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Letter to The Honorable George W. Bush President of the United States

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Date:
Location: Washington, DC


Letter to The Honorable George W. Bush President of the United States

May 9, 2006

The Honorable George W. Bush
President of the United States
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President:

We are greatly concerned about your sending mixed messages to the American people, the renewable fuels industry and Congress with respect to the promotion of domestic biofuels. As you know, the country is mired in a gas price crisis, and imports of petroleum are going up, not down. The Energy Information Administration of the U.S. Department of Energy currently projects we will import as much as 70 percent of our petroleum needs by 2030.

This is not the time to call into question the role that home-grown renewable fuels can play in reducing prices at the pump and our dangerous dependence on foreign oil. We welcome your statements in support of ethanol and biofuels, but we disagree with your suggestion to an audience of renewable fuels advocates last month that ethanol is partly responsible for the run-up in gasoline prices. In fact, ethanol makes up a fraction of the cost of a gallon of gasoline, the majority of which is the international price of crude oil, now hovering in the $70-75 per barrel range. In fact, if not for the increasing supply of ethanol in the marketplace, prices would be even higher.

To the extent the phase-out of MTBE may contribute to higher gasoline prices in some cases, that situation developed because the petroleum industry insisted on continuing to use MTBE, despite its known environmental risks, instead of making an orderly transition to ethanol much sooner. Now that those companies have finally realized that Congress is not going to exempt them from liability for MTBE's environmental damages, they are switching to ethanol. That is not the fault of the ethanol industry. Hence we see no justification for waiving air quality standards, as you have suggested, simply because the petroleum industry has thus far favored MTBE and disfavored ethanol.

Last week you called for repealing the tariff on imported ethanol, with the expectation that the United States would thus import more ethanol and bring down gasoline prices. This would be a serious mistake that would undermine a carefully-targeted U.S. tax incentive promoting the growth and development of our domestic renewable fuels industry. All the tariff does is offset the tax credit, so that it only goes to domestically-produced ethanol. Without the tariff, our U.S. tax incentive would help support ethanol production in foreign countries. Our focus must be on building energy security through domestically produced renewable fuels.

In any case, ethanol imports are neither necessary nor a practical response to current gasoline prices. We have sufficient ethanol production here at home, and it is expanding every day. The Renewable Fuels Association estimates that 500 million gallons of additional production capacity will be on line by early July of this year. That is enough to replace MTBE and to supply already existing ethanol markets. Meanwhile, there is no ready supply of foreign ethanol to be shipped to the United States. The other major ethanol producer, Brazil, recently lowered the mandated ethanol content of its national fuel portfolio from 25 percent to 20 percent because it is short of ethanol. Last year, the United States imported only 80 million gallons of ethanol from Caribbean countries, well short of the 270 million they are allowed to ship us tariff-free under the Caribbean Basin Initiative (CBI).

We also welcomed the call in your State of the Union speech earlier this year for increased federal investment to produce greater supplies of domestic ethanol. We want to work with you to make this investment a reality, but your Fiscal Year 2007 (FY07) budget proposes less than half the funding for biomass energy research and development authorized in the energy bill you signed into law last year. What's worse, where your budget does call for increased funding, it comes from reductions in other renewable energy and energy efficiency initiatives. We urge you to reconsider your budget proposal and submit a revised budget request with adequate funding for these initiatives in light of the current energy crisis.

Your Administration's recent actions cannot be reconciled with the stated goals of your energy program. We urge you to abandon your focus on providing incentives to foreign countries to ship ethanol into the United States, to uphold air quality standards and to work with us to expand domestic renewable fuels production.

Sincerely,

Dick Durbin (D-IL)
Barack Obama (D-IL)
Byron Dorgan (D-ND)
Tom Harkin (D-IA)
Tim Johnson(D-SD)

http://durbin.senate.gov/record.cfm?id=255384&&

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