Reid: The 
     undersigned organizations are writing to express our strong 
     support for S. 650, legislation establishing a Renewable 
     Fuels Standard (RFS) growing to 8 billion gallons by 2012. 
     This landmark legislation would increase the nation's energy 
     independence, protect air and water quality, provide 
     increased flexibility for refiners, and stimulate rural 
     economies through the increased production of domestic, 
     renewable fuels.
       The ethanol and biodiesel industries have undergone 
     unprecedented growth over the past several years. In fact, 
     the U.S. currently has the capacity to produce more than 3.7 
     billion gallons of ethanol and biodiesel, and plants under 
     construction will add an additional 700 million gallons of 
     capacity by the end of the year. Most of this growth has been 
     in farmer-owned plants, which taken as a whole, now represent 
     the single largest producer in the country. Clearly, the 
     renewable fuels industry is poised to make a significant 
     contribution to this nation's energy supply.
       With rising crude oil and gasoline prices hurting 
     consumers, and record petroleum imports exacerbating our 
     trade imbalance and slowing economic growth, we need to be 
     maximizing the production and use of domestic renewable fuels 
     such as ethanol and biodiesel. Enacting an RFS that would 
     provide a market of 8 billion gallons by 2012 demonstrates a 
     firm commitment to reducing this nation's foreign oil 
     dependence while providing a significant impact to the 
     American economy. Specifically (in 2005 dollars):
       The production and use of 8 billion gallons of ethanol, 
     biodiesel and other renewable fuels by 2012 will displace 
     over 2 billion barrels of crude oil and reduce the outflow of 
     dollars largely to foreign oil producers by $64.1 billion 
     between 2005 and 2012. As a result of the RFS, America's 
     dependence on imported oil will be reduced from an estimated 
     68 percent to 62 percent.
       The renewable fuels sector will spend an estimated $6 
     billion to build 4.3 billion gallons of new ethanol and 
     biodiesel capacity between 2005 and 2012.
       The renewable fuels sector will spend nearly $70 billion on 
     goods and services required to produce 8 billion gallons of 
     ethanol and biodiesel by 2012. Purchases of corn, grain 
     sorghum, soybeans, corn stover and wheat straw, alone will 
     total $43 billion between 2005 and 2012.
       The combination of this direct spending and the indirect 
     impacts of those dollars `` circulating throughout the 
     economy will:
       Add nearly $200 billion to GDP between 2005 and 2012.
       Generate an additional $43 billion of household income for 
     all Americans between 2005 and 2012, and
       Create as many as 234,840 new jobs in all sectors of the 
     economy by 2012.
       We urge your support of this important bill as the Congress 
     considers comprehensive energy policy legislation. The RFS is 
     a vital and necessary component of any energy policy designed 
     to reduce our nation's dependence on foreign sources of 
     petroleum.
           Sincerely,
       Renewable Fuels Association, American Farm Bureau 
     Federation, National Corn Growers Association, American 
     Soybean Association, National Grain Sorghum Producers, 
     American Coalition for Ethanol, National Biodiesel Board, 
     Energy Future Coalition, Biotechnology Industry Organization, 
     New Uses Council, National Sunflower Association, United 
     States Canola Association, Ethanol Producers & Consumers, 
     Environmental & Energy Study Institute, National Farmers 
     Union.
  Mr. JOHNSON. Mr. President, I rise today to join twenty of my Senate 
colleagues in introducing landmark legislation that will double the 
amount of ethanol used in motor fuel by 2012.
  The Fuels Security Act of 2005 establishes a renewable fuels standard 
program beginning with 4 billion gallons in 2006 and culminating in 8 
billion gallons in 2012--nearly a 40 percent increase from legislation 
that I first sponsored in 2003. The legislation creates a functioning 
and flexible market for ethanol produced from South Dakota's farmer-
owned plants. South Dakota has more farmer-owned ethanol plants than 
any other State, and South Dakota producers deliver a greater 
percentage of corn for ethanol production than any neighboring State. 
Revising and strengthening the proposed RFS is important to South 
Dakota producers and our value-added economy.
  In 2004, the domestic ethanol industry produced a record 3.4 billion 
gallons of ethanol and an additional 700 million gallons of capacity 
will be added in 2005. Because of the strong increase in ethanol 
production over the last few years it is necessary to revisit and 
revise the proposed RFS to more accurately reflect the growing market. 
Increasing the RFS schedule to 8 billion gallons in 2012 ensures market 
stability and encourages investment in ethanol plants and 
transportation infrastructure.
  Ethanol stands out as an agriculture sector that is resisting the 
move toward greater consolidation and concentration. The Fuels Security 
Act of 2005 goes a long way toward ensuring that farmers retain market 
power and will continue to play a leading role in renewable energy 
production.
  While adjusting the schedule to match growth is crucial, equally 
important is ensuring that the schedule and standard are not eroded by 
a permissive credit program or inconsistent and suspect waiver 
authority provisions. To that end, the Fuels Security Act of 2005 
creates a one-year credit program to provide flexibility to blenders 
without diluting the RFS requirement. An ill-defined or open-ended 
credit program will cause investors to hedge against investing in new 
ethanol facilities as the guarantee of an increased baseline is 
weakened through multi-year credit trading language.
  Additionally, the bill includes an effective tool to ensure that 
after 2012, America's renewable fuel market does not diminish and 
capacity and production match demand. The bill directs the Secretaries 
of Agriculture and Energy, as well as the Environmental Protection 
Agency to ensure the RFS schedule grows with the overall motor vehicle 
fuel pool after 2013.
  I am proud to stand with over a dozen agriculture, clean energy and 
renewable fuels organizations that support this legislation. 
Accordingly, I ask unanimous consent that a letter written by over a 
dozen agriculture and energy groups be printed in the Record at the 
conclusion of my remarks.
  The PRESIDING OFFICER. Without objection it is so ordered.
  (See exhibit 1)
  Mr. JOHNSON. Mr. President, I am encouraged that as a consequence of 
the strong bipartisan support for increasing the RFS to 8 billion 
gallons, my colleagues and I can add this bill to a comprehensive 
energy proposal working through the Senate.
  Furthermore, as a member of the Senate Energy and Natural Resources 
Committee, I remain committed to working with my Senate colleagues, 
Chairman Domenici and Majority Leader Frist and Minority Leader Reid 
toward ensuring that the Fuels Security Act of 2005 becomes law.

                               Exhibit 1

                                                   March 17, 2005.
     Re the Fuels Agreement and the Renewable Fuels Standard.

     Hon. Bill Frist,
     U.S. Senate Majority Leader,
     Capitol Building, Washington, DC.
     Hon. Harry Reid,
     U.S. Senate Minority Leader,
     Capitol Building, Washington, DC.
       Dear Majority Leader Frist and Minority Leader Reid: The 
     undersigned organizations are writing to express our strong 
     support for S. 650, legislation establishing a Renewable 
     Fuels Standard (RFS) growing to 8 billion gallons by 2012. 
     This landmark legislation would increase the nation's energy 
     independence, protect air and water quality, provide 
     increased flexibility for refiners, and stimulate rural 
     economies through the increased production of domestic, 
     renewable fuels.

[[Page S3005]]

       The ethanol and biodiesel industries have undergone 
     unprecedented growth over the past several years. In fact, 
     the U.S. currently has the capacity to produce more than 3.7 
     billion gallons of ethanol and biodiesel, and plants under 
     construction will add an additional 700 million gallons of 
     capacity by the end of the year. Most of this growth has been 
     in farmer-owned plants, which taken as a whole, now represent 
     the single largest producer in the country. Clearly, the 
     renewable fuels industry is poised to make a significant 
     contribution to this nation's energy supply.
       With rising crude oil and gasoline prices hurting 
     consumers, and record petroleum imports exacerbating our 
     trade imbalance and slowing economic growth, we need to be 
     maximizing the production and use of domestic renewable fuels 
     such as ethanol and biodiesel. Enacting an RFS that would 
     provide a market of 8 billion gallons by 2012 demonstrates a 
     firm commitment to reducing this nation's foreign oil 
     dependence while providing a significant impact to the 
     American economy. Specifically (in 2005 dollars):
       The production and use of 8 billion gallons of ethanol, 
     biodiesel and other renewable fuels by 2012 will displace 
     over 2 billion barrels of crude oil and reduce the outflow of 
     dollars largely to foreign oil producers by $64.1 billion 
     between 2005 and 2012. As a result of the RFS, America's 
     dependence on imported oil will be reduced from an estimated 
     68 percent to 62 percent.
       The renewable fuels sector will spend an estimated $6 
     billion to build 4.3 billion gallons of new ethanol and 
     biodiesel capacity between 2005 and 2012.
       The renewable fuels sector will spend nearly $70 billion on 
     goods and services required to produce 8 billion gallons of 
     ethanol and biodiesel by 2012. Purchases of corn, grain 
     sorghum, soybeans, corn stover and wheat straw, alone will 
     total $43 billion between 2005 and 2012.
       The combination of this direct spending and the indirect 
     impacts of those dollars circulating throughout the economy 
     will:
       Add nearly $200 billion to GDP between 2005 and 2012.
       Generate an additional $43 billion of household income for 
     all Americans between 2005 and 2012, and
       Create as many as 234,840 new jobs in all sectors of the 
     economy by 2012.
       We urge your support of this important bill as the Congress 
     considers comprehensive energy policy legislation. The RFS is 
     a vital and necessary component of any energy policy designed 
     to reduce our nation's dependence on foreign sources of 
     petroleum.
           Sincerely,
         Renewable Fuels Association; American Farm Bureau 
           Federation; National Corn Growers Association; American 
           Soybean Association; National Grain Sorghum Producers; 
           American Coalition for Ethanol; National Biodiesel 
           Board; Energy Future Coalition; Biotechnology Industry 
           Organization; New Uses Council; National Sunflower 
           Association; United States Canola Association; Ethanol 
           Producers & Consumers; Environmental & Energy Study 
           Institute.

  Mr. OBAMA. Mr. President, I am pleased to join as a cosponsor of the 
Fuels Security Act of 2005, which sets a renewable fuels standard for 
the years 2006 to 2012.
  To lessen our dependence on foreign oil and strengthen our economy 
here at home, renewable fuels like ethanol ought to be a larger part of 
our domestic fuel supply. This bill will contribute to that objective, 
and I commend Senators Lugar and Harkin for their leadership in 
crafting this legislation.
  Yesterday, during the markup of a similar bill in the Senate 
Environment and Public Works Committee, I expressed strong support for 
establishing a meaningful renewable fuels standard as an important part 
of a comprehensive national energy policy. The bill before the 
Committee set targets at 3.8 billion gallons in 2006 and 6 billion 
gallons in 2012, improving upon last year's RFS provision in the energy 
bill conference report that set targets at 3.1 billion gallons and 5 
billion gallons, respectively.
  I voted for the chairman's mark yesterday because it gets the RFS 
debate rolling in the new Congress. However, I also noted that it has 
been widely reported in the trade press that the 30-state Governors 
Ethanol Coalition has recommended to the President that refiners be 
required to purchase a minimum volume of ethanol of at least 4 billion 
gallons in 2006, rising to 8 billion gallons in 2012. This 
recommendation adds weight to the view expressed by me and others that 
the committee's targets are too conservative.
  Why are these specific targets so important? They are important if we 
are to maximize the ethanol industry's ability to boost farm income by 
providing a new market for corn; to promote economic growth in rural 
communities by increasing production in existing plants and attracting 
investment in new community-sized ethanol facilities; and to reduce our 
alarming dependence on imported oil by expanding the volume of ethanol 
in our transportation fuel mix.
  These are important objectives. They matter. And that is why it is 
important to get the specific targets right.
  In committee yesterday, I suggested that since ethanol production is 
expected to reach 4 billion gallons this year, we ought to adjust the 
committee bill's RFS targets on the Senate floor to reflect current 
market reality. I am pleased that Chairman Inhofe seemed open to that 
debate.
  I think the Governors Ethanol Coalition recommendation of at least 4 
billion gallons in 2006 and 8 billion gallons in 2012 is a good place 
to start this debate. I think any RFS legislation enacted by Congress 
should contain these levels.
  That is why I am pleased to cosponsor the Fuels Security Act 
introduced by Senators Lugar and Harkin today. The ethanol volume 
targets in this bill--4 billion gallons in 2006 and 8 billion gallons 
in 2012--are in much greater alignment with expected ethanol production 
in future years than those in the Committee bill.
  Earlier this week, I had the opportunity to tour the Aventine ethanol 
plant in Pekin, IL. My visit reminded me of the work of a Pekin native 
more than 50 years ago. That person--Senator Everett Dirksen--
encouraged federal lawmakers to consider ``processing our surplus farm 
crops into an alcohol . . . to create a market in our own land for our 
own people.''
  Today, farmers across Illinois, including farmers near Pekin, are 
growing corn for fuel, both strengthening our energy security and 
providing an economic boost to rural communities. By enacting a 
meaningful RFS, we are displacing more foreign oil with homegrown 
energy. We are expanding the market for Illinois corn. And we are 
promoting the use of renewable fuel. Remember, unlike other energy 
sources, when you run out of ethanol, you can simply grow more.
  For too many years, America has been overly dependent on foreign oil 
to meet its domestic energy needs. And, despite rising crude oil prices 
and unsettling volatility in the Persian Gulf, that trend is 
increasing, not declining. Renewable fuels such as ethanol can help 
address this dangerous dependence on foreign oil. And a strong 
renewable fuels standard will maximize this contribution.
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