[Congressional Record Volume 154, Number 91 (Wednesday, June 4, 2008)]
[Senate]
[Pages S5041-S5042]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mrs. FEINSTEIN (for herself, Mr. Gregg, Ms. Cantwell, Mr.
Allard, and Ms. Collins):
S. 3080. A bill to ensure parity between the temporary duty imposed
on ethanol and tax credits provided on ethanol; to the Committee on
Finance.
Mrs. FEINSTEIN. Mr. President, I rise to introduce the Imported
Ethanol Parity Act of 2008.
This legislation is cosponsored by Senators Gregg, Cantwell, Allard
and Collins.
First, let me explain what this bill does. The Imported Ethanol
Parity Act instructs the President to lower the ethanol import tariff,
so that it is no higher than the subsidy for blending ethanol into
gasoline.
This legislation is necessary because the Farm Bill extended the
tariff for two more years at $0.54 per gallon, even though the Farm
Bill reduced the ethanol blending subsidy to $0.45 per gallon.
In effect, the Farm Bill has turned the tariff from an ``offset''
into a true trade barrier of at least $0.09 per gallon.
The Ethanol tariff poses many problems.
It increases the cost of Gasoline in the United States by making
ethanol more expensive.
It prevents Americans from importing ethanol made from sugarcane.
Sugar ethanol is the only available transportation fuel that works in
today's cars and emits considerably less lifecycle greenhouse gas than
gasoline;.
It taxes imports from our friends in Brazil, India, and Australia,
while oil and gasoline imports from OPEC enter the United States tax
free.
It hinders the emergence of a global biofuels marketplace through
which countries with a strong biofuel crop could sell fuel to countries
that suffered drought or other agricultural difficulties in the same
crop year. Such a global market would permit mutually beneficial trade
between producing regions and stabilize both fuel and food prices.
It makes us more dependent on the Middle East for fuel when we should
be increasing the number of countries from whom we buy fuel. When it
comes to energy security for the United States, which has less than 3
percent of proven global oil reserves and 25 percent of demand, we must
diversify supply.
Bottom Line: until the tariff is lowered, the United States will tax
the only fuel it can import that increases energy security, reduces
greenhouse gas emissions, and lowers gasoline prices.
In 2006 I introduced legislation to eliminate the ethanol tariff
entirely, and in 2007 I cosponsored an amendment to the Energy Bill
which would have eliminated the tariff.
The Imported Ethanol Parity Act is a different proposal that I
believe addresses the concerns of tariff defenders.
The advocates of the $0.54 per gallon tariff on ethanol imports have
always argued that the tariff is necessary in order to offset the
blender subsidy that applies to the use of all ethanol, whether
produced domestically or internationally. They argue that the ethanol
subsidy exists to support American farmers who produce ethanol at
higher cost than foreign producers.
For instance, on May 6, 2006, the Chairman of the Senate Finance
Committee stated on the Senate floor that, ``the U.S. tariff on ethanol
operates as an offset to an excise tax credit that applies to both
domestically produced and imported ethanol.''
On May 9, 2006, the Renewable Fuels Association stated in a press
release: ``the secondary tariff exists as an offset to the tax
incentive gasoline refiners receive for every gallon of ethanol they
blend, regardless of the ethanol's origin.''
In a letter to Congress dated June 20, 2007, the American Coalition
for Ethanol, the American Farm Bureau Federation, the National Corn
Growers Association, the National Council of Farmer Cooperatives, the
National Sorghum Producers, and the Renewable Fuels Association stated
that the ``(blender) tax credit is available to refiners regardless of
whether the ethanol blended is imported or domestic. To prevent U.S.
taxpayers from subsidizing foreign ethanol companies, Congress passed
an offset to the tax credit that foreign companies pay in the form of a
tariff.''
Just this month, the Renewable Fuels Association's Executive Director
asserted that ``The tariff is there not so much to protect the industry
but the U.S. taxpayer.''
Bottom Line: the tariff cannot be justifiably maintained at $0.54 per
gallon if its intent is to offset a $0.45 per gallon blender subsidy,
and it should be reduced.
Ethanol from Brazil or Australia should not have to overcome a trade
barrier that no drop of OPEC oil must face.
Tariff defenders either should support this legislation or explain
how a tariff can justifiably be higher than the subsidy it is designed
to offset.
Climate Change is the most significant environmental challenge we
face, and I believe that lowering the ethanol tariff will make it less
expensive for the United States to combat global warming.
The fuel we burn to power our cars is a major source of the
greenhouse gas emissions warming our planet. To reduce this impact, we
need to increase the fuel efficiency of our vehicles and lower the
lifecycle carbon emissions of the fuel itself.
For this reason, in March 2007, I introduced the Clean Fuels and
Vehicles Act with Senators Olympia Snowe and Susan Collins.
The legislation proposed a ``Low Carbon Fuels Standard,'' which would
require each major oil company selling gasoline in the United States to
reduce the average lifecycle greenhouse gas emissions per unit of
energy in their gasoline by 3 percent by 2015 and by 3 percent more in
2020.
The legislation was modeled on the state of California's Low Carbon
Fuels Standard, which also requires a reduction in the lifecycle
greenhouse gas emissions from transportation fuels.
This concept became a major aspect of the Energy Independence and
Security Act of 2007, in which Congress required oil companies to use
an increasing quantity of ``advanced biofuels'' that produce at least
50 percent less lifecycle greenhouse gas than gasoline.
Unfortunately the ethanol tariff puts a trade barrier in front of the
lowest carbon fuel available, making it considerably more expensive for
the United States to lower the lifecycle carbon emissions of
transportation fuel.
The lifecycle greenhouse gas emissions of ethanol vary depending on
production methods and feedstocks, and these differences will impact
the degree to which ethanol may be used to meet ``low-carbon'' fuel
requirements under California law and the Energy Independence and
Security Act of 2007.
For instance, sugar cane ethanol plants use biomass from sugar stalks
as process energy, resulting in less fossil fuel input compared to
current corn-to-ethanol processes. By comparison, researchers at the
University of California concluded that ``only 5 to 26 percent of the
energy content (in corn ethanol) is renewable. The rest is primarily
natural gas and coal,'' which are used in the production process.
The 2007 California Energy Commission Report entitled Full Fuel Cycle
Assessment: Well-to-Wheels Energy Inputs, Emissions, and Water Impacts
[[Page S5042]]
concluded that the direct lifecycle greenhouse gas emissions of
imported sugar based ethanol are 68 percent lower than gasoline, while
the direct lifecycle greenhouse gas emissions of corn based ethanol
from the Midwest are 15 to 28 percent lower than gasoline.
Further research released in 2008 suggests that the lifecycle
greenhouse gas emissions of corn based ethanol may be higher than
gasoline, when land use change is factored into the equation.
The bottom line: biofuels that protect our planet may be produced
abroad, and we should not put tariffs in front of these fuels, while we
import crude oil and gasoline tariff free.
Energy and food prices are both rising at unprecedented rates, and
there is a great deal of debate about whether the renewable fuels
standard mandating ethanol use is causing the problem.
I have always opposed corn ethanol mandates. But I remain concerned
that the blending subsidy and the ethanol tariff have as much to do
with rising corn prices as the ethanol mandate.
Corn ethanol production has considerably exceeded the renewable fuels
standard every year since its adoption in 2005. With oil prices this
high, it is profitable to produce ethanol at record corn prices with or
without the mandate. The low value of renewable fuels standard credits,
known as RINs, confirms that using ethanol is not a burden for oil
companies.
To address the rising cost of corn, we have to address the underlying
economics of corn ethanol production, and effectively increasing the
tariff on imports, as the Farm Bill has done, is a step in the wrong
direction.
This legislation corrects the Farm Bill's mistaken policy that
imposed a real trade barrier on clean and climate friendly ethanol
imports, giving gasoline imports a competitive advantage over cleaner
fuel that simply should not exist at a time we are trying to combat
climate change.
It prevents ethanol producers abroad from receiving American ethanol
subsidies, which is supposedly the intent of the ethanol tariff.
I think it strikes the right balance, and I urge Congress to pass
this legislation.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 3080
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Imported Ethanol Parity
Act''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) On May 6, 2006, the Chairman of the Finance Committee
of the Senate stated on the Senate floor that, ``the United
States tariff on ethanol operates as an offset to an excise
tax credit that applies to both domestically produced and
imported ethanol.''.
(2) On May 9, 2006, the Renewable Fuels Association stated:
``the secondary tariff exists as an offset to the tax
incentive gasoline refiners receive for every gallon of
ethanol they blend, regardless of the ethanol's origin.''. In
May 2008, the Renewable Fuels Association's Executive
Director asserted that ``The tariff is there not so much to
protect the industry but the United States taxpayer.''.
(3) In a letter to Congress dated June 20, 2007, the
American Coalition for Ethanol, the American Farm Bureau
Federation, the National Corn Growers Association, the
National Council of Farmer Cooperatives, the National Sorghum
Producers, and the Renewable Fuels Association stated that
the ``(blender) tax credit is available to refiners
regardless of whether the ethanol blended is imported or
domestic. To prevent United States taxpayers from subsidizing
foreign ethanol companies, Congress passed an offset to the
tax credit that foreign companies pay in the form of a
tariff.''.
(4) The Food, Conservation, and Energy Act of 2008, as
contained in the Conference Report to accompany H.R. 2419 in
the 110th Congress, proposes to decrease the excise tax
credit for blending ethanol from $0.51 to $0.45 per gallon,
but extend the $0.54 per gallon temporary duty on imported
ethanol, increasing the competitive disadvantage of ethanol
imports in the United States marketplace. The legislation
would transform a tariff designed to offset a domestic
subsidy into a real import barrier of at least $0.09 per
gallon.
(5) The State of California is adopting a Low Carbon Fuels
Standard that requires a reduction in the lifecycle
greenhouse gas emissions from transportation fuels, and the
Energy Independence and Security Act of 2007 requires the
United States to use increasing quantities of ``advanced
biofuels'' that have lifecycle greenhouse gas emissions that
are at least 50 percent less than lifecycle greenhouse gas
emissions from gasoline.
(6) The lifecycle greenhouse gas emissions of ethanol vary
depending on production methods and feedstocks. These
differences will impact the degree to which ethanol may be
used to meet ``low-carbon'' fuel requirements under
California law and the Energy Independence and Security Act
of 2007.
(7) Sugar cane ethanol plants use biomass from sugar stalks
as process energy, resulting in less fossil fuel input
compared to current corn-to-ethanol processes.
(8) The 2007 California Energy Commission Report, entitled
``Full Fuel Cycle Assessment: Well-to-Wheels Energy Inputs,
Emissions, and Water Impacts'', concluded that the direct
lifecycle greenhouse gas emissions of imported sugar based
ethanol are 68 percent lower than gasoline, while the direct
lifecycle greenhouse gas emissions of corn based ethanol from
the Midwest are 15 to 28 percent lower than gasoline.
(9) The cost to ship ethanol by sea from foreign production
areas to California is competitive with the cost to ship
ethanol by rail from the American Midwest, according to
ethanol producers and importers.
(10) Ethanol production will vary from region to region
each year based on crop performance, and a global biofuels
marketplace would permit mutually beneficial trade between
producing regions capable of stabilizing both fuel and food
prices.
(11) In March 2007, the United States and Brazil entered
into a strategic alliance to cooperate on advanced research
for biofuels, develop biofuel technology, and expand the
production and use of biofuels throughout the Western
Hemisphere, especially in the Caribbean and Central America.
(12) On March 9, 2007, President Bush stated ``it's in the
interest of the United States that there be a prosperous
neighborhood. And one way to help spread prosperity in
Central America is for them to become energy producers.''.
(13) According to a February 2008 study by the
Massachusetts Institute of Technology, titled ``Biomass to
Ethanol: Potential Production and Environmental Impacts'',
the current ethanol distribution system in the United States
is not capable of efficiently supplying ethanol to the East
Coast markets.
SEC. 3. ETHANOL TAX PARITY.
Not later than 30 days after the date of the enactment of
this Act, and semiannually thereafter, the President shall
reduce the temporary duty imposed on ethanol under subheading
9901.00.50 of the Harmonized Tariff Schedule of the United
States by an amount equal to the reduction in any Federal
income or excise tax credit under section 40(h), 6426(b), or
6427(e)(1) of the Internal Revenue Code of 1986 and take any
other action necessary to ensure that the temporary duty
imposed on ethanol under such subheading 9901.00.50 is equal
to, or lower than, any Federal income or excise tax credit
applicable to ethanol under the Internal Revenue Code of
1986.
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