Floor Speech of U.S. Senator Chuck Grassley

Home-Grown Ethanol

Delivered Thursday, December 2, 2010

 It seems like every few weeks or so that there are a lot of misleading and misinformed accusations launched at our nation's renewable fuels producers.  It's impossible to come to the Senate floor and respond to all of them, but sometimes the claims are so outrageous that they require an informed response. So, I'm here to give that response with emphasis upon the words informed.

Earlier this week, a number of my colleagues here in the Senate, including a few of my fellow Republicans, sent a letter to the majority and minority leaders expressing their opposition to extending the tax incentives for home-grown ethanol.  Home-grown means that we're less dependent upon people like Dictator Chavez and the oil sheiks.  My colleagues argued that the tax incentive for the production of clean home-grown ethanol is fiscally irresponsible.  They express their support for allowing the 45-cent-per-gallon credit for ethanol use to expire.  It's important to remember that the incentive exists to help the producers of ethanol compete with the big oil industry, and remember the big oil industry has been well supported by the federal treasury for more than a whole century.

Many of the Republican senators who signed on to that letter have also been leading the effort to ensure that no American sees their taxes go up on January 1, 2011, which will happen automatically if we don't do something this very month.  The largest tax increase in the history of the country can happen without even a vote of the Congress because of the sunsetting law.  And, of course, in that regard, I support the position of my Republican colleagues. But, a repeal of the ethanol tax incentive is a tax increase that will surely be passed on to the American consumer.

I'd like to remind my colleagues of a debate that we had earlier this year on an amendment offered by Senator Sanders.  The amendment that he offered would have, among other things, repealed the $35 billion in tax subsidies enjoyed by oil and gas.  Opponents of the Sanders amendment argued that repealing the oil and gas subsidies would reduce domestic energy production and drive up our dependence upon foreign oil.  Now, opponents to the Sanders amendment argued that it would cost U.S. jobs and increase prices at the pump for consumers. Now, I agreed with the arguments of the opponents.  All of my Republican colleagues and more than one-third of the Democrats did as well.  Thus, Senator Sanders' amendment was defeated.

That majority against the Sanders amendment knew that if you tax something, you get less of it. Repealing incentives on ethanol would have the very same result. Well, guess what?  I know that removing incentives for oil and gas will have the same impact as removing incentives for ethanol.  We'll get less domestically produced ethanol and be more dependent upon those oil sheiks.  But it will also cost U.S. jobs.  It will increase our dependence on foreign oil.  It will increase prices for American consumers.  So whether it's jobs or increased dependence or increasing the price of gas, no American would like that to be the result.

Madam President, we're already dependent on foreign sources for more than 60 percent of our oil needs.  We spend $730 million a day on imported oil.  That money is leaving America for the Middle East and nutty dictators like Chavez.

Why do my colleagues want to increase our foreign energy dependence when we can produce that energy right here at home?

So I'd like to ask my colleagues who voted against repealing oil and gas subsidies but support repealing incentives for renewable fuels, how do you reconcile such inconsistency?

The fact is, it's intellectually inconsistent to say that increasing taxes on ethanol is justified, but it's irresponsible to do so on oil and gas production.  If tax incentives lead to more domestic energy production and the result is good-paying jobs, why are only incentives for oil and gas important, but not for domestically produced renewable fuels?

It's even more ridiculous to claim that the 30 year-old ethanol industry is mature, and thus no longer needs the support that they get, while the century-old big oil industry still receives $35 billion in taxpayers' support.  Regardless, I don't believe we should be raising taxes on any type of energy production or on any individual, particularly during a recession.  Allowing the ethanol tax incentive to expire will raise taxes on producers, blenders and ultimately consumers of renewable fuel.

A lapse in the ethanol tax incentive is a gas tax increase of over five cents a gallon at the pump.  I just don't see the logic in arguing for a gas tax increase when we have so many Americans unemployed or underemployed and struggling just to get by.

On Tuesday this week, all of my Republican colleagues and I signed a letter to Majority Leader Reid stating that preventing a tax increase, meaning mostly income tax increases, and providing economic certainty, should be our top priority in the remaining days of this congress.  I know that we all agree that we cannot and should not allow job-killing tax hikes during a recession. Unfortunately, those members who have called for ending the ethanol incentive have directly contradicted this pledge because a lapse in the credit will raise taxes, costing over 100,000 U.S. jobs at a time of near 10 percent unemployment.  The taxpayer watchdog group, Americans for Tax Reform, considers the lapse of an existing tax credit for ethanol to be a tax hike.

Now is not the time to impose a gas tax hike on the American people.  Now is not the time to send pink slips to more than 100,000 ethanol-related jobs.

A year ago at this time, I came to the Senate floor to implore the democratic leadership to take action to extend expiring tax incentives for the biodiesel industry.  They failed in their responsibility to extend that incentive and provide support for an important renewable industry.   So, while 23,000 American jobs were supported on December 31 last year, nearly all those jobs have disappeared.  An industry with a capacity to produce more than two billion gallons of renewable fuel a year is on track to produce less than 20 percent of that capacity this year.

Ethanol currently accounts for 10 percent of our transportation fuel.  A study concluded that the ethanol industry contributed $8.4 billion to the federal treasury in 2009, $3.4 billion more than the ethanol incentive.  Today the industry supports 400,000 U.S. jobs.  That's why I support a home-grown renewable fuels industry, as I know the Obama administration does as well.  I would encourage anyone who is unclear on the administration's position to contact Agriculture Secretary Vilsack.

I'd like to conclude by asking my colleagues if we allow the tax incentive to lapse from where should we import an additional 10 percent petroleum?  Should we rely on Middle East oil sheiks or Hugo Chavez?

I would prefer to support a renewable fuel based right here at home rather than send it a pink slip. I would prefer to decrease our dependence on Hugo Chavez, not increase it, and I certainly don't want to support raising the tax on gasoline during recession.  I would respectfully ask my colleagues to reconsider their support for this job-killing gas tax increase.

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Wednesday, December 1, 2010

Senators Urge Action for Energy Security and Job Creation

WASHINGTON - Saying that ethanol offers the most effective alternative to foreign oil and supports hundreds of thousands of jobs in the United States, Senators Chuck Grassley and Kent Conrad have gathered signatures for a letter to Senate leaders urging action this year on legislation to extend renewable fuel tax and tariff provisions.

The senators said immediate action is warranted to "provide stability and certainty for producers and consumers of renewable fuels."

"Ethanol has proven its value as a homegrown, renewable fuel and, in light of the hundreds of billions of dollars shipped abroad as a result of foreign oil dependence, ethanol is a relative bargain," Grassley said.

"Our country is spending over $730 million a day on imported petroleum this year, money that often ended up in the hands of unstable or unfriendly governments," Conrad said.  "This is not the time to reduce the supply of a domestic source of fuel and place at greater risk the thousands of well-paying jobs that the renewable fuels industry has created."

The senators said that ethanol is the only renewable fuel that is substantially working to reduce U.S. dependence on oil.  Domestically produced ethanol displaces millions of barrels of imported oil every year from Saudi Arabia, Venezuela and Nigeria and now accounts for almost 10 percent of the U.S. fuel supply.

Last April, Conrad and Grassley introduced a bill to extend, through 2015, the volumetric ethanol excise tax credit, or VEETC, which is also known as the blenders' credit; the small ethanol producer tax credit; the cellulosic producer tax credit; and the ethanol import tariff.

Ethanol is good for rural economies, and a recent study found that the failure to extend the VEETC credit and the secondary tariff would result in the loss of more than 100,000 jobs nationwide and reduce ethanol production by nearly 40 percent.

The lapse of the separate tax credit for biodiesel, which expired at the end of 2009, has cost nearly 23,000 jobs. "We can't risk a repeat performance with ethanol, where 112,000 jobs are at stake," Grassley said.  Of the ethanol tariff, he said, "the United States already provides generous duty-free access to imported ethanol under the Caribbean Basin Initiative, but the CBI cap has never once been fulfilled.  In fact, last year, only 25 percent of it was even used by Brazil and other countries."

Grassley and Conrad are longtime advocates for tax incentives for biofuels such as ethanol and biodiesel.  Grassley is Ranking Member of the tax-writing Finance Committee.  Conrad is a senior member of the Finance Committee and Chairman of the Senate Budget Committee.  Grassley is a senior member of the Budget Committee.

The text of their letter is below.  It also was signed by Senators Tom Harkin, Kit Bond, Ben Nelson, Amy Klobuchar, John Thune, Sam Brownback, Byron Dorgan, Tim Johnson, Al Franken, Mike Johanns, Mark Kirk, Debbie Stabenow and Claire McCaskill.

November 30, 2010

The Honorable Harry Reid

Majority Leader

United States Senate

S-221 United States Capitol

Washington, D.C. 20510

 

The Honorable Mitch McConnell

Minority Leader

United States Senate

S-230 United States Capitol

Washington, D.C. 20510

 

Dear Majority Leader Reid and Minority Leader McConnell:

We are writing to ask that you make an extension of renewable fuel tax and tariff provisions a high priority on the Senate's legislative agenda for the remainder of the year. Allowing the provisions to expire or remain expired would threaten jobs, harm the environment, weaken our renewable fuel industries, and increase our dependence on foreign oil.

Our country is spending over $730 million a day on imported petroleum this year, money that often ended up in the hands of unstable or unfriendly governments. The price tag for our dependence on foreign oil is likely to rise even higher as the economy recovers. This is not the time to reduce the supply of a domestic source of fuel and place at greater risk the thousands of well-paying jobs that the renewable fuels industry has created. Congress should demonstrate that it continues to recognize the need to develop domestic, renewable sources of fuel.

Next year the Senate will be in a position to debate alternative legislative proposals for developing renewable fuels, including proposals to invest in biofuel infrastructure. In advance of this debate, we believe that, in an effort to provide stability and certainty for producers and consumers of renewable fuels, Congress must act to extend biofuels tax and tariff policies for the longest term possible. We ask that you place such an extension high on the Senate's upcoming agenda.

Sincerely,

Kent Conrad

Chuck Grassley

Kit Bond

Tom Harkin

Amy Klobuchar

Ben Nelson

Sam Brownback

John Thune

Tim Johnson

Byron Dorgan

Mike Johanns

Al Franken

Debbie Stabenow

Mark Kirk

Claire McCaski

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