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Location: Washington, DC

ENERGY -- (Senate - January 18, 2007)


Mr. GRASSLEY. Mr. President, I rise to talk about energy, and I start by reminding people, as well as my fellow Senators, that in August 2005, the President signed an energy bill that was very comprehensive--probably tilted toward renewable fuels, such as ethanol, and toward conservation, such as fuel cell cars, but also a small part of it was some incentives for domestic fuel, petroleum production, for refining and for distribution and for things of that nature.

It was a very comprehensive bill because we were concerned about the price of gasoline. We were concerned about what working men and women of America were having to pay. We were concerned about national security. There were a lot of reasons for passing that bill.

But then you get into an election year, 2006, and the impression you get from the election rhetoric is that we never had an energy policy, never passed a bill, or what we did pass was only for the big oil companies, and that there was no concern whatsoever about national security, there was no concern on the part of the Senate, when we passed that Energy Policy Act in 2005, about what many working men and women were paying for gasoline and things of that nature.

And all of this rhetoric against it--or what was said about it, if anybody wanted to admit we had an energy policy passed by Congress--was that it was all for big oil. I wish to remind people that bill was overwhelmingly bipartisan. But yet during the last campaign, one political party talked all about giveaways to big oil, never talked about ethanol, never talked about conservation, that it was an energy bill that was just for big oil and for big corporations, making the other political party out to be nothing but for big corporations, as opposed to what our incentive was: to drive down the price of gasoline and to have an adequate supply of gasoline and not be dependent so much upon foreign sources of oil, which was our motivation.

So I am here, now that the House of Representatives is working on a bill that deals with energy policy, and particularly to repeal what was referred to in the last election as ``sweetheart tax deals for big oil' that were included in that Energy Policy Act of 2005, to say this bill that we passed was very well balanced for ethanol, alternative energy, conservation, with a small part of it for domestic oil production, and how intellectually dishonest it is to refer to this bill as a giveaway to big oil.

I will use some statistics to back up what I am referring to. At the time we considered the Energy Policy Act of 2005, I was chairman of the Senate Finance Committee because my party was in the majority. So I played a central role in developing the tax title, along with my colleague, Senator Baucus. So, in fact, it was a very bipartisan bill. In fact, Senator Baucus and I produced, on a bipartisan basis, this comprehensive tax package that included provisions to increase domestic energy production, increase energy efficiency, and increase the development of alternative and renewable energies.

On the whole, I think the effort was a success. All you have to do to know it was a success is to look at the explosion in the building of ethanol plants throughout the country--most of them in the Midwest but throughout the country--as people are going to alternative energies, renewable fuels now because ethanol is made from crops that are growing from year to year. So I think the effort was very much a success, and that is one small part of it being a success.

The Senate tax title was supported unanimously--I wish to emphasize unanimously--because there, at that time, were 11 Republicans and 9 Democrats on the committee. It came out of our committee unanimously. This bill, which during the last election was talked about as a giveaway to big oil, came out of our committee unanimously and eventually passed the Senate 85 to 15. And the conference agreement, ironing out the differences between the House and the Senate, passed by a margin of 74 to 26.

So throughout the whole process it was bipartisan, that this was the answer to the energy problems facing the Nation--not that it was the end-all and be-all, but it was a very comprehensive effort and a successful effort to solve the energy problems of our Nation.

The entire tax package that was in this bill, the Energy Policy Act of 2005, had a budget score of $11.1 billion over 10 years.

According to the nonpartisan Congressional Research Service, $2.6 billion or 18 percent of the package was for oil and gas production, refining, and distribution. Distribution isn't always by the big oil companies. So 18 percent--that is why I said our bill, passed in 2005, signed by the President, was overwhelmingly tilted toward renewable fuels and toward conservation, not toward domestic petroleum production. According to the Joint Committee on Taxation, the tax title of the Energy Policy Act actually raised taxes on oil and gas companies by at least $224 million.

Understand, this was described in the last election as a giveaway to big oil. Yet nonpartisan staff said that oil and gas companies ended up paying $224 million in new taxes. In the last election, the tax title was characterized as tax giveaways to big oil, anywhere from $9 billion to $14 billion. How do you get $14 billion, if you want to say it was 100 percent for big oil instead of 18 percent? How can you say a bill that was scored at $11.1 billion could end up being a giveaway of $14 billion? It doesn't add up. And figures don't lie.

At a time of record high gas prices last year, the other side accused the Republican majority of failure of leadership. They said it was time to rewrite the Energy bill and stop the billion dollar tax giveaways for big oil, the same kind of misleading insinuations I have been referring to on another issue they had in the last campaign, about the fact that we ought to negotiate with drug companies to get prescription drug prices down, when we are already doing that, as I pointed out in some speeches last week. For the 24 most-used drugs by seniors, the plans that are negotiating with the drug companies have negotiated prices down an average of 35 percent.

Getting back to energy, during the same campaign cycle, Members on the other side sold the taxpayers a bill of goods. They committed to repealing all the tax giveaways to big oil that the Republican Congress included in the Energy Policy Act of 2005, which ended up with $224 million more coming in from oil and gas. With the results of the November election, I presume they believe they were given a mandate from the voters to take away all of those ``tax giveaways'--the words they used--in that bill. We heard the arguments over and over, both here on the Senate floor and across the country on the campaign trail. But now that the debt has come due, it is time for the new Democratic majority to deliver on their promises to the American people. So what have they come up with to repeal? How much money are they going to take back from big oil to alleviate consumer pain at the pump? Just one provision--that is right, one provision.

After all the demagoguery against our party and the Energy bill that passed by an overwhelming bipartisan majority, supposedly because of ties to big oil, are they accusing the Democrats who voted for it of ties to big oil as well? And they are going to repeal what? One single tax provision enacted in the Energy Policy Act signed by the President in August of 2005. Of course, that is only half the story. It turns out this outrageous ``tax giveaway' to big oil is scored by the Congressional Budget Office to save the U.S. Treasury $104 million over 10 years, not the $14 billion that was the outside figure used during the campaign, not $1.4 billion but $104 million.

I am a family farmer from New Hartford, IA. I know $104 million is still a lot of money. But it turns out to be less than 1 percent of the entire package of the energy tax incentives included in that Energy Policy Act that came out of my committee on a unanimous vote, all Republicans and all Democrats, and passed the Senate in an overwhelmingly bipartisan manner. So in a desperate attempt to increase the size of the tax penalty on domestic oil and gas producers, they have also included the repeal of the oil and gas industry's eligibility for the manufacturing income tax deduction. That is not just for oil and gas; that is for all manufacturing in America. This was another bill, in 2004, that passed overwhelmingly with a bipartisan majority. The American JOBS Creation Act of 2004 was a new law supported by 69 Senators--that is bipartisan--that contained far-reaching measures to revive the manufacturing base in America because of outsourcing.

We did that by cutting taxes so that the cost of capital is competitive with the cost of capital overseas, so we don't lose jobs overseas. We also created incentives for people to invest in the United States instead of investing overseas. It devoted tax benefits to American manufacturers in the form of a 3-percentage-point rate cut subject to the payment of wages to their employees. If they didn't hire more people, they didn't get the benefit. Remember, it was called the Americans JOBS Creation Act. This manufacturing tax cut goes to large and small corporations, family-held S corporations, partnerships, sole proprietors, family farmers, and cooperatives. If you manufacture here, you get the tax cut here. If you manufacture overseas, you don't get the tax cut. It was only for manufacturing in the United States, and it was only for U.S. manufacturers that paid employees' wages. It was not for manufacturing offshore and it was not for folks who only manufacture and hire overseas.

In defining U.S. domestic manufacturing, Congress included in the definition all things that are extracted or grown, including what the family farmers grow. That means that all domestic minerals and the people who produce domestic minerals receive benefits. And that would include extraction of domestic--meaning here in America--oil and gas and the production of products made out of our own oil and gas.

It seems very strange to me that if you want to become less dependent upon foreign oil, the first thing you would do, in your first 100 days being in the majority for the first time in 12 years, is to increase the taxes by 3 percentage points on domestic production of oil and gas, which was part of the American JOBS Creation Act of 2004, which passed in a bipartisan majority in the Senate.

In addition, the House proposal also increases the taxes on all refinery products. That means your home heating oil and your farmer's diesel used to run the machines that harvest the crops. In addition, fertilizer is a primary product of natural gas, so midwestern family farmers are going to be hurt and not helped by any of this proposal. That is what is coming out of the other body to this body to consider. Maybe because it is represented by so many people from the big cities of America, they don't realize food grows on farms. It doesn't grow in a supermarket. Maybe they don't realize what they are doing to the American farmer. But we don't need the cost of our anhydrous ammonia, which last summer was $550 a ton compared to about $250 a ton 2 years ago--so we have fertilizer to grow our crops--to be driven up still more.

In the 100 days of the new majority, this is what they are doing to the American consumer, the American farmer. All of this in the new House majority so they can rewrite and adopt a campaign promise to cut tax benefits to big oil. It is an example of a problem they made up that now they have to deliver on. In the process, they are going to hurt the family farmers, hurt the consumers, and cut out one of the things this body adopted in the JOBS Creation Act of 2004, to create manufacturing jobs in America, incentives to invest in America so that we don't have outsourcing.

If they wanted to get back at Exxon--that is big oil, if there ever was big oil--they missed the mark. The people who produce here in the United States are the same people you go to church with and your kids see in school. If you want to become more dependent upon foreign oil, then you should be happy with this proposal coming out of the first 100 days of the new majority in the new House of Representatives. If you want to create incentives for the production of U.S. lower 48 domestic oil and gas, then this quite obviously is the wrong policy, all for a campaign gimmick, all for campaign pandering. That is not right, to teach the family farmers and the consumers of America, who are already paying enough for their prices and are suffering from high energy costs, to do more by taking away this 3-percent point tax incentive we gave for investment in America to create jobs in America. If it is made in America, you get the benefit of it. If it is made overseas, you don't get the benefit.

Granted, there were also three provisions relating to royalty relief that were included in their bill. Two were included in the bipartisan Energy Policy Act, and one seeks to remedy an error caused by the Clinton administration bureaucrats in the Interior Department of 10 years ago. I will leave those discussions to the people who are best prepared to answer those, my colleagues on the Energy and Natural Resources Committee, who have jurisdiction and expertise in this area.

I also point out to my colleagues and constituents that I am not beholden to big oil or the energy industry. In the years I have been in the Senate, I have battled big oil, because they hate renewable fuels that we call ethanol. They don't want you burning anything in your gas tank that doesn't come out of their oil wells. They don't want you burning in your gas tank those things that come off the farmers' fields in the way of corn from which we make ethanol, also for all of the sorts of things that they don't like, what we call energy conservation and forcing electric utilities to use renewable portfolio standards within the industry. I have supported biodiesel. I have supported ethanol. I have supported renewable portfolio standards--all things that big corporations in America don't like. But we have been successful in doing it.

I have relentlessly chased the bad players in the petroleum industry at all levels, both legal and illegal. As chairman of the Senate Finance Committee, we closed over $10 billion in tax provisions that the President signed into law, shutting down fuel fraud and folks stealing fuel excise taxes from the Highway Trust Fund. These are real provisions, collecting $10 billion of taxes that were evaded that will no longer be evaded.

So what are the facts concerning the track record of the previous Congress and the President of the United States on energy policy and promoting renewable and alternative energy, and what is wrong with the rhetoric of the last campaign that led people to believe it was something different than we ended up passing? We extended and expanded the production tax credit for electricity produced from renewable sources such as wind, biomass, geothermal, and landfill gas. We enacted tax credits for the purchase of hybrid fuel cells and advanced lean burn diesel vehicles. We enacted incentives for the production and use of ethanol and biodiesel and the infrastructure to dispense that fuel.

The distinguished Presiding Officer contributed the idea behind doing that, so we would set up more biodiesel pumps at stations through the 30-percent tax credit that the Senator from Illinois thought of. I thank him for that idea. I was very happy to work with him on that. That is the distinguished Presiding Officer. We enacted the first ever renewable fuel standard for ethanol and biodiesel that has led to fantastic growth in the industry.

With regard to energy efficiency, we enacted incentives for efficiency improvement for new and existing homes and commercial buildings and for energy-efficient home appliances.

According to the clock in the other body, we are still somewhere within the first 100 days of the new Democratic majority, and again we see another example of legislative action not living up to campaign rhetoric. A word of caution to voters across America: Beware of the goods that you might be sold during an election. That applies to both Republicans and Democrats as far as I am concerned. In the case of repealing the ``big oil tax giveaways'--those are words used in the last election--from the Energy Policy Act, it turns out in fact to be a pig in a poke.

I yield the floor.

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