[Congressional Record Volume 157, Number 36 (Thursday, March 10, 2011)]
[Senate]
[Pages S1543-S1544]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ETHANOL SUBSIDIES AND TARIFFS
Mrs. FEINSTEIN. Mr. President, I have introduced legislation, with my
[[Page S1544]]
colleague Senator Webb, to repeal corn ethanol subsidies and reduce
ethanol tariffs.
This legislation has two major provisions.
First, it repeals the 45 cent per gallon corn ethanol blender
subsidies--26 U.S.C. 6426(b) and 26 U.S.C. 40(h)--as of July 1, 2011,
eliminating the corn ethanol subsidy six months early and saving
approximately $3 billion for American taxpayers.
The bill would not affect the credit for noncorn, second generation
``advanced biofuels'' through 2011.
Second, the bill would lower the tariff on imported ethanol to the
per gallon level of ethanol subsidies, to reestablish parity between
the subsidy and the offsetting tariffs.
This removes the real trade barrier on imported ethanol, but also
prevents foreign producers from benefitting from U.S. subsidies.
This legislation is necessary because the 54 cent-per-gallon tariff
on ethanol imports and the 45 cent-per-gallon corn ethanol subsidy are
fiscally irresponsible and environmentally unwise.
And their recent, 1-year extension in December 2010 made our country
more dependent on foreign oil.
Subsidizing blending ethanol into gasoline is fiscally indefensible.
If the current subsidy were to exist through 2014 as the industry has
proposed, the Federal Treasury would pay oil companies at least $31
billion to use 69 billion gallons of corn ethanol that the Federal
Renewable Fuels Standard already requires them to use under the Clean
Air Act.
We cannot afford to pay industry for following the law.
According to this month's Government Accountability Office report on
``Opportunities to Reduce Potential Duplication in Government Programs,
Save Tax Dollars, and Enhance Revenue'':
The ethanol tax credit and the renewable fuel standard can
be duplicative in stimulating domestic production and use of
ethanol, and can result in substantial loss of revenue to the
Treasury.
GAO found that the ethanol tax credit, which will cost about $5.7
billion in 2011, is largely unneeded to ensure demand for domestic
ethanol production.
The agency recommends that Congress reconsider the necessity of the
tax credit, given the effectiveness of the renewable fuel standard,
which is administered by EPA.
This legislation would simply implement the GAO's recommendation by
repealing this wasteful subsidy 6 months early.
In addition, this legislation would address the tariffs on ethanol
that make our country more dependent on foreign oil.
The combined tariffs on ethanol are 11 to 15 cents per gallon higher
than the ethanol subsidy it supposedly offsets, and this lack of parity
puts imported ethanol at a competitive disadvantage against imported
oil.
This discourages imports of low carbon biofuel from Brazil, India,
Australia, and other sugar producing countries, and it leads to more
oil and gasoline imports from OPEC countries that enter the United
States tariff-free.
Reducing the ethanol tariff will diversify our fuel supply, replace
oil imports from OPEC countries with low carbon biofuel from our
allies, and expand our trade relationships with democratic states.
The data overwhelmingly demonstrate that the costs of the current
corn ethanol subsidy and tariff far outweigh the benefits.
The Center for Agricultural and Rural Development at Iowa State
University recently estimated that a 1-year extension of the ethanol
subsidy and tariff would lead to only 427 additional direct domestic
jobs at a cost of almost $6 billion, or roughly $14 million of taxpayer
money per job.
According to a July 2010 study by the Congressional Budget Office,
ethanol tax credits cost taxpayers $1.78 for each gallon of gasoline
consumption reduced, and $750 for each metric ton of carbon dioxide
equivalent emissions reduced.
The ethanol subsidy and the ethanol tariffs also threaten our
environment.
They support and protect significantly more corn production in the
Mississippi River watershed, which experts believe is a primary cause
of a ``dead zone'' in the Gulf of Mexico.
The current ethanol subsidy lacks any requirement that the subsidized
fuel lead to a reduction in greenhouse gas pollution.
And the tariff on ethanol imports also prevents greater use of
imported ethanol made from sugarcane.
Both the U.S. Environmental Protection Agency and the California Air
Resources Board agree that putting sugarcane ethanol in our current
cars and trucks results in the least greenhouse gas pollution, of all
widely available options.
In contrast, the legislation I am introducing would--for the first
time--limit subsidies only to ``advanced biofuels'' that reduce
pollution at least 50 percent and are produced from noncorn biomass,
such as cellulose, switchgrass, or algae.
And it would level the playing field for low carbon biofuel imports,
which must compete against dirty oil from OPEC.
Historically our government has helped a product compete in one of
three ways: subsidize it, protect it from competition, or require its
use.
To my knowledge, corn ethanol is the only product receiving all three
forms of support from the U.S. government at this time.
By eliminating ethanol subsidies and trade barriers, this legislation
would produce a smaller budget deficit; a healthier Gulf of Mexico
ecosystem; less global warming pollution; and reduced dependence on
imported oil.
I look forward to working with my colleagues to advance responsible
energy tax policies that reduce pollution, create jobs, and improve our
international relationships.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 530
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. ETHANOL ELIGIBLE FOR BLENDER INCOME TAX AND FUEL
EXCISE TAX CREDITS.
(a) Income Tax Credit.--Section 40(h) of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new paragraph:
``(4) Ethanol eligible for credit.--In the case of any sale
or use for any period after June 30, 2011, this subsection
shall apply only to ethanol which qualifies as an advanced
biofuel (as defined in section 211(o)(1)(B) of the Clean Air
Act (42 U.S.C. 7545(o)(1)(B))).''.
(b) Excise Tax Credit.--Section 6426(b) of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new paragraph:
``(7) Ethanol eligible for credit.--In the case of any
sale, use, or removal for any period after June 30, 2011, no
credit shall be determined under this subsection with respect
to an alcohol fuel mixture in which any of the alcohol
consists of ethanol unless the ethanol qualifies as an
advanced biofuel (as defined in section 211(o)(1)(B) of the
Clean Air Act (42 U.S.C. 7545(o)(1)(B))).''.
(c) Effective Date.--The amendments made by this section
shall apply to any sale, use, or removal for any period after
June 30, 2011.
SEC. 2. ETHANOL TARIFF-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 combined temporary
duty imposed on ethanol under such subheading 9901.00.50 and
any other duty imposed under the Harmonized Tariff Schedule
of the United States 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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