[Congressional Record (Bound Edition), Volume 157 (2011), Part 7]
[Senate]
[Pages 8975-8978]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                ETHANOL

  Mr. GRASSLEY. Mr. President, tomorrow afternoon we will vote on 
Senator Coburn's amendment dealing with ethanol.
  I come to the floor at this time to express my strong opposition to 
that amendment. Senator Coburn's amendment would raise the tax on 
domestic energy production. It would do this by repealing an incentive 
for the use of a home-grown renewable fuel called ethanol.
  With conflicts in the Middle East and crude oil priced at $100 a 
barrel or more, we should be on the same side. Let me make that clear. 
We have Middle East problems. We have crude oil priced at over $100 a 
barrel. Oil interests and biofuels interests, if both are domestically 
produced, should be on the same side of the energy issue.
  Why would anyone prefer less domestic energy production? In other 
words, why would anyone prefer importing more oil over domestically 
produced energy, whether it is fossil fuel or renewable? We should all 
be on the same side of more domestically produced energy.
  The tremendous cost of America's dependence upon foreign oil has 
never been more clear. I support drilling here and drilling now. I 
support renewable energy. I support conservation. I support nuclear 
energy. The reason I support different forms of energy and why we have 
to support more energy is that if we are going to have an expanding 
economy and create more jobs, we are obviously going to use more 
energy.
  Remember, I included conservation in my energy program. So the 
attacks on domestic energy are quite a remarkable thing happening right 
now, when gasoline is $4 a gallon. We are spending $835 million a day 
imported oil. So whether it is oil or renewable energy, we should not 
be fighting each other over any source of domestic energy. We should be 
fighting together against OPEC and these foreign dictators and oil 
sheiks--some of them hate the United States--from holding our economy 
hostage.
  The author of the amendment has argued that the production of clean, 
home-grown ethanol is fiscally irresponsible. It is important to 
remember that the incentive exists to help producers of ethanol to 
compete with the oil industry--in other words, to have a level playing 
field for all forms of energy.
  Remember, the oil industry has been well supported by the Federal 
Treasury for more than a century. The Senator from Oklahoma, the 
sponsor of the amendment, has touted with much fanfare a letter from 
oil companies that says they don't need or want the credit. It is my 
understanding that many of the oil refineries are no longer in the 
business of downstream ethanol blending and, subsequently, do not pay 
the excise tax on gasoline and do not benefit from the credit.
  Now, isn't it easy to be advocating repeal of something when you 
don't benefit from it? It is even easier to advocate for repeal when 
doing so would undercut your competition.
  It shouldn't surprise anyone that the oil refiners and Big Oil are 
advocating a position that would reduce the competitiveness of 
renewable ethanol. Refineries enjoy a cozy monopoly on our Nation's 
transportation fuel. They opposed the Renewable Fuels Standard because 
it cuts into their monopoly.
  Alternatively, if the members of the National Petrochemical and 
Refiners Association say they don't want or don't need the credit, then 
it is pretty simple: Don't take it. It is a tax credit which they must 
apply for to the Internal Revenue Service. If they don't want it and 
they don't need it, they shouldn't file for that credit with the 
Internal Revenue Service. I would be glad to work with the Senator from 
Oklahoma in getting the members of the National Petrochemical and 
Refiners Association to return the credit to the Federal Treasury. No 
one is forcing them to take the credit. Since they seem eager to return 
it, perhaps Senator Coburn and I can work together to get them to 
return it.
  If you like tight gasoline supplies and if you like $4 gasoline, join 
the campaign led by Big Oil and the National Petrochemical and Refiners 
Association. If you want less dependence on foreign oil and more use of 
homegrown, renewable fuels, support ethanol producers.
  The fact is, the portion of the industry that blends ethanol and 
sells it to the consumers supports maintaining this credit. The Society 
for Independent Gasoline Marketers of America, or SIGMA, recently wrote 
to the Senate majority leader and minority leader opposing efforts to 
prematurely

[[Page 8976]]

and abruptly eliminate the blender's credit:

       On behalf of our client, the Society of Independent 
     Gasoline Marketers of America, I write to you to oppose 
     efforts in Congress to prematurely and abruptly eliminate the 
     VEETC--that is the ethanol blenders credit.
       Increasing the tax paid on ethanol-blended gasoline makes 
     no sense at a time when consumer fuel prices are already high 
     and the need to maximize domestic energy sources is so very 
     critical.

  Very true at the time when gasoline is $4 a gallon.
  SIGMA's members account for 37 percent of the petroleum retail 
market. SIGMA works to promote competition in the marketplace to help 
keep consumer fuel costs down. This is contrary to the position of oil 
refiners who prefer no competition.
  I have further words from that letter.

       This incentive has been an extremely useful tool in helping 
     the Nation's fuel marketers and chain retailers deliver fuels 
     to the market at a competitive price.
       By providing long-term price competitiveness for ethanol-
     blended fuels, VEETC also helps provide assurances to 
     marketers and retailers that important infrastructure 
     investments necessary to deliver these fuels will continue to 
     provide returns, and not result in wasted improvements.
       Simply put, SIGMA opposes recent moves to prematurely or 
     abruptly end the subsidies without any consideration for 
     future fuel and fuel-delivery costs.
       To end this incentive immediately would no doubt result in 
     an immediate spike in consumers' fuel costs.
       SIGMA believes that a policy that provides an effective 
     transition for the industry from the current tax structure is 
     a better alternative to the slash and cut budget strategy 
     being promoted by some Members of Congress.

  I ask unanimous consent to have this letter printed in the Record at 
the conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. GRASSLEY. The Senator from Oklahoma also mentioned the total cost 
of the blender's credit as a reason for supporting repeal of VEETC. He 
claimed the American people will have spent $32 billion on this credit 
over the past 30 years. That may be the case.
  Again, I don't believe we should be debating ethanol incentives by 
themselves or in a vacuum. For comparison's sake, I wish to inform my 
colleagues of the cost and duration of a few oil subsidies.
  The Senator from Oklahoma has derided the 30-year-old ethanol 
blender's credit, arguing that the industry is mature. Well, what about 
our century-old oil industry? Don't forget, oil was discovered in 
Pennsylvania in 1859. We haven't had the incentives for that long, but 
according to the Government Accountability Office, the tax break 
allowing for the expensing of intangible drilling costs began in 1916, 
more than 95 years ago, and continues today. The percentage depletion 
allowance was enacted in 1926, 85 years ago, and it still exists today. 
After 95 years, is the domestic oil industry not mature?
  I know my colleagues will be interested in how much these two 
subsidies have cost the American people. A report issued by the General 
Accounting Office in the year 2000 looked at the subsidies for oil 
production. It reviewed the 32-year period between 1968 to 2000. During 
that timeframe, the intangible drilling subsidy cost the American 
people as much as $52 billion. The percentage depletion subsidy cost 
the American people $82 billion. So these two provisions, enacted 
nearly a century ago, cost the American people as much as $114 billion 
from 1968 through 2000. And this doesn't even include the subsidies 
during the past 11 years.
  Last month, we had a vote here in the Senate to repeal a number of 
these oil and gas tax provisions. Opponents of repealing oil and gas 
subsidies argued then, and I presume would argue today, that doing so 
would reduce domestic energy production and drive up our dependence on 
foreign oil. Opponents at that time also argued it would cost U.S. 
jobs, and increase prices at the pump for consumers.
  I happen to agree with those arguments. But if those arguments are 
good for oil, then they are good not just for ethanol but they are good 
for all sorts of green energy as well.
  Prices at the pump are nearly $4 a gallon. All of our constituents 
are crying out for action to lower these prices, so it makes sense that 
Congress would consider steps to address the rising energy costs and 
work to drive down the cost to consumers at the pump.
  That is not what the Coburn amendment would do. It would not drive 
down the cost at the pump at all. It would very likely lead to higher 
prices for consumers. It won't lead to the production of anymore 
energy. It won't create anymore jobs. It very well could lead to less 
domestic energy production and less employment in the U.S. energy 
sector; in other words, more unemployment and more dependence on 
foreign sources of energy.
  At a time of $4 gas and 9.1 percent unemployment, why would we in 
this body consider an amendment that will increase the cost of energy 
production, reduce domestic energy supply, and lead to job losses?
  Ethanol is reducing prices at the pump. A recent study by the Center 
for Agriculture and Rural Development found that ethanol is reducing 
the price at the pump by an average of 89 cents a gallon.
  The fact is, this amendment is not about reducing prices at the pump. 
The amendment before us is not about reducing our dependence on foreign 
oil. This amendment is about raising taxes. And one thing is for 
certain: If you raise taxes on any activity, you get less of it. That 
is a common economic principle.
  A taxpayer watchdog group considers a repeal of this tax incentive to 
be what it is, a tax hike. Americans for Tax Reform said, ``Repealing 
the ethanol credit is a corporate income tax increase.'' I agree.
  Now is not the time to impose a gas tax hike on the American people. 
Now is not the time to send pink slips to ethanol-related jobs.
  I know we all agree that we cannot and should not allow job-killing 
tax hikes during this time of economic uncertainty. What this Congress 
should be doing is increasing the domestic production of energy as a 
way to increase jobs, increase domestic investment, and lower prices at 
the pump. This amendment does none of those things, and actually it 
does exactly the opposite. A repeal of the ethanol tax incentive is a 
tax increase that will surely be passed on to the American consumers. 
Repealing incentives for ethanol would have the same exact result as a 
repeal of the oil and gas subsidies. We will get less domestically 
produced energy. It will cost U.S. jobs. It will increase our 
dependence upon foreign oil. It will increase prices at the pump for 
the American consumer.
  So why do my colleagues want to increase our foreign energy 
independence when we can produce it right here at home? I wish to ask 
my colleagues who voted against repealing the oil and gas subsidies but 
support repealing incentives on renewable fuels, why the inconsistency?
  Interestingly, the same oil and gas association that is lobbying for 
repeal of the ethanol incentive led the charge against raising taxes on 
the oil and gas industry. The president of the National Petrochemical 
and Refiners Association stated:

       Targeting a specific industry or even a segment of that 
     industry is what we would consider punitive and unfair tax 
     policy, and it is not going to get us increased energy 
     security, increased employment and certainly not going to 
     lower the price of gasoline.

  That is the end of the quote from the president of the National 
Petrochemical and Refiners Association.
  The fact is, it is intellectually inconsistent to say that increasing 
taxes on ethanol is justified but that it is irresponsible to do so on 
oil and gas production. If tax incentives lead to more domestic energy 
production and to good-paying jobs, why are only incentives for oil and 
gas important? It is even more ridiculous to claim that the 30-year-old 
ethanol industry is mature but the oil and gas industry, now over 100 
years old, is not. Regardless, I don't think we should be raising taxes 
on any type of energy production or on any individual, particularly 
when we have a very weak economy. This amendment is a tax increase.
  The Senator from Oklahoma also insists that because the renewable 
fuel is required to be used, it does not need an

[[Page 8977]]

incentive. But with oil prices at $100 a barrel, oil companies are 
doing everything they can to extract more oil from the ground. There is 
not a mandate to use oil but oil already has a 100-year-old monopoly on 
our transportation infrastructure. They want to maintain as much of 
that 100-year-old monopoly as they can right now. Right now, because 10 
percent of the energy used in cars is ethanol, they may only have a 90-
percent monopoly, but they sure have a lot to say about what goes into 
your gas tank without competition.
  When there is little competition to oil and it is enormously 
profitable, wouldn't that industry argue that the necessary incentives 
exist to produce it without additional taxpayer support? Oil 
essentially has a mandate today, and the economics of oil production 
are clearly in favor of producers.
  It is still unclear to me why we are having this debate on this bill. 
This is not an energy bill. It is not a tax bill. Its prospects in the 
Senate are uncertain. Maybe most important, if this amendment were 
attached to this bill, the entire bill would be blue-slipped by the 
House because revenue bills under our Constitution must originate in 
the House of Representatives, and this is not a House revenue bill we 
are working on.
  If we send it to the other body with this amendment, they will send 
it right back to us. It will be dead on arrival in the other body. So 
why are we having this debate on this bill? We should be debating this 
amendment in the context of a comprehensive energy plan. This debate 
should include a review of the subsidies for all energy production, not 
just for one of many renewable resources.
  I could ask: Why are we talking about this subsidy on ethanol when we 
are not talking about the subsidies on oil? Why should we be talking 
about this subsidy on one alternative energy, which is ethanol, but not 
talking about the subsidies for wind and solar and biomass and 
geothermal and I suppose a dozen other alternative energy sources that 
we have? It boils down to the fact that we should not be singling out 
ethanol. Nearly every type of energy gets some sort of market-
distorting subsidy from the Federal Government. I have indicated that 
at least for 95 years on one oil subsidy.
  An honest energy debate should include ethanol, oil, natural gas, 
nuclear, hydropower, wind, solar, biomass, and probably a lot of others 
that do not come to my mind at this particular time. In December, 2010, 
Congress enacted a 1-year extension of the volumetric ethanol excise 
tax credit--that, for short, goes by the acronym VEETC--but this is 
also known as the blenders' credit.
  This 1-year extension has allowed Congress and the domestic biofuels 
industry to determine the best path forward for Federal support of 
biofuels.
  As a result of these discussions, Senator Conrad and I introduced 
bipartisan legislation on May 4 that is a serious, responsible first 
step to reducing and redirecting Federal tax incentives for ethanol. 
Our bill will reduce VEETC to a fixed rate of 20 cents in 2012, and 15 
cents in 2013. It will then convert to a variable tax incentive for the 
remaining 3 years based upon the price of crude oil. When crude oil is 
more than $90 a barrel, there will be no blenders credit. When crude 
oil is $50 a barrel or less, the blenders credit would be 30 cents. The 
rate will vary when the price of crude is between $50 and $90 a barrel.
  When oil prices are high, a natural incentive should exist in the 
market to drive ethanol use. The bill also would extend through the 
year 2016 the alternative fuel refueling property credit, the 
cellulosic producers tax credit, and the special depreciation allowance 
for cellulosic biofuel plant property.
  Today, Senator Thune and Senator Klobuchar are introducing another 
bipartisan bill to immediately reduce and reform the ethanol tax 
incentive. It includes many of the same features as the bill I 
introduced last month, but it enacts the reforms this year. The 
approach of Senator Thune also leads to significant deficit reduction.
  The legislation we have introduced is a responsible approach that 
will reduce the existing blenders credit and put those valuable 
resources into investing in alternative fuel infrastructure, including 
alternative fuel pumps.
  It would responsibly and predictably reduce the existing tax 
incentive and help get alternative fuel infrastructure in place so 
consumers can decide at the pump which fuel they would prefer. I know 
that when the American consumers have their choice, they will choose 
domestic, clean, affordable renewable fuel. They will choose fuel from 
America's farmers and ranchers rather than from oil sheiks and foreign 
dictators. Both of the ethanol reform bills I mentioned are supported 
by the ethanol advocacy groups. In an almost unprecedented move, the 
ethanol industry is advocating for a reduction in their Federal 
incentives. No other energy industry, whether it is fossil fuels or 
renewables, has come to the table to reduce their subsidies. No other 
energy advocate has come to me with a plan to reduce their Federal 
support.
  In conclusion, I would like to address two points that ethanol 
opponents continue to make, despite facts to the contrary. First, 
ethanol and ethanol incentives are not a major factor in rising food 
and corn prices. The U.S. Secretary of Agriculture, Tom Vilsack, 
recently stated:

       During the great run-up in food and commodity prices in 
     2007 and 2008, biofuel production played only a minor role, 
     accounting for about 10 percent of the total increase in 
     global prices.

  But going back to that time or even more recently, listening to the 
big food manufacturers that are part of this coalition attacking 
ethanol, you would think the entire blame for the increase in the price 
of food is because of ethanol, even though ethanol consumes only 3 
percent of the coarse grain produced in the entire world. A recent 
report by the Center for Agriculture and Rural Development concluded 
that only 8 percent of the increase in corn prices from 2006 to 2009 
was due to ethanol subsidies. Further, they concluded that because of 
this small impact, it 
``. . . necessarily implies that the contribution of ethanol subsidies 
to food inflation is largely imperceptible in the United States.''
  Second, ethanol reduces greenhouse gas emissions significantly 
compared to gasoline. The fact is, under the renewable fuels standard 
created in 2007, corn ethanol was required to reduce greenhouse gas 
emissions compared to gasoline by at least 20 percent. The fact is, 
corn ethanol exceeded that threshold. If you remove EPA's use of the 
murky science surrounding emissions from indirect land use changes, 
ethanol reduces greenhouse gas emissions by 48 percent compared to 
gasoline.
  A recent peer-review study published in the Yale Journal of 
Industrial Ecology found that ethanol reduces greenhouse gas emissions 
by up to 59 percent compared to gasoline. Ethanol currently accounts 
for 10 percent of our gasoline fuel pool. A study found that the 
ethanol industry contributed $8.4 billion to the Federal Treasury in 
2009. That happens to be $3.4 billion more than the ethanol incentive. 
Today, the industry supports 400,000 U.S. jobs. That is why I support 
homegrown, renewable, reliable biofuels.
  I would rather our Nation be dependent upon renewable fuel producers 
across this country rather than relying on Middle Eastern oil sheiks or 
Hugo Chavez in Venezuela. None of those people like us, and some of 
them are using our own money to train terrorists to kill us. Instead, I 
would prefer we support our renewable fuel producers based right here 
in the continental United States. I would prefer we decrease our 
dependence on Hugo Chavez and not increase it. I certainly don't 
support raising the tax on gasoline during a weak economy.
  I encourage my colleagues to vote no on the motion to invoke cloture 
on the Coburn amendment.
  I yield the floor.

                               Exhibit 1


                                        Steptoe & Johnson LLP,

                                    Washington, DC, April 1, 2011.
     Hon. Harry Reid,
     Majority Leader, U.S. Senate, Washington, DC.
     Hon. Mitch McConnell,
     Minority Leader, U.S. Senate, Washington, DC.
       Dear Leaders Reid and McConnell: On behalf of our client, 
     the Society of Independent Gasoline Marketers of America,

[[Page 8978]]

     SIGMA, I write to urge you to oppose efforts in Congress to 
     prematurely or abruptly eliminate the Volumetric Ethanol 
     Excise Tax Credit or VEETC. Increasing the tax paid on 
     ethanol blended gasoline makes no sense at a time when 
     consumer fuel prices are already high and the need to 
     maximize domestic energy sources is so critical.
       As the national trade association representing America's 
     independent fuel marketers and chain retailers, SIGMA 
     represents an important and innovative part of the America's 
     fuel marketing industry. SIGMA's approximately 270 corporate 
     members command some 37 percent of the petroleum retail 
     market, selling 64 billion gallons of motor fuel each year. 
     For more than 50 years, SIGMA has supported the nation's fuel 
     marketers by encouraging policies that promote growth, 
     innovation, and fairness in the industry, and competition in 
     the marketplace to help keep consumer fuel costs down.
       As the leading marketers of ethanol-blended fuel at the 
     retail level, SIGMA's members and customers are the 
     beneficiaries of VEETC. This incentive has been an extremely 
     useful tool in helping the nation's fuel marketers and chain 
     retailers deliver fuels to the market at a competitive price. 
     By providing long term price competitiveness for ethanol 
     blended fuels, VEETC also helps provide assurances to 
     marketers and retailers that important infrastructure 
     investments necessary to deliver these fuels will continue to 
     provide returns, and not result in wasted improvements.
       Simply put, SIGMA opposes recent moves to prematurely or 
     abruptly end the subsidies without any consideration for 
     future fuel and fuel-delivery costs. To end this incentive 
     immediately would no doubt result in an immediate spike in 
     consumers' fuel costs. SIGMA believes that a policy that 
     provides an effective transition for the industry from the 
     current tax structure, is a better alternative to the slash 
     and cut budget strategy being promoted by some Members of 
     Congress.
       I thank you in advance for your support in this regard. If 
     you have any questions or wish to discuss this matter 
     further, please feel free to contact me.
           Sincerely,
                                              R. Timothy Columbus,
           General Counsel to the Society of Independent Gasoline 
                                             Marketers of America.

  The PRESIDING OFFICER. The Senator from New Jersey.

                          ____________________