Ethanol

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Mr. THUNE. Mr. President, the Senator from Oklahoma has a strongly held view about ethanol, particularly on this issue, on the VEETC, and I understand that. I understand there are Members who would like to see that particular tax credit go away. I understand that.

What the Senator from Minnesota and I have come up with is a way for them to achieve that objective, but it does it in a way that is reasonable, measured, and which doesn't totally, in the middle of the year, abruptly disrupt an industry and all of the investment that has been made.

The question I ask my colleague is, does our word mean anything around here? We passed this in December. There were 81 Senators who voted for a package of tax extenders, one of which was the volumetric ethanol excise tax credit. Eighty-one Senators are on record. If you want to do away with it, there are lots of ways you can do that. But the way the Senator from Oklahoma is proposing to do that is to say, tomorrow let's pass this and end it. It is $2.5 billion we can save the taxpayers. Well, about $500 million a month is about what this is going to cost. With every month that goes by, there is a little less available to the taxpayer.

What we are saying is that we put in a billion dollars today into this proposal that would go toward debt retirement, and we phase out the tax credit to which the Senator from Oklahoma refers, and we take a very forward-looking, futuristic-type view toward ethanol production in this country, biofuel production in this country. We are going to be capped out at 15 billion gallons, which is the RFS, the renewable fuel standard to which the Senator from Oklahoma referred. We are going to hit that. Then we have to get to the next generation of biofuels.

With all due respect to my colleague from Oklahoma, methanol is not a realistic option. You would have to retool every plant in this country. We have 204 plants in America today that, directly or indirectly, employ 500,000 Americans. Those are the jobs that are impacted. We have had policy on the books now for nearly 30 years that has encouraged the investment in these plants on the belief that we need to get beyond dependence on foreign sources of energy. That ought to be our energy policy, and we ought to be looking to producing more.

I am for oil and gas. The reason I voted against the proposals leveled a couple weeks ago that would have targeted the oil and gas industry is because I think we need all forms of energy--oil and gas, clean coal, biofuels, nuclear, and we need any form of energy we can generate and produce in the United States. I am for it. That is why I think the future of this industry is still very bright, because I think there is an advanced biofuels future out there, and a cellulosic ethanol, next-generation ethanol, whatever you want to call it, where we can make it from switch grass, from blue stem grass, from corn stover, and these types of products. That is out there. But you don't get there unless you have a corn-based platform to start with.

The Senator talked about a renewable fuel standard and talked about this being redundant public policy. One of our colleagues from South Carolina introduced an amendment to this bill that would end that. I assume--I don't know this for a fact--that my colleague from Oklahoma would support that amendment, which would do away with the renewable fuel standard.

Mr. COBURN. Will the Senator yield?

Mr. THUNE. Certainly.

Mr. COBURN. The Senator obviously didn't hear what I said. I said I support ethanol, and I would not support that. I have been upfront with the Senator in the past, and you know my position on that.

So the question here--and I ask him a question: How do you fit what the people who would get this $3 billion, who the Senator says they don't want--why would they say that if it is going to have a negative impact on their industry?

Mr. THUNE. Well, I say to my colleague from Oklahoma that I was not aware he said he supports ethanol. I was not aware he supports the RFS. If there is an amendment offered to strike the RFS, which there will be--am I wrong in saying the Senator would oppose that amendment?

Mr. COBURN. I will oppose that amendment. My worry is because of the process of the Senate, we may not get that amendment to vote on. My colleague, as part of our leadership, would recognize that we have a problem with amendments.

Mr. THUNE. I don't disagree with that. There is an issue I have not argued. It is your prerogative to bring this up and file cloture, which you have done in this circumstance. I think the renewable fuels standard that creates the sort of policy construct we are talking about here today is one aspect of the biofuels policy going forward. The other aspect, going back for long time, historically, is the blenders credit.

I will tell you--because the statement you made is all the people who get this don't want it--well, that is not true. The large integrated oil companies, which are also refiners and, in many cases, retailers of refined gasoline, don't want it, maybe. I understand you have a letter to that effect. But there are lots of smaller refiners who do want it.

There are also an awful lot of--the blenders credit gets passed on to the retailer, which gets passed on to the consumer, hopefully. The people who will be impacted by this are not just the large integrated oil companies. If you talk about the large integrated oil companies, saying they don't want this--they said in hearings before congressional committees a few years ago they didn't want the oil subsidies they get in the Tax Code today. They are on the record saying that. Yet we voted to keep those in place just a few weeks ago.

Mr. COBURN. Will the Senator yield?

Mr. THUNE. Yes.

Mr. COBURN. Would the Senator define what a subsidy is to him, because part of the problem with the debate is that we keep saying ``subsidies.'' We don't have subsidies--not in the Senator's State or in Oklahoma. We have accelerated depreciation, which even if you took that away, the dollars to the Federal Government would not increase. How is there a subsidy to the oil and gas industry?

Mr. THUNE. When we characterize what you called tax expenditures, there are a bunch that fall into that category. I know the Senator is familiar with that as he served on the President's debt commission. It is about $1.1 trillion a year. In some way or another, we reduce the tax liability of various individuals and businesses around the country. I don't disagree with you. In fact, I will work with the Senator on a proposal that would address this and look at all those types of tax expenditures.

I think it is punitive to single out one and say we are going to kill this one, after we committed in December, with 81 votes, that we are for this. I don't know how we can, in good faith, go to this industry, which employs 500,000 Americans, and say we are going to pull the rug out from under you after 6 months.

That being said, I would characterize it as anything that reduces the tax liability that is public policy. I think it is characterized as tax expenditures. The oil depletion allowance and the intangible drilling costs--those are all things that are unique to the oil industry.

Mr. COBURN. Does it include charitable contributions--a subsidy, the same category?

Mr. THUNE. If it is under the definition of tax expenditure, sure. Oil depletion allowances and intangible drilling costs are characterized, for subsidy purposes, the same way as the ethanol tax credit. We have lots of what we would characterize as tax credits and earned income tax credits in the Tax Code. We have lots of what is characterized as tax expenditures. You may characterize it differently, and that is accelerated depreciation, but in fact for the purposes of description, as we describe things here, it fits into that category.

The oil industry came in front of congressional committees and said they didn't want those. So for them to say they don't want this particular blenders credit--and my view certainly isn't determinative, but I think the large integrated oil companies that get the blenders credit also view ethanol as a threat. Like it or not, today the only viable alternative to petroleum--the only one we have--is 10 percent of our fuel supply in this country.

I am not debating the Senator from Oklahoma about whether the merits of this particular policy--at least in its current form--should not be transformed and should be reformed; I am saying that we should. I have come to the Senator with a proposal to do that. That is not something, obviously, that he agrees to. That is fine. He is entitled to not support that. But I believe we ought to reform it. I think the way we reform it is do it in a reasonable way that doesn't cut it off tomorrow but, rather, phases it out.

I think that for the Senator from Oklahoma, to me, it is something that is a win for him as well. He gets what he wants. He gets the phaseout, plus $1 billion in debt reduction, and if this thing goes to the end of the year, we get zero. We get goose-egged.

This thing expires at the end of the year. Whether it gets extended or not remains to be seen. But one thing we know with certainty is that I am putting a proposal on the table today that gets $1 billion in reduction, that provides some certainty at least in phasing out the VEETC and also makes an investment in blender pumps, which is something that is very important to the future of the industry.

So I think it is a reasonable way to deal with this issue.

The Senator from Oklahoma and I have a disagreement, and that is probably not going to change. But I am offering what I think is a reasonable proposal that gets you where you want to end up and I think also is a way in which we can keep this industry from having the rug pulled out from under them after we made a commitment to them in December of last year.

Mr. President, I yield the floor.

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