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December 3rd, 2010

Grassley Defends Home-Grown Ethanol

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  The amendment that he offered would have, among other things, repealed the $35 billion in tax subsidies enjoyed by oil and gas.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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The Iowa Republican

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