[Congressional Record (Bound Edition), Volume 157 (2011), Part 7]
[Senate]
[Pages 8996-8998]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                ETHANOL

  Mr. THUNE. Mr. President, the Senator from Oklahoma has a strongly 
held view about ethanol, particularly on this issue, on the VEETC, and 
I understand that. I understand there are Members who would like to see 
that particular tax credit go away. I understand that.
  What the Senator from Minnesota and I have come up with is a way for 
them to achieve that objective, but it does it in a way that is 
reasonable, measured, and which doesn't totally, in the middle of the 
year, abruptly disrupt an industry and all of the investment that has 
been made.
  The question I ask my colleague is, does our word mean anything 
around here? We passed this in December. There were 81 Senators who 
voted for a package of tax extenders, one of which was the volumetric 
ethanol excise tax credit. Eighty-one Senators are on record. If you 
want to do away with it, there are lots of ways you can do that. But 
the way the Senator from Oklahoma is proposing to do that is to say, 
tomorrow let's pass this and end it. It is $2.5 billion we can save the 
taxpayers. Well, about $500 million a month is about what this is going 
to cost. With every month that goes by, there is a little less 
available to the taxpayer.
  What we are saying is that we put in a billion dollars today into 
this proposal that would go toward debt retirement, and we phase out 
the tax credit to which the Senator from Oklahoma refers, and we take a 
very forward-looking, futuristic-type view toward ethanol production in 
this country, biofuel production in this country. We are going to be 
capped out at 15 billion gallons, which is the RFS, the renewable fuel 
standard to which the Senator from Oklahoma referred. We are going to 
hit that. Then we have to get to the next generation of biofuels.
  With all due respect to my colleague from Oklahoma, methanol is not a 
realistic option. You would have to retool every plant in this country. 
We have 204 plants in America today that, directly or indirectly, 
employ 500,000 Americans. Those are the jobs that are impacted. We have 
had policy on the books now for nearly 30 years that has encouraged the 
investment in these plants on the belief that we need to get beyond 
dependence on foreign sources of energy. That ought to be our energy 
policy, and we ought to be looking to producing more.
  I am for oil and gas. The reason I voted against the proposals 
leveled a couple weeks ago that would have targeted the oil and gas 
industry is because I think we need all forms of energy--oil and gas, 
clean coal, biofuels, nuclear, and we need any form of energy we can 
generate and produce in the United States. I am for it. That is why I 
think the future of this industry is still very bright, because I think 
there is an advanced biofuels future out there, and a cellulosic 
ethanol, next-generation ethanol, whatever you want to call it, where 
we can make it from switch grass, from blue stem grass, from corn 
stover, and these types of products. That is out there. But you don't 
get there unless you have a corn-based platform to start with.
  The Senator talked about a renewable fuel standard and talked about 
this being redundant public policy. One of our colleagues from South 
Carolina introduced an amendment to this bill that would end that. I 
assume--I don't know this for a fact--that my colleague from Oklahoma 
would support that amendment, which would do away with the renewable 
fuel standard.
  Mr. COBURN. Will the Senator yield?
  Mr. THUNE. Certainly.
  Mr. COBURN. The Senator obviously didn't hear what I said. I said I 
support ethanol, and I would not support that. I have been upfront with 
the Senator in the past, and you know my position on that.
  So the question here--and I ask him a question: How do you fit what 
the people who would get this $3 billion, who the Senator says they 
don't want--why would they say that if it is going to have a negative 
impact on their industry?

  Mr. THUNE. Well, I say to my colleague from Oklahoma that I was not 
aware he said he supports ethanol. I was not aware he supports the RFS. 
If there is an amendment offered to strike the RFS, which there will 
be--am I wrong in saying the Senator would oppose that amendment?

  Mr. COBURN. I will oppose that amendment. My worry is because of the 
process of the Senate, we may not get that amendment to vote on. My 
colleague, as part of our leadership, would recognize that we have a 
problem with amendments.

  Mr. THUNE. I don't disagree with that. There is an issue I have not 
argued. It is your prerogative to bring this up and file cloture, which 
you have done in this circumstance. I think the renewable fuels 
standard that creates the sort of policy construct we are talking about 
here today is one aspect of the biofuels policy going forward. The 
other aspect, going back for long time, historically, is the blenders 
credit.

  I will tell you--because the statement you made is all the people who 
get this don't want it--well, that is not true. The large integrated 
oil companies, which are also refiners and, in many cases, retailers of 
refined gasoline, don't want it, maybe. I understand you have a letter 
to that effect. But there are lots of smaller refiners who do want it.

  There are also an awful lot of--the blenders credit gets passed on to 
the retailer, which gets passed on to the consumer, hopefully. The 
people who will be impacted by this are not just the large integrated 
oil companies. If you talk about the large integrated oil companies, 
saying they don't want this--they said in hearings before congressional 
committees a few years ago they didn't want the oil subsidies they get 
in the Tax Code today. They are on the record saying that. Yet we voted 
to keep those in place just a few weeks ago.

  Mr. COBURN. Will the Senator yield?


  Mr. THUNE. Yes.

  Mr. COBURN. Would the Senator define what a subsidy is to him, 
because part of the problem with the debate is that we keep saying 
``subsidies.'' We don't have subsidies--not in the Senator's State or 
in Oklahoma. We have accelerated depreciation, which even if you took 
that away, the dollars to the Federal Government would not increase. 
How is there a subsidy to the oil and gas industry?

  Mr. THUNE. When we characterize what you called tax expenditures, 
there are a bunch that fall into that category. I know the Senator is 
familiar with that as he served on the President's debt commission. It 
is about $1.1 trillion a year. In some way or another, we reduce the 
tax liability of various individuals and businesses around the country. 
I don't disagree with you. In fact, I will work with the Senator on a 
proposal that would address this and look at all those types of tax 
expenditures.

  I think it is punitive to single out one and say we are going to kill 
this one, after we committed in December, with 81 votes, that we are 
for this. I don't know how we can, in good faith, go to this industry, 
which employs 500,000 Americans, and say we are going to pull the rug 
out from under you after 6 months.
  That being said, I would characterize it as anything that reduces the 
tax liability that is public policy. I think it

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is characterized as tax expenditures. The oil depletion allowance and 
the intangible drilling costs--those are all things that are unique to 
the oil industry.

  Mr. COBURN. Does it include charitable contributions--a subsidy, the 
same category?

  Mr. THUNE. If it is under the definition of tax expenditure, sure. 
Oil depletion allowances and intangible drilling costs are 
characterized, for subsidy purposes, the same way as the ethanol tax 
credit. We have lots of what we would characterize as tax credits and 
earned income tax credits in the Tax Code. We have lots of what is 
characterized as tax expenditures. You may characterize it differently, 
and that is accelerated depreciation, but in fact for the purposes of 
description, as we describe things here, it fits into that category.

  The oil industry came in front of congressional committees and said 
they didn't want those. So for them to say they don't want this 
particular blenders credit--and my view certainly isn't determinative, 
but I think the large integrated oil companies that get the blenders 
credit also view ethanol as a threat. Like it or not, today the only 
viable alternative to petroleum--the only one we have--is 10 percent of 
our fuel supply in this country.

  I am not debating the Senator from Oklahoma about whether the merits 
of this particular policy--at least in its current form--should not be 
transformed and should be reformed; I am saying that we should. I have 
come to the Senator with a proposal to do that. That is not something, 
obviously, that he agrees to. That is fine. He is entitled to not 
support that. But I believe we ought to reform it. I think the way we 
reform it is do it in a reasonable way that doesn't cut it off tomorrow 
but, rather, phases it out.

  I think that for the Senator from Oklahoma, to me, it is something 
that is a win for him as well. He gets what he wants. He gets the 
phaseout, plus $1 billion in debt reduction, and if this thing goes to 
the end of the year, we get zero. We get goose-egged.

  This thing expires at the end of the year. Whether it gets extended 
or not remains to be seen. But one thing we know with certainty is that 
I am putting a proposal on the table today that gets $1 billion in 
reduction, that provides some certainty at least in phasing out the 
VEETC and also makes an investment in blender pumps, which is something 
that is very important to the future of the industry.

  So I think it is a reasonable way to deal with this issue.

  The Senator from Oklahoma and I have a disagreement, and that is 
probably not going to change. But I am offering what I think is a 
reasonable proposal that gets you where you want to end up and I think 
also is a way in which we can keep this industry from having the rug 
pulled out from under them after we made a commitment to them in 
December of last year.

  Mr. President, I yield the floor.

  The PRESIDING OFFICER. The Senator from Oklahoma

  .Mr. COBURN. Mr. President, let me make a couple of points.

  When the Federal Government writes a tax credit, that means we take 
money from our Treasury, which is empty; therefore, we borrow it, and 
we write a check to people. When we have an ``accelerated 
appreciation,'' what we do is allow people to pay less back in, a big 
difference.

  How many of the ethanol refineries and blenders are not represented 
by this group? It is about 11 percent. They all reside in the upper 
Midwest. That is why there is such a resistance to it.

  When I met with the representatives of the ethanol industry, the 
reason they don't want the credit to go away is because they are afraid 
that they won't be able to drive as hard a bargain with the large 
blenders of gasoline, that they will actually be able to determine what 
their grind cost is--in other words, what their true cost is.

  The difference between what the Senator from Minnesota and the 
Senator from South Dakota offer is $2 billion. That is the only 
difference. Theirs is just denial and spend $1 billion on pumps and 
infrastructure--money we don't have--and mine is to say quit doing it 
because we are going to blend the ethanol anyway. That is the only 
difference in the two programs. One continues to subsidize noneconomic 
blenders, obviously, because they want it--a very small portion. But 
the vast majority of people are producing ethanol-blended gasoline. And 
they say: How did they ever get to the point in our country where the 
Federal Government is going to tell you that you have to buy a gasoline 
that is only 65 percent as efficient as the gasoline you were buying? 
And, oh, by the way, because it is only 65 percent efficient, it 
actually pollutes more. That is why in this list of people supporting 
this are all the environmental groups, because they know it is bad 
policy.

  The reason I support a mandated level of ethanol is that until we 
have a cogent drilling policy in this country that says we are going to 
actually utilize our own resources, we need to keep ethanol. But what 
really ought to happen is we ought to let markets determine it. We will 
all be better off. We will have less government regulation, we will 
have less Tax Code expenditure and the markets will determine what the 
most efficient product is by what people will buy--what people will 
buy, what they want to buy. It is called freedom.

  We have gotten ourselves in this mix where, actually, what people 
don't realize is we are down to only 47 percent of our oil coming into 
this country is coming from outside now. We have moved from 62 down to 
47 percent, and the reason is because the oil and gas industry has 
actually gone out there and found an environmentally smart way to 
produce tons of gas liquids, which are easier to convert into fuel than 
anything--easier than oil, easier than any other product we have.

  So the Senator didn't really answer why the people who are getting 
the money don't want it and yet we should continue sending it to them.
  Ask yourself the question. We are broke, we are going to run a $1.4 
or $1.5 or $1.6 trillion deficit this year and here is a way to save $3 
billion, and the people we are going to send the money to--and borrow 
the money to be able to send it to them--don't want it. Yet they cannot 
answer why they do not want it. This represents 97 percent of all the 
blending in the country. They don't want the money and we are going to 
sit here as a body and continue to send them money they do not want? Go 
home and explain that to your constituents.

  From which child are we going to take opportunity because we do not 
have the courage to do the smart thing? We have a mandate. They have to 
blend it. They are making a ton of money.

  One final point, and I will let the Senate staff go home. Every time 
you go home to buy a gallon of gasoline today, the price you pay at the 
pump is not the price you pay. If you look at all the subsidies that 
are going to ethanol, when you go look at that $3.75--or that $4 around 
here, $3.50 in Oklahoma and Colorado--add $1.72 per gallon to it 
because that is what you paid in terms of the government support for 
the ethanol program in terms of subsidies, $1.72 a gallon. You buy it 
for $3.50, add $1.72, and you are paying $5.22 a gallon. You just don't 
know that we have picked your pocket through the government 
expenditures. Out of your taxes you paid, we pay them $1.72 per gallon. 
It makes no sense. What this does is eliminate 45 cents of that. It 
doesn't take it all away, the grants and the loans, the low-interest 
loans.

  The other thing people do not recognize is most of the ethanol 
plants, even with this subsidy, have been bought out because they were 
not economical because they did not know how to run them. That is why 
most of them ended up with the large companies, because they did not 
know how to run them, they were not efficient, and now they are 
profitable even without the blenders credit.

  It is a simple question: Do we save $3 billion or save $1 billion? I 
tell you, with what is in front of us as a Nation

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with our $14.3 trillion debt, I am going to opt for the kids who follow 
us and the grandkids. I am going for the $3 billion, not $1 billion.

  I yield the floor.


  

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