Energy Policy Act of 2003

ENERGY POLICY ACT OF 2003

AMENDMENT NO. 844 TO AMENDMENT NO. 539

    The PRESIDING OFFICER. The Senator from Iowa.

    Mr. HARKIN. Mr. President, I am pleased to join my colleagues on both sides of the aisle in support of the renewable fuels standard amendment to S. 14, the Energy bill on the floor.

    I paid close attention to the comments made by the distinguished Senator from New Hampshire. I don't know whether I should make the remarks I have prepared or try to refute the things he said point by point. Maybe I will do a little bit of both and blend them up a little.

    There was one statement made by the Senator from New Hampshire that I did want to point to at the beginning that I think is somewhat erroneous. The Senator from New Hampshire said there is going to be this money sucked out of the highway trust fund because of the use of ethanol. As everyone knows, there is a Finance Committee amendment that is going to be added to this measure or the Highway bill by both Senator Grassley and Senator Baucus. It has broad bipartisan support. That amendment will address this issue. It was reported out of the Finance Committee. As I said, it has broad-based support I believe on both sides of the aisle. This proposal would reshape the ethanol excise tax exemption. Ethanol blended fuels will make a similar contribution to the highway trust fund as regular gasoline.

    Mr. SUNUNU. Mr. President, will the Senator yield for a question?

    Mr. HARKIN. The proposal by the Finance Committee will actually add $2 billion to the highway trust fund annually.

    Yes, I would be delighted to yield for a question.

    Mr. SUNUNU. Is the Senator suggesting that ethanol under this legislation be subject to the exact same excise tax to which gasoline would be subject?

    Mr. HARKIN. I am not certain I understand the import of the question.

    Mr. SUNUNU. Gasoline is subject to a Federal excise tax of 18.3 cents per gallon. The Senator's description suggests that ethanol will now be taxed at 18.3 cents a gallon as well and that revenue will go into the highway trust fund.

    Mr. HARKIN. No. What I am suggesting is that in the past, as we know, a portion of the money was not added to the highway trust fund, it was added to the general fund. And there was a partial exclusion from tax on each gallon of gasohol sold. In effect we are making the highway trust fund whole in the expected Finance Committee amendment.

    Mr. SUNUNU. If the Senator will yield slightly further, that is precisely the point I was making—that ethanol will not be subject to excise taxes. It will require taking money from the general fund to pay for this tax and putting it into the trust fund, so that the trust fund won't be depleted as a result of the fact that ethanol is not subject to the full 18.3 cent tax. If we treat the two equally, we should subject them both to an 18.3-cent tax. If you give ethanol the subsidy, what you are forced to do—exactly what you described—is move general fund money into the trust fund to cover that loss of revenue.

    Mr. HARKIN. I say to my friend from New Hampshire, what we are doing is not taking money from the general fund. What we are doing is taking the money from the ethanol part of that which went to the general fund and putting it where it should have been in the first place; and that is, the highway trust fund. That is all we are doing. We are not taking money out of the general fund that comes from general income taxes and every other kind of excise taxes that are paid in this country. We are only talking about ethanol. It will add about $2 billion to the highway trust fund annually.

    The other point the Senator from New Hampshire made, which I wish to respond to, is on the issue of whether or not this is a great burden on the States.

    In California, nearly all of the refiners have voluntarily switched from MTBE to ethanol in advance of the State's MTBE phaseout deadline of January 1 of next year. Today, approximately 65 percent of all California gasoline is blended with ethanol. It is estimated that 80 percent of fuel in California will contain ethanol by this summer.

    I am told that last month the California Energy Commission stated that the transition to ethanol, which began in January of 2003, is "progressing without any major problems." There have been no ethanol shortages, transportation delays, or logistical problems associated with the increased use of ethanol in California. Thus, any efforts to carve out California, per the Feinstein amendment or amendments, from the renewable fuels standard, are unjustified and unnecessary.

    Most ethanol sold in California is under a fixed price contract at about 63 cents per gallon, after the tax incentives are applied. Wholesale gasoline in California—that is what ethanol is blended with—is selling for $1.04 a gallon on average. So ethanol is cheaper per gallon in California than is regular gasoline. So how can this be a burden at all on California?

    This renewable fuels standard, as has been said by so many before me, will increase the use of ethanol and other renewable fuels—including biodiesel; not just ethanol, but biodiesel—in the Nation's fuel supply from 2.6 billion gallons in 2005 to 5 billion gallons in 2012. This amendment is very similar to the language we overwhelmingly passed out of this body in the last Congress as part of a comprehensive Energy bill package. It represents the culmination of a historic fuels agreement negotiated by the agriculture, renewable fuels, petroleum, and environmental communities over the past several years.

    Unfortunately, the agreement—the amendment we passed overwhelmingly last year—did not become law in 2002 due to the demise of the Energy bill in conference negotiations. This year, we must pass the renewable fuels standard and have it signed into law by the President, who has indicated his support for this.

    The renewable fuels standard is truly an energy security measure. The former Director of the Central Intelligence Agency, James Woolsey, believes the renewable fuels standard is an essential component in the advancement of America's energy security. His sentiments have been echoed as well by ADM Thomas Moorer, former Chairman of the Joint Chiefs of Staff, and Robert McFarlane, former National Security Adviser under President Reagan.

    The renewable fuels standard will displace about 1.6 billion barrels of imported oil over the next decade. As a result of this, we will save $4 billion in imported oil each year. This is a critically important first step toward energy independence for America.

    As far as our economy goes, this renewable fuels standard amendment will add about $156 billion to our gross domestic product by 2012, spurring about $5.3 billion in new investment and creating 214,000 new jobs. It will boost farm income by $1.3 billion annually.

    I am very proud of the example set by my own State of Iowa where we have 12 plants producing more than one-fifth of U.S. ethanol. We have two biodiesel plants, which place Iowa first in the Nation in producing this soy-based fuel. Thirty percent of our corn crop goes into value-added ethanol production, supporting over 1,500 jobs, and pumping nearly $50 million annually into our State's economy, which is of critical help to our rural communities.

    These biofuels plants serve as local economic engines—providing high-paying jobs, capital investment opportunities, increased local tax revenue, and value-added markets for our farmers. A very large share of this production in Iowa is in plants built with the investments of farmer-owners.

    I want to add a statement. I was looking at one of the charts my friend from California, Senator Feinstein, had, which showed that Archer Daniels Midland had 46 percent of the production capacity—I think is what the chart showed—and all the rest of the plants around filled in the other 54 percent.

    Well, it is true that Archer Daniels Midland has been a leader in ethanol production in this country. I commend them for it. They have really paved the way. They broke through the barrier. They invested the money in finding new ways and new technologies and a cost-effective means of producing and distributing ethanol. So I believe it would be normal for a company such as Archer Daniels Midland to have a significant share of production capacity because they were there first. They recognized the environmental impact it would have in cleaning up the environment, the impact it would have on saving us from imported oil, the impact it would have on local jobs and the economies in many States, and what it would mean to replace a potentially carcinogenic octane enhancer called MTBE.

    So, yes, I commend Archer Daniels Midland for being a leader many years ago in starting to produce ethanol before many others even really thought about it. It is a very forward-looking company. They were there from the beginning.

    I would point out, however, that most of the new productive capacity coming on line in America is from farmer-owned cooperatives, farmer-owned plants. They are the ones building the new plants in cities and communities that dot our countryside. I think you have to look at this in that context.

    So, yes, I commend Archer Daniels Midland for being a leader in this many years ago, and for bringing us to the point where now we can spin off and spur more ethanol plant construction throughout the United States that basically is owned by smaller entities or by farmers themselves.

    As I said, these plants serve as local economic engines in so many of our communities. The value-added benefits of ethanol mean a $2 bushel of corn is converted into $5 of fuel and feed coproducts. That is another thing that people forget, that once we take the alcohol out of the corn, we have a very valuable byproduct left that can be fed to livestock, basically to cattle. So you get kind of two bangs for the buck out of it.

    The renewable fuels standard is more than just about increasing this use of fuels; it is more than just about cutting down on the imported oil; it is more than just the economic engines that it provides in many communities; it is also about providing a healthy and sustainable environment for future generations.

    Ethanol and biodiesel greatly benefit public health and the environment by protecting air and water quality and reducing greenhouse gas emissions. They are nontoxic, biodegradable, energy efficient, and cleaner burning sources of energy than petroleum-based fuels. A new report by the Pew Center on Global Climate Change finds that ethanol-blended fuels offer us the greatest promise for reducing transportation-related greenhouse gas emissions over the next 15 years.

    The U.S. Department of Energy has concluded that petroleum-based fuels account for 82 percent of carbon monoxide, which, according to the National Research Council, accounts for 20 percent of smog formation in cities. In contrast, the Environmental Protection Agency has determined that ethanol-blended fuels significantly reduce these emissions, and biodiesel nearly eliminates sulfur emissions that contribute to acid rain and reduces potential cancer-causing compounds.

    Clearly, the renewable fuels standard represents a momentous opportunity to enhance our Nation's energy security, strengthen our economy, create jobs, boost farm and rural income, and help clean up our environment. The 5 billion gallons of renewable fuels that would ultimately be required by the renewable fuels standard would replace gasoline we currently get from foreign oil, and at the same time reduce the price at the pump. Simply put, renewable fuels make good, common sense for our Nation and all of its citizens.

    More to the point of the amendment now before us by the Senator from California on State exemptions—there is really no need to grant States exemptions right now because in the underlying bill it already provides for States to be able to apply for and be granted an EPA waiver if they can show the RFS severely harms the economy or environment of the State or if there is an inadequate domestic supply or distribution capacity to meet the requirement. So, really, the amendment offered by the Senator from California is unneeded because there is already a waiver provision in there.

    Well, our renewable fuels standard is something we passed last year overwhelmingly with bipartisan support. I know there will be several attempts here to weaken it. I hope we again have, as we did last year, overwhelming bipartisan support to keep this strong renewable fuels standard in this bill and, get this Energy bill through and to the President so he can sign it this year.

    I yield the floor and suggest the absence of a quorum.