[Congressional Record (Bound Edition), Volume 157 (2011), Part 3]
[Senate]
[Pages 3707-3708]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     ETHANOL SUBSIDIES AND TARIFFS

  Mrs. FEINSTEIN. Mr. President, I have introduced legislation, with my 
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.

[[Page 3708]]

  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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