Ethanol

Floor Speech

Ms. KLOBUCHAR. Madam President, I am here to talk about the recent bipartisan compromise on biofuels. I have come to the floor a number of times to talk about this country's biofuels policy.

In the last month, I have worked on a bipartisan basis with Senator Feinstein of California and Senator Thune of South Dakota to develop a compromise agreement that represents a good-faith effort to improve our energy policy under very difficult economic times.

At a time of bitter budget debates and entrenched positions, we worked together to find common ground and we took a step in the right direction and that is a step of reducing the debt immediately by $1.3 billion of the $2 billion remaining on the subsidy. I will add that this is a subsidy this Congress voted for just in January of this year. The biofuels industry understands this subsidy was going to end at the end of this year, but they didn't just let it whittle away toward the end every year, knowing there was waning support for it; they came to the table and said let's see if we can do something good for energy policy and for this country's fiscal position.

Under this deal, the Volumetric Ethanol Excise Tax Credit will expire at the end of the month, instead of the end of 2011, as scheduled.

I have continued to say this debate is not about whether we end this tax credit; it is about how we do it. This compromise agreement represents a responsible and cost-effective approach to reforming our Nation's biofuels policy.

First, this compromise dedicates $1.3 billion or two-thirds of the remaining ethanol subsidies in savings toward deficit reduction. It goes right into the coffers of the government to reduce the debt. At a time when our country is struggling with increasing debt and partisan bickering, the compromise represents a step forward. Two-thirds of the money goes toward the debt.

What happens to the rest of the money? Normally, it would be going into that tax credit--$400 million every month--for the rest of this year. Instead, we take that existing $668 million--the other third--and use it to extend and expand support for the production of cellulosic biofuels. As the occupant of the chair knows, coming from New Hampshire, we have a lot of cellulosic biofuels in the Midwest, but it is something you can see all over the country. It is a commitment to a new generation of fuel--algae, biofuels, switchgrass, you name it.

There are a lot of possibilities here when you look at what could be the next generation of cellulosic ethanol. In fact, many of the first advanced biofuels plants are expected to be retrofitted onto existing corn-based ethanol facilities, providing additional benefits to rural communities.

This compromise also extends the small-producer tax credit for 1 year at a reduced rate. This tax credit benefits smaller ethanol plants, which were some of the earliest pioneers in the industry and often structured as farmer co-ops. Again, this is not new money. The money is ending, under our plan, as of July 31 for the tax credit. It simply takes one-third of the existing money and uses it in a smart way so that Congress won't have to spend any new money on very important areas, such as cellulosic biofuels. This extension helps provide small ethanol plants located in rural communities a glidepath to adjust to the elimination of the Volumetric Ethanol Excise Tax Credit.

Lastly, the compromise invests in the infrastructure we need to bring greater competition to the fuel market. This means extending tax credits--the existing money--to help gas stations install a variety of fuel-dispensing technologies, including ethanol, hydrogen, natural gas, and electric charging stations.

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So let me again repeat that this is not just about biofuels, it is about all kinds of alternative energy that competes with oil. We should encourage our homegrown fuels to compete with foreign oil, and this investment will help do just that and give consumers a real choice at the pump. I have always believed we should be investing in the farmers and workers of our country instead of the oil cartels in the Mideastern countries.

The ethanol industry should be commended for coming to the table to offer over $1 billion in savings during these difficult budget discussions. I think this is most significant for some of the discussions Senator Schumer was having and we have all been having about the debt. This compromise, while it may be $1 billion instead of $1 trillion, is an example of what we can do if we are really serious about reducing our debt. It is a model for what can happen to reduce government subsidies going forward.

Take for example the oil industry. Traditional ethanol is a maturing market providing only about 10 percent of America's fuel supply--10 percent of the fuel supply. We are now at the point where we are making more biofuels than we import oil from Saudi Arabia. That is pretty significant, but we are still only 10 percent with biofuels.

How about oil? Well, the rest is oil. The oil industry has been a mature industry and collected subsidies for nearly 100 years. Americans have shouldered these costs for too long. The oil companies no longer need these tax breaks, and we simply can't afford them when we look at the debt we are facing.

The list of the oil production tax deductions includes the domestic manufacturing tax deduction for oil production, costing $18.2 billion over 10 years; the expensing of intangible drilling, costing $12.5 billion to taxpayers over 10 years; the percentage depletion allowance, costing $11.2 billion over 10 years; and the dual-capacity rule for foreign tax credits, costing $10.8 billion to taxpayers over 10 years.

The question isn't about whether the oil companies deserve the profits; it is a question about whether the American people should pay the cost of providing preferential tax treatment for the five largest oil companies in the United States, which have racked up almost $1 trillion in profits in just the past decade. That is the issue. When we are dealing with this debt, when we are dealing with a debt where middle-class families are paying multiple amounts every single year--multiple dollars in interest on our debt--should they also be asked to foot the bill to pay for these subsidies to oil companies when these oil companies have made almost $1 trillion in profits in the past decade? That is the issue. It is a question about whether the mature oil industry should continue to receive billions in subsidies at a time when their profits are up 30 percent in the first quarter of 2011.

I am not against drilling at all. I am pleased about what is going on in North Dakota, right to our west. But when I look at what is happening with this debt right now, we have to be smart, and this is clearly one place to look for savings. It is a question about whether a hugely profitable industry should continue to enjoy lucrative tax advantages at a time when our Nation can least afford it. With oil prices much higher than actual costs, the oil industry doesn't need extra money from the government.

We must get serious about tackling the deficit and putting our country back on sound fiscal ground. The problem we are facing now is not only a crisis of dollars and cents, it is also a crisis of the divide and the deadlock. It is time to open the deadlock. We did it with biofuels. We came forward with a compromise with Senator Feinstein, who has spent her lifetime in the Senate fighting against ethanol. Senator Thune and I came together on a bipartisan basis and got it done. We did it--two-thirds of their immediate subsidy going to debt reduction.

We know this deficit isn't going to fix itself.

The ACTING PRESIDENT pro tempore. The Senator's time has expired.

Ms. KLOBUCHAR. I ask unanimous consent to speak for 1 more minute.

The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.

Ms. KLOBUCHAR. We all know this debt isn't just going to go away. We all know we can't just close our eyes and click our heels and wish our debts away.

In their report, the National Commission on Fiscal Responsibility and Reform wrote that ``every modest sacrifice we refuse to make today only forces far greater sacrifices of hope and opportunity upon the next generation.'' And they are right. A relatively small industry such as ethanol is willing to put two-thirds of its tax breaks on the table for deficit reduction immediately. The much larger and much more profitable oil industry can certainly afford to do the same, if not more.

I thank the Chair, and I yield the floor.

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