Creating Long-Term Energy Alternatives For The Nation Act Of 2007

Floor Speech

CREATING LONG-TERM ENERGY ALTERNATIVES FOR THE NATION ACT OF 2007 -- (Senate - June 20, 2007)

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Mr. THUNE. Mr. President, I wish to join my colleague from Iowa in opposing this amendment. In 2006, America's ethanol industry contributed over $41 billion to the national economy. Operation and construction of domestic biorefineries created 163,034 jobs in all sectors of the economy last year alone.

The bill before the Senate builds upon this success by boosting the renewable fuel standard to 36 billion gallons by the year 2022 and establishing other valuable incentives for renewable energy production. The amendment proposed by Senator Gregg, our colleague from New Hampshire, would send mixed signals to our ethanol producers, their investors, and the farmers who sell their products to ethanol plants.

In effect, what Congress would be doing is telling the ethanol industry: We are demanding more of your product, but at the same time we are going to open the back door and begin subsidizing foreign sources of ethanol. If this amendment is adopted, our marketplace would be flooded with heavily subsidized ethanol from foreign countries.

In 2006, Brazil exported 433 million gallons into the United States, which is an increase of 400 million gallons over the year 2005. That same year, Brazil paid over $220 million in duties to import this amount of ethanol. They were already importing ethanol into this country through the Caribbean Basin Initiative. They have not reached that cap, but I think it is fair to expect they are going to continue to flood the U.S. market every opportunity they get with ethanol that is produced in Brazil.

The tax credit that currently is in place for domestic ethanol is critical to the success of our industry, and it does not discriminate between domestic or foreign sources of ethanol. So what happens is, as soon as the Brazilian ethanol is blended with gasoline in the United States, taxpayers begin paying 51 cents for each gallon of foreign ethanol. If Senator Gregg's amendment is accepted, American taxpayers will immediately begin subsidizing hundreds of millions of gallons of foreign-made ethanol each year with no offsetting duty. Simply put, by eliminating this tariff, we would trade our dependence upon foreign sources of oil for a new and growing dependence upon foreign ethanol.

I would add the critics of this tariff have argued that it inflates the cost of gasoline in this country. In fact, gasoline prices, as my colleague from Iowa has noted, would not be affected by removing the tariff on imported ethanol. Ethanol itself represents less than 5 percent of U.S. motor fuel supplies, and imported ethanol represents a small fraction of that percentage.

The factors truly driving the price of gasoline higher have nothing to do with ethanol supplies. Record crude oil prices, tight refining capacity, lower gasoline production, and limited expansion of domestic refining expansion all play a much greater role than the supply of ethanol in today's higher gasoline prices.

Critics of the tariff also claim we will need ethanol imports to meet the growing demand for ethanol and to comply with the strengthened renewable fuel standard. Again, 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 planned production, which is more than enough--more than enough--to meet the heightened renewable fuel standards in the near term.

Additionally, we have to keep in mind the limitations placed on ethanol demand due to blend restrictions. Right now, only E10, 10 percent ethanol and 90 percent gasoline, is approved for use in nonflex-fuel vehicles. There is a point at which we are going to hit the E10 wall. Domestic production, as you can see if you look at this chart of ethanol production in this country, is more than adequate to meet the full market potential for E10. Some industry analysts predict we will very soon have excess ethanol production capacity when we hit the E10 wall.

That is why it is so important we expand ethanol and allow for higher blends--E15, E20--which in my view is something long overdue. The E10 wall is the point at which the market for E10 ethanol is saturated if ethanol production continues to grow at a record pace. While some in the industry disagree on when we will hit the E10 wall, it is clear it would have a harmful effect on the overall ethanol industry if Congress fails to act. Lifting the tariff on ethanol imports would only flood the marketplace with foreign ethanol, further magnifying the impact of the E10 wall.

Clearly, there are several reasons why my colleagues in the Senate
should oppose this amendment, which undermines our national energy policy of greater energy independence. So I ask my colleagues to oppose the amendment.

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