CongressHouse FloorSenate Floor • U.S. Capitol: 202-224-3121

March 31, 2011

Energy Subsidies

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Mr. GRASSLEY. Mr. President, often I come to the Senate floor to talk about alternative energy. Most of the time it is about biofuels. Sometimes it is about wind, because I am the author of the wind energy tax credit. Sometimes it is to speak about it. Hardly ever do I come to the floor to talk about it in regard to the attempt to amend a certain bill on the floor. I come for that purpose now, and I come to express my strong opposition to amendment No. 220 filed at the desk by Senator Coburn.

I don't find any fault with the issue Senator Coburn raises, only when it is raised. I sense from some of his arguments and press releases that it is raised to bring up the issue of energy and what energy should be subsidized or not subsidized, or whether any energy ought to be subsidized, and also maybe to point out some things that are wrong with the Tax Code. I can't find any fault with any of those motives. I only find fault, let's say, in the sense that it is being brought up to show that there are some things wrong with the Tax Code and the Tax Code ought to be reformed.

Yes, if anybody said the Tax Code was a perfect piece of work, you might think: Well, you have been in Washington too long or you don't exercise good judgment or you are not in the real world. So I think it is perfectly legitimate to bring up issues about the Tax Code, but in the sense of reform of the Tax Code, not as an isolated amendment to some other bill, for the simple reason that if you do that, with the complexity of our Tax Code--reforming it in that way--every Senator attempting to do that would be growing a long gray beard for the years it would take to do it piecemeal. Hopefully, we can get it done sometime in the context of tax reform and tax simplification, or flat tax or fair tax, and also with the corporation tax.

As to the motive for bringing up subsidies for energy, it is a perfectly legitimate subject to bring up, but it ought to be brought up in the context of a national energy policy. I believe Senator Coburn is like me. He feels if you are going to have a growing economy, you have to have a growth in the use of energy, except for possible conservation. If you are going to do more for more people, you are going to have to have an increase in the use of energy. So it is in that vein that I state my opposition to the Coburn amendment.

Senator Coburn's amendment would raise the tax on domestic energy production by repealing an incentive for the use of homegrown renewable ethanol. I am astonished, given our current situation, that there are some who would prefer less domestic energy production. With conflicts in the Middle East and crude oil over $100 a barrel, we should be on the same side.

I have always considered myself on the same side as Senator Coburn on energy issues. We should all be on the side of more domestically produced energy, and that would be nuclear, it could be alternative energy, and it

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would be drill here and drill now. The tremendous cost of America's dependence on foreign oil has never been more clear than when you have the conflicts and the revolutions going on in oil-producing regions of the world--now in the Middle East and northern Africa.

So we have this threat, and in light of that threat, we should have an energy policy that says ``all of the above.'' You don't pick and choose. I support drilling here and drilling now. I support renewable energy. I support conservation, both what might be mandated by public policy as well as personal conservation. I think people who know me know I have a reputation for conservation for several reasons--maybe energy conservation, but also it leaves more money in your pocket. I also support nuclear energy. So I believe it is very counterproductive for Senators from big oil country to single out energy that comes from American agriculture--renewable energy, homegrown energy, not imported. I didn't pick this fight. I support energy from all sources. I support traditional oil and gas, and more of it, from here. I held 21 meetings in 20 different counties Monday through Thursday during the last recess, and there wasn't a single person at one of them who didn't say: How come we aren't making more use of our own energy? They didn't say: We import $730 million a day of oil, but I told them, and it emphasized their point.

Why ship $730 million every day overseas to parts of the world where they use the money to train terrorists to kill us? And, of course, American taxpayers--American taxpayers--with tax incentives have been supporting oil and gas for over 100 years. So the attack on homegrown energy is remarkable, isn't it? We shouldn't be fighting each other over domestic energy sources. We should be fighting OPEC and foreign dictators and oil sheiks who hold our economy hostage. You see it right now, because of the anxiety about what is going on in Libya, and raising the price of gasoline 75 or 80 cents.

The author of the amendment has argued that the production of clean homegrown ethanol is fiscally irresponsible. It is important to remember that the incentive exists to help producers of ethanol to compete with the oil industry or, as you so often hear in this town, we have to have a level playing field. Remember that the oil industry has been well supported by the Federal Treasury for more than a century. Oil was discovered in 1859. I don't know how many years later it was that there were tax incentives for the production of oil, but it has been a long time.

President Obama, in his budget request for 2012, has advocated repealing a dozen or so subsidies to big oil. He has argued that a century-old industry no longer needs tax breaks. With oil prices at $100 a barrel, and record profits being made, some could certainly question why this industry needs any taxpayer subsidy at all. President Obama's proposal would repeal $44 billion in oil and gas subsidies over a 10-year period of time.

I wish to remind my colleagues of a debate we had last summer on an amendment offered by the distinguished Senator from Vermont, Senator Sanders. The amendment he offered would have, among other things, repealed about $35 billion of tax subsidies enjoyed by the oil and gas industry. Opponents of the Sanders amendment argued that repealing the oil and gas subsidies would reduce domestic energy production and drive up our dependence on foreign oil. Well, we don't want to do that, do we? Opponents also argued it would cost U.S. jobs. We also argued it would increase prices at the pump for consumers--something you don't want to do when you are in a recession. I tend to agree with these arguments in regard to the help that the Federal Treasury gives to oil companies. All of my Republican colleagues, and more than one-third of the Democrats, did as well. But a repeal of the ethanol tax incentive is a tax increase as well that will surely be passed on to the American consumer--no different for ethanol in your gas tank than gasoline in your gas tank. If you take subsidies off of oil, it raises the price of gasoline. If you take the incentives off of ethanol, it raises the price of ethanol.

I know that removing incentives for oil and gas will have the same impact as removing incentives for ethanol. We will get less domestically produced ethanol, it will cost U.S. jobs, it will increase our dependence upon foreign oil, and it will increase the price at the pump for the American consumer. We are already dependent upon foreign sources for more than 60 percent of our oil needs. Why do my colleagues at this time want to increase our foreign energy dependence when we can produce it right here at home--clean burning, environmentally good?

I wish to ask my colleagues who voted against repealing oil and gas subsidies but who support repealing incentives for renewable fuels why they have this inconsistency? Where are the amendments from fiscal conservatives and deficit hawks to repeal the oil and gas subsidies? The fact is it is intellectually inconsistent to say that increasing taxes on ethanol is justified but that it is irresponsible to do the very same thing on oil and gas production. If tax incentives lead to more domestic energy production and good-paying jobs, why are only incentives for oil and gas so important in accomplishing that goal?

It is even more ridiculous to claim that the 30-year-old ethanol industry is mature and, thus, no longer needs the support of the taxpayers, while the century-old oil industry still receives $35 billion in taxpayer support. Regardless, I don't believe we should be raising taxes on any type of energy production or on any individual, particularly during a weak economy.

The Senator from Oklahoma insists that because renewable fuel is required to be used, then somehow it doesn't need an incentive. But with oil prices at $100 a barrel, oil companies are doing everything they can to extract more oil from the ground. There isn't a mandate to use oil, but it has a 100-year monopoly on our transportation infrastructure, so essentially it is a mandate.

When there is little competition to oil, and it is enormously profitable--and we will see those reports next week--wouldn't the sponsor argue that the necessary incentives exist to produce it without additional taxpayer support, if we wanted to be consistent? Oil essentially does have a mandate, as I just said. The economics of oil production are clearly in favor of the producer, not the consumer. Why do they need taxpayer support?

It is also important to understand the hidden cost of our dependence upon foreign oil. We had a peer-reviewed paper published in 2010 concluding that--and let me say parenthetically, before I quote, the leeway is somewhere between $27 billion and $130 billion:

$27 to $138 billion is spent annually by the U.S. military for protection of Middle Eastern maritime oil transit routes and oil infrastructure, with an average of $84 billion a year.

This is $84 billion in American Treasury spent on the defense of shipping lanes to quench our thirst for foreign oil.

It is not reflected in the price at the pump. It is a hidden cost and the hidden cost is paid by the very same people who support the military, our Navy, the American taxpayers.

Milton Copulos, an adviser to President Ronald Reagan and a veteran of the Heritage Foundation, testified before Congress in 2006 on this very issue. He testified that the hidden cost of imported oil is equivalent to adding $8.35 to the price of a gallon of gasoline from the Persian Gulf. There is no hidden U.S. military cost attributed to homegrown ethanol.

Do you understand that? You don't have to have the Navy of the United States keeping shipping lanes open for the ethanol that you burn in your car. No subsidy of $8.35 a gallon for ethanol such as there is for oil, according to the Heritage Foundation.

Let's have a debate on ethanol, but let's debate it in the context of a comprehensive energy plan. This debate should include the subsidies for all energy production. We do not pick out one versus others. What is unique about the subsidy for ethanol? We also have subsidies for grain and for biodiesel. When is that going to come up? We had a subsidy for wind energy--I know it because I got that legislated 18 years ago--and a subsidy for solar, subsidy for biomass, subsidy for geothermal, subsidy for nuclear energy. Why just ethanol at this point?

But I said at the beginning, talking about energy subsidies--oil, alternative

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energy, nuclear energy, conservation--is legitimate. But don't pick one out. What are we going to do about all the rest of them? Are we going to take a subsidy a day? Take wind tomorrow? Take solar the next day? There is a context in which to do this. We all say we need a national energy policy. These subsidies have to be discussed in the context of a national energy policy. Nearly every type of energy gets some market-distorting subsidy from the Federal Government. We can say that is not right. But do we want alternative energy or don't we want alternative energy? Do we want renewable energy or don't we want renewable energy? Do you think we would have an ethanol industry today if there had not been a tax incentive a long time ago? No.

What about all the people who say we should not be using corn or grain, a food product, for fuel, we ought to be eating it? They say we ought to use corn stover, wood chips, switchgrass, other things that have cellulose in them and get our ethanol from that. I agree 100 percent. But how in the heck do we think we would ever get to producing ethanol out of corn stover and wood chips and switchgrass, et cetera, if we had not had 30 years of engineering to make ethanol out of grain--which we did not do very efficiently 30 years ago but now we do much more efficiently today. We have to have the first generation for the second generation.

I say an honest energy policy and debate should include ethanol. It should include subsidies for oil, natural gas, nuclear, hydropower, wind, solar, biomass. How do you think we would ever get hydropower in the West if the taxpayers had not paid for the Hoover Dam? It is hypocritical to put our economic and national security at risk by targeting ethanol while disregarding the subsidies for all other energy sources.

Do you know the debate about alternative energy is a debate about our national security because, for this country, the No. 1 responsibility of the Federal Government is our national defense and just think how weak our national defense is when we have to depend upon oil coming from the volatile Middle East, where there is revolution going on right now. Wouldn't it be better for it to be domestic crude? Why do you suppose the Defense Department, and even our whole aviation industry right now, is putting some money into research to develop alternative energies, including the stuff we call renewable and even things we do not know much about yet? Ethanol from algae is an example. Because our military leaders know we should not be dependent on it.

Just think of the retired generals and admirals out here speaking everyday of why we need alternative energy and speaking very highly of ethanol. I say it is hypocritical because it has something to do with our national security and we do take an oath to uphold that Constitution and the national security is our No. 1 responsibility. We know State governments and local governments cannot protect us from foreign intervention, people who want to kill us. Only the Federal Government is qualified and has the power to do it, the constitutional power--but also to bring the resources together to get the job done.

Repealing the ethanol tax incentive will raise taxes on producers, blenders, and ultimately consumers of renewable fuel. This amendment is a gas tax increase of over 5 cents a gallon at the pump. I don't see the logic of arguing for a gas tax increase when we have so many Americans unemployed and underemployed, struggling just to barely make it from day to day. I know we all agree we cannot and should not allow job-killing tax hikes during this time of economic recession and, more important, that recession is going to stay as long as there is some economic uncertainty. Debates such as this--should we be importing more oil--lend themselves to that uncertainty. Unfortunately, those Members who have called for ending the ethanol incentive have directly contradicted this pledge of not having tax hikes because a lapse in the credit will raise taxes, will cost over 100,000 U.S. jobs at a time of near 9 percent unemployment and increase our dependence upon foreign oil.

There is a taxpayer watchdog group called Americans for Tax Reform. They consider repeal of this incentive to be a great big tax increase. Americans for Tax Reform states: ``Repealing the ethanol credit is a corporate income tax increase.''

I agree. 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 ethanol-related jobs. 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 jobs. That is why I support a homegrown renewable fuels industry.

I conclude by asking my colleagues: If we allowed the tax incentives to lapse, from where would we import an additional 10 percent of our oil? Because there is a policy in this Congress, don't drill in the United States, import it. The President was in Brazil, last week I believe it was, saying: President of Brazil, you ought to drill off the shore of Brazil because we want to import oil from you. At the very same time we are slow at issuing permits so we can drill our own oil off our own shores, particularly in the Gulf of Mexico.

Where are we going to go? Are we going to go to the Middle Eastern oil sheiks? Send even more billions of dollars over there to give them money to train terrorists to kill us or do we want to get it from Hugo Chavez, who every day is saying something about how he hates America? He is taking the side of Qadhafi right this very day, against the revolutionaries of that country, the very people we are trying to help bring a better life to and stop genocide. I don't think we want to go to the Middle East for 10 percent more of our energy in our cars or to Hugo Chavez. I prefer, instead, that we support our renewable fuel producers based right here at home, rather than send our workers a pink slip. I would prefer to decrease our dependence on Hugo Chavez, not increase that dependence on him, and I certainly do not support raising the tax on gasoline during this weak economy.

Let me say something I said at the beginning and then I am going to yield the floor; that is, there is a context to talk about this. There is nothing illegitimate about anybody bringing up any tax incentive anytime they want to or any law that is on the books because they ought to be reviewed from time to time. But when it comes to energy policy at a time of $4 gas, at a time of anxiety about what is going on in Libya, at a time when we all know that people in this country want a national energy policy, it ought to be talked about in the context of energy legislation. We should talk about subsidy as a generic subject, not just picking out ethanol or any other one, just like some people here would like to pick out the subsidy for oil and end it--such as the President has suggested in his budget. We want to do it in the context of a national energy policy and a subsidy that is a subsidy to oil, to all renewable energies--and there are a dozen of them, I bet--to conservation, and to nuclear energy.

Let's emphasize nuclear energy. When we are talking about a subsidy, do we think we would have a single nuclear plant in the United States if 60 years ago the Federal Government, this Congress, hadn't passed the Price-Anderson Act to set up Federal support for it, indirect or direct, whatever it was. It took that to get it going. We had to reinstitute that in 2005 or we still wouldn't be considering any nuclear plants.

We do it in the context of a national energy policy. We do it in the context of subsidies on all sorts of energy, not just one of them. If we are doing it for tax reform purposes, then it has to be done in the context of overall tax reform because, as I said, we start on this little tax incentive today and that little tax incentive tomorrow and that little tax incentive the next day and we will be here until as long as Methuselah lived, in order to get it all done.

I hope there will be some consideration of this in a generic way, not in the specific way of this amendment. That is why I do not support the amendment at this time, but I want people to know I do not abhor the idea of talking about the ethanol tax credit or any other tax credit, except I want to talk about energy tax credits all together.

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I yield the floor.

(Senate - March 30, 2011)

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