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Creating Long-Term Energy Alternatives for the Nation Act of 2007

Floor Speech

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Date:
Location: Washington, DC

CREATING LONG-TERM ENERGY ALTERNATIVES FOR THE NATION ACT OF 2007 -- (Senate - June 20, 2007)

BREAK IN TRANSCRIPT

Mr. GRASSLEY. Mr. President, I hope Senator Thune is here. I was going to yield time to him first.

I yield myself a couple minutes while we are waiting for Senator Thune.

Mr. President, first of all, to change direction from where Senator Gregg was, today corn is $3.50 in central Iowa, and it is down 25 cents from yesterday because it rained in Illinois in the last 48 hours. So weather is affecting the price of grain quite a bit. If city slickers are worried about the price of corn flakes going up, just remember that a farmer only gets a nickel out of every box of corn flakes that is half filled with air anyway. There are events that are affecting the price of corn a lot different from just ethanol. But the impression one gets around here when reading the papers is that there is so much corn going into ethanol that it is driving up the price of food for city people around this country.

The other issue is that the Senator from New Hampshire said corn is being subsidized $3 billion. When corn is above roughly $2 in the Midwest, there is no loan deficiency payment being paid out for that corn. So at the price corn is today, there is no subsidy for corn.

Another issue we ought to think about is, whether we are importing ethanol or importing oil--don't forget, a few years ago, we started a program of tax incentives for ethanol and other renewables so we would be energy independent. Do we want to be dependent on imported ethanol as we are dependent on imported oil?

What is involved is an infant industry that is just now being able to come to a peak with great advancement in the future but still infant from the standpoint that the next step in ethanol production is cellulosic ethanol, to get ethanol not from grain corn but from wood chips, from switchgrass, or from corn stover. It will be 3 to 5 years before the scientific process of enzymes is efficient enough for that production to come about.

Even though we are now having a massive production of ethanol from grain corn, we cannot sustain this beyond 15 billion gallons of ethanol coming from grain corn or corn getting above that figure. And the underlying bill from the Senate Energy Committee recognizes that point because they have a 15-billion-gallon limit of grain corn producing ethanol. Beyond that, it is going to have to come from wood chips, switchgrass, corn stover--anything that has cellulose in it from which they can make ethanol.

Just because all of a sudden we have a burgeoning production of ethanol from grain corn doesn't mean this industry is mature to a point where we are going to be as energy efficient as we should be, as energy independent as we should be, and that is why it is still necessary to keep the tax incentives. That is why it is still necessary to have this import duty.

I am going to continue to yield time to myself until Senator Thune arrives. I wish to make a statement in opposition to the amendment offered by the distinguished Senator from New Hampshire.

With today's gas prices, many in Congress are looking for solutions and for someone to blame. Unfortunately, some have chosen to pinpoint ethanol as the culprit. Because of new demand for ethanol, some of my colleagues have begun to argue that there is a shortage and that it is responsible for the rising cost of gasoline. They look to increased imports of ethanol and the lifting of the import tariff as a solution, and that is the substance of the amendment that is before us. But increased imports would have little impact on the price of gasoline. Let me emphasize because that is the basis of the amendment and I am saying the amendment is not going to accomplish its goal. Increased imports will not reduce the price of gasoline. This is the case because ethanol is such a tiny fraction of the cost of gasoline. In fact, in Iowa, you can buy a gallon of ethanol gasoline mixture--90 percent gasoline, 10 percent ethanol--for 8 to 10 cents under what the price of 100 percent of ethanol costs.

In regard to not changing the price of gasoline, I quote Guy Caruso, Administrator of the Energy Information Administration of the Department of Energy, last year saying that the 10-percent blend of ethanol is affecting price by ``just a few pennies.'' Ethanol's role in gasoline prices is a tiny fraction of the overall increase.

In addition, it is important to point out that the United States already provides significant opportunities for countries to ship ethanol into our market duty free. Numerous countries do not pay the U.S. ethanol tariff at all. Through our free-trade agreements and trade preference programs, some 73 countries currently have duty-free access to U.S. markets for ethanol fully produced in those countries. For all other countries, including Brazil, the world's major exporter of ethanol, the United States provides duty-free access through a carve-out in the Caribbean Basin Initiative.

Get it right: Brazilian ethanol exporters don't have to pay the U.S. tariff today. Under this CBI, ethanol produced in Brazil and other countries that is merely dehydrated in a Caribbean country can enter the United States duty free up to 7 percent of the U.S. ethanol market, a very generous access, and it has been on the books for 20 years. Yet Brazil and other countries have never come close to hitting this 7-percent cap of ethanol that can come into our country duty free already. In fact, we are almost halfway through 2007, and this duty-free cap has been filled only 23 percent for this year.

Moreover, this cap grows every year because this 7 percent is 7 percent of a higher figure because of higher production of domestic ethanol every year.

And it isn't that the Caribbean countries don't have the capacity to dehydrate more ethanol. They do have that capacity.

So we are already providing duty-free access for Brazilian ethanol that is shipped through the Caribbean countries. Much of this duty-free ethanol is being exported to the East Coast, the part of the country that Senator Gregg contends would benefit from the complete lifting of the U.S. tariff on ethanol.

The fact of the matter is that Brazil isn't taking full advantage of duty-free treatment currently available to them. I don't know why we should bend over backward to provide more duty-free access for Brazil. In fact, I would offer to the authors of this amendment that when this 7 percent loophole gets filled and that much ethanol has come into the country, I would be glad to sit down and see if there is a need to lift the cap totally.

I especially don't know why we should do this, given Brazil's stance in the Doha Round negotiations of the World Trade Organization. Brazil is the
leader of the G20 negotiating group in the WTO negotiations, a group that is resisting our efforts to obtain improved market access for U.S. products, both manufactured and agricultural, throughout the entire world.

In addition, the Brazilian Government intervenes extensively in the price and supply of ethanol in that country. But the U.S. tariff on ethanol operates as an offset to a U.S. excise tax credit that applies to both domestically produced as well as imported ethanol. So by lifting the tariff, we would, in effect, be giving the benefits of this tax credit to subsidize the Brazilian production of ethanol.

Providing yet more duty-free treatment for subsidized Brazilian ethanol would send the wrong signal to those Americans who are devoting their careers to helping America become more energy independent. The U.S. ethanol industry is working every day to lessen our dependence upon foreign oil. This is a virtue that President Bush has touted again and again. Last year, the President restated his goal to replace oil around the world by expanding the production of ethanol.

The President stated:

The Federal Government has got a role to play to encourage new industries that will help this Nation diversify away from oil. And so we are strongly committed to corn-based ethanol produced in America.

And today the President would add to that we are committed to doing more in cellulosic production of ethanol as well.

The President clearly understands the need to assist our infant domestic ethanol industry so we can get a foothold and we can succeed. Why would the United States now want to send a signal that we are backing away from our efforts to seek energy independence? We are already dependent upon foreign oil. Surely we don't want our country to go down the path of eventually becoming dependent upon foreign ethanol as well.

Providing yet more duty-free treatment would be a step in the wrong direction, discouraging the advancement of investment in biorefineries for ethanol and biodiesel. It would be bad for energy independence and, obviously, bad for our national security. So I hope my colleagues will oppose the Gregg amendment.


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