Renewable Fuels

RENEWABLE FUELS -- (House of Representatives - April 05, 2005)

The SPEAKER pro tempore (Mr. Fitzpatrick of Pennsylvania). Under the Speaker's announced policy of January 4, 2005, the gentlewoman from South Dakota (Ms. Herseth) is recognized for 60 minutes as the designee of the minority leader.

Ms. HERSETH. Mr. Speaker, I rise today to engage in a dialogue with my colleagues about the policy choices that we must make in the coming weeks and months to address the energy needs and challenges that our country will face in the years and decades to come.

I believe that renewable fuels must play a central role in this debate and in the policy decisions that we in Congress will make this year. I have a strong interest in renewable fuels for several reasons. My home State of South Dakota is a major corn-producing State and one of the top five ethanol-producing States in the Nation. South Dakota alone has the capacity to produce more than 450 million gallons of clean renewable ethanol every year. This fact, of course, gives me a natural interest in renewable fuel production. That, however, is not the only reason I care about ethanol. And each of us who serves in Congress should care about renewable fuels as well.

Renewable fuels provide benefits to the economy, especially those in economically challenged rural years. They benefit the environment, and they enhance our national security. For all of these reasons, Congress should care about renewable fuels, and renewable fuels should be a major component in our Nation's long-term energy policy.

I sought this opportunity to address the House tonight to share with my colleagues important information about renewable fuels and to dispel some myths about ethanol along the way. Ethyl alcohol, or ethanol, is essentially pure grain ethanol that man has been making for centuries by fermenting and distilling simple sugars.

Today, ethanol is a fuel produced from crops such as corn, grain sorghum, wheat, sugar, and other agricultural feedstocks. Most fuel ethanol produced in the United States is derived from corn, and the industry uses a lot of it. The latest figures indicate that more than 10 percent of the U.S. corn crop is utilized to produce ethanol. Because ethanol is produced from crops or plants that harness the power of the sun, it is truly a renewable fuel. We have consistently increased our use of corn to produce ethanol every year in the United States. We are doing so because the demand for ethanol is growing and consumers are realizing its value.

The ethanol industry is growing despite the many myths that have intervened at various points in the historical development of ethanol that misrepresent the technological advancements and the state of the industry today. Some of this misinformation, or disinformation, has been promoted by opponents of the ethanol industry, and some myths have even been propagated by those in academia.

One of the most persistent ethanol myths refers to its energy balance. This myth suggests that the process used to create a gallon of ethanol consumes more energy than that gallon of ethanol contains. And despite overwhelming and irrefutable evidence to the contrary, this unfortunate fallacy persists. But the facts are clear, whether produced from corn or other grains or from biomass materials like wood waste, ethanol production has become an extremely energy-efficient process. Remarkable technological advances have occurred in both agriculture and ethanol production in recent years that have made this possible.

Farming practices today are vastly improved from what they were just a few decades ago. Gasoline-powered farm machinery has been entirely replaced by more efficient diesel engines, and the machinery has become larger. This means that farmers can produce more grain with less fuel. Some farmers today utilize global positioning satellites and no-till farming methods that also greatly increase yields and reduce the fertilizer and chemical use on fields.

The industry also has developed corn varieties that enable farmers to produce significantly larger yields on the same piece of ground. Ethanol plants are located in predominantly rural areas, close to the cornfields, and the trucks and trains that move the corn from the farm to the marketplace also become more efficient.

The technology used in ethanol plants also has greatly advanced in recent years. The industry itself has developed advanced enzymes that break down the starches in corn much more efficiently than in the past. Ethanol plants now employ molecular sieves that remove moisture from ethanol much more efficiently than old methods. They also utilize efficient natural gas burners to fuel the fermentation process.

All of these developments have significantly improved the efficiency of both corn and ethanol production and the net energy balance of the process. This efficiency is confirmed by a 2004 analysis completed by the U.S. Department of Agriculture and the Argonne National Laboratory, a U.S. Department of Energy laboratory operated by the University of Chicago.

These entities analyzed ethanol's entire production cycle and concluded that ethanol yields 167 percent of the fossil energy that is used to grow, harvest and refine the grain and transport the ethanol to gasoline terminals for distribution. Ethanol also can be produced from cellulose feedstocks, such as rice straw, corn stover and sugarcane residue. As we improve the technology necessary to utilize these feedstocks, ethanol will achieve an even more favorable net energy balance.

Some have, unfortunately, propagated the myth that ethanol increases the cost of gasoline. But when you examine the facts, you see that the exact opposite is true. Ethanol expands U.S. fuel supplies, competes with fossil fuels in the marketplace, and reduces the overall gasoline prices paid by the driving public.

Like many of you, I was back in my home district over the Easter work period talking to South Dakotans. We are all well aware of what the price of gasoline has done in the past few months and how it affects our constituents. The price of ethanol, however, is largely unaffected by world oil prices, and it has not experienced the increases in price that petroleum has.

Today the net cost of ethanol to refiners is below the average wholesale price of gasoline in the United States. This means that blending ethanol into the gasoline supply actually reduces the cost of gasoline by displacing high-octane petroleum components. In fact, earlier today I checked on the gas prices in my hometown of Brookings, South Dakota. Premium gasoline at the BP gas station along Interstate 29 in Brookings is selling for $2.45 a gallon. Regular gas is going for $2.35. By contrast, E-85, which is a blend of 85 percent ethanol and 15 percent gasoline, is selling for $1.88, 57 cents per gallon cheaper than premium petroleum.

American auto companies are beginning to recognize the value of ethanol as well. General Motors recently provided an E-85-capable Chevrolet vehicle to the Governor of South Dakota as part of a campaign to promote ethanol and E-85-capable vehicles. This is part of a campaign by GM and the Governor's Ethanol Coalition designed to increase awareness of ethanol and flexible fuel vehicles and to promote the increased use of E-85 as a renewable alternative transportation fuel.

U.S. ethanol plants have produced record amounts of ethanol over the last 6 years to meet the increased demand. Without ethanol our country would be even more reliant on foreign imports of oil, and the pain at the pump would be much more severe.

In the end the ethanol industry is not resting. Over the last 25 years, 81 new ethanol plants have been built, and 16 additional plants are under construction today. In that same time period, not a single new U.S. refinery has been built, and scores have been closed. While we must address refining capacity issues as part of a balanced national energy policy as well, ethanol can play an increasing role in meeting growing demand.

The chart I put up now reflects the historic development within the United States of fuel ethanol production beginning in 1980 through 2004, reflecting the point that I mentioned about how the ethanol industry is growing to meet demand in large measure based upon other policies passed by this body to promote the use of this renewable energy, and, again, in light of the technology advancements that I mentioned previously.

A recent economic analysis entitled Ethanol and Gasoline Prices, by economist John Urbanchuk, found that ethanol production adds critical supply to the U.S. gasoline market. Without ethanol, gasoline demand would further outpace domestic supply and result in a major price spike.

Specifically, the report found if gasoline is at $2 per gallon, gasoline prices would increase 14.6 percent, or 29.2 cents per gallon, without ethanol in the short term. Without ethanol, gasoline prices would increase 3.7 percent, or 7.6 cents per gallon, in the long term once refiners build new capacity or secure alternative sources of supply.

Ethanol use will boost U.S. gasoline supplies by more than 3.3 billion gallons in 2005, as they did in 2004. Without ethanol, refiners would be forced to import an additional 217,000 barrels per day of high octane, clean-burning, gasoline-blending components.

There is a reason that these numbers are so large. We already use a lot of ethanol in this country. It would probably surprise many in this body to know that today more than 30 percent of all gasoline sold in this country is blended with ethanol. Even more surprising to many, ethanol has already been seamlessly incorporated into the vehicle fuel markets in States like California, New York and Connecticut. This is because these States have to add oxygenates to their fuel to meet clean air standards, but have banned the use of a popular oxygenate called methyl tertiary butyl ether, or MTBE, because it is a known pollutant. And California is not alone. MTBE is already banned or being phased out in at least 20 States, and many more States are considering such a ban. This has forced these States to adopt the use of an alternative oxygenate, ethanol.

The California Energy Commission has repeatedly confirmed that ethanol used in that State actually costs refiners less than the gasoline with which it is blended. The U.S. Energy Information Administration has found no price impact from the recent switch from MTBE to ethanol. Even the chief economist of the American Petroleum Institute stated last year that his organization has not seen a major price impact from State MTBE bans and the resulting switch to ethanol.

As you can see, ethanol has the potential to become a more significant portion of our energy portfolio in this country today, and Congress should enact policies that recognize its value and promote even greater use in the future.

Renewable fuels benefit more than just fuel supplies and gasoline prices. The increased use of ethanol has bolstered struggling rural economies across the Plains States. A 2002 study of the ethanol industry found that with an approximate cost of $60 million for 1 year of construction, an ethanol plant expands the local economic base by $110 million each year. Ethanol production generates an additional $19.6 million in household income annually. Tax revenue for local and State governments increases by at least $1.2 million per year. The ethanol industry operations and spending for new construction added $1.3 billion of tax revenue for the Federal Government and $1.2 billion for State and local governments during 2004.

As you can see by the next map, ethanol production facilities today are located in many regions of the country, but they are concentrated throughout the Midwest and the Great Plains, and the Midwest and the Great Plains constitute a region of the country that has faced many economic challenges in recent years.

It is important to note that many of these facilities have been funded or are owned by local farmers, who use them to increase the value of their corn and profit from the sale of the ethanol and allow them to get a greater percentage of the processing part of the chain of production, rather than just the cost of the commodity, of the corn, that is brought to the facilities.

As I mentioned, increased ethanol use and the corresponding increase in the localized demand for corn raises the prices that family farmers receive for their crop. This in turn lowers Federal farm program costs and saves taxpayers money.

In 2004, USDA estimated that ethanol production reduced farm program costs by $3.2 billion. The combination of spending for ethanol plant production and capital spending for new plants under construction added more than $25.1 billion to gross output in the United States economy in 2004.

As you can see from the following chart, we are utilizing an ever-increasing amount of corn to produce ethanol in the country. This increasing amount of corn utilization also reflects an increase in the percentage of corn going to ethanol production, as the following chart demonstrates.

Rather than spending billions of dollars in oil revenues to politically unstable foreign countries around the world, we should be promoting the increased use of this home-grown fuel source that benefits farmers, families and small communities across South Dakota, and clearly this chart here that demonstrates the impact on corn-producing States like South Dakota and throughout the Great Plains and the Midwest, the economic impact, as earlier charts have shown, is evident.

Ethanol is one of the best tools we have to combat pollution caused by motor vehicle emissions. Ethanol contains 35 percent oxygen. Adding oxygen to fuel greatly enhances its combustion, which in turn reduces harmful tailpipe emissions.

Adding ethanol also displaces high toxic gasoline components, such as benzene, a known carcinogen. Ethanol is nontoxic, water-soluble and quickly biodegradable. It will not cause the groundwater pollution problems that have been linked to MTBEs.

Ethanol reduces particulate emissions, especially fine particulates that pose health risks to susceptible populations, including children, seniors and those with respiratory ailments.

Importantly, ethanol is a renewable fuel. The ethanol production process represents a carbon cycle, where plants absorb carbon dioxide during growth, recycling the carbon released during fuel combustion.

The use of ethanol-blended fuels reduces greenhouse gas emissions by 12 to 19 percent compared with conventional gasoline, according to the Argonne National Laboratory. In fact, Argonne states that ethanol use in the United States in 2004 reduced greenhouse gas emissions by more than 7 million tons, equivalent to removing the annual emissions of more than 1 million automobiles from the road.

Ethanol is widely used in Federal clean fuel programs required by the Clean Air Act, including winter oxygenated fuels and reformulated gasoline, or RFG programs, in cities that exceed public health standards for carbon monoxide and ozone pollution. The American Lung Association of Metropolitan Chicago credits ethanol-blended RFG with reducing smog-forming emissions by an amazing 25 percent since 1990.

It should be noted that when ethanol is blended with gasoline, it slightly raises the volatility of the fuel, which can lead to increased evaporation for certain emissions, particularly in warmer weather. But as is often the case, that is only half of the story. Blending ethanol and gasoline also dramatically reduces carbon monoxide tailpipe emissions. According to the National Research Council, carbon monoxide emissions are responsible for as much as 20 percent of smog formation.

Additionally, ethanol-blended fuels reduce the tailpipe emissions of volatile organic compounds which also can pollute the atmosphere. Thus, the use of ethanol plays an important role in smog reduction, and on balance is considerably friendlier to the environment than petroleum.

A recent study found that fuel blended with just 10 percent ethanol greatly reduces vehicle emissions. The use of E-10 results in a 50 percent reduction in tailpipe fine particulate matter emissions, up to a 30 percent reduction in carbon monoxide emissions, a 13 percent reduction in the amount of toxins emitted, and a 21 percent reduction in the potency of these toxins. Because of its demonstrated benefits to our water and air quality in this country, Congress should enact policies that promote the increased use of clean-burning ethanol as part of a broad national energy policy.

Ethanol also can provide significant benefits in the area of energy security. Over the past several years, we have become increasingly dependent on imported petroleum to meet our energy needs. The U.S. imports about two-thirds of its oil, and some experts predict our dependence upon foreign crude oil could climb to 70 percent in the years to come. Much of this oil will come from the Middle East. Fears of additional terrorist attacks have added a risk premium to world oil prices. At the same time, developing nations such as China and India have increased their demand for oil. As a result, world oil prices are on the rise.

Just last week a study released by investment bank Goldman Sachs declared that markets have entered what they describe as a "superspike period" that could enact 1970s-style price surges that drive oil prices as high as $105 a barrel. If this occurs, it will have an even more devastating impact on farmers and ranchers, small business owners, working families, commuters, transportation companies and airlines, and the overall impacts on the national economy will worsen.

As a domestic renewable source of energy, ethanol can reduce our dependence on foreign oil and increase the United States' ability to control its own security and economic future by increasing the availability of domestic fuel supplies.

As I just noted, the U.S. imports 64 percent of its petroleum needs today. By 2025, the Energy Information Administration predicts the U.S. will import 77 percent of its petroleum.

World demand for oil will continue to increase, particularly in response to the emerging economies in China, India and Brazil. If, as predicted, U.S. domestic oil production fails to keep pace, petroleum could become so expensive that we will be forced to look for other sources of energy and new technologies to deal with these challenges.

Renewable fuels such as ethanol and biodiesel can be part of meeting these goals. They are grown here at home and are virtually infinite renewable sources. Increasing production here at home, especially from renewable sources, will make us a safer and more secure Nation.

Creating a viable renewable fuels industry in the United States must be a central component of our comprehensive national energy policy. The ethanol industry has shown that it is capable of providing a significant contribution to our Nation's energy needs. It is incumbent upon Congress to implement policies that promote the development and production of ethanol and other renewable fuels.

The ethanol industry is growing, as I have mentioned, to meet the demands of the marketplace for clean renewable fuels. And as this table shows, many States have responded to that call, as other States look to ethanol production as an increasing component of economic development. This table indicates current ethanol production capability and facilities and also reflects those currently under construction, and the overall amount of production capacity that the ethanol can withstand with current facilities and those that are in the planning stages and under construction today.

So in addition to the over-3.6 billion gallons of current production capacity, existing ethanol plants undergoing expansion and the 16 new plants under construction will add an additional nearly 750 million gallons of production capacity.

This continued expansion in ethanol production is necessary to meet the growing demand for alternatives to MTBE. The Federal ethanol program is providing economic stimulus to rural America, adding jobs, reducing the United States dependence on imported energy, reducing our bloated trade imbalance, and lowering auto emissions in our Nation's cities. All of these benefits accrue while consumers realize lower fuel prices at the pump for gasoline blended with ethanol.

In the coming weeks, this body will be debating and hopefully passing a comprehensive energy policy that will address the long-term energy needs of the country. Because of the obvious and proven benefits that domestically produced ethanol and biodiesel provide, our national energy policy should encourage the increased production of renewable fuels across the country.

Although the energy bill that the House passed last year did contain a renewable fuels standard, it was not adequate to meet the needs of the growing industry and adequately incentivize renewable fuels production. For that reason, in the upcoming days, I will be joining with a bipartisan group of colleagues in introducing the Fuels Security Act of 2005. This legislation, identical to a bill introduced in the Senate a few weeks ago, recognizes the benefits of ethanol and biodiesel and would promote their production in a realistic and economically viable way. It would provide benefits to rural America, benefits to our national energy security, and benefits to the environment without disrupting fuel supplies or increasing the cost of motor vehicle fuel.

Specifically, our bill will accomplish several things. It sets forth a phase-in for renewable fuel volumes over 7 years, beginning with a 4 billion gallon requirement in 2006 and ending with 8 billion gallons in 2012. It contains an escalation clause that would allow for increases in the renewable fuels requirement beyond 2012. It creates a credit program for refiners, blenders, or importers who exceed minimum obligations, thus allowing them to trade these credits with other refiners and minimize market disruptions.

Importantly, our approach does this in a way that would not enable excess credits to overhang the market and enable refiners to stymie the goals of the renewable fuels standard. It promotes the production of non-corn ethanol by crediting 1 gallon of cellulosis biomass ethanol to be equal to 2.5 gallons of corn-derived ethanol. It authorizes the EPA, in consultation with the Secretary of Agriculture and the Secretary of Energy, to waive the renewable fuels mandate for any State that would experience severe economic or environmental harm from the mandate, or where there is inadequate domestic supply to meet the requirement. And it eliminates the 2 percent oxygenate requirement for reformulated gasoline under the Clean Air Act and ensures that fuel performance standards and toxic emissions limits under the Clean Air Act continue to be met.

Mr. Speaker, this is a reasonable approach to promoting these fuels, and it will provide benefits to our country for years to come.

I now want to turn time over to my distinguished colleague, the gentleman from the State of Nebraska, who serves with me on the Committee on Agriculture who has been a leading proponent of ethanol production in the State of Nebraska and throughout the Great Plains to the benefit of the country. So I yield to the gentleman from Nebraska (Mr. Osborne).

BREAK IN TRANSCRIPT

Ms. HERSETH. Mr. Speaker, I wanted to thank the gentleman from Nebraska for sharing his insights as it relates to the state of the ethanol industry today, its capacity to meet our national energy needs, particularly in pointing out not only the use and the importance of the byproducts generated from ethanol production, and making specific note of how the legislation we intend to introduce affects biodiesel production as well, and encouraging our colleagues from urban areas to take a renewed look at ethanol.

I now would like to yield as much as 18 minutes or as much as he would like to consume to the gentleman from Iowa (Mr. King), who clearly has been a leading advocate as well as introduced other important legislation in this Congress and in prior terms important to renewable energy and to ethanol.

BREAK IN TRANSCRIPT

Ms. HERSETH. Mr. Speaker, I thank the gentleman from Iowa (Mr. King) very much for sharing his perspectives based on historical development of the industry, the challenges that we faced in the past and clearly the opportunities that we have today and in the future to utilize ethanol and other renewable fuels as part of a national energy policy. I appreciate as well his thoughtful insights as it relates to the investment in rural America, the impact in a positive way on rural communities, how rural America has stepped up as well to provide capital for investment in the technologies that are necessary to begin and expand and construct the ethanol facilities.

Also, the points made about the potential impact, the positive impact that ethanol production and increasingly utilizing renewable energies and our national energy policy and increasing the blend that can have on our trade balance, as well as clearly the positive environmental impact of ethanol and renewable energy.

So I want to thank again both my distinguished colleague, the gentleman from Iowa (Mr. King), as well as the gentleman from Nebraska (Mr. Osborne) for their prior work and their commitment to ensuring that renewable energy is a core component of our national energy policy, demonstrating not only the regional support but the bipartisan support for the legislation that we will be introducing.

Renewable fuels such as ethanol already constitute, as we have shown, a significant portion of our Nation's energy portfolio. They reduce the cost of petroleum and are home grown, clean, efficient, and economically beneficial to rural America.

Mr. Speaker, I ask my colleagues not to believe the myths and misinformation of the past, and to fairly evaluate or reevaluate the role of ethanol and other renewable fuels as a core component of our national energy policy.

I firmly believe that Congress must enact policies that will facilitate the positive impact of the renewable fuels industry because it will, in turn, benefit the entire country.

We will be introducing this legislation in the coming days, and I urge my colleagues to join me in supporting this important initiative, to join their colleagues such as the gentleman from Iowa (Mr. King) and the gentleman from Nebraska (Mr. Osborne) and a number of others who will introduce this legislation.

BREAK IN TRANSCRIPT

http://thomas.loc.gov