Craig Thomas Rural Hospital And Provider Equity Act

Floor Speech

CRAIG THOMAS RURAL HOSPITAL AND PROVIDER EQUITY ACT -- (Senate - June 14, 2007)

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Mr. THUNE. Mr. President, I rise to speak about an amendment I filed that would extend the current tariff on imported ethanol by 2 years. Over the past 2 years, I have been proud to stand with my colleagues in the Senate as we have made clean renewable energy a top priority in our national energy policy. The Energy Policy Act of 2005, passed in the previous Congress, made a historic commitment to renewable fuels by establishing a national renewable fuels standard and extending several important renewable energy tax credits. This law has effectively promoted homegrown sources of energy such as ethanol and biodiesel. The bill before the Senate today builds upon that success by boosting the renewable fuels standard to 36 billion gallons by the year 2022 and establishing other valuable incentives for renewable energy production.

The amendment I have offered to the underlying bill would significantly add
to the existing renewable energy incentive promoted by this bill. My amendment would extend the 54-cents-per-gallon tariff on ethanol imports through 2010. The current tariff is set to expire at the end of 2008.

This energy legislation does some great things for renewable fuels such as corn-based ethanol and advanced biofuels such as cellulosic ethanol. However, if we increase the renewable fuels standard without extending the tariff on ethanol imports, we are sending a mixed signal to our ethanol producers, their investors, and the farmers who sell their products to ethanol plants. In essence, Congress is telling the ethanol industry that we are demanding more of your product, but at the same time we are going to open the backdoor and begin subsidizing foreign sources of ethanol.

We need to ask: What is the purpose of the ethanol import tariff, and what will happen if the tariff is allowed to expire? First, the ethanol tariff serves to offset heavily subsidized ethanol from foreign countries. Brazil, which is a world leader in ethanol production, has been subsidizing its ethanol industry for the past 30 years. Now that Brazil's ethanol industry is mature and meeting a high percentage of Brazil's fuel needs, Brazil is hungry to export their subsidized ethanol to the United States. In 2005, Brazil exported 33 million gallons into the United States. In 2006, that number increased more than tenfold to 433 million gallons. That same year Brazil paid over $220 million in duties to import this amount of ethanol. Further, Members of Congress and the American public have every reason to believe this trend will continue well into the future and will certainly be expedited if the tariff is allowed to expire.

According to media reports, Brazil's state-run oil firm, Petrobas, has publicly announced plans to build an ethanol-only pipeline from central Brazil to ports in the western part of Brazil in order to more easily export ethanol to North America and Asia. According to the Inter-American Development Bank's Global Biofuels Outlook for 2007, Brazil will be exporting almost 1.6 billion gallons of ethanol by 2012. Clearly, foreign producers of ethanol would love to import billions of gallons of unregulated ethanol into our country.

The second purpose of the ethanol tariff is to offset the current tax credit available to domestic blenders of ethanol. It is important to remember that each gallon of ethanol that is blended with gasoline in the United States currently receives a 51-cent-per-gallon tax credit. This tax credit, which has played a leading role in ethanol's success story, does not discriminate between domestic or foreign sources of ethanol. If a shipment of Brazilian ethanol arrives at a U.S. port and is blended with gasoline on U.S. soil, this Brazilian ethanol is eligible for the blenders tax credit. This tax credit is currently scheduled to expire at the end of 2010.

Extending the ethanol import tariff to correspond with the expiration of the tax credit is in the best interest of our ethanol producers and the American taxpayer. If the tariff expires before the ethanol blenders tax credit expires, American taxpayers will be subsidizing hundreds of millions of gallons of foreign-made ethanol each year. Simply put, the well-intentioned policy of boosting the renewable fuels standard could have serious unintended consequences, if the ethanol tariff expires at the end of 2008. In fact, we would merely trade our dependence upon foreign sources of oil for a new and growing dependence upon foreign ethanol. This tradeoff is dangerous and will undermine hard-fought efforts to grow our domestic ethanol industry which is creating jobs and economic growth in America's heartland.

Critics of the tariff claim that we will need ethanol imports to meet a growing demand for ethanol and to comply with the strengthened renewable fuels standard. However, the facts tell a very different story. Our Nation's current domestic production capacity is 6.2 billion gallons of ethanol. According to industry experts, an additional 6.4 billion gallons of capacity are currently under construction and will soon be refining ethanol. That is a total of 12.8 billion gallons in current and planned production. By comparison, the heightened renewable fuels standard in this bill is 12 billion gallons in 2010, the year the ethanol import tariff would expire under my amendment. The renewable fuels standard will require 12.6 billion gallons in 2011. Clearly we do not need imported ethanol to meet the renewable fuels requirement included in this bill.

The Senate has also voted on extending the ethanol tariff to the year 2010. During debate on the transportation reauthorization bill in the 108th Congress, 76 Senators voted in favor of extending the ethanol tariff through the year 2010. Again, I stress, the Senate is already on record in support of the very proposal outlined in my amendment.

In addition to extending an effective renewable fuels policy, my amendment would also shed light on a disturbing loophole in our trade policy which allows foreign ethanol producers to avoid the ethanol tariff by shipping ethanol through the Caribbean Basin Initiative. The CBI is a Cold-War-era policy established to promote the political and economic stability of 24 Caribbean countries. Under the Caribbean Basin Initiative, many goods, including ethanol, can be shipped into the United States duty free. Brazil is currently shipping wet ethanol, ethanol that contains 10 percent water, to beneficiary countries, only to be dehydrated and shipped to the United States duty free. According to the Congressional Research Service, ethanol dehydration plants are currently operating in Jamaica, Costa Rica, El Salvador, Trinidad, and Tobago, all of which are Caribbean Basin Initiative countries.

Although Caribbean Basin Initiative imports are capped relative to the size of the U.S. ethanol market, these imports are increasing rapidly and could reach 2.5 billion gallons by the year 2022, under an expanded renewable fuels standard.

The troubling part of this policy is that it is unclear how much of this ethanol actually originates in Caribbean countries. If the majority of this ethanol is simply dehydrated in Caribbean countries, then the purpose of the ethanol tariff and of the Caribbean Basin Initiative is being subverted. My amendment calls for a study of Caribbean Basin Initiative imports to determine the origin of these imports and the economic impact on both the domestic ethanol market and the economies of the Caribbean Basin Initiative countries.

My amendment also promotes renewable energy on another front. Part of the revenue generated by duties applied to ethanol imports would be directed to a renewable energy fund within the United States Treasury.

This fund would be dedicated to funding renewable energy systems rebates, which were authorized in section 206 of the Energy Policy Act of 2005. Transfers from this fund would be subject to appropriations.

The section 206 rebate program offers incentives for the installation of renewable energy systems in homes and small businesses. The amount of the rebate is 25 percent of the costs for purchasing or installing the equipment or $3,000, whichever is less.

According to the Energy Information Administration, section 206 rebates could increase residential renewable energy consumption between 7 trillion to 14 trillion Btu's by the year 2010.

The Energy Information Administration also predicts that section 206 rebates would greatly increase the use of geothermal heat pumps, residential wood stoves, solar technologies, residential wind turbines, and wood-pellet and corn-burning stoves.

This commonsense, bipartisan measure gives consumers choice and flexibility to produce and consume renewable energy in their homes. Although it was supported by the Senate in 2005, it is yet to be funded. My amendment would direct some of the revenue generated from extending the tariff toward funding this important program.

Specifically, it would direct up to $100 million in 2009 and $150 million in 2010 to fund the renewable energy systems rebate program--well below the $250 million authorized level.

In conclusion, ethanol is being produced here at home at record levels, but it is an industry that is still in its infancy, and we need to be doing all we can to invest in it and encourage its growth--not the growth of foreign ethanol companies. I encourage my colleagues to support my amendment which will keep American-made, homegrown renewable fuels at the forefront of our national energy policy.

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