To provide a condition precedent for the effective date of the revenue raisers.

CREATING LONG-TERM ENERGY ALTERNATIVES FOR THE NATION ACT OF 2007--
Continued

The ACTING PRESIDENT pro tempore. The Senator from Louisiana.

Amendment No. 1658

Mr. VITTER. Mr. President, I rise in strong support of an amendment I
filed at the desk some time ago, Vitter amendment No. 1658, and I would
like to briefly explain what that is.
At its core, this amendment would allow Louisiana to use more Federal
coastal impact assistance dollars, which are already going to the State
under preexisting law, a law we passed a couple of years ago, to be
used specifically for one of our top priorities in the wake of
Hurricanes Katrina and Rita, and that is a hurricane protection effort.
By way of background, in 2005, we passed the Energy Policy Act, and
that did a very important thing for the State of Louisiana and other
producing States. It established a Coastal Impact Assistance Program
for the six States in the United States that produce offshore energy,
particularly oil and gas. Obviously, that includes Louisiana. Under
that 4-year Coastal Impact Assistance Program, certain Federal dollars
flow to those producing States in light of the enormous work they do
producing energy for our country and the negative impact that activity
has in many cases on our coastline.
Back at that time, a provision was made to restrict the amount of
those funds that could go specifically to infrastructure projects, and
that cap was established, with the work of Senator Bingaman and others,
at 23 percent. Back in 2005, I argued strongly and worked with Senator
Bingaman and others to say that cap should be lifted with regard to
hurricane protection work, at least in Louisiana, because that work was
absolutely so vital, so essential for our very existence.
Unfortunately, that argument did not hold the day. The cap was not
lifted, and an exemption was not put in place for hurricane protection
efforts.
I am trying to get that cap lifted for hurricane protection work in
Louisiana now. My argument that we should do it comes down to two
words--two words that happened, that devastated our coastline between
then and now, and the two words are ``Katrina'' and ``Rita.'' Since
that original act in 2005, Katrina and Rita struck, and they struck
literal death blows to the Louisiana coast. If hurricane protection was
a big priority before that, it has only grown enormously with those two
hurricanes coming upon our shores.
I think there is every rationale, every reason to allow us to use
more of that coastal impact assistance money for hurricane protection
efforts and to lift that arbitrary ceiling of 23 percent for
infrastructure projects, specifically when we are talking about
hurricane protection efforts.
I have been in contact with Senator Bingaman about this issue. We
have just discussed it on the Senate floor. I know he is considering
these arguments. Perhaps in wrapping up my discussion, I could invite
the Senator to engage in a brief colloquy and ask him again to focus on
the extreme needs of the Louisiana coast in the wake of Hurricanes
Katrina and Rita and to continue consideration of lifting this cap in
light of those extreme needs and to see where we are in that
discussion.
The ACTING PRESIDENT pro tempore. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, let me respond to the comments the
Senator from Louisiana made.
Procedurally, we are not able to bring up or consider the amendment
he has talked about today. I have explained to him the reason for that
is there is a Republican objection to us bringing up and considering a
great many amendments that Democratic Members would like to bring up
and consider at the same time. So I regret that.
On the substance, I am not in a position to indicate right now
whether this kind of change would take place. I would assume that to
make that judgment, we would have to know something about the hurricane
assistance that has been provided and whether there are still adequate
funds available for some of this wetland assistance that was the
purpose of the original legislation in 2005.
Obviously, I think the entire Senate has been anxious to be of
assistance to all of the gulf coast. This legislation he is referring
to, the wetlands protection part of the 2005 Energy bill, was part of
that. There have been several things that have been done since the
devastating hurricanes hit that region. But I do not know enough about
the specifics of those assistance programs to pass judgment on the
contents of his amendment. I commend him for offering it, but I am not
in a position to support it or oppose it.
Mr. VITTER. Mr. President, reclaiming my time.
The ACTING PRESIDENT pro tempore. The Senator from Louisiana is
recognized.
Mr. VITTER. Reclaiming the floor, I will put that down as an
``undecided,'' and ``maybe.'' I want to continue these discussions with
the Senator from New Mexico. He is essentially the key to clearing this
amendment, probably without objection.
Again, I restate that because of the devastating impact of Hurricanes
Katrina and Rita, I think there is every reason in the world to lift
this arbitrary cap of 23 percent, specifically and only for hurricane
protection work on our coast. It is absolutely vital for our survival.
It will not mean we are not doing everything else we have been talking
about. That is moving forward for a number of reasons, including the
revenue sharing piece we were able to pass into law late last year.
That will give significant new revenue to our coastal restoration
efforts and other things. I again urge the Senator to continue to look
at this and hopefully clear this so it can be adopted without even the
need for a vote on the floor, adopted by unanimous consent.

Amendment No. 1776

Now I wish to move to a second very important amendment I have at the
desk, which is amendment No. 1776. I just happened to get that number
but I think it is a very appropriate number for this amendment because
this goes to our very important, patriotic efforts to increase our
energy independence and to get away from our enormous reliance on the
Middle East, including very dangerous countries and regimes in the
Middle East that are clearly not friends of ours at all.

[[Page S8023]]

This amendment is straightforward. It would allow increased domestic
production of minerals or renewable energy in Federal areas that are
not allowed now, if and only if all four of these things happen--really
five.
No. 1, the national average gasoline price would have to exceed $3.75
a gallon at the pump.
No. 2, in addition, foreign imports of oil would have to exceed 65
percent of all oil use.
No. 3, in addition, the President would have to determine that an
ample supply of renewable fuels is insufficient to meet fuel demand
domestically at that time.
No. 4, in addition, the President would have to determine that
continued and growing reliance on foreign oil imports is a threat to
national security.
If all of those four preconditions were met, then and only then, No.
5, the Governor of a State, with the concurrence of the State
legislature, could petition the Secretary of the Interior to initiate
leasing activities on specified Federal lands within the State or
within the administrative boundaries of the Outer Continental Shelf
related to that State for oil and gas or alternative energy production.
So if everything I mentioned happened, then and only then a State
itself, through its Governor, through its State legislature, can say:
Yes, sir, Mr. President, we want to be part of the solution. This is a
dire, extreme case. This is a real national security threat. We want to
be part of the solution by producing, safely and in an environmentally
friendly way, more oil and gas, more renewable energy for America.
I think this is an utterly commonsense and very much needed amendment
to increase domestic production, decrease reliance on foreign sources.
That goes to energy security. As such, it goes to economic security. It
goes to national security.
Again, none of this would happen unless all of those things happened
first: gasoline prices at $3.75 at the pump, foreign imports over 65
percent of everything we are using in this country, the President
saying renewables cannot make up the difference, the President saying
this is a real national security issue, the Governor of the State
saying we want to do this, it is our home, we can do it responsibly,
and the State legislature of the State concurring. All of those things
would have to happen before opening up either land within the State or
part of the Outer Continental Shelf off the State to leasing activity,
in terms of Federal land.
It is very important that we do a balanced approach, all sorts of
things, to decrease our reliance on foreign sources. This is a very
commonsense part of that menu.
With that, I understand there may be objection, but I ask unanimous
consent to set aside the pending amendment so that this very
commonsense amendment, which goes to the heart of this debate and the
heart of the bill, Vitter amendment No. 1776, can be called up and made
pending.
The ACTING PRESIDENT pro tempore. Is there objection?
Mr. BINGAMAN. I object.
Mr. REID. Could I ask a question, through the distinguished Senator
from Louisiana, to the manager of the bill, the Senator from New
Mexico?
The ACTING PRESIDENT pro tempore. The majority leader is recognized.
Mr. REID. Would the distinguished chairman of the Energy Committee
inform the Senate why there isn't more done on this bill? People have
said to me we want to have it debated--and not just Democrats;
Republicans have asked me the same question--why aren't we able to move
on to get some of this done?
Mr. BINGAMAN. Mr. President, let me respond to the majority leader by
saying there are a great many good amendments Republican Members would
like to offer, there are good amendments Democratic Members would like
to offer. We are informed there is objection to us bringing up any of
these amendments and getting a vote on them at this time because of
objections from a Senator on the Republican side.
For that reason, we are somewhat unable to proceed with any of these
legislative matters. I know the time is running toward the vote on
cloture--both on the tax package and on the bill itself. I know there
is good faith on both sides in wanting to do some more business before
those cloture votes occur. But obviously, good faith on the part of
many Senators does not ensure we can make progress. We have to have
unanimous consent and we cannot get that.
Mr. REID. I don't know if the Senator from Louisiana still wants the
floor?

Mr. VITTER. Yes, I do.
Mr. REID. Would it be OK if I direct another question to the manager
of the bill?
Mr. VITTER. Certainly.
Mr. REID. I say through the Chair to the distinguished Senator from
New Mexico, I have worked for all the time I have been in the Senate,
for more than a dozen years, on a very close, intimate basis while we
were managing the Energy and Water appropriations bill, with the senior
Senator from New Mexico, Senator Domenici. What is going on here, as
the comanager of this bill, is very unlike Senator Domenici. Senator
Domenici likes things debated. He likes votes to take place. He likes
movement here in the Senate.
Senator Domenici is not part of holding this legislation up, is he?
Mr. BINGAMAN. Mr. President, let me respond to the majority leader. I
think it is fair to say there is a good-faith effort on the part of
both managers to try to move forward with legislation in a way that is
fair to both Republicans and Democrats, and allows consideration of
amendments on both sides. But we are being blocked by others.
Mr. REID. One last question, if the Senator will be patient, the
Senator from Louisiana.
The Senator from New Mexico, the senior Senator from New Mexico, the
manager of the bill, has been in the Senate longer than I have, and he
knows more about procedure than I do, but has the Senator tried, for
example, having 60-vote margins on some amendments that people may not
want, to see if there is any other way to move this along to get that
objection withdrawn?
Mr. BINGAMAN. Again, Mr. President, in response, let me say we have
tried to get agreement that certain of the amendments that are
objectionable to some Members on the Republican side--we would agree
that we would be bound by a 60-vote threshold on those amendments. But
at least at this point, my understanding is the objection is to any
consideration of the amendments, regardless of what the threshold is
going to be. We are unable to proceed right now. I hope that changes. I
hope we can dispose of some of the very meritorious amendments that
both Republican Senators and Democratic Senators wish to offer before
we get to cloture.
Mr. REID. Mr. President, I want the record to reflect my appreciation
for the courtesy extended to me by the distinguished Senator from
Louisiana.
The ACTING PRESIDENT pro tempore. The Senator from Louisiana is
recognized.
Mr. VITTER. Mr. President, I was happy to do that.
Reclaiming the floor, all of that is interesting. It is also what is
commonly referred to as ``inside baseball.'' For the sake of the
insiders here, let me translate for you what the American people just
heard. To quote Charley Brown, ``Wah, wah, wah, wah, wah, wah, wah.''
The fact is, what Americans are faced with is an energy crisis and we
have all this ``inside baseball'' tangling us up in the Senate, in the
House, and we are not doing a darned thing about it.
The other fact is there is no objection on the Republican side to
calling this amendment up, No. 1776, to making it pending, to
considering it. There are all sorts of debate and all sorts of
discussions about other amendments. There is certainly no objection on
our side to this amendment. Why should there be? Why shouldn't we allow
individual States to say: Yes, we want to be part of the solution,
particularly when all of the following events occur: average price of
gasoline reaches $3.75 a gallon, foreign imports top 65 percent of
everything used in the country, the President certifies that renewables
can't make up the gap, the President certifies there is a continuing
reliance on foreign oil, which is a national security threat? If all of
those things happen, shouldn't we be allowing a State,

[[Page S8024]]

through its Governor, through the State legislature, to be part of the
solution in a safe and environmentally sensitive way to produce more
energy in this country that doesn't take away the need for alternative
fuels, that doesn't take away the need for conservation or everything
else?
But the clear and simple fact is, this problem is so big we need to
do all of the above. Certainly this commonsense approach should be on
that menu, should be among all of the above.
Let's get beyond the Washington insider ``Wah, wah, wah,'' all the
running around, all the objections, all the being tied up in knots, and
present some reasonable, commonsense solutions to this growing national
energy crisis.
I hope those who control the floor and leave the floor, starting with
the distinguished majority leader, to whom I deferred a few minutes ago
on the floor, can be part of that.
The PRESIDING OFFICER (Mr. Sanders). The Senator from West Virginia
is recognized.
(The remarks of Mr. Byrd are printed in today's Record under
``Morning Business.'')
Mr. BINGAMAN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. NELSON of Florida. I ask unanimous consent that the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. NELSON of Florida. Mr. President, the moment of truth is coming
on this Energy bill very shortly as to whether we will stick with the
bill which requires the meeting of cars and light trucks to be 35 miles
per gallon not for another 13 years, until 2020, and thereafter the
mileage standards to improve by 4 percent a year. There is a great deal
of consternation going on here, particularly by the automobile industry
that does not want to comply with these standards.
I was prepared to offer an amendment that I think 35 miles is too
low. We have the technology. The question is, Do we have the political
will? We have the technology to go to 40 miles per gallon. I have filed
an amendment. But apparently, because of the dynamics of the Senate
taking up this issue, we are struggling to get the votes in order to
keep the 35-miles-per-gallon standard in the bill.
There are all kinds of side discussions going on in the corridors and
anterooms of the Capitol as to whether there will be any offer,
particularly by the Senator from Michigan, Mr. Levin, as to reduced
standards. Originally, he was proposing a standard of 36 miles per
gallon but not to be achieved until the year 2025, with other trucks
exempted from that. So you see the battle, the choice that is basically
set.
Why should we do this now? Let's look at history. I came into public
office in 1972, now 35 years ago. At the time in the early 1970s, we
had an embargo by the oil-producing countries, particularly in the
Persian Gulf region. There was a panic. There were long lines at the
gas stations. The price of oil shot up from a low price of something
less than $10 a barrel back then, it shot up considerably and everybody
was concerned. Americans were impatient. The Persian Gulf region became
a target of our disaffection. Then the spigot was turned on. The oil
began to flow again. The embargo was released. The price started to
recede. America went back to sleep.
It happened again in the late 1980s, about the time I was elected to
Congress. Again, there were long gas lines, the cost of gasoline shot
up, the enmity toward the Persian Gulf region nations, the double
whammy that interest rates soared upward of 15, 16 percent. All of that
was a real crunch on Americans. But the spigot was turned on again. The
oil flowed. The price receded a little bit--not nearly as much as it
was back in the early part of the decade of the 1970s--and America went
back to sleep again.
All the time at each of these moments, the alarm was sounded that
from a defense posture, the United States did not want to be dependent
on foreign oil. Yet each time dependence increased and the amount of
foreign oil imported into the United States increased to the point that
today we are importing 60 percent of our daily consumption of oil.
Where is it coming from? It is coming from places such as the Middle
East, the Persian Gulf, Nigeria, and Venezuela. I have mentioned four
parts of the world that are relatively unstable. Yet this is what is
supplying us with 60 percent of our daily consumption of oil.
So we come to the moment of truth which may occur this afternoon, if
an alternative amendment is offered to the miles per gallon required in
this Energy bill. The moment of truth is, is America ready to have the
political will to change its gas-guzzling ways? We are talking about
reasons of energy. We haven't even said anything about what the excess
carbon dioxide as a result of the burning fossil fuels is doing going
into the air, creating the greenhouse effect and heating up the Earth.
That is another complete story. But it is all as a result of this.
People say: Another part of this, we are going to talk about
renewable fuels for electric utilities. That is an important part too.
But when you look at where do we consume most of the oil, the petrol,
it is in the sector of transportation. Within transportation, where is
most of the oil consumed? It is consumed in private vehicles. So we are
coming to the moment of truth. Are we going to finally require, without
many exceptions, the automobile industry to do what technology easily
allows us to do--but not even do it tomorrow, phase it in over a 13-
year period to the year 2020, requiring that we have greater miles per
gallon and, therefore, what does that mean? Less consumption of oil.
That means less dependence on foreign oil. This is where the greatest
consumption of oil is, our private vehicles. The moment of truth is
here.
There is clearly a defense reason we ought to explore as to why we
ought to do this as well. Can you imagine the different posture of the
Armed Forces of the United States if we did not have to be the
protector, almost the sole protector, of the sealanes upon which the
great supertankers of the world steam in order to satiate an oil-
thirsty world? Thus, who do you think defends and protects the sealanes
coming out of the Persian Gulf, coming through one of those
chokepoints, a military chokepoint called the Strait of Hormuz, 19
miles wide, on one side Iran, on the other side of the 19 miles, Oman,
through which narrow passage the supertankers of the world have to flow
to get out into the Indian Ocean? Who protects that? The United States.
Wouldn't it be different from a defense posture with a Latin American
President such as Hugo Chavez, who continues to thumb his nose at the
United States because he can since he has petrol dollars, since he
supplies 12 to 14 percent of our daily consumption. And, by the way,
his company, which has been nationalized by the Government of
Venezuela, the oil industry called PDVSA, did you know that they own
all the Citgo stations in the United States? So his threat of cutting
off is more hollow than real because he would be, to use the old
expression, ``cutting off his nose to spite his face''--if he were to
suddenly shut down the oil supply going into all of his gasoline
stations around the United States. Nevertheless, he has made that
threat. In the process, with his oil wealth, because we do buy half of
his oil production, he can buy friends around the region. Happily, he
has not been totally successful. But he can buy friends and buy
influence with his petrol dollars, either in the form of direct
financial remuneration or in the form of oil and gasoline supplies to
oil- and gasoline-thirsty countries, such as the little countries in
the Caribbean, the little countries in Central America. That is another
thing we are facing. The moment of truth has come.
I had an automobile dealer, one of the very best from my State of
Florida, sit with me yesterday and tell me the automobile industry
could not make this adjustment. But that is what the automobile
industry has been saying for the last 35 years, ever since we had that
first major oil disruption in the early 1970s. In his particular case,
he has tried, within the industry, to get the industry to be willing to
reform itself and use the technology we have to do much higher miles
per gallon. I thanked him profusely and congratulated him on his
efforts. But Mr. Automobile Industry, backed up by Mr. Oil Industry,
don't come tell me we don't

[[Page S8025]]

have the technical capability and the American people the capability of
buying automobiles that will take us from what is now, on the average,
about 22 miles per gallon on vehicles--they have a different standard;
it is something like 27, but in reality it is only 22--don't tell me we
don't have the technology in 13 years to get us to 35 miles per gallon.
I wish it were 40. But if we can get this, we are all the better off.
I wish to share one more thing, as we are coming to the moment of
truth.
Two weeks ago, during the break, I spent it going around on an
intelligence mission in Africa, and it became quite apparent in one of
those countries, Nigeria--we get 12 to 14 percent of our daily supply
and consumption of oil from that one country, Nigeria--it became very
apparent to me those facilities were defenseless.
At the same time, it was very apparent to me that al-Qaida is on the
rise in Africa. They are coming out of Arabia, into the Horn of Africa,
there at Somalia, in all the midst of that chaos, and they are moving
across the Sahel and the Sahara of Africa. They have even changed some
of the names of the terrorist groups there in Africa to be AQIM, al-
Qaida in the Islamic Maghreb. That is the group that just tried to
assassinate the President of Algeria a couple months ago, and they got
close. They got a big truck bomb, suicide bomber, next to the
Presidential palace. It killed a dozen people, but they did not get the
President. But it is on the rise.
Guess what one of their targets is going to be. The oil facilities in
Nigeria. The only way we are going to stop that, since the Nigerian
Government cannot protect them, is through the cooperative arrangement
we have with African nations' intelligence services cooperating with
our intelligence services. That cooperation is going on and has saved
some of the terrorist strikes elsewhere in the world. That is the only
way we are going to interdict--to find out ahead of time and stop it;
otherwise, it is going to happen. When that happens, right there, with
14 percent of the daily supply suddenly cut off, we are going to rue
the day if, on this day, this moment of truth, we have not set
ourselves on a mandatory course of higher miles per gallon in order to
force less consumption of oil, particularly foreign oil.
That is the message. I do not see how any Senator can ignore this
message. Yet we are scrambling for 60 votes to close off debate to get
to the end of this bill because of that provision in it.
Senators, the moment of truth is coming, portending enormous
consequences for the future of our country and for the future of the
free world, and it is going to happen today.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Arizona.

Amendment No. 1800 To Amendment No. 1704

Mr. KYL. Mr. President, I have an amendment I send to the desk.
The PRESIDING OFFICER. The clerk will report the amendment.
The legislative clerk read as follows:

The Senator from Arizona [Mr. Kyl] proposes an amendment
numbered 1800 to amendment No. 1704.

Mr. KYL. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To disallow the credit for renewable diesel for fuel that is
coprocessed with petroleum)

On page 69, lines 17 to 20, strike ``to so much of the
renewable diesel produced at such facility and sold or used
during the taxable year in a qualified biodiesel mixture as
exceeds 60,000,000 gallons''.

Mr. KYL. Mr. President, I wish to ask the chairman of the committee,
is it not correct that at this time there is agreement to have a
debate--40 minutes equally divided--on this particular amendment, and
the vote to be set at a later time, but we would try to conclude the
debate at this time?
Mr. BINGAMAN. Mr. President, in response, that is my understanding,
that we will have 40 minutes equally divided prior to a vote on or in
relation to the amendment, and that vote may take place later in the
afternoon.
Mr. KYL. Mr. President, I thank the Senator very much.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. KYL. Mr. President, this amendment is designed to get back to the
original intent with regard to the Energy Policy Act of 2005 in
relation to a very specific, rather narrow provision, but an important
provision, that provided a $1 per gallon credit for renewable diesel.
The idea was to encourage the creation of new technologies for
renewable diesel. The idea was primarily to try to get products, such
as cellulosic products, that could eventually be added to or be turned
into a fuel that could be burned as diesel fuel. As a result, that $1
per gallon credit was deemed an important way to create a new kind of
product.
Well, as entrepreneurs will do, a couple of very bright people
figured out they could take an existing product, which is already
used--namely, animal fat--and put that in with diesel fuel, in effect--
I am simplifying the process--and, voila, it all burns the same, but it
would qualify as renewable diesel, biomass under the credit and,
therefore, they would get the $1 per gallon credit for doing something
that adds essentially nothing to the process and uses animal fat--
primarily, tallow--which is already used by the oleochemical industry,
which is seeing the price skyrocket because of the interpretation these
oil companies have gotten IRS to agree to that they could actually use
this animal fat in their diesel and, therefore, get the credit for
producing a new kind of diesel.
That was never the intent. The intent was to find some new kinds of
biomass processes that could be converted to a diesel fuel and have it
be a renewable diesel fuel--something truly new--not to take existing
diesel and take an existing product that is already used by a very
green industry.
By the way, the oleochemical industry is an industry that gets no
subsidy, and uses this animal fat--something that is good to dispose
of--to make plastics, cleaning products, home cleaning products, some
rubber kinds of products, and most especially soap. The basic
ingredient in soap is tallow. There is a finite market for that. The
soap people buy all the stuff that is on the market, but they found
that the cost has gone up 100 percent in the last 6 months because of
this interpretation that tallow could be bought up by, primarily, one
big oil company, Conoco oil company, which has figured out they can get
the advantage of this $1 per gallon subsidy.
That is wrong. It was never intended for that. If they want to go out
and invent a new process with the big tax credit we have given them,
that is great, but not to use the tax credit to do something that can
be done anyway and which has the effect, the unintended consequence, of
hurting an industry that employs at least 4,000 people. By the way, if
that industry is not able to buy the tallow--the animal fat that is
being used here--then the only alternative is to produce things like
soap in foreign countries that have alternative supplies to what we
have in the United States.
So the unintended consequence of this is not just that somebody gets
to take advantage of a $1 per gallon tax credit that is very generous--
and not producing anything new--but they are also driving out of the
United States an important industry which does use this waste animal
fat, and uses its very productively, without any subsidy.
Mr. President, I ask unanimous consent to have printed in the Record
a letter from the chief executive officer of the National Biodiesel
Board, who wrote to me on June 20.
There being no objection, the material was ordered to be printed in
the Record, as follows:

National Biodiesel Board,

Jefferson City, MO, June 20, 2007.
Hon. Jon Kyl,
U.S. Senate,
Washington, DC.
Dear Senator Kyl: The National Biodiesel Board (NBB)
supports your efforts to promote sound energy policy by
ensuring that renewable diesel produced through petroleum co-
processing does not qualify for the $1.00 per gallon
renewable diesel excise tax credit.
In a time of budget deficits and rising fuel prices due in
large part to limited domestic refining capacity, the NBB
questions the wisdom of directing tax benefits and limited
feedstock to subsidize existing oil refining operations at
the expense of free-standing producers of biodiesel and
renewable diesel. Under your amendment, vegetable oils and
animal fats co-processed with petroleum would not qualify for
the $1.00 per gallon renewable diesel tax credit, but would
continue

[[Page S8026]]

to qualify for a 50 cents per gallon credit that is provided
under current law. The NBB believes that your amendment
represents balanced energy policy and is consistent with the
goals of the underlying legislation.
Again, the NBB thanks you for your efforts on this issue
and urges Senators to support passage of your amendment to
preclude petroleum co-processing from qualifying for the
$1.00 per gallon renewable diesel tax credit.
Sincerely,
Joe Jobe,
Chief Executive Officer.

Mr. KYL. Here is what the letter says:

The National Biodiesel Board supports your efforts to
promote sound energy policy by ensuring that renewable diesel
produced through petroleum co-processing does not qualify for
the $1.00 per gallon renewable diesel excise tax credit.
In a time of budget deficits and rising fuel prices due in
large part to limited domestic refining capacity, the NBB
questions the wisdom of directing tax benefits and limited
feedstock--

That is the animal fat--

to subsidize existing oil refining operations at the expense
of free-standing producers of biodiesel and renewable diesel.
Under your amendment, vegetable oils and animal fats co-
processed with petroleum would not qualify for the $1.00 per
gallon renewable diesel tax credit, but would continue to
qualify for a 50 cents per gallon credit that is provided
under current law. The NBB believes that your amendment
represents balanced energy policy and is consistent with the
goals of the underlying legislation.

And so on.
We are not eliminating the tax credit. We are not eliminating this
other credit. All we are doing is getting back to the original intent,
which was not to provide this additional $1 per gallon credit for
something that could be done anyway. We want you to go out and invent
something new here using biomass for biodiesel, not using something
that can already be done.
According to the testimony of the company that is primarily going to
be doing this, this has not resulted in any major expenditure on their
part. I will quote from ConocoPhillips' 2005 annual report. They have
``conducted a successful test that converted vegetable oil into high-
quality renewable diesel fuel . . . , and can be produced with existing
refinery equipment with minimal incremental capital investment.'' In
other words, this is not something that requires some new investment
that requires the American taxpayers to subsidize it.
As I said, they are taking something they can do right now, and they
are simply taking advantage of a tax break we did not intend to be used
by a company like that.
Now, in anticipation of this boondoggle--and it has gotten quite a
bit of press--there has been a suggestion: Well, we can limit it to
taxpayers with 60 million gallons of production. The problem is, in the
Finance Committee mark that was changed from ``taxpayer'' to
``facility.'' So now a company can have 20 different facilities, each
one producing 60 million gallons, and they are right back in business.
It is no limitation at all.
So my colleagues should not be hornswoggled--to use the old phrase my
grandfather used to use--that somehow there is some kind of limitation
on this. Very cleverly, the Conoco folks were able to get in this
legislation that it applies per facility; and by having multiple
facilities, there is, in effect, no limitation.
Mr. President, I will be happy to give those who want to speak in
opposition to this amendment an opportunity to try to refute what I
have said, but I think this is very straightforward. There is no sense
in rewarding what I would consider to be behavior that was never
intended by this Congress in providing this kind of a tax credit.
When we are going to take a tax benefit--in effect, using taxpayer
dollars--to promote something, we want to make sure we are promoting
something that is in the best interest of the American taxpayer, not
just a way for somebody who knows how to make a buck to use it to make
a buck, especially if it has a negative consequence on an existing
industry, the oleochemical industry, and, in particular, the soap
makers of this country.
The PRESIDING OFFICER. Who yields time?
The Senator from Montana.
Mr. BAUCUS. Mr. President, I yield myself such time as I might
consume.
Yesterday, the Finance Committee passed the Energy Advancement and
Investment Act. That measure passed by a vote of 15 to 5. That is a
very broad-based, bipartisan majority for the Finance Committee
amendment that is now pending on this energy bill.
It is a major amendment. The committee spent a lot of time trying to
figure out the best way for America to turn the corner, for the United
States to begin to wean ourselves away from OPEC, to wean ourselves
away from our reliance upon foreign oil, to try to enhance our national
security, make the United States a little more able to determine its
own destiny with respect to energy.
In doing so, we therefore also created lots of incentives for
American production of renewables, for renewable energy, conservation,
hybrid automobiles, hybrid plug-ins, cellulosic ethanol--a whole
multitude of ways to help America become much more self-sufficient and,
hopefully, therefore, be able to get our gasoline prices down a little
bit because at the current time we very much are in the throes of big
oil's control as to what they charge at the gas pump. This is a very
thoughtful amendment. We spent a lot of time trying to put all this
together.
The Finance Committee amendment includes a compromise on the topic of
Senator Kyl's amendment; that is, renewable diesel. There are a lot of
offsetting interests here, to be honest about it, from different parts
of the country. Some are more concerned about biodiesel produced from
products such as soybeans; others are much more concerned about
renewable diesel produced by other products that could be organic
products. In trying to get that balance put together, the goal is the
same, which is to displace foreign oil.
I hope, therefore, that the amendment offered by the Senator from
Arizona is not agreed to because the effect of it will be not to
displace a good bit of foreign oil, which is contrary to the main point
of the underlying legislation.
Under current law, there is a $1-a-gallon credit for renewable
diesel, including that produced with animal fats. There is also a $1-
per-gallon credit for biodiesel, which is made from soybeans and other
seeds. The committee amendment extends both of these credits for 2
years, until 2010; otherwise, they will expire at the end of next year.
The Senator from Arizona appears to be concerned that renewable
diesel coprocessors--such as Conoco, for example--will increase the
cost of consumer goods. He thinks consumer goods are going to go up as
a consequence of our assistance for renewable diesel. He argues that
the price of animal fats to be used in making renewable diesel, which
are also used in making soap, will drive up the cost of those consumer
goods.
I might say that fancy term ``coprocessors'' includes companies such
as ConocoPhillips, which will use some of its existing infrastructure
to produce renewable diesel. That is true.
The Senator from Arizona also appears to be concerned about the size
of the subsidy--$1 per gallon--for this fuel. I might say that this was
a question which members of the committee were concerned with. There
are those who thought that biodiesel would be in competition with
renewable diesel, so we worked to find a way to work together to reach
a balance. This is a compromise we worked out: the dollar credit for
each, but in addition, the committee capped the tax credit for
renewable diesel coprocessors at 60 million gallons per facility. We
put a cap on it. Another way to say it is that once that cap is
reached, then the $1-per-gallon credit will no longer be available. We
have a limit. We are cognizant of the points made by the Senator from
Arizona.
We also commissioned a study on the effects of energy tax incentives
on consumer goods. The 60-million limitation is the same as the
definition used for a small producer of biodiesel or ethanol. Now, is
60 million a magic number? No. But it is a standard used in current
law. That is why we took it. It is not something pulled out of thin
air. One might ask: Should the $1 subsidy remain current law for good?
My answer is, probably not. This is a bold step in the sense that we
are trying to push-start and help kick-start renewables and alternative
energies. We don't know if these incentives are exactly

[[Page S8027]]

right. They are probably not exactly right, but they are the best we
could come up with at this time, and we think that probably they will
work pretty well, but we will have to come back and revisit them. Some
are not going to work very well, some will be increased and some will
be decreased.
I say all that because the committee amendment before us extends this
$1 for each--that is, for biodiesel and renewable--for just 2 more
years. It is not a 5-year or a 10-year extension. It is not a permanent
provision. It is just for 2 years. It will sunset in 2 years. That is
contrary to most of the recommendations we have been getting from
industry across the board; namely, they like 5-year incentives toward
capital needs. A couple years, 3 years; 1 year is not enough, 2 years
is not enough. We extended most of these credits on renewables and
alternatives for 5 years. Section 485, which is renewable credits, is
extended for 5 years, but we limited this to just 2 years as an
extension because we are not as confident that is what the exact
provision should be.
So I hope this amendment offered by the Senator from Arizona is not
agreed to. The underlying Finance Committee amendment, which is
pending, we thought it through the best we could. We think it is
balanced. We think it is fair. Therefore, we hope it is sustained. Let
me restate that every gallon of renewable diesel produced is a gallon
of foreign oil displaced, which I think is pretty important.
I appreciate the efforts of my good friend from Arizona, but I think
by and large they are not well placed.
I understand there are a couple of others who wish to speak on our
side. How many minutes would the Senator from Iowa like to speak? For 5
minutes. Senator Lincoln, about the same.
Mr. President, how much time is remaining on our side?
The PRESIDING OFFICER. Twelve minutes.
Mr. BAUCUS. Mr. President, I yield 5 minutes to each Senator who
wants to speak, and I first yield to the Senator from Iowa, my good
friend, Senator Grassley.
Mr. GRASSLEY. Mr. President, I thank the Senator for yielding. I am
glad to come to the floor to speak about renewables. I am going to
speak against the Kyl amendment.
I think we ought to put things in perspective. For two decades, maybe
longer than that, this country has been seeking various approaches to
alternative energy so that we are not dependent upon foreign sources
and, more recently, violent and unpredictable sources of energy for the
United States for reasons of national security, for reasons of our
economy. There are a lot of good reasons we shouldn't be so dependent
upon fossil fuels and foreign sources of energy. So we have had two or
three decades, starting out with ethanol and now going into other
things such as biodiesel, wind, Sun, and things of that nature.
Now we are finding that the things this country was so united on,
such as the need for renewables, the need for helping agriculture, the
need for lowering our trade deficit, the needs of national security,
the needs of a cleaner environment--everybody was united that we ought
to be doing it, and now we are being somewhat successful. It used to be
we would have to listen to all of the excuses of big oil, fight big
oil, why we shouldn't have renewables. Now we are finding out about the
high price of food, the high price of animal feed, just as if all of
the problems of our country are on the backs of the American farmers,
which is very unfair. Now we are finding some dissension from other
industries being affected. We are still in the infancy of these
industries, whether it is ethanol after a couple of decades or whether
it is biodiesel after 3 or 4 years. We are in a state of infancy yet in
renewables.
We ought to be as united today as we were over the past two decades
on what is right for this country, good for agriculture, good for the
environment, good for our national defense, good for good-paying jobs
in parts of rural America where it has never been before. Everything
about it is good, good, good. We better stick together because
otherwise we will continue to be dependent upon those violent regions
of the world for energy; we are going to be dependent on something God
made a finite quantity of, such as fossil fuels. We need to move
forward, united. This is the second amendment today and, who knows, we
may have 10 other amendments which are very detrimental to the causes
of getting this infant industry of renewables off the ground.
Having said that as a backdrop, I wish to speak specifically about
what is wrong with the amendment that is before us. I can't replace the
good things--or I can only add to the good things which the Senator
from Montana has already spoken to. But there is no cap on any
biodiesel production. They may go forth and produce and meet their
specific chemical standards. They have the right to produce as many
gallons of biodiesel as they like, and it will be qualified for the
excise tax credit through the end of 2010. Now, people will argue that
it ought to be longer, but you have to fit things into what we have
offsets for, so it is the year of 2010. If they are a small producer,
they will be able to receive the credit until December 2012. If you are
a noncoprocessing facility and do 100 percent biomass, not including
chemicals, catalysts, and the like, they have the same rules as
biodiesel. If you coprocess at a facility, your total credit is limited
to 60 million gallons. If you claim a renewable diesel credit, the 60
million gallons is the current definition of a small producer. So a
coprocessor facility will not be able to receive any more tax benefits
than the small producer. For example, if you have a 100-million-gallon
facility that you are concerned about, they have a built-in $40 million
advantage over any coprocessing facility. Obviously, a barrel of
vegetable oil or animal oil is substantially more expensive than a
barrel of crude oil, and the credit by law is limited to only the
volumetric amount of the biomass.
I hope this makes it clear that we should not support the amendment
of the Senator from Arizona.
I yield the floor.
The PRESIDING OFFICER. The Senator from Arizona is recognized.
Mr. KYL. Mr. President, may I be informed as to how much time remains
on this side?
The PRESIDING OFFICER. Twelve minutes for the Senator from Arizona
and 6\1/2\ minutes for the Senator from Montana.
Mr. KYL. Might I take a little bit of time, then, before the other
side speaks again on this issue?
I respect my colleagues who have spoken, but I have not really heard
an argument that, to me, anyway, argues against the specific amendment
I am offering. Remember, I am not doing away with the credit. The
arguments that have been raised here make it sound as if we are trying
to do away with the credit. That is absolutely not true. The credit
remains. What we are trying to do is essentially reverse an IRS ruling,
which I submit was made in error, with respect to the application of
the tax credit. They said you could actually apply it to a process to
which it was never intended to be applied.
A letter to the Secretary of Treasury at the time this legislation
was originally considered makes that crystal clear.
Congressman Blunt wrote:

It has been brought to my attention that some taxpayers are
suggesting to the Department of Treasury that section 1346 of
the Act, the renewable diesel provision, could be broadly
interpreted to include traditional processes. This is not
what we intended in the provision, and neither the statute
nor the associated JCT estimate of revenue implications in
any way support such a reading.

What he is saying is this: Two years ago when this tax credit was
created, it was designed to incentivize the creation of a new product
so that we didn't have to continue to explore for oil or export it from
foreign sources; we could begin to make renewable diesel out of
biomass. That was the idea. We have all of this waste product of
biomass. We have cellulosic products we can create here, and that will
create a new renewable fuel source.
Everybody said: That is a great idea. To get it promoted, let's have
a dollar-per-gallon tax credit for the production of that. It was not
intended to apply, as the Congressman from Missouri pointed out, to
include traditional processes for refining and producing fuel. In other
words, it was designed to promote something new.
So when these folks found that they could take animal fat,
essentially, to greatly simplify it, and add it to their

[[Page S8028]]

existing stocks, voila: a biomass renewable fuel that qualified for a
generous tax benefit, that was never intended. All my amendment does is
to say that interpretation is not correct; you can't do that. The
underlying dollar-per-gallon credit exists. The other 50-cent-per-
gallon credit exists. We don't take away any of that. All we do--and
the primary person or company that is affected by this, I acknowledge,
is Conoco Oil Company. They have figured out, with minimal new
investment, as they themselves wrote in their annual report, that they
could take advantage of this tax credit by using the animal fat.
Now, again, I suppose it wouldn't matter that much if a big oil
company is taking undue advantage of a tax credit we create. That is
probably done all the time. I don't like it. That is why taxpayers are,
frankly, sometimes upset with Congress that we pass these great,
generous subsidies and sometimes they are utilized by people who
shouldn't be utilizing them, not to create a new kind of diesel fuel in
this case but to keep using the same old diesel fuel.

The other unintended consequence, though, is one that affects another
industry, a clean industry, an industry that is using the waste fat,
the vegetable oil and animal fat, the waste product of turkeys and
chickens, for example. It is utilized today in a variety of these oleo
chemical products which are products we use every day--house-cleaning
products, soap, as I said.
The problem is that because these existing refineries are buying up
these waste products, they are driving up the cost. There is only so
much of this animal fat around. It is a finite amount. When the demand
is increased by having these oil refineries buy it all up so they can
put it into their diesel fuel so they can get an extra credit, that is
driving up the price which, as I said, has gone up 100 percent in the
last 6 months.
If that continues, these soap companies are not going to be able to
afford the primary feedstock for the soap, and they are going to have
to produce it abroad, another great unintended consequence of what
started out to be a good idea but didn't turn out to be such a hot
idea.
This is a very parochial issue. I submit, except for the chairman and
ranking member of the committee, primarily the opponents of this are
from places that take advantage of this provision. I cannot object to
their fighting for their local industries, but I think it is important
for us to recognize that as a national energy policy and as a national
tax policy, we have to look at it in nationwide terms. When we have
created a credit to produce something new, and it ends up not being
used to produce something new but to produce something that currently
exists by existing refineries and uses up the feedstock of another
important industry, driving the cost of that industry way up, we better
pay attention to that. The fix doesn't hurt anybody, except primarily,
as I said, this one big oil company because it leaves the credit in
place, it leaves the 50-cent credit in place. It doesn't do anything
with those credits. It doesn't say they are not extended. All it does
is say we go back to the way it was prior to this IRS ruling that said
they could take advantage of this provision for the existing refiners.
I will conclude. We don't need to subsidize existing oil-refining
operations at the expense of freestanding producers of biodiesel and
renewable diesel. That is who this tax credit was designed to help, the
freestanding facilities, the ones that were actually producing
something new.
A key component of rising fuel prices in this country is a lack of
refining capacity in the United States. We all know that. Freestanding
biodiesel and renewable diesel producers have both fuel and refining
capacity. We ought to be encouraging them, and that is what the $1-per-
gallon credit was designed to do.
By contrast, coprocessed renewable diesel adds no new net fuel and no
new refining capacity to the diesel pool. This was not intended to help
the existing refiners. They are already in business, they are already
making money, and we don't need to give them $1-a-gallon credit for
doing something we don't need to have them do.
Finally, as I said, the availability of feedstock, such as animal fat
and vegetable oils, is essentially fixed, and this $1 renewable diesel
credit is the motivation for integrating the oil companies to engage in
coprocessing. This will clearly increase demand for the feedstock
needed to produce biodiesel and increase costs. It is not wise tax
policy to drive tax policies and limited feedstock to support existing
refinery operations at the expense of biodiesel and freestanding
renewable diesel production.
The economic benefits associated with freestanding biodiesel
production could be lost if this $1-per-gallon renewable tax incentive
is directed to support operations in existing oil refineries.
I ask my colleagues to please keep this in perspective and take into
account that those who say this amendment is bringing the end of the
world, no, it is not. It doesn't change existing law at all. All it
does is say to go back to the original intent and apply this very
generous tax credit for the purpose we originally intended: to produce
something new, not to use existing refineries and give them a tax
credit for doing something they are already doing.
I hope when the amendment is called that my colleagues will see
through some of the smokescreen that has been presented, not in the
Chamber but on the outside with regard to this amendment, and will
agree that national policy dictates that we take care of taxpayers'
dollars carefully, that we set our energy policy carefully, and that we
not let people take undue advantage of it in ways we did not intend.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, I ask the Senator from Arizona, before
the debate proceeds, we now have agreements with Senator Inhofe for two
votes. One is a vote in relation to amendment No. 1693 and then a vote
in relation to amendment No. 1666. I was wondering if the Senator will
agree that following the debate on those two amendments, which will
take an hour, if the Senator will be able to return to that point and
debate his second amendment and then we can have a stack of four votes.
Mr. KYL. Mr. President, I will be happy to do this on my time because
I am going to yield back my time on this amendment in any event. I am
happy to have the vote on this amendment stacked with the Inhofe
amendment at whatever time that will occur.
With regard to the second amendment, which I am going to propose, I
am not at liberty to do that right now because there are numerous
people who wish to speak. I assure the chairman that as soon as I have
that list and know how much time it is, I will let him know that.
Mr. BINGAMAN. I appreciate the response.
I yield the floor.
Mr. BAUCUS. Mr. President, I yield to the Senator from Arkansas 5
minutes.
The PRESIDING OFFICER. The Senator from Arkansas.
Mrs. LINCOLN. Mr. President, I start first by thanking both the
chairman and ranking member and their staff for some incredibly hard
work to get this legislation ready to come to the floor. It was
absolutely no small feat, but it is so very important that we bring
this portion of our objective in leading our Nation away from
dependence on foreign oil and back to our ability to provide for
ourselves.
This energy tax package that Chairman Baucus and Senator Grassley
have brought together is remarkable--remarkable in its balance, it is
remarkable in the engine it provides to drive the incentives industry
needs to move us toward renewable fuels.
I wish to say how much I appreciate their effort. Throughout the
history of our Nation, we have faced great technological challenges
that we have confronted and overcome. We didn't put a man on the Moon
by talking about how important it was. We developed a plan, and we
committed the resources necessary to achieve that plan. We are at that
juncture now in this country in regard to renewable fuels and our
dependence on foreign oil. I applaud their efforts in what they have
done and accomplished.
I also wish to point out, in terms of what the Senator from Arizona
has

[[Page S8029]]

brought up, he mentioned this is not a new product. I venture to say
how many people have heard of diesel made from animal fat, particularly
chicken fat? This is a new product. It is a product that produces a
renewable diesel that is very clean burning and very positive for our
environment and the overall objective of what we are trying to reach in
this underlying bill and that is reducing our CO<inf>2</inf> emissions,
reducing what is going into the environment, and reducing our
dependence on foreign oil.
The Senator from Arizona mentions the original intent. The original
intent was to promote renewable diesel. In fact, the renewable diesel
credit is drafted as technology neutral, regardless of the state of the
art or process at the time of enactment. The EPAct statute simply
provides that renewable diesel fuel, in order to qualify for the
credit, must be produced using a thermal depolymerization process. We
have the history on that process. We know what the intent and the
purpose of EPAct was and is, and we meet that intent. We meet that
intent with the encouragement of making sure we are looking at all the
renewable feedstocks in this country to put into the mix to lessen our
dependence on petroleum products and to create variety in what it is we
go to.
I know there are some in this body on both sides who think maybe this
is an opportunity to get even with big oil. That is not the intent of
this bill, and I hope we would not stray to that. I hope we would not
stray to the idea that we are here to get even with big oil but that we
are here to encourage those in the oil industry to move into renewable
fuels, to move into the opportunities that exist in technology, to push
them into an area where renewables make sense.
Senator Kyl's amendment does not solve the problem he raises
regarding the increase in the price of fat. The credit that Senator Kyl
seeks to strike is for a process that is in the very early stages of
production. This process has not even been produced in terms of barrels
of fuel in this country. So it is difficult to see how it could have
had the profound effect on the prices that Senator Kyl claims it has.
The fact is, the price of fat has been driven up in part due to its
use in the production of biodiesel. Senator Kyl said in our hearing
yesterday that if he could, he would try to remove all credits he
believes might distort existing markets.
If we think we are going to move ourselves as a nation and as a
people, with the culture and the amenities to which we have become
accustomed, to a society that depends on renewable fuels without making
at least some minor changes in the marketplaces of our existing
feedstocks, we might as well pack it up and go home right now.
If we are going to eliminate all the credits and all the
opportunities that exist to go to renewable fuels, and we are going to
eliminate them because of some blip they may cause momentarily before
we begin to move into the decade where we can balance our needs for
renewable feeds with other items, we might as well go home because that
is going to happen.
What we have done is crafted in this bill a very sensible solution.
Senator Kyl mentions the stand-alone renewable diesel facilities need
to be protected, they need to be maintained. They are. They have no cap
whatsoever in this bill, just as there is no cap on biodiesel. But
where we have facilities that are taking the steps in the right
direction to coproduce, they are going to get a credit. They are going
to get a credit up to the amount where they meet what the small
producers are doing, a 60-million-gallon-per-facility cap. It is very
reasonable, and it certainly speaks to the efforts of what we are
trying to do in this underlying bill.
Today's amendment may only affect renewable diesel, but it is
entirely possible that next year the target will be biodiesel or
ethanol or cellulosic ethanol, if what he wants to do is eliminate
credits that protect those underlying feedstocks.
While it may be good intention for something that is parochial for
the Senator from Arizona, I say let us all remember what the ultimate
objective of this bill is: to lessen our dependence on foreign oil,
clean our environment, and make sure that we are moving to renewables.
That is exactly what the underlying bill does.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, how much time remains?
The PRESIDING OFFICER. The Senator from Montana has no time
remaining.
Mr. BINGAMAN. Mr. President, I see no Senators on either side, so I
will propound a unanimous consent request.
I ask unanimous consent that Senator Alexander be recognized for 10
minutes, to be followed by 10 minutes for Senator Klobuchar, and
following that, the pending amendments be set aside so I may offer
amendment No. 1693 and that Senator Inhofe can then offer his first-
degree amendment No. 1666; that the two amendments be debated
concurrently for 1 hour, to be equally divided between Senator Inhofe
and myself; that at the conclusion or yielding back of time, the Senate
vote in relation to amendment No. 1693, to be followed by 2 minutes for
debate and a vote in relation to amendment No. 1666; that no amendments
be in order to either amendment prior to the votes in relation to the
amendments; and that upon the disposition of the Inhofe amendment, the
Senate vote in relation to the Kyl amendment No. 1800, with 2 minutes
of debate prior to the vote.
The PRESIDING OFFICER. Is there objection?
Mr. DOMENICI. We have no objections. We have worked together to
arrive at this schedule.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Tennessee.
Mr. ALEXANDER. I thank the Senator from New Mexico for the courtesy
of the next 10 minutes, and I would ask the Chair to let me know when 1
minute remains.
Mr. President, I compliment both Senators from New Mexico for their
work on energy. As they did 2 years ago, they have made some important
proposals. The 2005 bill was a terrific step forward, and there are
some important suggestions in this bill. I want to especially say a few
words about the tax part of the bill that came out today, and I will
have more to say about that tomorrow and amendments to offer.
It is probably not the first time it has been said of the Senate that
there is too much wind here, but I would like to suggest there is too
much of that in the tax bill that has been reported to the Senate. Here
is the tax bill. As I read the figures: $28.5 billion more over the
next 10 years, $10 billion of it for wind. Almost all of it is for
subsidies to wind developers. 34 percent of the bill's total goes
toward this tax credit.
This isn't the first time the Senate has been generous to wind. In
the 2005 bill it was 19 percent. Why would I say that is a little too
much wind? It is because in many parts of the country the wind doesn't
blow sufficiently for us to rely on it for electricity.
We have had some debate about Senator Bingaman's proposal, which
might work very well in New Mexico or some other States to say that 15
percent of the electricity ought to be from renewable energy, mostly
wind under this definition.
This map of the United States shows that much of the wind in the
Southeast and Eastern United States doesn't blow enough for that to
happen there. So under that proposal, the one we were debating earlier,
called the renewable portfolio standard, I am afraid Tennesseans would
have to pay basically a tax of 2 cents per kilowatt-hour, which would
be $410 million a year.
We have one wind farm in the entire Southeast, and it is in Tennessee
on Buffalo Mountain. Last August, while we were all sweating and
perspiring with our fans on the front porch, the wind farm operated for
7 percent of the time. Most of us want our air conditioners when it's
hot--not just when the wind blows enough to make electricity.
We are not the only ones who are beginning to see the limits of wind.
Yesterday, the President of Pacific Gas and Electric in California,
which likes wind power and is using wind power, said, according to
California Energy Markets, that they will not make substantial new
investments in wind generation, and ``we think we are approaching in
California itself the limit on wind.''

[[Page S8030]]

So why then if we are going to spend $28 billion for energy
sufficiency--that would mean reliable, clean electricity for the
country in the world that uses 25 percent of all the energy in the
world--why then would we develop a national wind turbine policy instead
of a national energy policy? Isn't $10 billion more--which would make
our total investment over the next 10 years more than $2 billion a year
for wind turbines--isn't that too much wind?
I am not even talking so much about the fact of what these look like.
I think I have said many times on this floor that in Tennessee I don't
like the fact that these only work, when they work, on our most scenic
ridgetops. We would prefer not to have them. That is not the case with
everybody, I understand that. But it is important for people to know
these aren't your grandmother's windmills.
These are twice as tall as the sky boxes at the football stadium, and
the rotor blades go from the 10-yard line to the 10-yard line. So there
are limits as to where they should go.
Across the country, even when performing well, they only work a third
of the time. They often blow at the wrong time--at night, when people
are asleep and not using so much electricity. And you can't store the
wind. Basically, a utility makes a big investment, paying somebody $20
million--in the TVA Buffalo Mountain case $60 million for 20 years--to
buy wind, whenever it comes, and if it comes at night when the lights
are off, tough, they just lose it. If it comes 7 percent of the time in
August, when everybody's air conditioners are up, it doesn't help very
much. Of course, even if you had it, you still need nuclear or coal or
something else because most people want their computers and their
electricity on when they want them on.
As I mentioned, it is very difficult to store. It only uses about 1
percent of our current electricity needs. It does little to clean the
air because we already have caps on sulfur and nitrogen, which I would
like to accelerate, and it means lots of new power lines. So we have a
400-percent increase in wind capacity that would produce no change in
emissions of nitrogen, no change in sulfur, and very little in carbon.
My point is, I believe there are better ways to spend that $10
billion of the $28 billion we propose to spend over the next 10 years,
better ways to spend one-third of all this money than on a national
wind policy, since it doesn't work very well, it is not very reliable,
and much of the country can't use it at all.
For example, take fluorescent lighting. I know Senators Bingaman and
Domenici have talked about this, but if we spent $2 billion a year just
in tax credits for fluorescent lighting, we could save enough energy to
equal eight 1,000-megawatt nuclear reactors, or 18,000 1.8-megawatt
wind turbines.
Let's take another idea. What if we took the $2 billion a year and
gave a credit for appliances, such as dishwashers, washing machines,
and refrigerators. There is such a credit in the tax bill, and that is
good. It costs about $100 million a year to encourage that. Why don't
we extend that to 10 years? That would be $1 billion of the $10 billion
we are spending on wind. It would save more electricity than we would
get building wind.
We talk about not just carbon but clean air. I know Vermont wants
clean air. We want clean air in the mountains in Tennessee. For $2
billion a year we could buy six new scrubbers a year at $300 million a
scrubber. A scrubber takes the sulfur out of the air that contributes
to the unhealthy aspects and to the soot and to the smog that is
unhealthy for people and interferes with our view of the mountains.

Or take utility bills. The average utility bill for Tennesseans is
$100 a month. This is $2 billion a year. We could just give the money
to Tennesseans, 1.7 million households, for a full year. One month's
electric bill for 20 million households, that is what we could do for
$2 billion.
If we were a little more creative, we might go to the metering that
some utilities are now putting in homes and say: If your electric bill
is $100, and you reduce your use of electricity by $20, we will match
it by $20 and we will collect all that information in the utility. And
as a result, you will get a $60 bill instead of a $100 bill each
month--instead of investing in more wind.
Or you could use that money for clean coal power plants. The 2005
bill that Senator Bingaman and Senator Domenici worked on had a number
of initiatives for nuclear, clean coal, IGCC, and a number of things
that are underfunded. We don't have enough money for them. Well, if we
don't have the money for those things--which we decided by consensus in
2005 was the best way to create clean reliable electricity for a
country that uses 25 percent of all the energy in the world--if we
didn't have the money in 2005, why don't we take this $28 billion over
the next 10 years, or at least some of this $10 billion for wind, and
put it in clean coal or these other areas?
The PRESIDING OFFICER. One minute remains.
Mr. ALEXANDER. I thank the Chair.
Mr. President, I wanted the Senate to know that of the $28 billion,
one-third of it goes to wind turbines. We have a national wind policy
instead of a national energy policy.
We will be spending $2 billion a year on wind subsidies. And there
are many other wind subsidies in the Federal Government. You get bonds
to build them, you get accelerated depreciation, and then there are the
State subsidies. So I am suggesting there is too much wind, and a wiser
use of at least half that $10 billion would be for conservation,
efficiency, scrubbers, and other forms of energy that are reflected in
the 2005 Energy bill.
I thank the Chair and the Senator from New Mexico for the time.
Mr. DOMENICI. Mr. President, I ask unanimous consent the Senate grant
me 1 minute at this point to make a statement and ask the Senator a
question.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DOMENICI. Senator, first of all, I listened. Some people might
say the Senator from New Mexico shouldn't listen again because I have
listened now at least twice to you on this subject matter.
To tell you the truth, your analysis of the situation becomes more
relevant every single month that passes in the Congress because today
we are about to decide what to do with $30 billion, more or less; that
we are going to levy a tax; and you have come before us and told us
what you might do.
I might say, as chairman of the Energy Committee, I don't serve on
the Finance Committee. That is the breaks of the way things are done in
the Senate. I am not complaining, but I can guarantee you and the
Senate that I, as one Senator, and as chairman of the Energy Committee
a year and a half ago--not now--I would never have voted to put that
much money in wind and so little in other technologies and breakthrough
science items.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. DOMENICI. I yield the floor.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, I ask unanimous consent to have printed
in the Record a statement from the Joint Tax Committee which does an
estimate of the amount of the new tax package that would go to wind.
The estimate for a 5-year extension of section 45 credit is $10,292
million, and the amount attributed to wind is $7,846, in their
estimation. The rest would be used for biomass and geothermal and other
energy sources.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Congress of the United States,

Joint Committee on Taxation,

Washington, DC.
Hon. Jeff Bingaman,
U.S. Senate.

[[Page S8031]]

FISCAL YEARS
[millions of dollars]
----------------------------------------------------------------------------------------------------------------
Item                2007      2008      2009      2010      2011      2012     2007-12    2007-17
----------------------------------------------------------------------------------------------------------------
5-year extension of section    ........  ........       -75      -294      -610      -949    -1,929      -10,292
45 credit...................
Amount attributable to     ........  ........       -52      -199      -419      -679    -1,350       -7,846
wind....................
8-year extension of section    ........  ........       -75      -294      -610      -949    -1,929      -13,110
45 credit...................
Amount attributable to     ........  ........       -52      -199      -419      -679    -1,350      -10,122
wind....................
5-year extension of section    ........  ........       -83      -129      -107      -116      -434        -655
48 credit...................
----------------------------------------------------------------------------------------------------------------
Note: Details may not add to totals due to rounding.

I hope this information is helpful to you. If we can be of
further assistance in this matter, please let me know.
Sincerely,
Thomas A. Barthold,
Acting Chief of Staff.

Mr. BINGAMAN. Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Minnesota.

Amendment No. 1557

Ms. KLOBUCHAR. Mr. President, I am here once again to address my
amendment for a national greenhouse gas registry. As you know, this is
an amendment that I am cosponsoring with Senator Snowe and two other
Republicans, as well as Senator Bingaman.
This is an idea whose time has come. This is an amendment that
doesn't actually say what the policy will be with regard to greenhouse
gases. It simply requires that on a national basis we collect accurate
information so we can make smart policy decisions.
I am sorry to say the other side has not yet agreed to vote on this
amendment. It is looking a little bleak as time ticks on, but I am
still here. It puzzles me because the senior Senator from Oklahoma, in
a trade magazine--Environment and Energy Daily--was recently quoted in
a short interview, after repeatedly calling global warming a hoax, as
saying that he predicted this measure, this bill, would probably be
adopted, if offered. And I think that may be accurate.
We know a number of Republicans are interested in this bill. We have
worked very hard and we think it is important. That is why it is very
distressing to me that we are not even going to be allowed to have a
vote on this.
It is distressing because one of the reasons Senator Snowe and I came
up with this amendment is because we did hear what we considered
something of an outcry from businesses across this country. As you
know, 31 States have come up with plans involving greenhouse gas
emissions and climate change, and they are actually starting their own
registry out of complete and utter frustration with the Federal
Government. It is absurd to think a majority of States is having to put
together a greenhouse gas registry because our national Government is
so complacent. Back in January we had a number of these companies that
gathered together and came to us and said we want action on climate
change. We want to get this registry going. We want to have it done by
the end of the year.
I have been here long enough to know we are not going to get it done
by the end of the year unless we vote on it now.
I want to mention some of the companies that expressed interest in
this: Alcan Inc., Alcoa, American International Group, Inc.--that is
AIG, Boston Scientific Corporation, BP America Inc., Caterpillar Inc.,
ConocoPhillips, Deere & Company, the Dow Chemical Company, Duke Energy,
DuPont, Environmental Defense, FPL Group, Inc., General Electric,
General Motors Corp., Johnson & Johnson, Marsh, Inc. PepsiCo, Pew
Center on Global Climate Change, PG&E Corporation, PNM Resources,
Shell, Siemens Corporation. They all said they wanted us to get
something done on climate change.
You can imagine my surprise when we found out that in fact the U.S.
Chamber of Commerce opposed this bill. They never talked to me about
it; they just sent out a letter. In fact, they threatened this could be
one of the key votes for the chamber this year, depending on how people
voted on this little bill that simply asks that accurate data be
collected and be able to be posted on a Web site as they do in Canada
and other places. But they said it might be a key vote, right up there
with the estate tax last year and some of the other votes that were
national issues.
There have been a lot of things said about this bill. The senior
Senator from Oklahoma actually sent out a letter about it. He talked
about how it would apply to virtually every business in America in this
letter.
The simple truth is we wrote this amendment with business in mind
because we had the impression, from what we had heard, that business
wants to work with us on this important issue of climate change. The
amendment contains explicit provisions excluding companies for which
reporting was excessively burdensome or expensive. The new registry
only covers major emitting facilities and major sources of fossil
fuels. Utilities already reporting under the Clean Air Act would not
have to report their data twice.
For facilities facing costs and purchasing advanced monitoring
equipment, the EPA would accept basic information on the amount and
type of fossil fuels they consume, which is collected by businesses for
general accounting purposes. Section 165(b)(10)(c) of my amendment
specifies that confidential business information will not be published
under the National Greenhouse Gas Registry.
The legislation also has an exception for small businesses, the
exception as defined by the Small Business Administration--businesses
that generate fewer than 10,000 metric tons of greenhouse gas
emissions. And 10,000 metric tons is not an arbitrary number. The
American Chemical Society released a report in 2003 which talked about
this as a threshold, 10,000 metric tons, a threshold which

. . . effectively relieves the agriculture and commercial
building sectors from reporting, substantially reduces the
number of manufacturing facilities that would report while
continuing to capture 80 percent of emissions.

Clearly this is not true.
We also know the current status. We have some businesses, major
emitters, reporting to the Department of Energy. Some report to the
EPA. Some report every 3 years. Some report every week. Some report
every year. This is not the kind of information we expect to have in
order to make policy decisions on climate change.
In his letter, the senior Senator from Oklahoma also said
organizations such as the Sierra Club or the Natural Resources Defense
Council would be put in charge of third-party verification and have
access to confidential business information. This is so inaccurate I do
not even know where to begin. Under my amendment, the EPA Administrator
may ensure that reports are certified by a third-party entity, but as
with the California Climate Registry, third-party verifiers will have
to be verified themselves as experienced firms in providing greenhouse
gas emission certifications. These are engineering firms; they are not
political interest groups.
Finally, they claim this amendment did not go through the committee
process. That interests me because a little over 5 years ago, Senator
Brownback, the Republican Senator, along with then-Senator Corzine of
New Jersey, passed an amendment in this Chamber creating a greenhouse
gas registry. This registry would have been voluntary, but after 5
years, if the registry contained less than 60 percent of the total
greenhouse gas emissions in the U.S.--that is clearly where it is now--
mandatory reporting would have been triggered. Sadly, the bill didn't
get ultimately through this Congress. But the point is, this Chamber
has already voted on this.

Here is a simple truth. This amendment seeks to create common
standards for measuring, tracking, verifying, and reporting greenhouse
gas emissions by major industries. It requires the Environmental
Protection Agency--not exactly an engine of radical reform at this
moment--to consider cost and coordinate with existing Federal and

[[Page S8032]]

State programs to implement this registry.
This is an opportunity that the Senate should be willing to put its
head up and vote for. It is an opportunity to at least get the accurate
data so we can start talking about climate change reform.
I never knew I would end up here in the Senate. I grew up in a
middle-class family. My grandpa was a miner and a logger. My dad was a
journalist. My mom was an elementary schoolteacher. I worked jobs all
my life--as a pie cutter. I worked as a car hop. I worked as a
secretary. I went to public high school. I got a law degree. I went to
a law firm, and I ended up being privileged to be the district attorney
for the largest county in Minnesota. When Senator Dayton decided he
wasn't going to run again for the Senate, I ran for the Senate.
It has been my belief throughout my life that you can get things done
if you have right on your side, and if you are able to work with other
people, you can get things done and you can change things. It started
in the fourth grade when I was the first girl to wear bell-bottom
pants, the first girl to wear pants in my public elementary school. I
was kicked out by Mrs. Quady, the principal, but I came back the next
day and within a year the girls were allowed to wear pants.
In high school they said we couldn't raise enough money to have our
high school prom, and we sold Life Saver lollipops and we got it done.
In DA, we had troubled crime in a lot of our neighborhoods and we
reached out to these neighbors and organized, and they did a lot of
good work and we had some amazing examples of individual citizens
getting things done on the front end.
Now we are here. We have a major challenge confronting us. That is a
challenge of climate change. There are people out there waiting for us
to do something about it. There is a scientist out there right now
seeing how the sea level is going up. There is another scientist who
measures the temperatures and sees how, since the ice age, we have only
had a 5-degree increase in temperature and just the last century we
have seen a 1-degree increase, with the EPA estimating a 3-degree
increase in the next hundred years. There are little kids out there
wearing ``Save the Penguins'' buttons right now. There is a hunter in
Hinckley, MN, who sees changes in the wetlands. He is waiting for us to
act. There is a ski resort on up in Grand Marais, MN, that had 30
percent less profits in this last year because of the decrease in snow.
He is waiting for us to act.
That is why I ask my colleagues on the other side of the aisle to
allow this important amendment to be heard. It doesn't dictate what the
policy will be. It simply asks that we collect accurate information.
I am an optimist. The seat I hold was once held by Hubert Humphrey.
At the end of his life, he said the words that are on his grave:

People consider me sentimental but to the end I remain an
optimist. I remain an optimist with joy and without apology
about this great American experiment in Democracy.

I remain an optimist too. I remain an optimist because I have seen
the great work the Senator from New Mexico and others have done in this
energy bill, and I believe more can be done. I remain an optimist that
this bill will ultimately pass. If not today, this amendment will
ultimately pass on another bill.
I yield the floor.
The PRESIDING OFFICER (Mrs. McCaskill). The Senator from New Mexico.
Mr. BINGAMAN. For the information of Senators, we have now an hour
equally divided, half of it under the control of Senator Inhofe and
half of it under my control. It is for two purposes. It is to debate
amendment No. 1693, which I have submitted, and also to debate
amendment No. 1666, which Senator Inhofe has submitted.
Why don't I take 5 minutes at this point.

Amendment No. 1693 To Amendment No. 1502

Let me call up amendment No. 1693.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from New Mexico [Mr. Bingaman], for himself,
Mrs. Boxer and Mr. Reid, proposes an amendment numbered 1693
to amendment No. 1502.

Mr. BINGAMAN. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To ensure that the renewable fuel standard does not harm the
environment)

On page 59, after line 21, insert the following:

Subtitle D--Environmental Safeguards

SEC. 161. GRANTS FOR PRODUCTION OF ADVANCED BIOFUELS.

(a) In General.--The Secretary shall establish a grant
program to encourage the production of advanced biofuels.
(b) Requirements and Priority.--In making grants under this
section, the Secretary--
(1) shall make awards to the proposals for advanced
biofuels with the greatest reduction in lifecycle greenhouse
gas emissions compared to the comparable motor vehicle fuel
lifecycle emissions during calendar year 2007; and
(2) shall not make an award to a project that does not
achieve at least a 50-percent reduction in such lifecycle
greenhouse gas emissions.
(c) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section $500,000,000 for
the period of fiscal years 2008 through 2015.

SEC. 162. STUDIES OF EFFECTS OF RENEWABLE FUEL USE.

Section 211 of the Clean Air Act (42 U.S.C. 7545) is
amended by adding at the end the following:
``(t) Studies of Effects of Renewable Fuel Use.--
``(1) In general.--Not later than 1 year after the date of
enactment of this subsection, the Administrator shall offer
to enter into appropriate arrangements with the National
Academy of Sciences and any other independent research
institute determined to be appropriate by the Administrator,
in consultation with appropriate Federal agencies, to conduct
2 studies on the effects of increased domestic use of
renewable fuels under the Renewable Fuels, Consumer
Protection, and Energy Efficiency Act of 2007.
``(2) Matters to be studied.--
``(A) In general.--The studies under this subsection shall
assess, quantify, and recommend analytical methodologies in
relation to environmental changes associated with the
increased domestic use of renewable fuels under the Renewable
Fuels, Consumer Protection, and Energy Efficiency Act of
2007, including production, handling, transportation, and use
of the fuels.
``(B) Specific matters.--The studies shall include an
assessment and quantification, to the maximum extent
practicable, of significant changes--
``(i) in air and water quality and the quality of other
natural resources;
``(ii) in land use patterns;
``(iii) in the rate of deforestation in the United States
and globally;
``(iv) to greenhouse gas emissions;
``(v) to significant geographic areas and habitats with
high biodiversity values (including species richness, the
presence of species that are exclusively native to a place,
or the presence of endangered species); or
``(vi) in the long-term capacity of the United States to
produce biomass feedstocks.
``(C) Baseline comparison.--In making an assessment or
quantifying effects of increased use of renewable fuels, the
studies shall use an appropriate baseline involving increased
use of the conventional transportation fuels, if displacement
by use of renewable fuels had not occurred.
``(3) Reports to congress.--The Administrator shall submit
to Congress a report summarizing the assessments and findings
of--
``(A) the first study, along with any recommendations by
the Administrator to mitigate adverse effects identified by
the study, not later than 3 years after the date of enactment
of this subsection; and
``(B) the second study, along with any recommendations by
the Administrator to mitigate adverse effects identified by
the study, not later December 31, 2015.''.

SEC. 163. INTEGRATED CONSIDERATION OF WATER QUALITY IN
DETERMINATIONS ON FUELS AND FUEL ADDITIVES.

Section 211(c)(1) of the Clean Air Act (42 U.S.C.
7545(c)(1)) is amended--
(1) by striking ``nonroad vehicle (A) if in the judgment of
the Administrator'' and inserting ``nonroad vehicle--
``(A) if, in the judgment of the Administrator, any fuel or
fuel additive or'';
(2) in subparagraph (A), by striking ``air pollution
which'' and inserting ``air pollution or water pollution
(including any degradation in the quality of groundwater)
that''; and
(3) by striking ``, or (B) if'' and inserting the
following: ``; or
``(B) if''.

SEC. 164. ANTI-BACKSLIDING.

Section 211 of the Clean Air Act (42 U.S.C. 7545) (as
amended by section 162) is amended by adding at the end the
following:
``(u) Prevention of Air Quality Deterioration.--
``(1) Study.--
``(A) In general.--Not later than 18 months after the date
of enactment of the

[[Page S8033]]

Renewable Fuels, Consumer Protection, and Energy Efficiency
Act of 2007, the Administrator shall complete a study to
determine whether the renewable fuel volumes required by that
Act will adversely impact air quality as a result of changes
in vehicle and engine emissions of air pollutants regulated
under this Act.
``(B) Considerations.--The study shall include
consideration of--
``(i) different blend levels, types of renewable fuels, and
available vehicle technologies; and
``(ii) appropriate national, regional, and local air
quality control measures.
``(2) Regulations.--Not later than 3 years after the date
of enactment of the Renewable Fuels, Consumer Protection, and
Energy Efficiency Act of 2007, the Administrator shall--
``(A) promulgate regulations to implement appropriate
measures to mitigate, to the greatest extent achievable,
considering the results of the study under paragraph (1), any
adverse impacts on air quality, as the result of the
renewable volumes required by that Act; or
``(B) make a determination that no such measures are
necessary.
``(3) Other requirements.--Nothing in title I of the
Renewable Fuels, Consumer Protection, and Energy Efficiency
Act of 2007 supercedes or otherwise affects any Federal or
State requirement under any other provision of law that is
more stringent than any requirement of this title.''.

Mr. BINGAMAN. Madam President, let me take up to 5 minutes to speak
on amendment No. 1693 and then yield to my colleague Senator Boxer 10
minutes for her to speak on that same amendment.
This amendment addresses a number of important environmental issues
associated with renewable fuels. It contains four sections. The first
section makes an authorization for grants to encourage production of
advanced biofuels with the most favorable greenhouse gas emission
characteristics.
The second section provides for a study by EPA of potential issues
that may arise as a result of increases in the renewable fuels
standard. That study will result in two reports to Congress, one in
2010, the other in 2015.
The third part of the amendment allows the EPA to consider
groundwater impacts when regulating fuel additives under the Clean Air
Act. One of the reasons we had a problem with MTBE as a fuel additive
was that we looked at it in a one-dimensional way. This section of our
amendment will allow a full look at all relevant impacts of fuel
additives going forward.
The final part of the amendment is a provision commonly known as
antibacksliding. It basically allows EPA to address air quality issues
that might arise as a result of the increased volumes of renewable fuel
mandated by the Energy bill. These changes have been developed by
Senator Boxer and her staff, and myself and my staff, in a
collaborative manner. I thank her and her staff for the good work they
did on these provisions.
I also acknowledge the assistance and support we have received on
this amendment from the Renewable Fuels Association.
This is a consensus amendment on the part of those with interests in
enhancing our energy security through increased use of renewable fuels
in an environmentally responsible way.
I urge my colleagues to support this amendment.
I will now yield to the Senator from California for her comments on
this, and I will yield her up to 10 minutes, and I will then speak in
opposition to the amendment by the Senator from Oklahoma.
The PRESIDING OFFICER. The Senator from California is recognized.
Mrs. BOXER. Madam President, thank you so much.
I thank Senator Bingaman very much for this amendment we have worked
very hard on for days now. I am delighted we are able to offer it.
I see my ranking member is here because he has an amendment that in
concept--I am going to look at the details--in concept makes a lot of
sense. In terms of this amendment, I hope I will be able to support it
because what we are trying to make sure of is that in the new fuels
program, this bill, we do not lose any ground in terms of the Clean Air
Act so we still are able to give EPA important authority under the
Clean Air Act to mitigate any adverse air quality impacts that might
result from the increased use of renewable fuels.
What we learned when we dealt with MTBE, which was an additive in
gasoline, was we were not prepared for any adverse impacts from MTBE.
We thought it was going to be the answer. As you know, MTBE permeated
the water supplies in many States. We thought it was going to clean up
the air and, guess what, it did. But it created havoc with our water
quality.
We want to make sure--we worked hard on this--that in this new fuels
program, we do not backslide and that we are able to have all the
protections we need. So at first, we fixed the water problem and now
this is fixing the air quality problem.
What we do is, we give EPA authority under the Clean Air Act to
consider impact on water quality when regulating fuel. Such authority,
as I say, will prevent future MTBE situations. We require EPA to
contract with the National Academy of Sciences to conduct a
comprehensive study of the environmental impact of increasing use of
renewable fuels.
The study will analyze impacts of renewable fuels on air quality,
water quality, land-use patterns, deforestation rates, greenhouse gas
emissions, ecologically important areas, and the long-term ability to
produce biomass feedstocks.
Now, I wanted to say to my ranking member, Senator Inhofe, if I can
have his attention, that I know what he is trying to do in his
amendment in many ways parallels this. We, in this amendment, make sure
that EPA can look at the long-term to produce biomass feedstock because
that is a very important point.
I think the Senator and I both care about this. I think the Senator
and I both care that the EPA is not going to lose jurisdiction over
this new fuels program.
The amendment to me is also exciting because it includes a grant
program for biofuels that achieve at least a 50-percent reduction of
lifecycle emissions of greenhouse gases. So what we are saying is, we
want innovation, and we are saying we will start a grant program so we
get that technology that we all know is going to, in fact, step up and
meet the challenge of global warming.
There are so many ways we can meet the challenges of reducing our
carbon footprint. One way is to have fuels that have a 50-percent
better carbon footprint. This amendment ensures that EPA will play a
critical role in protecting our environment from any adverse
environmental impact that may be realized from an increase in the
production and use of renewable fuels.
So it is pretty simple. The Senator from New Mexico and I have been
in very close contact over these last several days. I have been helping
him to manage this bill, although I have to say, he is very competent
at doing it himself.
But I have given him my advice and my help and the help of my good
staff. We did have a worry at the very beginning that we did not want
to live to see another MTBE problem, that is, unintended consequences
of a new fuels program and unintended consequence. So how we would
protect against is to be very vigilant, and we are very vigilant.
We say to the EPA: Make sure that whatever these fuels are, they are
real good for our people, good for our air, good for our water, good
for our land use, and also our long-term ability to produce biomass
feedstocks.
Again, we go a step further we set up a grant program for new fuels,
biofuels that achieve at least a 50-percent reduction in the lifecycle
emissions of greenhouse gases. This particular program is authorized at
$500 million. Of course, it is subject to appropriations. I do not have
the need to speak any longer on this amendment. I would retain the
balance of my time Senator Bingaman gave me.
I yield the floor.
The PRESIDING OFFICER. The Senator from Oklahoma.

Amendment No. 1666 to Amendment No. 1502

Mr. INHOFE. Mr. President, it is my understanding that the unanimous
consent request was for the two amendments to be side by side.
At this point, I call up amendment 1666 and ask for its immediate
consideration.
The PRESIDING OFFICER (Mr. Obama). The clerk will report the
amendment.
The assistant legislative clerk read as follows:

The Senator from Oklahoma [Mr. Inhofe], for himself, Mr.
Burr, and Mrs. Dole, proposes an amendment numbered 1666 to
amendment No. 1502.

[[Page S8034]]

Mr. INHOFE. Mr. President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To ensure agricultural equity with respect to the renewable
fuels standard)

At the end of subtitle A of title I, add the following:

SEC. 113. AGRICULTURE EQUITY.

(a) Assessment of Food and Feed Availability.--
(1) In general.--The Administrator of the Environmental
Protection Agency (referred to in this section as the
``Administrator'') shall conduct an assessment of the
availability of corn for food and feed uses by not later than
July 31 and November 30 of each calendar year after the date
of enactment of this Act.
(2) Regional weather conditions.--
(A) In general.--Not later than August 1, 2007, and
annually thereafter, the Administrator, in consultation with
the Secretary of Agriculture, the Secretary of Commerce, and
the Association of American Feed Control Officials, shall
submit to Congress, and publish in the Federal Register, an
assessment of the Administrator regarding--
(i) regional weather conditions during the current crop
year; and
(ii) the impact of the conditions on projected local corn
supplies.
(B) Factors for consideration.--In conducting the
assessment under subparagraph (A), the Administrator shall
take into consideration, as applicable--
(i) the impacts of drought, including reduced
precipitation;
(ii) the impacts of flooding, including increased
precipitation; and
(iii) projected local demand for corn during the following
crop year.
(3) Estimates.--
(A) In general.--Not later than December 1, 2007, and
annually thereafter, the Administrator shall conduct an
assessment of the most current estimates of the ratio that,
with respect to the marketing year beginning in September of
the calendar year in which the assessment is conducted--
(i) United States domestic ending stocks of corn; bears to
(ii) total use of corn.
(B) Factors for consideration.--In conducting the
assessment under subparagraph (A), the Administrator shall
take into consideration, and rely on, the data published by
the Secretary of Agriculture in the monthly report entitled
``World Agricultural Supply and Demand Estimates'' (or
similar public and authoritative estimates provided by the
Secretary of Agriculture).
(b) Potential Economic and Consumer Harm Assessment.--
(1) Regional weather conditions.--If the Administrator
determines that an assessment of the Administrator under
subsection (a)(2) indicates that there is a reasonable
likelihood that the ratio described in subsection (a)(3)(A)
will be equal to or less than 0.10, the Administrator shall
publish the determination in the Federal Register by not
later than 14 days after the date on which the determination
is made.
(2) Estimates.--If the Administrator determines that an
assessment of the Administrator under subsection (a)(3)
indicates that there is a reasonable likelihood that the
ratio described in subsection (a)(3)(A) will be equal to or
less than 0.10, the Administrator, in consultation with the
Secretary and the Secretary of Agriculture, shall publish, by
not later than 14 days after the date on which the
determination is made, the intention of the Administrator to
request the President to modify a portion of the requirement
described in section 111(a)(2).
(3) Regional disruption.--If the Administrator determines
that an assessment of the Administrator under subsection
(a)(2) indicates that a regional disruption to the
availability of feed corn with respect to livestock producers
will occur, the Administrator, in consultation with the
Secretary of Agriculture, shall develop and implement a plan
to ensure that regional food and feed supplies are
maintained, to the maximum extent practicable, including
through adjustments to the applicable renewable fuels
standard under section 111(a) in the affected region.
(c) Actions To Prevent Economic and Consumer Harm.--
(1) In general.--Subject to paragraph (2), the
Administrator may submit to the President a petition to
request a modification of a requirement under the renewable
fuels standard under section 111(a) in a quantity of gallons
sufficient to ensure, to the maximum extent practicable, that
the ratio described in subsection (a)(3)(A) will be at least
0.10.
(2) Limitation.--A requirement under the renewable fuels
standard under section 111(a) shall not be reduced by more
than 15 percent during any calendar year.
(3) Effective period.--A modification under paragraph (1)
shall be effective during the 1-year period beginning on the
effective date of the modification.
(d) Public Participation.--
(1) In general.--The Administrator shall--
(A) make each assessment conducted, and each modification
provided, pursuant to this section available to the public;
and
(B) provide an opportunity for public comment relating to
each assessment and modification for a period of not more
than 30 days.
(2) Modifications.--Not later than 14 days after the end of
the comment period described in paragraph (1)(B), the
President shall promulgate the modification that is the
subject to the comment period, unless the President, in
consultation with the Administrator, determines that clear
and compelling evidence demonstrates that the modification
would not have a material effect on the quantity of corn
available for food and feed use.

Mr. INHOFE. Mr. President, let me first respond to something the
chairman of the committee, Senator Boxer, had stated. I believe I agree
that our committee should have the jurisdiction. I do agree with her.
There are some other things. In fact, there is an easier way to do
it, I would suggest to my chairman. That would be to strike the portion
in the bill, the underlying bill, that talks about the President or the
administration and merely put in the EPA. If you do that, then, of
course, you correct the jurisdictional problems. It is another way of
doing it.
My concern is that your amendment does get into some areas I do not
find I get quite as excited about as the chairman does, such as having
us study land-use patterns, which I do not think is as appropriate for
the Federal Government to do as State and local government.
We had this debate in the past. But I would say I would like to
accomplish some of the things that the chairman has tried to accomplish
with her amendments.
Mrs. BOXER. May I ask my friend to yield. It can come off my time.
Mr. INHOFE. No, it can come off mine.
Mrs. BOXER. Thank you so much. Let me say to my ranking member I
agree with him. We tried that approach. We were not able to gain
ground. So I am with you. But we were not able to do it in our
negotiation with the Energy Committee. So we went as far as we could
go, and I think we have made tremendous progress.
Again, it was give and take and it was tough and your staff was very
helpful as they were helping us get the best we could get. But I think
after this amendment, we can foresee a future where any President--this
one said he would not do it, but a future President could take the
whole fuels program and eliminate EPA. So I would hope my friend would
join me in this.
The other part, we are asking for reports from the EPA, we are not
giving them authority over these issues. We are going to get
information from them. That information we can share with local and
State.
So I know my friend is going to give it some real hard thought, as I
am about his amendment. But perhaps we can wind up supporting each
other's amendments. But we will see where we go from here. But I say to
my friend, he is absolutely right, striking the offending language
would have been great for me, but we were not able to achieve that with
the Energy Committee.
Mr. INHOFE. I appreciate the comments of the chairman. I recognize
her concern with MTBE contamination. I understand that. But getting the
Administrator authority to use the Clean Air Act to regulate water
quality is something I would have to think about a little bit.
Let me go back and talk a little bit about the amendment we are
running concurrently with the other amendments. This is amendment 1666.
We have a lot of cosponsors to this. I would invite more to come down.
I think people would see this is a very rational way to address one of
the problems with the mandates that come with this bill.
We seek to ensure the bill does not pick winners and losers in
domestic agriculture. Although high corn prices might be good for corn
farmers, it is harmful for livestock and poultry industries.
Now, in my State of Oklahoma, I don't have a dog in this fight, or I
guess I could say I have all the dogs in this fight, because we are a
corn State, we are a very large livestock State. I have heard from a
lot of our people there expressing their concerns.
In fact, 15 industry groups have joined together and sent both Senate
leaders a letter expressing their concern that the biofuels title in
this bill could harm their industries.
I ask unanimous consent at the conclusion of my remarks to have
printed in the Record a copy of that letter.

[[Page S8035]]

The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. INHOFE. Unfortunately, the collective livestock and grocery
producers' concern continues. In fact, the earlier coalition has grown
to 18 industry representatives, including cattle, poultry, swine
producers, Coca-Cola, Pepsi, even Cargill. In a letter to me, the
coalition writes:

We are asking Congress to provide those that utilize and
rely on corn and corn products a reasonable amount of
certainty that adequate supplies are available to all users
of this commodity.

We know right now the price of corn is very high. This obviously
has--it does not happen in a vacuum. Too often on the Senate floor we
believe things can be done without affecting others. In this case, it
is definitely affecting others, as indicated by these communications.
Now, with respect to our amendment, they state:

Your amendment would go a long way in ensuring a safety net
ensuring those of us that utilize corn and corn products will
have enough to go around should a drought or flood occur that
would limit the harvested amount that is available.

Now, our amendment seeks to provide some of the much needed equity in
the current system. This amendment simply requires that the USDA
provide information on projected corn harvests each year. Well, they do
that anyway. This is not going to incur anymore of a hardship on the
USDA; they have that capability; they are already doing it.
If the projected harvest is below a certain percentage, then the
administrator has the authority to modify the mandate for the next
year.
So that if it comes down and we see we are going to have a drought,
we are going to have some kind of a problem, we would be able to
address that by making a small adjustment to the mandate that is there.
Now, I would expect the ethanol industry to support our amendment,
since first they claim there is no food versus feed issue. Second,
because they have stated repeatedly that corn farmers can grow much
more renewable--Fuels Association President Bob Dineen said--this is
the one who is very strong in the ethanol mandate the American farmer
absolutely has the ability to grow more corn to provide sufficient
quantities of grain and food and feed for fuel usage and we are going
to see that that happens.
Well, if that is the case, then there is not a problem. So I am not
suggesting or picking any favorites with this amendment. I am saying we
ought to be sure in the event that something that can be foreseen, and
these droughts can be foreseen--as I say, they are doing it right now.
So this amendment supports that concept.
Corn farmers have done a great job in increasing yield per acre in
the past and they will continue to do that. Our amendment simply
provides, as a collective food industry State, a reasonable amount of
certainty and a safety net, so that all the U.S. agriculture is able to
prosper.
I know there are others who are on the floor who would disagree with
my amendment. I certainly wish to make sure they have time to express
themselves. So if the Senator from Iowa is prepared at this point to
speak, I would be glad to yield to him.

Exhibit 1

June 20, 2007.
Sen. James Inhofe,
Russell Senate Office Building,
Washington, DC.
Dear Ranking Member Inhofe: We believe in the need to
advance renewable and alternative sources of energy. New fuel
sources offer the potential to eliminate our dependence on
foreign oil while contributing to the long-term stability of
our rural economies. But, as we seek to implement policy that
will move us toward accomplishing this objective, it is
essential that we carefully weigh the impacts of our actions
on other segments of the economy. Additionally, we would hope
that any policy that is agreed upon during this debate would
not overly tax one group in an effort to hopefully achieve
the objective of energy independence.
We are concerned that the very aggressive increase in
biofuels mandates proposed in S. 1419 raises fundamental
questions about the impact that an increased federal
government mandate for corn-based ethanol, in addition to new
state mandates, will have on the livestock, poultry and food
industry's ability to produce competitively available,
affordable food. It is vitally important that we fully
appreciate and understand the implications of quintupling the
Renewable Fuel Standard (RFS) mandate, and we would ask that
you use careful consideration and listen to the significant
issues being raised by those in the agriculture and food
products community.
Rapid development of the corn-based ethanol industry is
already having adverse impacts on food supplies and prices, a
major concern for us. Rising food prices, coupled with the
rising energy prices we are seeing throughout the country,
pose a threat to the health of our national economy.
According to a recent report by Merrill Lynch Chief
Investment Strategist Richard Bernstein, within the first
three months of the year, food prices rose at an annualized
rate of 7.3 percent. That is slightly higher than the
anticipated annual rise in healthcare costs over the next
decade, according to the Centers for Medicare and Medicaid
Services' National Health Statistics Group. In addition, the
continued aggressive expansion of corn ethanol production
diminishes the availability of soybeans and other crops. We
need a safety valve that ensures availability and that works.
We are asking Congress to provide those that utilize and
rely on corn and corn products a reasonable amount of
certainty that adequate supplies are available to all users
of this commodity. Your amendment to S. 1419, the Agriculture
Equity Adjustment Provision (#1666) would go a long way in
achieving a safety net ensuring those of us that utilize corn
and corn products will have enough to go around should a
drought or flood occur that would limit the harvested amount
that is available.
We look forward to working with you to achieve a balanced
approach between all competing uses of corn as we go forward
in this energy debate. We need an adequate contingency plan
in place, and this amendment achieves that goal.
Thanks again for your leadership and efforts.
Sincerely,
American Feed Industry Association, American Meat
Institute, Cargill, The Coca Cola Company, ConAgra
Foods, General Mills, Grocery Manufacturers/Food
Products Association, Hormel Foods, National
Cattlemen's Beef Association, National Chicken Council,
National Pork Producers Council, National Restaurant
Association, National Turkey Federation, PepsiCo, Inc.,
Seaboard Corporation, Tyson Foods, United Egg
Association, United Egg Producers.

The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, I would be glad to yield the Senator
from Iowa up to 5 minutes to speak in opposition to this amendment.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, this is the third amendment today that
has been very detrimental to the future of ethanol and other renewable
fuels.
If we had had this attitude expressed 20 years ago when we started,
in a very elementary way, down the road to a successful renewable fuels
industry that we are now developing, and it is still an infant
industry, we would never be here today, where we could say that we have
a strong opportunity of renewable fuels.
This is the third amendment that raises questions about whether we
are going to continue to have investment in renewable fuel production
and everything that is connected with it.
Something that bothers me more than anything else, and I have
expressed it on previous amendments today, is throughout the
development of renewable fuels, and particularly agriculture being the
production of the renewable feedstock, we have always had agriculture
very much united between renewable fuels.
Within the last 4 or 5 months, because corn has gone from $2 to $4 a
bushel, we now have beef producers raising questions about whether we
ought to have an ethanol industry. You have the pork producers--and
evidently we have the poultry people--raising the same question. If
agriculture is not going to be united, if they had not been united, we
would never have gotten here. I do not know what happens in a matter of
4 or 5 months, that after 20 years, all of a sudden things are bad
about renewable fuels, and the farmer is being blamed for everything,
$4 corn, food going up, energy prices going up.
You know, food prices, a farmer gets a nickel out of a big box of
Corn Flakes that is half full of air when you buy it for $4. The farmer
is being blamed for $4 corn, raising the price of food, raising the
price of energy, causing livestock feed to go up.
You know, for the last 40 years, we have had a principle in
agriculture that we call the hog-corn ratio. It was never felt, during
the corn-hog ratio, when you use that, that the high price of corn was
bad for livestock because, you

[[Page S8036]]

know, livestock prices would soon rise, and it was considered good,
good, good. Everything about ethanol has been considered good, good,
good: Good for the farmers, good for the environment, good for high-
paying jobs in the small towns of rural America, good for national
defense because of less dependence upon violent parts of the world for
petroleum to be delivered, good for our balance of trade. Everything is
good, good, good about renewable energy.

Now, in the last 4 or 5 months--do you think the price of corn is
going to be $3.50 or $4 forever? This fall at harvest time, we might
find corn at $2.50. We had 77 million acres of corn planted last year.
We have 91.5 million acres believed to be planted this year. When June
30 comes and the USDA makes their next report, it may be 95 million
acres of corn--the most acres planted since 1944. When you have that
supply of grain coming in, the fact that the price is going to be where
it is today is a dream. In 1995, we had a drought. Corn got to $4 or
$5. Everybody thought it was going to be $4 or $5 for the next 5 years.
The next harvest season, it was down to $1.60 a bushel. Here we have
people raising questions about the stock ratio, the stock on hand that
we have of grain, that when it gets down to a certain level, we are not
going to use grain for renewable fuels. What are you going to do? Are
you going to go shut down every ethanol plant that is operating in the
United States? What other amendment comes to the floor with the idea
that we are going to shut down an industry under certain circumstances?
It never happens.
This is not a very good approach, particularly the use of stock
ratios as proposed in this amendment. There are even questions about
the use of that among economists at this point.
This is a very bad amendment for renewable fuels, for agriculture.
All that is good about renewable fuels, and you shut down the whole
industry, it is for naught. You can't do that.
I ask Members to vote against the amendment.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, how much time remains on both sides?
The PRESIDING OFFICER. The Senator from Oklahoma has 23 minutes and
the Senator from New Mexico has 16 minutes.
Mr. BINGAMAN. Mr. President, let me speak briefly in opposition to
the amendment by the Senator from Oklahoma.
First, I ask unanimous consent to have printed in the Record
following my remarks a letter I received from the American Coalition
for Ethanol, the American Farm Bureau Federation, the National
Association of Wheat Growers, the National Corn Growers Association,
National Farmers Union, the National Sorghum Producers, and the
Renewable Fuels Association.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. BINGAMAN. I would like to briefly hit the high points of this
letter and explain why they are so strongly in opposition to Inhofe
amendment No. 1666. I will read parts of the letter into the Record so
Members will be aware of their position. It says:

As the Senate continues to debate the energy bill . . . we
urge all Senators to vote against the amendment offered by
Senators [Inhofe, Burr, and Dole] when it is brought up for a
vote. We strongly oppose this amendment as it would
effectively gut the RFS and thwart the growth of the domestic
ethanol industry.

It goes on to say:

Senators Inhofe, Burr and Dole are proposing an amendment
to the energy bill that would put in place a stocks-to-use
mechanism that would suppress crop prices and be detrimental
to the American farmer and to domestic renewable fuels.
Stocks-to-use has limited value as an indicator of demand and
expected price. It is an oversimplified way to look at
supply/demand and pricing and does not often provide an
accurate picture of how markets would be impacted.

It goes on with various examples.
The Senator from Iowa pointed out that the price of corn is high
today but may not be high indefinitely. It makes the same point here.
It says:

Most long-run economic models [from the] (U.S. Department
of Agriculture and Food and Agricultural Policy Research
Institute, and others) project stocks-to-use ratio slightly
under 10 percent for the next several years, with prices in
the $3.00-$3.50 range. Additionally, many economists have
stopped using the stocks-to-use ratio in their econometric
models as a tool to forecast price because of its obvious
limitations.

They go on and on along the same line, pointing out deficiencies in
the approach being taken by the Senator from Oklahoma in the amendment.
Let me conclude with their final statement:

Efforts to undermine the continued growth of the U.S.
ethanol industry should not be tolerated. A careful look at
the facts reveals that American farmers have met, can and
will continue to meet our domestic and international
commitments for food and feed while still making a
significant and growing contribution to lessening our
dependence on imported oil with homegrown, American-made
renewable fuels. We strongly urge you to oppose the Inhofe/
Burr/Dole amendment.

It is hard to know how to do better than that letter in pointing out
the deficiencies in the amendment. It is clearly an amendment we should
oppose.

Exhibit 1

June 20, 2007.
Majority Leader Harry Reid,
U.S. Senate.
Chairman Jeff Bingaman,
Committee on Energy and Natural Resources,
U.S. Senate.
Minority Leader Mitch McConnell,
U.S. Senate.
Ranking Member Pete Domenici,
Committee on Energy and Natural Resources,
U.S. Senate.
Dear Senators: As the Senate continues to debate the energy
bill, H.R. 6, we urge all Senators to vote against the
amendment offered by Senators James Inhofe (R-OK), Richard
Burr (R-NC), and Elizabeth Dole (R-NC) when it is brought up
for a vote. We strongly oppose this amendment as it would
effectively gut the RFS and thwart the growth of the domestic
ethanol industry.
Senators Inhofe, Burr, and Dole are proposing an amendment
to the energy bill that would put in place a stocks-to-use
mechanism that would suppress crop prices and be detrimental
to the American farmer and domestic renewable fuels. Stocks-
to-use has limited value as an indicator of demand and
expected price. It is an oversimplified way to look at
supply/demand and pricing and does not often provide an
accurate picture of how markets would be impacted. For
example, in 2003/04 the stocks-to-use ratio was one of the
lowest in the last 20 years at 9.4 percent, but prices
remained at $2.50 for a season average. Most long-run
economic models (U.S. Department of Agriculture and Food and
Agriculture Policy Research Institute, and others) project
stocks-to-use ratio slightly under 10 percent for next
several years, with prices in the $3.00-3.50 range.
Additionally, many economists have stopped using the stocks-
to-use ratio in their econometric models as a tool to
forecast price because of its obvious limitations. As corn
usage are likely to increase substantially to 13, 14, or even
15 billion bushels in the future, a 10 percent stocks-to-use
ratio could very well equate to carry-out of 1.3, 1.4, or 1.5
billion bushels. So while the stocks-to-use ratio might seem
low in these cases, actual carry-out levels would be right in
line with the l2-year average (95/96 to 06/07) of 1.38
billion bushels.
According a recent analysis from the University of
Illinois, ``the stocks-to-use ratio is generally used as a
`short cut' approximation for summarizing annual supply and
demand conditions. However, very different supply and demand
conditions in individual years can lead to similar ratios of
stocks-to-use, but very different prices. The most obvious
example is the contrast between a year of very small
production that results in a low stocks-to-use ratio, but
also requires very high prices to force a reduction in
consumption and a large crop year that results in a high
level of consumption, a low stocks-to-use ratio, but low
prices.''
Without the strong domestic market corn farmers won't have
the incentive to plant as many acres and take the risk that
large production will drive down corn prices. An arbitrary
stocks-to-use ratio trigger that restricts corn use for
ethanol would likely diminish overall demand and put downward
pressure on the price for corn. This would serve as a
disincentive to farmers and discourage them from planting
more corn at a time when more corn is what the feed and fuel
industries need. The food and feed industries have assumed
that farmers will continue to produce record crops regardless
of prices and profitability. If production declines, or even
grows more slowly, stocks could also fall, eventually driving
prices higher. In the long-term, America's farm sector is
better off maintaining a strong and growing domestic demand
base and adding value markets.
The corn industry will continue to strive to satisfy a
variety of important demands and maximize the utility of its
product. Seed technology developments, increasing
agricultural efficiency, innovation in biofuels production
processes and other breakthroughs will ensure that growers
will continue to meet the world's need for food, feed, fuel,
and other uses.
Efforts to undermine the continued growth of the U.S.
ethanol industry should not be tolerated. A careful look at
the facts reveals that American farmers have met, can and
will continue to meet our domestic and international
commitments for food and feed

[[Page S8037]]

while still making a significant and growing contribution to
lessening our dependence on imported oil with homegrown,
American-made renewable fuels. We strongly urge you to oppose
the Inhofe/Burr/Dole amendment.
Sincerely,
American Coalition for Ethanol, American Farm Bureau
Federation, National Association of Wheat Growers,
National Corn Growers Association, National Farmers
Union, National Sorghum Producers, Renewable Fuels
Association.

Mr. BINGAMAN. I see the Senator from South Dakota here. I yield him 4
minutes to speak in opposition.
The PRESIDING OFFICER. The Senator from South Dakota.
Mr. THUNE. Mr. President, I rise to express my opposition to this
amendment. I worked closely with my colleague from Oklahoma on a number
of issues when I was a member of the Environment and Public Works
Committee. I worked with him last week on an amendment to expand
refinery capacity because we have a shortage of refinery capacity. It
is something that needs to be addressed. Unfortunately, that amendment
failed. This amendment, however, is not necessary because we don't have
a shortage of corn. In fact, demand for corn has increased because of
ethanol production. It is expected to increase further thanks in part
to the growth and expansion of renewable fuels. But to suggest for a
minute that somehow we are going to run out of corn simply is not true.
In fact, one of the most respected economists in the agricultural
community, USDA's Dr. Keith Collins, has testified before the Senate
Agriculture Committee about corn and ethanol production. I will
highlight some of the points he made.
First, since 1948, corn yields have increased fourfold--from 40
bushels per acre to 160 bushels per acre--due to fertilizer, better
management, technology, and improved crop genetics. Corn yields in the
past couple of years have moved above the long-term trend and may
continue to do so in coming years as well, helping to meet biofuel
demand and reduce pressure on corn prices and acreage. Over the past
few years, new-generation rootworm-resistant corn has been introduced
and is showing strong yield increases in many areas.
As we look out over the next decade, USDA trend projections suggest
that U.S. corn yields per acre are going to rise to 168 bushels per
acre by the year 2016, and some seed companies suggest they are going
to go even higher, as much as 20 bushels per acre above that level.
Every 5-bushel increase in yield above the current trend level would be
the equivalent of adding around 2.5 million acres to corn plantings,
enough to produce 1 billion gallons of ethanol each year.
If you look State by State, Arkansas growers are expected to plant
560,000 acres of corn in 2007, up from 190,000 in 2006, a nearly 300
percent increase in corn acreage in 1 year. Louisiana farmers intend to
plant 700,000 acres in 2007, up from 300,000 acres in 2006, a 233-
percent increase in corn acreage. In Mississippi, corn producers are
expected to plant 950,000 acres in 2007, up from 340,000 acres in 2006,
a 280-percent increase in corn acreage.
My point is, in the underlying bill, basically, there is a
stipulation that ethanol production can't exceed about 15 billion
gallons. USDA's Dr. Keith Collins, who is an expert economist down
there, says we can get to 15 billion gallons of ethanol based on corn
production. Today, we are producing about 6.5 billion gallons of
ethanol. So to get to 15 billion gallons, which is what the USDA's
Chief Economist says we can reach, we have a long way to go. There is a
lot of headroom to 15 billion gallons. To suggest for a minute that
somehow we need this sort of an amendment that would put all these
additional restrictions on the renewable fuels standard, I submit is
unnecessary.
The underlying bill has provisions already that address this issue
and waivers in place for economic hardships experienced by certain
regions or States. Specifically, the President can waive the RFS if one
of the following conditions is met: implementation of the requirement
would severely harm the economy or environment of a State or region or
the United States; if extreme and unusual circumstances exist that
prevent distribution of an adequate supply of domestically produced
renewable fuel to consumers.
I would also add that this particular amendment creates lots of
problems for areas of the country because it forces investors to make
investment decisions based upon the weather. We all know we can't
protect the weather or predict the weather with certainty.
This amendment is misguided and unnecessary. I hope we will vote it
down.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. INHOFE. Mr. President, let me inquire of the time remaining on
each side, please?
The PRESIDING OFFICER. There is 23 minutes for the Senator from
Oklahoma, and the Senator from New Mexico has 7\3/4\ minutes.
Mr. INHOFE. First, I may be yielding back some time. Let me respond
to a couple assertions that have been made.
The Senator from Iowa was talking about in the event that livestock
would not be hurt because they would actually end up going up later in
the market and that will take care of that problem. I would suggest to
you that a lot of individuals don't agree with that. I have a letter I
will read a little bit out of. It is signed by the National Cattlemen's
Beef Association, the Chicken Council, the Pork Producers Council, the
Restaurant Association, and the Turkey Federation. All of them don't
feel this is going to be the market result.
Since the Senator from New Mexico read some excerpts of a letter
signed by a large number, we have many more who have signed this letter
than the letter which was submitted by the Senator from New Mexico.
One of the paragraphs in here says: We are concerned that the very
aggressive increase in biofuels mandates proposed in S. 1419 raises
fundamental questions about the impact that an increased Federal
Government mandate for corn-based ethanol, in addition to new State
mandates, will have on the livestock, poultry, and food industry's
ability to produce competitively available, affordable food.
In other words, this is going to affect a lot of people in their
estimation in terms of the cost of food, not just livestock, not just
the grain concern that is out there.
It continues: It is vitally important that we fully appreciate and
understand the implications of quintupling the renewable fuels standard
mandate, and we would ask that you use careful consideration and listen
to the significant issues being raised by those in the agriculture and
food products community.
Let me mention, I know the Senator from South Dakota was not in the
Chamber when I made my remarks, but Oklahoma also is a corn State. I
really believe the excellent statement that was made by the Senator
from South Dakota--who has been a real champion, maybe the No. 1
champion, in this body of corn ethanol--really makes my case for me. If
these States are increasing their production the way they are, then
there is no problem. Nothing in this amendment is going to affect
anything at all. In fact, the only concern we have is in the event
there is a year where this is not true.
Let me just go ahead and make sure everyone understands what this
amendment does and does not do. Quite often on the floor, we get people
opposing something, and then you scratch your head and say: Wait a
minute, is that my amendment they are talking about?
The amendment is a modification provision for food and animal feed
based on the ratio of cornstalks to projected demand. In the case of a
short- or low-corn crop year, there is currently no meaningful safety
valve that would address this situation. This amendment would provide a
small level of confidence to producers as well as investors that corn
would be available to meet the needs of all uses. In other words, if
the production is up, there is not a problem. This addresses disasters
and worst-case scenarios and assures the renewable fuels standard does
not lead to a shortage of corn for human or animal consumption.
It requires the USDA and the EPA to make a midyear-end determination
of current weather conditions, followed by an end-of-the-year
determination on the stalks-to-use ratio following harvest. If the
determination estimates the stalks-to-use ratio is below 10 percent, it
would trigger a temporary adjustment in the RFS to account for the

[[Page S8038]]

need for increased availability of corn feed. The amendment would not
permit the RFS to fall more than 15 percent in any given year.
Now, it has been said--I suspect there is a letter floating around
somewhere that says this would be the end of the world and it would
completely destroy what they are trying to do. Let me just read the one
limitation that is in this amendment. It says:

A requirement under the renewable fuels standard under
section 111(a) shall not be reduced by more than 15 percent
during any calendar year.

That is, if there is some kind of a drought or some kind of a real
serious problem--it can be too much water or not enough water--then it
would not affect it by more than 15 percent. Well, that is 15 percent.
That is not the end of the world. It means 85 percent of these mandates
are still going to be there and still be in effect.
So I think it is a very modest approach. The list of people who share
this concern is a very long one. I mentioned some of the names--these
industries. I will go ahead and read them at this time: American Feed
Industry Association, American Meat Institute, Cargill, the Coca-Cola
Company, ConAgra Foods, General Mills, Grocery Manufacturers/Food
Products Association, Hormel Foods, the National Cattlemen's Beef
Association, the National Chicken Council, National Pork Producers
Council, the National Restaurant Association, National Turkey
Federation, PepsiCo, Incorporated, Seaboard Corporation, Tyson Foods,
United Egg Association, United Egg Producers--and the list goes on and
on. So there is this concern out there.
Again, my State is not dissimilar in any way to the State of New
Mexico. They are right next door. I would suggest we probably have
about the same size corn industry, as well as perhaps our cattle
industry is not quite as large as it is in New Mexico, but it certainly
is not dissimilar. There is nothing I would do to be damaging to the
corn industry because that is a major industry, of course, in my State.
The Food Products Association--let me mention to you how they feel.
In a worst-case scenario, if you do not have some kind of a safety
valve, it could be damaging. They say: More and more pursuit of corn-
based ethanol is resulting in higher food and feed prices. The price of
corn has jumped 55 percent since September.
According to USDA's Chief Economist, the consequences of ethanol are
the biggest thing going on in agriculture today. An increase in ethanol
production is already having a significant impact on food and feed
supplies, such as corn, soybeans, and wheat.
The U.S. Labor Department recently reported that February prices for
foodstuffs and feedstuffs were 18 percent above year-ago levels. That
was in the Wall Street Journal of March of this year. According to the
Wall Street Journal, the higher corn prices have raised costs for
livestock and poultry which are fed corn and for crops such as
soybeans, which farmers are replacing so they can grow more corn. The
corn companies are starting to pass those higher prices on to
consumers. Wholesale consumer food prices were 6.8 percent above year-
ago levels.
So this is not happening in a vacuum. Obviously, the mandates are
there for corn ethanol, and they will continue to be there. As we look
down the road, Oklahoma has been pretty active in the work they are
doing right now on the other types of cellulosic biomass. Right now,
one of our companies in Oklahoma has been very active in that. We are
leading the field. We have Oklahoma State University and Oklahoma
University and the Noble Foundation leading the country in the pursuit
of these technologies.
The coal-to-liquid technology is here. We are currently flying B-52s
with all eight engines running on this type of a fuel. So we know it is
coming. So it is not all just corn ethanol. Again, we are a corn State.
We are also a big livestock State. I think this is a middle-of-the-road
type of amendment.
Again, you have to respond to these statements that you are going to
destroy something, when the limitation by law would be 15 percent of
the current mandate in the event of some kind of a disaster. USDA is
already making these studies and doing it, and it is not really
requiring anything more.
With that, Mr. President, I will retain the remainder of my time and
yield the floor.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, how much time remains on both sides?
The PRESIDING OFFICER. The Senator from New Mexico has 7 minutes 45
seconds, and the Senator from Oklahoma has 13\1/2\ minutes.
Mr. BINGAMAN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. BINGAMAN. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BINGAMAN. Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Mississippi.

Amendment No. 1510

Mr. COCHRAN. Mr. President, it is my intention to offer an amendment
at the appropriate time to reduce the impact of future disruptions of
our supplies by enlarging the Strategic Petroleum Reserve. This
amendment, which is cosponsored by Senators Bayh, Lott, and Landrieu,
will expand the capacity of the Strategic Petroleum Reserve from 1
billion barrels to 1.5 billion barrels.
The economic security of the United States is threatened by our
vulnerability to disruptions of the world oil supply and the volatile
prices of energy. Whether we like it or not, our Nation's
transportation sector, our major industries, and our military forces
are all dependent upon petroleum. We must protect ourselves from the
instability and the uncertainty of the international oil market.
The existing inventory in the Strategic Petroleum Reserve represents
only 56 days of net petroleum imports. Our obligation to the member
countries of the International Energy Agency requires us to maintain
the equivalent of 90 days of net petroleum imports. Increasing the
authorized capacity of our reserves will help ensure that we meet our
international obligations.
Mr. INHOFE. Mr. President, will the Senator yield?
Mr. COCHRAN. Mr. President, I am happy to yield for a question.
Mr. INHOFE. Yes, for a question.
It is my understanding that the time you are taking right now will be
taken off of our time equally, and since we are under a UC for a time-
certain for a vote, I know that would not be the Senator's intention.
Mr. COCHRAN. No, it would not. I will be happy to put these remarks
in the Record.
Mr. INHOFE. Well, I think that is probably a good idea.
Mr. COCHRAN. No one was speaking when I asked for recognition. I have
a statement that lasts maybe 5 minutes.
Mr. INHOFE. Go ahead.
Mr. COCHRAN. All day long, I have been trying to get an opportunity
to make this statement.
Last December, the Department of Energy identified the salt domes
near Richton, MS, as a preferred site for a new Strategic Petroleum
Reserve storage facility. My State welcomes the opportunity to help
meet our Nation's energy needs. Other sites in Texas and Louisiana will
also gain additional reserves under the plan being developed by the
Department of Energy.
Mr. President, our Nation's energy security and stability depend on a
combination of efforts to increase domestic supplies of oil, gas, and
petroleum, as well as the development and promotion of new renewable
energy technologies. The combination of these efforts will make it
possible for us to reduce our dependence upon foreign oil and provide
for a bright economic future for all Americans.
I urge the Senate to adopt this amendment.
Mr. President, I ask unanimous consent to have a copy of the
amendment printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

On page 314, after line 2, add the following:

SEC. 708. INCREASE IN CAPACITY OF STRATEGIC PETROLEUM
RESERVE.

(a) Strategic Petroleum Reserve.--
(1) Policy.--Section 151(b) of the Energy Policy and
Conservation Act (42 U.S.C. 6231(b)) is amended by striking
``1 billion'' and inserting ``1,500,000,000''.

[[Page S8039]]

(2) Creation.--Section 154(a) of the Energy Policy and
Conservation Act (42 U.S.C. 6234(a)) is amended by striking
``1 billion'' and inserting ``1,500,000,000''.
(b) Filling Strategic Petroleum Reserve to Capacity.--
Section 301(e) of the Energy Policy Act of 2005 (42 U.S.C.
6240 note; Public Law 109-58) is amended by striking
``1,000,000,000-barrel'' and inserting ``1,500,000,000-
barrel''.

The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, let me once again ask how much time
remains.
The PRESIDING OFFICER. There is approximately 12\1/2\ minutes for the
Senator from Oklahoma. The Senator from New Mexico has approximately 4
minutes.
Mr. BINGAMAN. Mr. President, in light of that, since there is 12
minutes still remaining for the Senator from Oklahoma--I do not know
how much of that time he wants to use. Once he has used his time, I was
going to take a couple minutes to sum up my position in favor of the
first amendment that is being offered and we are voting on, and then I
would yield that time. But I defer to the Senator from Oklahoma to make
any statement he has.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. INHOFE. All right. Mr. President, I say to the Senator, I do not
think adequate time has been given to the amendment you want to
address, the Boxer amendment, and if you would want some of my time to
do that, I would be willing to give it up. I am really prepared to
yield back at the appropriate time on this amendment.
Let me make this comment. If people are concerned my amendment is
going to be devastating, just keep in mind we have this limitation.
There is a very sizable mandate that is out there. The very maximum
that would be used would be to reduce that mandate--in a year when a
disaster occurs--by only 15 percent. In other words, 85 percent of that
mandate would still be in effect. I think that is a very reasonable
approach to it.
With that, Mr. President, I will yield the floor.
The PRESIDING OFFICER. The Senator from New Mexico.

Amendment No. 1693

Mr. BINGAMAN. Mr. President, let me sum up my argument in favor of
the first amendment we are going to be voting on in this sequence of
three amendments; that is, amendment No. 1693 that I have cosponsored
with Senator Boxer.
The amendment does address a number of important environmental issues
associated with renewable fuels. It is an amendment that contains four
sections.
The first makes an authorization for grants to encourage production
of advanced biofuels with the most favorable greenhouse gas
characteristics.
Second, we have a study by the EPA of potential issues that may arise
as a result of increases in the renewable fuels standards. That study
will result in two reports to Congress, both in 2010 and 2015.
The third part allows the EPA to consider groundwater impacts when
regulating fuel additives under the Clean Air Act, which is a good
provision.
The final part is a provision commonly known as an anti-backsliding
provision, basically allowing EPA to address air quality issues that
might arise as a result of the increased volumes of renewable fuel
mandated in this Energy bill.
Mr. President, let me at this time conclude my remarks and ask the
Senator from California if she wishes to make any concluding remarks.
Mrs. BOXER. Mr. President, I say to the Senator, if you could yield
me about 2 minutes.
Mr. BINGAMAN. Mr. President, I yield the remainder of my time to the
Senator from California.
The PRESIDING OFFICER. The Senator from California.
Mrs. BOXER. Mr. President, I thank the Senator.
Mr. President, the Senator from Illinois has asked if he could have a
minute and a half. If there is no objection, I suggest we allow that to
happen at this time, and I will then follow him with 2 minutes.
The PRESIDING OFFICER. The Senator from Illinois.

Amendment No. 1666

Mr. DURBIN. Mr. President, one of the pending amendments we will
consider very shortly is by Senator Inhofe, and this would create an
additional mechanism that would interrupt the bill's renewable fuels
standard depending on the ratio of stocks of corn to total corn use,
known as the stocks-to-use ratio.
Statistics show that stocks-to-use does not correlate to price and
supply information. In addition, there is already a waiver provision in
the bill that offers protection to consumers if corn prices or
availability becomes unsustainable.
According to one economic analysis, the 10-percent stocks-to-use
trigger required by this amendment would suppress corn prices to $2.50
to $2.60 a bushel. In the current farm bill, the target price is $2.63.
So by artificially suppressing the price of corn from $2.50 to $2.60,
the Inhofe amendment would put downward pressure on prices and cause
the triggering of loan deficiency payments. As a result, this amendment
would cost the Government more in farm payments.

I am going to urge my colleagues to oppose this amendment. I
understand there is a budget point of order. I have notified Senator
Inhofe that I will raise that point of order at the appropriate time.
I reserve the remainder of my time.
The PRESIDING OFFICER. The Senator from California is recognized.

Amendment No. 1693

Mrs. BOXER. Mr. President, I just wanted to say I hope amendment No.
1693 that has been offered by Senator Bingaman and myself will be
overwhelmingly supported by both sides. We know what happens when we
ignore unintended consequences. I think this amendment makes sure we
don't experience another MTBE; that, in fact, we are careful,
regardless of what the fuels turn out to be, because we are not picking
winners and losers. We are saying: Let technology go.
As a matter of fact, in this program we have to assist in the
development and production of biofuels, cellulosic. So what we don't
know is when these fuels come, what are they going to do to the
environment? We all want to be free of foreign oil. Every one of us.
But we don't want to make mistakes.
So I hope this amendment No. 1693 will be strongly supported. It
ensures that the EPA stays involved. It doesn't give away all the
powers of EPA to the Department of Energy. We just need to make sure
what we are doing in the future is sound.
I think Senator Inhofe has made a very important point about corn.
There are wonderful things about corn, but there are some negatives.
The PRESIDING OFFICER. The Senator's time has expired.
Mrs. BOXER. I think this first amendment can protect against these
problems.
I yield the floor.
Mr. INHOFE. Mr. President, how much time is remaining on both sides?
The PRESIDING OFFICER. There is 1\1/2\ minutes remaining.
Mr. INHOFE. On my side?
The PRESIDING OFFICER. On your side.
Mr. INHOFE. And on the other side?
The PRESIDING OFFICER. The time has expired.
Mr. INHOFE. Mr. President, I ask unanimous consent to include Senator
Pryor as a cosponsor of amendment No. 1666.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BINGAMAN. Mr. President, I ask unanimous consent to add to
amendment No. 1693 Senators Dodd, Cardin, and Sanders as cosponsors, to
the amendment we are about to vote on.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. INHOFE. Mr. President, I also ask unanimous consent to add
Senator Gregg as a cosponsor.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BINGAMAN. Mr. President, I believe Senator Gregg would be a
cosponsor to amendment No. 1666?
Mr. INHOFE. That is correct.
Mr. BINGAMAN. Mr. President, at this point I ask for the yeas and
nays on amendment No. 1693.
The PRESIDING OFFICER. Is there a sufficient second? There appears to
be a sufficient second.
The question is on agreeing to the amendment.
The clerk will call the roll.
The legislative clerk called the roll.

[[Page S8040]]

Mr. DURBIN. I announce that the Senator from Delaware (Mr. Biden),
the Senator from Connecticut (Mr. Dodd), and the Senator from South
Dakota (Mr. Johnson) are necessarily absent.
Mr. LOTT. The following Senators are necessarily absent: the Senator
from Kansas (Mr. Brownback), the Senator from Oklahoma (Mr. Coburn),
the Senator from Arizona (Mr. McCain), and the Senator from Alaska (Mr.
Stevens).
The result was announced--yeas 58, nays 34, as follows:

[Rollcall Vote No. 219 Leg.]

YEAS--58

Akaka
Alexander
Baucus
Bayh
Bingaman
Boxer
Brown
Byrd
Cantwell
Cardin
Carper
Casey
Clinton
Collins
Conrad
Corker
Dorgan
Durbin
Feingold
Feinstein
Gregg
Harkin
Hutchison
Inouye
Isakson
Kennedy
Kerry
Klobuchar
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Lugar
McCaskill
Menendez
Mikulski
Murray
Nelson (FL)
Nelson (NE)
Obama
Pryor
Reed
Reid
Rockefeller
Salazar
Sanders
Schumer
Smith
Snowe
Specter
Stabenow
Tester
Webb
Whitehouse
Wyden

NAYS--34

Allard
Bennett
Bond
Bunning
Burr
Chambliss
Cochran
Coleman
Cornyn
Craig
Crapo
DeMint
Dole
Domenici
Ensign
Enzi
Graham
Grassley
Hagel
Hatch
Inhofe
Kyl
Lott
Martinez
McConnell
Murkowski
Roberts
Sessions
Shelby
Sununu
Thune
Vitter
Voinovich
Warner

NOT VOTING--7

Biden
Brownback
Coburn
Dodd
Johnson
McCain
Stevens
The amendment (No. 1693) was agreed to.

Amendment No. 1666

The PRESIDING OFFICER. Under the previous order, there will now be 2
minutes for debate equally divided prior to a vote in relation to
amendment No. 1666 offered by the Senator from Oklahoma, Mr. Inhofe.
The Senator from Illinois.
Mr. DURBIN. Mr. President, this Inhofe amendment is one I am
opposing, and I urge my colleagues to oppose it. There is already a
waiver provision in the bill that offers protection to consumers if
corn prices or availability become unsustainable.
Unfortunately, the language of the Inhofe amendment could trigger a
dramatic decrease in income of farmers and a dramatic increase in
Government costs. As a result, I raise a point of order that the
pending amendment violates section 201 of Senate Concurrent Resolution
21, the concurrent resolution on the budget for fiscal year 2008.
The PRESIDING OFFICER. The point of order must be made after time has
expired.
The Senator from Oklahoma.
Mr. INHOFE. Mr. President, there have been some misconceptions about
this amendment. First, my State of Oklahoma is a corn State. It is a
livestock State. If my colleagues will look at the groups of people
that have joined in and said we need to have this safety valve, it is
virtually everyone: the National Cattlemen's Beef Association, the
Chicken Council, port producers, Restaurant Association--all of these
recognizing that in the event something should happen with a severe
drought--and these are easy to predict--we should have some kind of a
trigger that would allow the mandate to be reduced.
All this does is simply provide that if the USDA determines because
of weather patterns there is going to be a real problem in the crop of
corn, the mandated limit can be reduced by as much as 15 percent. In
other words, we are still going to have an 85-percent mandate.
I suggest my colleagues look very carefully at this amendment. This
is going to offer some assistance in the event of a serious drought or
something that will affect the corn crop in America.
I ask my colleagues to support my amendment.
The PRESIDING OFFICER. The Senator's time has expired.
The Senator from Illinois.
Mr. DURBIN. Mr. President, do I have any time remaining for debate?
The PRESIDING OFFICER. The Senator has half a minute remaining.
Mr. DURBIN. Mr. President, first, I ask unanimous consent to have
printed in the Record a letter in opposition to the Inhofe amendment
from the American Coalition for Ethanol, the American Farm Bureau
Association, the National Association of Wheat Growers, the National
Association of Corn Growers, National Farmers Union, National Sorghum
Producers, and the Renewable Fuels Association.
There being no objection, the material was ordered to be printed in
the Record, as follows:
June 20, 2007.
Majority Leader Harry Reid,
U.S. Senate.
Chairman Jeff Bingaman,
Committee on Energy and Natural Resources,
U.S. Senate.
Minority Leader Mitch McConnell,
U.S. Senate.
Ranking Member Pete Domenici,
Committee on Energy and Natural Resources,
U.S. Senate.
Dear Senators: As the Senate continues to debate the energy
bill, H.R. 6, we urge all Senators to vote against the
amendment offered by Senators James Inhofe (R-Okla.), Richard
Burr (R-N.C.) and Elizabeth Dole (R-N.C.) when it is brought
up for a vote. We strongly oppose this amendment as it would
effectively gut the RFS and thwart the growth of the domestic
ethanol industry.
Senators Inhofe, Burr and Dole are proposing an amendment
to the energy bill that would put in place a stocks-to-use
mechanism that would suppress crop prices and be detrimental
to the American farmer and domestic renewable fuels. Stocks-
to-use has limited value as an indicator of demand and
expected price. It is an oversimplified way to look at
supply/demand and pricing and does not often provide an
accurate picture of how markets would be impacted. For
example, in 2003/04 the stocks-to-use ratio was one of the
lowest in the last 20 years at 9.4 percent, but prices
remained at $2.50 for a season average. Most long-run
economic models (U.S. Department of Agriculture and Food and
Agriculture Policy Research Institute, and others) project
stocks-to-use ratio slightly under 10 percent for next
several years, with prices in the $3.00-3.50 range.
Additionally, many economists have stopped using the stocks-
to-use ratio in their econometric models as a tool to
forecast price because of its obvious limitations. As corn
usage are likely to increase substantially to 13, 14, or even
15 billion bushels in the future, a 10 percent stocks-to-use
ratio could very well equate to carry-out of 1.3, 1.4, or 1.5
billion bushels. So while the stocks-to-use ratio might seem
low in these cases, actual carry-out levels would be right in
line with the 12-year average (95/96 to 06/07) of 1.38
billion bushels.
According to a recent analysis from the University of
Illinois, ``the stocks-to-use ratio is generally used as a
``short cut'' approximation for summarizing annual supply and
demand conditions. However, very different supply and demand
conditions in individual years can lead to similar ratios of
stocks-to-use, but very different prices. The most obvious
example is the contrast between a year of very small
production that results in a low stocks-to-use ratio, but
also requires very high prices to force a reduction in
consumption and a large crop year that results in a high
level of consumption, a low stocks-to-use ratio, but low
prices.''
Without the strong domestic market corn farmers won't have
the incentive to plant as many acres and take the risk that
large production will drive down corn prices. An arbitrary
stocks-to-use ratio trigger that restricts corn use for
ethanol would likely diminish overall demand and put downward
pressure on the price for corn. This would serve as a
disincentive to farmers and discourage them from planting
more corn at a time when more corn is what the feed and fuel
industries need. The food and feed industries have assumed
that farmers will continue to produce record crops regardless
of prices and profitability. If production declines, or even
grows more slowly, stocks could also fall, eventually driving
prices higher. In the long-term, America's farm sector is
better off maintaining a strong and growing domestic demand
base and adding value markets.
The corn industry will continue to strive to satisfy a
variety of important demands and maximize the utility of its
product. Seed technology developments, increasing
agricultural efficiency, innovation in biofuels production
processes and other breakthroughs will ensure that growers
will continue to meet the world's need for food, feed, fuel
and other uses.
Efforts to undermine the continued growth of the U.S.
ethanol industry should not be tolerated. A careful look at
the facts reveals that American farmers have met, can and
will continue to meet our domestic and international
commitments for food and feed while still making a
significant and growing contribution to lessening our
dependence on imported oil with homegrown, American- made
renewable fuels. We strongly urge you to oppose the Inhofe/
Burr/Dole amendment.
Sincerely,
American Coalition for Ethanol.
American Farm Bureau Federation.
National Association of Wheat Growers.
National Corn Growers Association.

[[Page S8041]]

National Farmers Union.
National Sorghum Producers.
Renewable Fuels Association.

Mr. DURBIN. I make the point again that there is already a waiver
provision in this bill. The Inhofe amendment goes too far in that
regard.
If it is the appropriate time, I will raise my point of order.
The PRESIDING OFFICER. The Senator may make the point of order.
Mr. DURBIN. Mr. President, I raise a point of order that the pending
amendment violates section 201 of Senate Concurrent Resolution 21, the
concurrent resolution on the budget for fiscal year 2007.
Mr. INHOFE. Mr. President, I move to waive the applicable points of
order against my amendment and ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The question is on agreeing to the motion. The clerk will call the
roll.
The bill clerk called the roll.
Mr. DURBIN. I announce that the Senator from Delaware (Mr. Biden) and
the Senator from South Dakota (Mr. Johnson) are necessarily absent.
Mr. LOTT. The following Senators are necessarily absent: the Senator
from Kansas (Mr. Brownback), the Senator from Oklahoma (Mr. Coburn),
and the Senator from Arizona (Mr. McCain).
The PRESIDING OFFICER (Ms. Klobuchar). Are there any other Senators
in the Chamber desiring to vote?
The yeas and nays resulted--yeas 31, nays 63, as follows:

[Rollcall Vote No. 220 Leg.]

YEAS--31

Alexander
Boxer
Bunning
Burr
Cardin
Carper
Chambliss
Cochran
Collins
Cornyn
DeMint
Dole
Enzi
Hutchison
Inhofe
Isakson
Kyl
Leahy
Lott
Mikulski
Murkowski
Pryor
Reed
Sanders
Schumer
Sessions
Shelby
Snowe
Stevens
Sununu
Vitter

NAYS--63

Akaka
Allard
Baucus
Bayh
Bennett
Bingaman
Bond
Brown
Byrd
Cantwell
Casey
Clinton
Coleman
Conrad
Corker
Craig
Crapo
Dodd
Domenici
Dorgan
Durbin
Ensign
Feingold
Feinstein
Graham
Grassley
Gregg
Hagel
Harkin
Hatch
Inouye
Kennedy
Kerry
Klobuchar
Kohl
Landrieu
Lautenberg
Levin
Lieberman
Lincoln
Lugar
Martinez
McCaskill
McConnell
Menendez
Murray
Nelson (FL)
Nelson (NE)
Obama
Reid
Roberts
Rockefeller
Salazar
Smith
Specter
Stabenow
Tester
Thune
Voinovich
Warner
Webb
Whitehouse
Wyden

NOT VOTING--5

Biden
Brownback
Coburn
Johnson
McCain
The PRESIDING OFFICER. On this vote, the yeas are 31, the nays are
63. Three-fifths of the Senators duly chosen and sworn not having voted
in the affirmative, the motion is rejected. The point of order is
sustained and the amendment falls.

Amendment No. 1800

Under the previous order, there will now be 2 minutes of debate
equally divided prior to a vote in relation to amendment No. 1800,
offered by the Senator from Arizona, Mr. Kyl.
Mr. KYL. Madam President, this amendment very simply changes an IRS
interpretation of the 2005 Energy bill that provides a $1-per-gallon
tax credit for creation of biodiesel. An interpretation by IRS said
that if you take animal fat and add it to the biodiesel--or add it to
diesel, you have biodiesel and then get the $1-per-gallon credit. That
was not what was intended when this was created.
What has happened is all of the animal fat used to do this was
already being used by the oleo chemical industry. Folks, for example,
who make soap and detergents and the like, are finding the cost of the
animal fat, their feed stock, has skyrocketed 100 percent this past
year because of the way this has been done. As a result, we are simply
changing the interpretation IRS put on it that big oil companies can
take advantage of what was not intended to be a tax credit for them,
people who are already refining diesel fuel. But rather, those who
would create legitimate new diesel fuel from legitimate biomass, the
credit remains; nothing changes for that. It simply means the oil
companies taking advantage of the credit in an improper way would no
longer be able to do so.
The PRESIDING OFFICER. The Senator from Montana is recognized.
Mr. BAUCUS. Madam President, the Senator from Arizona seeks to strike
the provision of the underlying Finance Committee amendment--frankly,
the amendment package which the committee voted to report by a vote of
15 to 5. The underlying amendment before us extends for 2 years the $1-
per-gallon credit for renewable diesel, including diesel produced from
animal fats. That credit is in current law. It is only 2 years old. We
should give it time to work.
Under the language in the underlying Finance Committee amendment, we
will revisit subsidies for most fuels, including this one, in the year
2010. The bottom line is we want to displace foreign oil imports--that
is the goal--and every gallon of renewable diesel produced is a gallon
of foreign imports displaced.
I urge my colleagues to help decrease foreign oil imports and oppose
the Kyl amendment.
I yield the remainder of my time.
The PRESIDING OFFICER. The question now is on agreeing to the Kyl
amendment.
Mr. KYL. Madam President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second? There is a
sufficient second.
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. DURBIN. I announce that the Senator from Delaware (Mr. Biden) and
the Senator from South Dakota (Mr. Johnson) are necessarily absent.
Mr. LOTT. The following Senators are necessarily absent: the Senator
from Kansas (Mr. Brownback), the Senator from Oklahoma (Mr. Coburn),
and the Senator from Arizona (Mr. McCain).
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 45, nays 49, as follows:

[Rollcall Vote No. 221 Leg.]

YEAS--45

Alexander
Allard
Bennett
Cantwell
Clinton
Coleman
Collins
Corker
Cornyn
Craig
Crapo
DeMint
Dodd
Domenici
Durbin
Ensign
Enzi
Feingold
Graham
Gregg
Harkin
Hatch
Inhofe
Kennedy
Kerry
Klobuchar
Kyl
Lautenberg
Martinez
McCaskill
McConnell
Menendez
Murkowski
Murray
Obama
Schumer
Sessions
Shelby
Snowe
Specter
Sununu
Thune
Voinovich
Warner
Webb

NAYS--49

Akaka
Baucus
Bayh
Bingaman
Bond
Boxer
Brown
Bunning
Burr
Byrd
Cardin
Carper
Casey
Chambliss
Cochran
Conrad
Dole
Dorgan
Feinstein
Grassley
Hagel
Hutchison
Inouye
Isakson
Kohl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
Mikulski
Nelson (FL)
Nelson (NE)
Pryor
Reed
Reid
Roberts
Rockefeller
Salazar
Sanders
Smith
Stabenow
Stevens
Tester
Vitter
Whitehouse
Wyden

NOT VOTING--5

Biden
Brownback
Coburn
Johnson
McCain
The amendment (No. 1800) was rejected.
Mr. BINGAMAN. Madam President, I move to reconsider the vote and move
to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. BINGAMAN. Madam President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
The PRESIDING OFFICER. The Senator from New Mexico is recognized.
Mr. BINGAMAN. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BINGAMAN. Madam President, I ask unanimous consent that there be
up to 2 hours 10 minutes for debate prior to a vote in relation to the
Kyl second-degree amendment to the Baucus amendment No. 1704, and the
cloture vote on the Baucus amendment;

[[Page S8042]]

with the time divided as follows: 60 minutes to be used during today's
session, and 70 minutes available for debate when the Senate resumes
consideration of H.R. 6 on Thursday, June 21; with all time equally
divided and controlled between Senators Baucus and Kyl or their
designees; with the Republican time being controlled 15 minutes by
Senator Kyl and 20 minutes by Senator Domenici; that no other amendment
be in order prior to disposition of the Kyl amendment; with 30 minutes
of the time on Thursday available for debate with respect to the motion
to invoke cloture on the Baucus amendment No. 1704; and then, upon the
use or yielding back of time, the Senate proceed to a vote in relation
to the Kyl amendment; that upon disposition of the Kyl amendment, the
Senate proceed to a vote on the motion to invoke cloture on the Baucus
amendment No. 1704.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 1733 to Amendment No. 1502

The PRESIDING OFFICER. The Senator from Arizona.
Mr. KYL. Madam President, I have an amendment at the desk, No. 1733,
and would ask that it be called up at this time.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:

The Senator from Arizona [Mr. Kky] proposes an amendment
numbered 1733 to amendment No. 1502.

Mr. KYL. I ask unanimous consent that further reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To provide a condition precedent for the effective date of
the revenue raises)

At the end of subtitle B of title VIII add the following:

SEC. ___. CONDITION PRECEDENT FOR THE EFFECTIVE DATE OF
REVENUE RAISERS.

Notwithstanding the provisions of this subtitle, the
amendments made by this subtitle shall not take effect unless
the Secretary of Energy certifies that such amendments shall
not increase gasoline retail prices and the reliance of the
United States on foreign sources of energy.

Mr. KYL. Madam President, I will speak for one minute and then yield
about 10 minutes to the Senator from Kentucky who will begin the
discussion. Actually, I would like to read the entirety of this
amendment. It will take me about 10 seconds. It explains what the
amendment does.

Notwithstanding the provisions of this subtitle, the
amendments made by this subtitle shall not take effect unless
the Secretary of Energy certifies that such amendments shall
not increase gasoline retail prices and reliance of the
United States on foreign sources of energy.

What this amendment does very simply is to say that the $28.6 billion
in tax increases called for by this bill will be allowed to go into
effect as long as the Secretary of Energy can certify that it would not
raise gas prices or cause further dependence on foreign oil. The reason
for the amendment, obviously, is to make a point. It is going to be
very difficult to have $28.6 billion in tax increases on oil producers
not reflected on our gasoline cost at the pump. I predict Americans
will pay more for their gasoline because of the tax increases in this
legislation.
I will have more to say about the three different kinds of tax
increases, why I believe that is the case, why I think it is a bad idea
for us to increase our dependence on foreign oil and increase the cost
of gasoline to consumers as a result of the tax increases embodied in
this bill.
At this time, I yield 10 minutes to the Senator from Kentucky.
The PRESIDING OFFICER. The Senator from Kentucky is recognized.
Mr. BUNNING. Madam President, I thank Senator Kyl for yielding. I
rise in support of amendment No. 1733 that would prevent the tax
increases in this bill from going into effect if the tax provisions
raise gasoline prices or increase our dependency on foreign oil. I
voted against these tax increases in the Finance Committee, and I
strongly oppose all the tax increases in this bill. But there is one
provision I oppose in particular. I am referring to the 13-percent
severance tax on oil and gas leases.
There are several reasons why the Federal Government will never see
the $10.6 billion allegedly raised by this provision and why we should
not, under the banner of tax law, confiscate property. Very simply, the
United States should not break its contracts. A deal is a deal. The
Clinton administration bid out these lease contracts in the Gulf of
Mexico in 1998 and 1999, more than 1,000 of them. Now, with the benefit
of hindsight, the small number of performing leases--about 20 of them--
look like a bad deal for the Government. That may be true. Some leases
negotiated before and after the period in question have 12.5 percent
royalty rates. These leases have a zero rate.
On the other hand, the favorable terms that Senator Bingaman
complains about encourage the oil companies to pay more at the outset
to drill in deeper waters. Senator Bingaman knows he cannot tear up the
contracts he does not like, so he has proposed an unprecedented and
unusual targeted severance tax that falls almost exclusively on the
current holders of these leases. This tax is so unusual, the Federal
Government has never imposed a severance tax on resources, and we never
have enacted a tax that can be offset by royalty payments.
If there is any doubt about the purpose of this tax, Senator Bingaman
cleared that up earlier today when he explained the tax will not impact
future leaseholders. The only people who actually pay this 13 percent
tax are the holders of the leases Senator Bingaman thinks are a bad
deal. As Senator Bingaman explained, future leases are expected to have
a royalty rate higher than the tax, and royalties can be used to offset
the tax under Senator Bingaman's scheme. The problem with this is
Congress cannot reverse contracts legislatively without paying
compensation. The Supreme Court has said as much in two recent cases:
Winstar and Mobil Oil. What is more, the Federal courts have said
Congress cannot use its taxing power to break or modify a Government
contract.
But that is precisely what this measure aims to do. If we enact this
legislation, we will cast a small degree of doubt on every contract the
Federal Government ever writes. We will raise the cost of Government
today and for generations because every contractor will wonder whether
their Congress might step in to claw back the benefits of the deal.
Here is a true story. During the savings and loan crisis, Federal
regulators tried to encourage healthy thrifts to buy up failing thrifts
to stabilize the savings and loan industry. They agreed to more lenient
regulatory standards and tax benefits that would be available to the
healthy thrifts. Later, when the cost of the savings and loan bailout
became a concern, Congress enacted laws that took back some of these
benefits. One of these laws was the Guarini amendment, a targeted tax
provision. Similar to the Bingaman severance tax, the law seemed to
raise revenue on paper. But in the end, the Federal courts reversed
themselves, and the Federal Government paid out millions in damages for
breach of contract. The same Federal court that decided these cases has
exclusive jurisdiction to decide whether the 13-percent severance tax
is legal. I am not optimistic.
We should make sure this provision never becomes law by voting for
the Kyl amendment. It is unconstitutional. It is un-American. It will
raise gasoline prices across the board, not lower them, by imposing
additional costs on the American oil and gas companies. Most of them
are small companies that risk capital to search for oil in the Gulf of
Mexico.
I thank the Chair and yield the floor.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. KYL. Madam President, unless the chairman of the committee would
like to speak next, I yield 5 minutes to the Senator from Colorado.
The PRESIDING OFFICER. The Senator from Colorado is recognized.
Mr. ALLARD. I thank the Senator from Arizona for yielding me the time
to speak on his amendment which basically requires a certification from
the Secretary of Energy that these taxes will not increase retail
gasoline prices or the reliance of the United States on foreign sources
of energy. I think it is a good amendment. Here is why. The current
bill, as I see it, does nothing to produce more energy. It doesn't do
anything to make energy less expensive. It makes us more dependent on

[[Page S8043]]

foreign oil from my perspective. This amendment helps remediate the
provisions of the current Energy bill before us.
I think back to the previous Energy bill passed in the fall of 2005,
in which we accomplished a lot. We did a lot to increase the supply of
energy through incentives and to hold down costs because we were
increasing supply. It made us less dependent on foreign oil.
In that particular legislation, we took nothing off the table. We
kept traditional fuels out there. Many of those were the petroleum
products, but included hydroelectric plants. We also had incentives in
there for nuclear fuels. We did a lot to encourage renewable fuels. We
had provisions to encourage production of solar energy, production of
wind-generated energy, geothermal energy, probably one of the more
practical and efficient ways of generating energy, with some of the
local governments in the State of Colorado taking advantage of the
source. Hydrogen was a source, cellulosic sources of alcohol and energy
fuels, corn ethanol. We even had conservation provisions in there, for
example, provisions which would allow tax credits for housing and
construction projects that produced buildings that conserved energy. It
was a good, well-balanced bill, and it didn't have many mandates in it.
One of the concerns I have is the huge amount of mandates and tax
increases we have in this bill which will make it more difficult to
generate energy. Not only will it make it more difficult to generate
energy, but it will also make it more expensive. When you make anything
more expensive, consumer demand will go down, but also production will
go down because what you are implementing is taxes that are directed to
the producer.
As Senator Bunning commented, there is going to be an injustice. It
wouldn't surprise me if we have court action and if it doesn't turn
away some of the revenue-producing provisions of this bill.
I am not in support of the bill as it stands now. With the adoption
of the Kyl amendment, I think it remediates many of the provisions in
this bill that I have an objection to. These provisions undo a lot of
what we did in the big Energy bill in 2005.
I am urging my colleagues to join me in supporting the Kyl amendment.
It simply states that the amendments shall not take effect unless the
Secretary of Energy certifies that such amendments shall not increase
gasoline retail prices and the reliance of the United States on foreign
sources of oil. It is very simple, straightforward. I urge my
colleagues to join me in supporting this important amendment.
I yield the floor.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. KYL. Mr. President, I ask unanimous consent that the amendment I
have offered, No. 1733, be modified to reflect that it is a second-
degree amendment to the Baucus amendment No. 1704.
The PRESIDING OFFICER (Mr. Casey). Without objection, it is so
ordered.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I yield myself such time as I may consume.
First, let me begin by reminding the Senate why we are here today. We
want a strong energy policy. I think most Senators agree that the
underlying bill, plus the Finance Committee bill, moves this country
very much in the right direction, making us less dependent upon OPEC.
It enhances national security. It will move us more toward alternative
and renewable fuels, conservation, cellulosic ethanol, and also clean
coal technology. This is a very good bill.
It is important to remind ourselves why we have these provisions that
are the subject of the amendment offered by the Senator from Arizona.
We have to pay for what we do here. It is something called pay-go.
Essentially, whenever we decrease taxes--and that is what the
underlying Finance Committee bill does, it decreases taxes; it gives
incentives to lots of different organizations to help develop new
technologies, this is a tax-decrease bill--we also, under our rules,
have to raise revenue the same amount that we decrease revenue.
We are here today to debate the offsetting amendment offered by the
Senator from Arizona. Basically, should we pay for what we are doing?
That is the basic question.
I say that is the basic question because it is one that offers no
alternative. He just wants to strike the provisions that raise revenue
in this bill to pay for other things, to pay for the tax decreases. So
on a net basis, it is zero. Some like to say this is a tax increase
bill. It is not. It is a net zero--zero-zero.
So the Senator from Arizona is not suggesting any alternative. He
just says, no, we do not pay for what we are trying to do here. I think
this body all agrees we need to pay and should pay for what we do. The
question is whether this is a proper pay-for. I remind my colleagues
that this full committee amendment, which includes the provisions which
are the subject of the amendment of the Senator from Arizona, passed
the committee by a vote of 15 to 5--a very strong, bipartisan vote.
Many Senators believed--15 Senators believed--this is proper. It is
right to have these provisions in this legislation.
We clearly do not want to increase the deficit. If the Senator's
amendment passes, and these incentives for clean energy remain, it will
have an effect of increasing the deficit.
Let's go in a little more detail about these offsets. The first is
the section 199. What is that? I think all of our colleagues remember
that several years ago--basically prior to 2004--the United States had
a program called FSC-ETI. That was a program placed to give incentives
for companies to manufacture products that are shipped to foreign
countries. It was an incentive for domestic manufacturers to ship
products overseas. The World Trade Organization ruled that this
incentive violated WTO rules. The Europeans have something similar.
They just constitute it a little differently, so they are able to have
their stimulus for their exports that go overseas. But ours was ruled
illegal by the WTO.
So what did we do about that in the Congress? We decided we were
going to enact this section 199. What is that? Basically, it gives a
deduction for domestic manufacturers, and it is phased in. When fully
phased in in 2010, it will allow 9 percent of qualified production
activities income to be deducted.
Well, here we are today saying: Well, for the five major oil
companies, that 199 deduction for their production is no longer
available to them. Some here suggest: Well, that is going to have the
effect of increasing prices at the pump and it will maybe discourage
domestic production in the United States.
Look at the record. Look at the facts. The facts are basically these.
Since this provision went into effect--section 199--what has happened
domestically in the United States? The major oil companies have gotten
a significant break. It comes down to approximately $10 billion over 10
years. Domestic production by the five major oil companies has actually
declined, even though they had this break, they got this additional
incentive. Did it increase production in the United States? No, it did
not increase production in the United States. It decreased production.
Remember, this is a provision which applies to domestic production. It
did not increase domestic production. Domestic production by oil
companies actually decreased over this period of time.
I might also say that the Joint Committee on Taxation has done an
analysis on this issue, and they demonstrated many of the points I am
making.
So if you look at all the various factors that bear on this issue,
you reach the conclusion that domestic production has gone down. So the
argument that this one bill, this one portion will be responsible for
decreasing domestic production is a specious argument. The facts show
the opposite.
What determines gasoline prices charged at the pump? The Joint
Committee on Taxation looked at this question, and it is their
determination that--and it is obvious--the price at the pump is
determined by an awful lot of complex factors. It is global demand. It
is a lot of supply factors. I could go on as to all the factors the
Joint Committee on Taxation believes contributes to this issue. To say
there is a direct link that this provision is actually going to
increase prices is just not accurate. It is just not going to happen.

[[Page S8044]]

It is a fallacious argument to try to discourage and confuse people
into saying, therefore, this is not a good pay-for.
What are the other oil provisions? There are three of them. I already
mentioned one. The second one is a loophole-closer.
Basically, this is a loophole identified by the Joint Committee on
Taxation. In short, it has to do with credit American companies get for
taxes paid overseas. For oil and gas production, there are two specific
provisions relating to foreign taxes. One provision, called foreign oil
and gas extraction income, or FOGEI, applies to extraction costs of oil
and gas. The other, foreign oil related income, or FORI, applies to
downstream distribution costs.
The long and short of it is that the Joint Committee on Taxation
recommended changes to the system of credits against foreign taxes, a
streamlining of FOGEI and FORI. And that's what the Finance Committee
has done.
We closed this loophole, and it happens to raise over $3 billion
dollars. This is a loophole closer. That is what this is. I cannot see
any reason why anyone would have any problem with that.
In fact, the oil company people tell us it is probably a good thing
to close this loophole. Why? Because it is so complicated to comply
with.
Now, let's go to the third provision in this bill. This is the
provision with respect to Outer Continental Shelf severance taxes.
Clearly, constitutionally, the Congress always has the power to enact a
tax. This is a 13-percent tax on production in the gulf. That is what
it is. Producers can offset that tax with royalties they otherwise
would pay for those leases in the gulf.

Now, the provision applies not just to the so-called years in
question--1998 and 1999. It applies to a much broader range of leases
in the gulf. This is not targeted to those 2 years people discuss. This
is a severance tax that Congress has the power to levy in this area.
A couple points: The President himself enacted a higher level of
royalties for all new leases at 16\2/3\ percent. On his own, he raised
the royalty rate to 16\2/3\ percent for most new offshore deepwater
federal oil and gas leases.
In this amendment, we are talking about a 13-percent severance tax.
Is this a breach of contract? No. We have asked the American Law
Division of the Congressional Research Service to research this point
for us because we do not want to do anything that is going to be
unconstitutional and wrong. They say no, that basically Congress has
the power to enact this provision. Under the broad public purposes,
which is the basic standard, which is utilized here in the courts,
Congress does have the power to do this. The question is, Is this a
taking or confiscatory? No. This is not confiscatory. Nobody can make
an argument this is confiscatory. So there is no takings, fifth
amendment question here. Someone can raise it, but I think any
reasonable person looking at this issue would say it is not a taking,
it is not confiscatory, and second, this is not a breach of contract
because we are saying: Hey, Congress has the power to enact the tax and
credit royalties against it.
Do not forget, the President already said those folks, those
companies are not paying enough. So he raised the royalty rate to 16\2/
3\. We are saying 13 percent, in the form of a tax. We are trying to be
reasonable. We are trying to do what is right. We came up with that 13
percent.
Another point that is kind of tricky about this amendment--it is kind
of interesting about this amendment--essentially, it is delegating to
the Secretary whether or not the oil companies are going to pay taxes.
That is basically what the amendment says: Congress, you cannot decide;
it is not your prerogative; it is up to the Secretary. Because he has
this little clause in there that says: Unless the Secretary certifies,
it is not going to increase prices. Come on. The Secretary can say
anything he wants to say in this area because it is so complicated. It
is so complicated. We should not be giving such broad authority to the
Secretary for him to determine whether this offset should be enacted.
But that is what the Kyl amendment does. I think any reasonable person
would say: Hey, that is not the right thing to do. We do not want to
give the Secretary this authority. You guys--men and women in
Congress--we elected you to do what is right. Basically, what is right
is to enact these provisions.
So I, therefore, urge all of us--the body--let's keep our heads on
straight. Let's keep our feet on the ground. This is common sense.
Let's oppose this thing that does not make any sense.
Mr. President, I ask how much time remains on both sides?
The PRESIDING OFFICER. The Senator from Montana has 16\1/2\ minutes.
The Senator from Arizona has 16 minutes.
Mr. BAUCUS. I thank the Chair.
The PRESIDING OFFICER. The Republican whip is recognized.
Mr. LOTT. Mr. President, I have not spoken on this energy
legislation. There is no question in my mind that we need a national
energy policy. I do not think this bill, in its current form, does what
we need to do. I have always believed what we need to do in America is
produce more energy here at home. More supply--that is the answer--not
try to do with less, try to shrink what we have in terms of energy or
conserve ourselves into an energy policy. I want more. This is America.
We can produce more of everything. More oil? Yes. More natural gas?
Absolutely, and do a lot of innovative things with it. More coal? I am
for clean coal technology. I am for changing coal to liquids. I am for
doing whatever we can with coal. I am for hydro. We should have more
hydroplants, but we have people who have reservations about that. It
has environmental or conservation problems. And more nuclear. It is
clean. It is safe. But what are we doing to get more of them on line?
Nothing.
This bill has turned out to be really about alternative fuels,
conservation, and green policies.
Now, for years, I have said I do not want any of that. I want
production. By the way, in my State, we can do it. We can have more of
everything: oil, gas, coal to liquid, lignite coal, ethanol. We are
trying to do it all. We are going to be energy independent. In fact, we
are going to wield our power to other parts of the country. So that is
what I wanted, but I am over that. I want a national energy policy. I
am prepared to accept alternative fuels, some renewables if they make
sense, if they are justified in the market but not paid for by
outrageous tax credits that don't produce anything. I am for
conservation. We should encourage that. Get different light fixtures,
look at the utilities we have in our houses, the appliances, are they
using too much electricity; insulation, I am for all of that.

So let's have the grand compromise on energy. Let's do it all. This
bill doesn't do it. To my colleagues, I want to say I believe America
is in great danger because of our inability to come together and do it
all.
I was in Russia 3 or 4 weeks ago. I had a chance to see their
transmission network of gas and to look at their fields in Siberia, the
oil and natural gas. I met with the leadership of Gazprom, the Russian
Government-controlled energy company. It was scary. I have no doubt in
my mind they intend to use gas as a weapon. They are going to be
shipping natural gas that provides the power to all of Europe, Eastern
Europe, Western Europe, all the way to Ireland. By the way, if they
don't get what they want, they will cut it off.
Here we are in America. We are dependent for our energy sources, 80
percent on foreign oil. Is that good? No, that is bad. Look at whom we
are depending on: Russia, Iraq, Iran, Nigeria, Venezuela, and then some
who I guess are more stable for now: Saudi Arabia, Kuwait. Is that what
we want? No, we don't want that. This is a dangerous situation.
So we should encourage and facilitate the whole package. Flexible
fuels, I am for that. We should try to see what we can do with
renewables. I don't believe for a minute we are going to get 15 percent
of our energy needs from wind. Come on now. Wind and solar. There are
people who think we are going to heat, power, and supply all our energy
needs in the future from wind and solar. For heaven's sake, get real.
We have already sunk billions of dollars into some of these ideas that
might work or might not. I am willing to try them. I will buy the deal,
but

[[Page S8045]]

this is not the deal. This is another tax increase: $28.6 billion. I
thought it would be $15 billion.
By the way, let me make it clear. There is some good stuff in here.
Some of it I supported, some of it I voted for. But overall, what we
have is an energy bill that came out of the Energy Committee that now
doesn't amount to very much; it is all about renewables and green
policy. It is not going to produce another drop of oil, 1 cubic foot of
natural gas. In fact, now, we are going to discourage oil and gas
exploration in the Gulf of Mexico.
By the way, I should be able to talk about this because this is in my
neck of the woods. I have lived in the shadow of oil and gas rigs for
years in the gulf. The best fishing in the gulf is around the rigs. We
have oil and gas out there. Our policy in America is we don't want to
drill where it is. We don't want to drill in the gulf, we don't want to
drill on the west coast, we don't want to drill on the east coast, we
don't want to drill in ANWR. I have a novel idea of where we ought to
drill: Drill where it is, and do it safely. We can do that. Finally,
after a lot of huffing and puffing and stroking and scratching last
year, we finally said: Yes, we are going to have more oil and gas
exploration in the Gulf of Mexico. It is going to be in a defined area.
It is not going to be close to the shore, which I think it should be,
much closer to the Florida coast, for instance--and my coast, too, for
that matter--but we did it for control in a responsible, acceptable
way. The States, by the way, are going to get some royalties out of it
for the first time ever, or for the first time in many years. We came
up with a good deal.
Now, in this bill, we are going to go back, and we are going to levy
a 13-percent tax on oil and gas production in the Gulf of Mexico that
will cost $10.6 billion on the oil companies. Now, look, I am not going
to cry any tears for oil companies. I have a populist streak in me. I
don't like gasoline prices. But, buddy, let me tell you, this bill is
not going to reduce anybody's gasoline prices. This bill is not a
national energy policy.
This bill will lead to less American production in the critical areas
where we could do something quickly. By the way, we are going to tax
them. Are we never going to learn when you tax something, you get less?
If you get less, what do you think it is going to do to the price of
gasoline? By the way, we are going to ride these cats--these
companies--offshore. They are not going to put up with all these taxes.
They are going to go get it somewhere else. They can do business
internationally. The biggest company in the world, ExxonMobil--they are
not the biggest company in terms of oil or gasoline in America, no;
there are other companies that fit that role--much of their business is
overseas.
So there is about $21 billion more on the oil companies, and I think
it is being done in the wrong way. But we can't come out and talk about
how we are going to make such great changes and that we are going to do
something about energy prices and the price of gasoline, when the
reverse is true. This bill would say that--exactly, it would
effectively strike all the tax increases unless and until such time as
the Energy Secretary can certify they will not result in increased gas
prices or increased dependence on foreign sources of energy.
You are right, you know, they would not be able to certify that. This
would not be good for the country.
Yes, again, I wish to say the Wyden amendment is in there. I support
it. I voted against the amendment awhile ago that Senator Kyl had. I am
not pure either. I am over trying to be pure. But I do expect us to not
do the wrong things on energy policy--don't do the bad things, even if
we can't do the right things.
I am extremely upset about what we have come up with out of the
Finance Committee and on the energy package as a whole. This is not
going to do the job. It is not going to become law.
So here again, the Senate is spinning its wheels. Yes, well, we are
making a statement. Maybe we will feel better. But in terms of
addressing an energy policy, this will not do it.
I yield the floor. Thank you for the extra time.
Mr. BAUCUS. Mr. President, I yield 5 minutes to the Senator from New
York, but I don't see him yet. So I yield the balance--11 minutes plus
5 is 16--so I yield 11 minutes to the Senator from Oregon, Mr. Wyden,
and the remaining 5 to the Senator from New York when he appears on the
floor.
The PRESIDING OFFICER. The Senator from Oregon is recognized.
Mr. WYDEN. Mr. President, I wish to pick up on the comments of my
friend from Arizona and my friend from Mississippi, two Senators whom I
have worked with on many issues and must unfortunately disagree with
them on this one. I want the Senate to understand exactly what the
implications would be if the Kyl amendment were to pass.
If the Kyl amendment were to pass, the major oil companies would
receive billions and billions of dollars of subsidies that President
Bush says the major oil companies do not need. I wish to be specific on
this as we go to the debate with the Senator from Arizona and the
Senator from Mississippi.
The President of the United States has said that when the price of
oil is over $55 a barrel, the oil companies do not need incentives to
develop and explore. Let me repeat that. President Bush has said when
the price of oil is over $55 a barrel, the oil companies do not need
incentives to explore and search for oil. The price of oil at this time
is substantially over $55 a barrel. So if the Kyl amendment passes and
we refuse to strip these incentives the President says aren't needed,
we are going to continue business as usual.
The Kyl amendment says, essentially: Let us continue these practices
we have had for the last few years that have done nothing--nothing--to
reduce our dependence on foreign oil.
What we have had in the past are billions of dollars of subsidies.
For example, in section 199 of the Tax Code, not for investing in
refinery capacity, not for investing in new production, not for
investing in renewable fuels but essentially continuing the practices
that have nothing--done nothing to reduce our dependence on foreign
oil. I have always said we ought to target tax breaks and incentives
where there is an opportunity for new production. That is why I have
always favored looking at potential incentives for small companies.
But that is not what this amendment is all about. This amendment is
about continuing the giveaways for the big companies, the giveaways the
President of the United States says are not needed.
So where we are is oil is at almost $70 a barrel, gas is over $3,
more imports than ever, and it seems to me continuing business as usual
as the Kyl amendment would do is not a case you can make. The Finance
Committee amendment changes our course. It ends the section 199 tax
breaks for the major oil companies. It takes steps to end our addiction
to oil. It takes steps to end our addiction to continuing billions of
dollars of subsidies that the President says are not needed.
Let us not continue these billions and billions of dollars in the
name of a modern energy policy. It is not. The idea that shoveling all
these breaks, these billions of dollars of breaks at the oil industry
is somehow going to be good for America is not borne out by the record.
It is not borne out by the record, and in my view, until we take these
steps to protect taxpayers and protect consumers and protect the
security of the country, I think what will happen is we will continue
to increase our addiction to foreign oil, we will continue to have
these prices, these staggeringly high prices of $70 a barrel and
consumers will still get clobbered at the pump.
I am going to have more to say about this in the course of tomorrow,
but I would say in closing--and I see my good friend from Arizona on
the floor of the Senate--that if the Senate supports this particular
amendment, the Kyl amendment, what it will be doing is it will be
continuing billions of dollars in tax breaks that if you use the test
applied by the President of the United States, those major companies do
not need. No one has been able to make a case, it seems to me, that the
President of the United States is wrong. In fact, every time this topic
has come up, I have said I think the discussion ought to begin with the
comment of the President. I credit the President for his statement
because I think it reflects modern reality. The President knows a lot
about the oil

[[Page S8046]]

business, and the President says you don't need these subsidies when
the price is over $55 a barrel.
But along comes the Kyl amendment, and the Kyl amendment says: No, I
pretty much don't see it the way the President of the United States
sees it. I am going to continue the billions and billions of dollars of
subsidies when it is not needed.
The last point I would like to make very quickly deals with the
Bingaman language. We have heard again and again that this somehow
retroactively sweeps in and unravels previous agreements. That is
untrue. Yesterday, I asked in the Senate Finance Committee the counsel
about this. The counsel was very clear it applies prospectively, it
does not apply retroactively, and it applies to all of the activity
going on in the gulf.
The Government Accountability Office has said that in terms of our
position in the world, we stand almost alone in terms of our position
relative to getting a fair shake on revenue and protecting taxpayers.
The reality--and the Bingaman amendment picks up on this--is taxpayers
are getting fleeced by major oil companies when they drill on public
land.
We are talking about our land, the people's land. We are not talking
about private lands. We are talking about our lands. And the Bingaman
amendment takes steps to correct that situation.
I hope my colleagues will reject the amendment of the Senator from
Arizona. If I have made one point tonight, I want it understood, if the
Kyl amendment is adopted, major oil companies would continue to receive
billions of dollars of subsidies that the President of the United
States has said they do not need.
Mr. President, I note that my colleague from New York has not
arrived. The Senator from Arizona, I am sure, wants to respond. I
reserve the time that was propounded in the request by Senator Baucus
for Senator Schumer when he arrives. Since he is not here, and Senator
Kyl is, I yield the floor to him with the reservation for Senator
Schumer when he arrives.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. KYL. Mr. President, I wish to respond to some of the comments my
colleagues made to remind everyone many of the dire predictions,
including the ones of my good friend from Oregon, are a little beside
the point.
If you look at the actual wording of my amendment, it does not say
anything about subsidies to big oil companies or anything of the like.
Maybe I better read it again:

Notwithstanding the provisions of this subtitle--

And those are the tax increases on oil companies, as well as the
other tax increases in the legislation--

the amendments made by this subtitle shall not take effect
unless the Secretary of Energy certifies that such amendments
shall not increase gasoline retail prices and the reliance of
the United States on foreign sources of energy.

That is all it says. There isn't any more. There isn't anything about
subsidies to oil companies or anything of the like.
What the Senator from Oregon might be saying is that the provisions
of the bill are not going to go into effect because it is true that the
tax increases will, in fact, raise prices for American gasoline
consumers and will increase our dependency on foreign oil. If, as the
chairman of the committee said, that is not true, there is no
relationship--in fact, his exact words were: It is fallacious to argue
that these new taxes in the bill will raise fuel costs. If that is
true, then there would not be any effect. The argument of the Senator
from Oregon then falls. But if it is true the taxes in this legislation
will raise prices for oil consumers or gasoline consumers and will
further our dependence on foreign oil, then the Senator from Oregon at
least has a point to argue because one provision out of the three major
tax provisions relates to the general subject that he and I have worked
on in the past and that he was talking about, which is the royalties
that should be paid by offshore oil companies.
One of two things is true, but they can't both be true. It might be
true the tax increases in this legislation are going to raise the cost
of gasoline to American consumers and increase our dependency on
foreign oil, and then at least one of the things the Senator from
Oregon talked about would at least come into play.
Or it could be, as the Senator from Montana said, there would not be
any effect because this would not raise gasoline prices, in which case
the Senator from Oregon is simply incorrect when he says that the
effect of my amendment is to provide subsidies for oil companies. They
can't both be true.
What is the probability? I think the probability is that the tax
increases in this legislation will raise prices for American consumers
and will increase our dependency on foreign oil. And that is just not
my guess, although it is fairly intuitive if you understand anything
about economics. If you tax something, more generally the producer of
that product is going to reflect the prices in what he charges to
consumers, and the price, therefore, paid at the pump, in the case of
gasoline, goes up.
A recent study by the Heritage Foundation found that the tax
provisions alone in this legislation, setting aside the other mandates
in the Energy bill, will likely increase gas prices by 21 cents per
gallon over the next 8 years. Taking all of the provisions together,
the Energy bill could increase the price of regular unleaded gasoline
from $3.14 a gallon to $6.40 a gallon by the year 2016, a 104-percent
increase.
For comparison, current policies will lead to gas prices climbing
from $3.14 to $3.67 in the year 2016. And in just the next year alone,
consumers can expect to pay between $3.16 to $3.79 due to the impact of
this bill.
During the next decade, between now and the year 2016, due to this
bill alone, consumers can expect to spend an average of $1,445 more per
year on gasoline. Again, that is not just speculation. It is obviously
the law of supply and demand. It is the law of economics. If you are
going to impose this tax, it is going to be passed on by the people who
pay the tax. So American consumers can expect to pay a lot more for
gasoline at the pump.
I don't think anybody would argue that our dependence on foreign oil
is going to decrease. In fact, because of one of the three provisions
of this bill, the foreign tax credit tax increase, it is obvious our
oil producers are going to be put at an economic disadvantage vis-a-vis
those abroad, and it is obvious we are going to have to be more
dependent on foreign oil, not less.
It was interesting that the Senator from Montana started out his
argument saying the purpose of this bill is to get more energy,
especially from renewable fuels. It is true the purpose of a good
energy bill should be to get more energy. The problem is, this bill
doesn't provide any more energy. It does focus some subsidies on
renewable fuels, and the only way we are going to get more renewable
fuel energy, obviously, is by subsidizing those particular energy
sources. But the bill itself provides not a drop of new oil. Yet
somehow or another it costs $28.5 billion, and that gets to the second
point the Senator from Montana made.
He said this is not a tax-increase bill; this is a tax-decrease bill.
But then he lets the cat out of the bag by saying: Of course, we must
still pay for what we are doing. Well, indeed. We do have to pay for
what we are doing, and what we are doing is spending $28.5 billion. So
the bill raises taxes by $28.6 billion. That is the estimate the
Congress must use. That is what the Finance Committee is required to
use, $28.6 billion in new taxes. The reason: to pay for what we are
doing, for what the bill spends.
Granted, some of the spending in the bill is in the form of tax
breaks, such as the last tax break we talked about. Unfortunately, my
amendment was not adopted, so a tax break is going to be misused, and
we are going to be paying billions of dollars because of that misuse.
But I think there is no question that the tax increases that are
provided for in this bill will be seen as tax increases.
Mr. President, has my time expired?
The PRESIDING OFFICER. Yes, it has.
Mr. KYL. That is the end of my time. I will resume this argument
tomorrow morning and remind my colleagues why it is that I think we
don't want to pass the tax increases in the bill.
Mr. WYDEN. Parliamentary inquiry.
The PRESIDING OFFICER. The Senator from Oregon.

[[Page S8047]]

Mr. WYDEN. Mr. President, I believe I have a couple of minutes, and
then Senator Schumer has time reserved. I ask unanimous consent that
Senator Klobuchar follow Senator Schumer.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WYDEN. Mr. President, I will be very brief. The Senator from
Arizona makes the point that he always does eloquently about markets,
and I come back to the fact that President Bush has said you don't need
subsidies when the marketplace price is over $55 a barrel. So what we
want to do is cut back on the subsidies and begin to create the kind of
market that I know the Senator from Arizona favors.
I also ask unanimous consent to have printed in the Record a
Government Accountability Office report of May 1, 2007, which makes it
very clear that taxpayers are being ripped off for the drilling by
major companies on public lands.
There being no objection, the material was ordered to be printed in
the Record, as follows:

United States Government

Accountability Office,

Washington, DC, May 1, 2007.
Subject: Oil and Gas Royalties: A Comparison of the Share of
Revenue Received from Oil and Gas Production by the
Federal Government and Other Resource Owners

Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources,
U.S. Senate.
Hon. Nick J. Rahall II,
Chairman, Committee on Natural Resources,
House of Representatives.
Hon. Stevan Pearce,
Ranking Member, Subcommittee on Energy and Mineral Resources,
Committee on Natural Resources, House of Representatives.
Hon. Mary L. Landrieu,
U.S. Senate.
Amid rising oil and gas prices and reports of record oil
industry profits, a number of governments have taken steps to
reevaluate and, in some cases, increase the share of oil and
gas revenues they receive for the rights to develop oil and
gas on their lands and waters. For example, the State of
Alaska has recently passed new oil and gas legislation that
will increase the state's share of revenue received from oil
and gas companies operating state leases. In January 2007,
the Department of the Interior announced an increase in the
royalty rate for future leases granted in the deepwater
region of the Gulf of Mexico. Companies engaged in
exploration and development of oil and gas resources do so
under terms of concessions, leases, or contracts granted by
governments or other resource owners. The terms and
conditions of such arrangements are established by law or
negotiated on a case-by-case basis. One important aspect of
the arrangements is the applicable payments from the
companies to the resource owners--in the United States, these
include bonuses, rentals, royalties, corporate income taxes,
and special fees or taxes. The precise mix and total amount
of these payments, referred to as the ``fiscal system''
varies widely across different resource owners. The total
revenue, as a percentage of the value of the oil and natural
gas produced, received by government resource owners, such
as U.S. federal or state governments is commonly referred
to as the ``government take.'' For example, a government
take of 50 percent means that the government receives 50
percent of the cash flow produced from an oil or gas
field.
In fiscal year 2006, oil and gas companies received over
$77 billion from the sale of oil and gas produced from
federal lands and waters, and the Department of the
Interior's Minerals Management Service (MMS) reported that
these companies paid the federal government about $10 billion
in oil and gas royalties. Clearly, such large and financially
significant resources must be carefully developed and managed
so that our nation's rising energy needs are met while at the
same time the American people are ensured of receiving a fair
rate of return on publicly owned resources, especially in
light of the nation's daunting current and long-range fiscal
challenges.
As requested, this report documents the information
provided to your staffs in March 2007 on the U.S.
government's take and implications associated with increasing
royalty rates. Specifically, this report discusses (1) the
United States' government take relative to that of other
government resource owners and (2) the potential revenue
implications of raising royalty rates on federal oil and gas
leases going forward. To address the government take, our
work included reviewing results of studies done by oil
companies and industry consultants. We also collected and
analyzed various studies generated by MMS, the agency
responsible for collecting oil and gas royalties from federal
lands and waters. In addition, we reviewed results of studies
prepared over the last 13 years by various private and
government sources on government take and interviewed Alaskan
state and private consulting firm officials. In evaluating
the study results we conducted interviews with study authors
and an industry expert to discuss the study methodologies and
the appropriate interpretation of the results. Based on these
interviews and our review of study results, we believe the
general approach that these study authors took was reasonable
and that the study authors are credible. However, we did not
fully evaluate each study's methodology or the underlying
data used to make the government take estimates. Overall,
because all the studies came to similar conclusions with
regard to the relative government-take ranking of the U.S.
federal government and because such studies are used by oil
and gas industry companies and governments alike for the
purposes of evaluating the relative competitiveness of
specific fiscal systems, we are confident that the broad
conclusions of the studies are valid. To address the revenue
implications of raising royalty rates, we gathered
information from reports, studies, and government documents,
and drew from past GAO reports related to oil and gas
royalties. We also discussed the material in this report with
MMS officials and they made helpful suggestions about the
factors affecting the revenue implications of raising royalty
rates. Our work was done from January 2007 through March 2007
in accordance with generally accepted government auditing
standards.

In Summary

Based on results of a number of studies, the U.S. federal
government receives one of the lowest government takes in the
world. Collectively, the results of five studies presented in
2006 by various private sector entities show that the United
States receives a lower government take from the production
of oil in the Gulf of Mexico than do states--such as
Colorado, Wyoming, Texas, Oklahoma, California, and
Louisiana--and many foreign governments. Other government-
take studies issued in 2006 and prior years similarly show
that the United States has consistently ranked low in
government take compared to other governments. For
example, a study completed in 2006 for MMS showed that the
U.S. federal government take in the Gulf of Mexico
deepwater and shallow water was lower than 29 and 26,
respectively, of the 31 fiscal systems analyzed. In
deciding where and when to invest oil and gas development
dollars, companies consider the government take as well as
other factors, including the size an availability of the
oil and gas resources in the ground; the costs of finding
and developing these resources, including labor costs and
the costs of compliance with environmental regulations;
and the stability of the fiscal system and the country in
general. All else held equal, more investment dollars will
flow to regions in which the government take is relatively
low, where there are large oil and gas deposits that can
be developed at relatively low cost, and where the fiscal
system and government are deemed to be relatively more
stable. Regarding the deepwater areas of the U.S. Gulf of
Mexico, the current size of the government take, the
relatively large estimated amounts of oil and gas in the
ground, and the proximity to the large U.S. market for oil
and gas make this region a favorable place to invest.
However, the high costs of operating in deepwater may
deter some investment.
Increasing royalty rates on future federal oil and gas
leases would likely increase the federal government take but
by less than the percentage increase in the royalty rate
because higher royalty rates would likely reduce some taxes
and other fees and may also discourage some development and
production. For example, the recently announced increase in
royalty rates from 12.5 percent to 16.67 percent on future
leases sold in the deepwater regions of the Gulf of Mexico
will, according to MMS, increase overall federal revenues but
will also cause reductions in some fees and in oil and gas
production. Specifically, MMS estimates that the new royalty
rate of 16.67 percent will increase revenue by $4.5 billion
over 20 years. MMS also estimates that, by 2017, this
increased revenue will be partially offset by revenue losses
of $820 million over 20 years as a result of reduced rental
fees as well as a decline in production of 5 percent. A lower
royalty rate can encourage oil companies to pursue oil
exploration and production and thereby provide an economic
stimulus to oil producing regions. For example, according to
a MMS study issued in 2006, as the industry expands output in
the Gulf of Mexico, employment levels in all Gulf Coast
states-including Alabama, Louisiana, Mississippi, and Texas-
tend to rise to meet industry needs. As part of an energy
strategy to meet the nation's energy needs and balance the
impacts of energy use on the environment and climate, a
healthy domestic oil and natural gas industry is essential,
and that means that the United States must continue to create
a market that is competitive in attracting investment in oil
and natural gas development. Such development, however,
should not mean that the American people forgo a competitive
and fair rate of return for the extraction and sale of these
natural resources, especially in light of the current and
long-range fiscal challenges facing our nation. The potential
trade-offs between higher revenue collections and higher oil
production highlight the broader challenge of striking a
balance between meeting the nation's increasing energy needs
and ensuring a fair rate of return for the American people
from oil production on federally leased lands and waters.

background

The Department of the Interior, created by the Congress in
1849, oversees and manages the nation's publicly owned
natural resources, including parks, wildlife habitat,

[[Page S8048]]

and crude oil and natural gas resources on over 500 million
acres onshore and in the waters of the Outer Continental
Shelf. In this capacity, the Department of the Interior is
authorized to lease federal oil and gas resources and to
collect the royalties associated with their production. The
Department of the Interior's Bureau of Land Management is
responsible for leasing federal oil and natural gas resources
on land, whereas, offshore, MMS has the leasing authority. To
lease lands or waters for oil and gas exploration, companies
generally must first pay the federal government a sum of
money that is determined through a competitive auction. This
money is called a bonus bid. After the lease is awarded and
production begins, the companies must also pay royalties to
MMS based on a percentage of the cash value of the oil and
gas produced and sold. Royalty rates for onshore leases are
generally 12 and a half percent whereas offshore, they range
from 12 and a half percent for water depths of 400 meters or
deeper (referred to as deepwater) to 16 and two-thirds
percent for water depths less than 400 meters (referred to as
shallow). However, the Secretary of the Interior recently
announced plans to raise the royalty rate to 16 and two-
thirds percent for most future leases issued in waters 400
meters or deeper. MMS also has the option of taking a
percentage of the actual oil and natural gas produced,
referred to as ``taking royalties in kind,'' and selling this
energy itself or using it for other purposes, such as filling
the nation's Strategic Petroleum Reserve. In addition to
bonus bids and royalties, companies pay taxes on corporate
profits. The sum of all these and other payments comprises
the government take. Because different governments set
different levels of taxes, fees, and royalties, the relative
size of any one component of government take generally varies
across different fiscal systems.

study results indicate that the federal government receives among the
lowest government takes in the world

Results of five studies presented in reports or testimony
to the Alaskan state legislature in 2006 indicate that the
federal government receives one of the lowest government
takes among the jurisdictions evaluated. The hearing was held
to discuss a proposed new state tax on oil company profits.
This proposal eventually was adopted and, in 2006, the State
of Alaska enacted a new oil and gas production tax law which
imposed a 22.5 percent tax on oil company profits. Two of the
studies presented were from major oil companies, and three
were from private consulting firms. The five studies had
differing scopes and somewhat different estimates of
government take. For example, one study focused primarily on
comparing U.S. federal, state, and Canadian fiscal systems,
while other studies focused on international comparisons. The
results of the five studies are summarized below and in
more detail in enclosure I.
BP (formerly British Petroleum), one of the world's largest
oil companies. testified that the federal government's take
for leases in the Gulf of Mexico (45 percent) was lower than
9 out of 10 other fiscal systems presented, including
Colorado, Wyoming, Texas, Oklahoma, California, and Louisiana
(between 51 percent and 57 percent).
ConocoPhillips, Alaska's number-one oil producer in 2005,
testified that the federal government's take for leases in
the Gulf of Mexico (43 percent) was lower than all 8 other
fiscal systems presented, including the United Kingdom (52
percent) and Norway (76 percent).
CRA International (formerly Charles River Associates), a
global firm specializing in business consultancy and
economics, testified that the federal government's take in
the Gulf of Mexico--both deepwater (42 percent) and shallow
water (50 percent)--was lower than the 6 other fiscal systems
it evaluated, including Australia (61 percent).
Daniel Johnston and Company, an independent petroleum
advisory firm providing services to the oil and gas industry,
testified that the federal government's take in the Gulf of
Mexico for deepwater (between 37 and 41 percent) was 4th
lowest and for shallow water (between 48 and 51 percent) was
8th lowest among 50 fiscal systems it evaluated.
Van Meurs Corporation--a company which provides
international consulting services in several areas including
petroleum legislation, contracts, and negotiations--reported
that the federal government's take in the Gulf of Mexico (40
percent) was the lowest among 10 fiscal systems it evaluated,
including Alaska (53 percent) and Angola (64 percent).
It should be recognized that the studies presented in this
testimony were done before the recent increase in the royalty
rate for future deepwater leases in the Gulf of Mexico. This
action will, as new leases are added to the mix over time,
cause the average government take in the Gulf of Mexico to
rise somewhat. In addition, 4 of the 5 studies compared
government take based on 11 fiscal systems or fewer. A
comparison of a much larger number of fiscal systems provides
more comprehensive information. In this regard, we found that
other expanded government-take studies have been issued.
These are summarized below and more details are presented in
enclosure II.
A study issued in 2006 and done under contract with MMS by
the Coastal Marine Institute of the Louisiana State
University reported on 31 fiscal systems in 25 countries. The
study showed, out of the 31 fiscal systems, Gulf of Mexico
deepwater, at between 38 and 42 percent, was lower than 29
other systems and Gulf of Mexico shallow water, at between 48
percent and 51 percent, was lower than 26 systems. Three
other offshore fiscal systems were also shown. This included
Trinidad & Tobago offshore with a government take between 48
percent and 50 percent, Australia offshore with a government
take of between 53 percent and 56 percent, and Egypt offshore
with a government take of between 79 percent and 82 percent.
Of the 31 fiscal systems presented, Mexico had the lowest
government take at between 30 percent and 32 percent, and, at
the other end of the spectrum, Venezuela had the highest
government take at between 88 percent and 93 percent.
A second study, issued in 2002 by Wood MacKenzie, a private
consulting firm, analyzed 61 fiscal systems within 50
countries. The study showed that, out of 61 fiscal systems,
Gulf of Mexico deepwater ranked lower than 54 other systems
with a federal government take of about 42 percent, while
Alaska's government take was about 64 percent. Of the 61
fiscal systems analyzed, Cameroon had the lowest government
take at about 11 percent, and at the other end of the
spectrum, Iran had the highest government take at about 93
percent.
A third study, issued by Van Meurs Corporation in 1997,
analyzed 324 fiscal systems in 159 countries. The study
showed that, out of 324 fiscal systems, Gulf of Mexico water
greater than 800 meters ranked lower than 298 other systems
with a federal government take of about 41 percent and Gulf
of Mexico water between 200 and 400 meters ranked lower than
276 systems with a federal government take of about 47
percent. The study also indicated that governments tend to
compete regionally and that the regional average government
take for countries within North America was about 57 percent.
Finally, one of the first expanded, or comprehensive,
studies was completed by Van Meurs Corporation in 1994 for
the World Bank. That study showed that the government take
from federal onshore lands, Gulf of Mexico deepwater, and
Gulf of Mexico shallow, ranked lower than 194, 191, and 180
out of 226 fiscal systems in 144 countries, territories, and
joint development zones analyzed.
The last few years of high oil and gas prices and record
industry profits have been a factor in causing a number of
resource owners to reevaluate their fiscal systems. For
example, and as already discussed, the State of Alaska
enacted in 2006, a new oil and gas production tax law which,
among other things, imposed a 22.5 percent tax on oil company
profits. In addition, at least five states--including New
Jersey, New York, Pennsylvania, Washington, and Wisconsin--
and Alberta Province in Canada are considering new oil and
gas tax legislative proposals.
The level of government take can influence investment in
oil and gas development and production. Resource owners are
competing to some extent for finite private investment in oil
and gas development, and in considering the ideal
government take, the resource owners must consider that
there may be a trade-off between the magnitude of
government take and the level of investment. From the oil
and gas industry's perspective, government take represents
one of the costs of doing business. As with any industry,
if the costs in one geographic area increase, industry may
pursue locations elsewhere.
In addition to the overall government take, the mix of
taxes, fees, and royalty rates that comprise the government
take may also be important in determining the level of
investment. For example, in commenting on Alaska's then-
proposed revisions to its oil and gas tax law, a BP official
testified that a fiscal system should be equitable to
investors and the government alike and should be profit-
related, that is, with a tax levied on profits not revenues.
Similarly a ConocoPhillips official testified that a balanced
fiscal system is critical for future oil and gas investment
in Alaska and that Alaska must maintain its fiscal system
competitiveness on a global basis.
Further, the size of oil and gas reserves, the costs of
exploration and development, and the stability of the
government and regulatory environment play a role in
companies' investment decisions. In many regards, the United
States is a desirable place to invest in oil and gas
development and production. For example, of non-OPEC
countries, the United States held almost 10 percent of oil
reserves as of 2006. In addition, including the existence of
a nearby market for all that is produced, the United States
is generally considered a stable place to invest, especially
when compared to many countries, such as Venezuela and
Nigeria, that have large oil and gas reserves. For example,
in Venezuela, it was reported last year that the government
had taken a series of steps to increase the government take
as well as take greater control over oil operations in that
country, and in Nigeria, it was recently reported that there
have been repeated instances of oil company employees being
kidnapped or attacked. However, much of the estimated oil
reserves in the United States, such as those in the deepwater
areas of the Gulf of Mexico, and the smaller pockets of oil
remaining in mature oil fields will be more costly to develop
than oil in some other regions, and these higher costs are a
deterrent for investment. In addition, to the extent that
environmental regulations in the United States are stricter
than in some other oil producing countries, this could
increase compliance costs and necessitate to some extent a
lower government take in the

[[Page S8049]]

United States. Further, to the extent that labor costs are a
factor in determining the profitability of oil development
projects, the United States may have higher labor costs than
some other oil producing countries, and this would also
necessitate, to some extent, a lower government take.

increasing royalty rates on future federal oil and gas leases would
likely increase the federal government take

Increasing royalty rates on future federal oil and gas
leases would likely increase the federal government take but
by less than the percentage increase in the royalty rate
itself because higher royalty rates will likely reduce some
taxes and other fees and may also discourage some development
and production compared to what it would be under lower
government take conditions. For example, because the federal
government assesses taxes on corporate profits, an increase
in royalty rates would raise oil and gas company costs,
thereby reducing their profits and, consequently,
the corporate income taxes they pay. In addition, an
increase in royalty rates may reduce the amount, in fees
or bonuses, oil and gas companies are willing to pay for
the rights to develop individual leases. Because such fees
or bonuses are determined competitively, this may lead to
lower government revenue. Finally, higher royalty rates
may deter some development or production of oil and gas if
companies can find more profitable investment
opportunities elsewhere and for which other factors, such
as stability and the amount of oil and gas reserves are
comparable.
MMS' analysis that accompanied a recently announced
increase in the royalty rate for new federal deepwater
offshore Gulf of Mexico leases illustrates how the increase
in royalty rates can be offset somewhat by reduced fees and
production. MMS estimates that the increased royalty rate of
16.67 percent--from 12.5 percent--will increase revenue from
royalty payments by $4.5 billion over 20 years. However, MMS
also recognized that this royalty rate increase will likely
cause declines in bonus and rental revenues as well as reduce
oil and gas production compared to what it would have been
under the lower royalty rate. Specifically, MMS estimated a
decline of bonus and rental revenues amounting to $820
million over 20 years and a decline in production of 5
percent, or 110 million barrels of oil equivalent, over 20
years compared to what production would have been at the
lower rate. Nonetheless, MMS estimates that by 2017, the net
increase in total revenue will still be substantial.
In addition to revenue considerations, there are a number
of other considerations that could be considered when
establishing a royalty rate or the overall government take.
These include environmental issues and socioeconomic effects.
Royalties or other fees or taxes may reduce the amount of
investment in oil and gas development and production and,
therefore, to the extent that higher royalty rates reduce oil
and gas development and production in the United States,
could be used as a policy tool to reduce the domestic
environmental impacts of oil and gas development. Regarding
socioeconomic effects of oil and gas development and
production, a 2006 study done under contract for MMS noted
that as the oil and gas industry expands output in the Gulf
of Mexico, employment levels in all Gulf Coast states--
including Alabama, Louisiana, Mississippi, and Texas--tend to
rise to meet industry needs.
As agreed with your offices, unless you publicly announce
the contents of this report earlier, we plan no further
distribution until 30 days from the date of this report. At
that time, we will send copies to appropriate congressional
committees, the Secretary of the Interior, the Director of
MMS, the Director of the Office of Management and Budget, and
other interested parties. We will also make copies available
to others upon request. In addition, the report will be
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www.gao.gov'>http://
www.gao.gov</a>.
If you or your staff have any questions or comments about
this report, please contact me at (202) 512-3841 or

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. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made
contributions to this report include Frank Rusco, Assistant
Director; Robert Baney; Dan Novillo; Dawn Shorey; Barbara
Timmerman; and Maria Vargas.

Mark E. Gaffigan,

Acting Director, Natural Resources
and Environment.

Mr. WYDEN. Mr. President, this General Accounting Office report makes
it very clear that relative to all the other countries in the world,
our taxpayers are not getting a fair shake. So this is ultimately about
cutting back on subsidies the President says are not needed in order to
create markets and to prevent the taxpayers of this country from being
fleeced.
I thank my colleague. I know Senator Schumer has been patient.
Mr. KYL. Mr. President, I ask unanimous consent that Senator
McConnell be added as a cosponsor to my amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SCHUMER. Parliamentary inquiry, Mr. President: Do I have 5
minutes?
The PRESIDING OFFICER. The Senator has 6 minutes.
Mr. SCHUMER. It is my lucky day, Mr. President.
I rise to speak against the amendment offered by my good friend from
Arizona which will restore many of the tax breaks for big oil we voted
to eliminate in the Finance Committee just yesterday.
After a wave of mergers in the industry over the past two decades, we
now have an elite group of five very large integrated oil companies
dominating our domestic petroleum market. These companies are price
leadership. They all seem to set the same price. They don't get in a
room and do it. One leads and the others follow. They wink at each
other. It shouldn't be legal, but it is.
They have the power to block alternative fuels, such as E85, at their
branded stations and, as we all know, they have the political power to
secure billions of dollars in tax breaks they don't need and we can
ill-afford.
It is time to get serious about our energy policy and stop giving
away taxpayers' dollars that just end up in the pockets of big oil
rather than going to renewable energy alternatives or curbing the cost
of gasoline at the pump.
On the surface, it seems that big oil is pumping cash rather than
pumping petrol. They don't try to find much new oil, and ExxonMobile
alone bought back $29 billion of its stock in the last year. The bottom
line is, if they have all this extra money to buy back their stock, why
are we giving them tax breaks?
When the head of ExxonMobile, one of the big oil companies, came to
us in the Judiciary Committee, he said he didn't believe in alternative
fuels. I wouldn't either if I were the head of one of the five big oil
companies that had an oligopolistic stranglehold on the market. I
wouldn't want an alternative. So they are not going to do what most
other businesses, where there was a semblance of competition, would do:
find a new product because they know their old product is getting
expensive and may run out someday.
So that is our job. We are taking back these taxes. We are not just
putting them into the Treasury. It is not taxing for taxing sake. We
are putting them into tax breaks for alternative fuels. Since the oil
companies would not look at alternatives, we are going to take the
money that we have given them in taxes, and never should have, and give
it to other companies that will invest in alternative fuels.
This is a mature industry by any standard and no longer does it need
tax breaks. I have actually introduced a bill to repeal every special
tax break received by the major oil and gas companies.
The policy of giving them breaks has failed. Despite ever-increasing
petroleum products and general Federal tax giveaways, the oil companies
don't believe they need to compete. The oil companies believe they
don't need to compete to create new domestic gasoline supply. We
haven't had a new refinery built in 30 years. When they have merged,
they have closed refineries. So it hasn't worked.
While ExxonMobile doled out $29 billion, or 60 percent of its
cashflow, on stock buyback alone, their overall production has barely
budged since the 1999 merger. Exxon never should have been allowed to
merge with Mobile. On the Joint Economic Committee, we are looking it
over, seeing if we can look into undoing some of those unfortunate
mergers, which occurred, by the way, under both Democratic and
Republican Presidents. But at the same time, we have to get moving on
alternative fuels.
The Finance Committee chairman and ranking member--bipartisan--were
right to scale back the tax breaks that go to this very profitable
industry and instead target them to renewable energy in a way that
ensures technology will succeed.
The finance amendment extends tax breaks for alternative fuels by
several additional years. When we were at our issues conference in New
York City, DPC, Democratic Policy Committee, we heard a brilliant
presentation by an investment banker from Goldman Sachs who said we are
great at developing new technologies, but we are not very good at
commercializing them, implementing them. That is because the tax breaks
we give go for a year, 2

[[Page S8050]]

years, and no business wants to invest when they are not sure these
breaks will continue.
The proposal in the bill, which I was proud to cosponsor, says the
tax breaks will be extended for 5 years and longer so that companies
will know they do keep those tax breaks and have an incentive to
invest. So it makes eminent sense. Take the money away from taxes for
the oil companies which refuse to engage in finding alternatives and
give them to new companies that will. It is a policy that makes sense
for the good of the consumer because, in the long run, it will lower
prices; for the good of our foreign policy because it will decrease our
dependence on dictators and potentates we don't like, such as the heads
of Iran and Venezuela; and it is good for our climate because as we
move to alternative fuels, less CO<inf>2</inf> will be put in the
atmosphere.
For the first time in 6 years, this Congress is willing to stand up
to the oil companies. I know many on the other side of the aisle
aren't. The previous energy bills reflect what the Bush administration
believes: What is good for the oil companies is good for our energy
policy is good for America. They are wrong, as the price at the pump,
as the increase of CO<inf>2</inf> in our air reveals, and as our
increasing imports of oil show. We are changing that policy.
I know others on the other side of the aisle are blocking us because
of obeisance to big oil, but we will succeed because the American
people are behind us, and our country needs no less.
Mr. OBAMA. Mr. President, I was unable to be present during the vote
on the Gregg amendment due to a previously scheduled conflict. But had
I been present, I would have voted against waiving the Budget Act in
relation to the Gregg amendment to eliminate the 54-cents-per-gallon
tariff on imported ethanol.
This amendment to lift the tariff against Brazilian ethanol would
merely replace our dependence on foreign oil with a new dependence on
foreign ethanol. If we are serious about addressing national and
economic security, we need to develop a robust renewable fuels industry
in this country. This amendment would frustrate that goal.
Mr. KERRY. Mr. President, I would like to speak to the two amendments
proposed yesterday, which invest in coal particularly as a
transportation fuel and which threaten to increase the dangers of
climate change rather than lessening them. These two amendments offer
the Senate false choice: either to reduce our dependence on foreign oil
or to worsen the rise of global climate change. But the truth is, we
don't have to choose between our security at home and the security of
our planet.
Energy policy today is more critical than ever because it touches on
not one but two of our most vital national interests: namely, energy
security and climate change. We cannot afford to sacrifice our fight
against climate change at the altar of energy independence. Promoting
the conversion of domestic coal to liquefied fuel will dramatically
increase CO<inf>2</inf> emissions and that is no better than robbing
Peter to pay Paul.
The truth is, we can break the stranglehold of foreign oil, we can
create new jobs in energy, and we can strengthen our hand addressing
global climate change and we shouldn't settle for approaches that don't
help us achieve all three of these national imperatives.
Here's what scientists are telling us: On nearly a weekly basis, we
see mounting scientific evidence highlighting the need to act. The most
recent report from the Intergovernmental Panel on Climate Change
written by more than 600 scientists, reviewed by another 600 experts,
and edited by officials from 154 governments has confirmed the threat
and the need for urgent action.
Because it will set back the fight against climate change, coal to
liquids offers us--at best--a Pyrrhic victory in our struggle to create
a sensible, sustainable energy policy. Study after study has shown that
liquid fuels derived from coal produce significantly higher
CO<inf>2</inf> emissions than traditional fuels. Transforming coal into
liquid fuel involves heating it to 1,000 degrees and mixing it with
water to create a gas, which is then converted into fuel usable in cars
and jets. If that sounds like an energy-intensive process, it is. And
energy-intensive processes generate a lot of CO<inf>2</inf> emissions.
Every gallon of liquid fuels derived from coal produces up to 2.5 times
more well-to-wheels global warming emissions than gasoline or diesel
fuel from crude oil. That means that even with 85 percent capture of
CO<inf>2</inf> during production, well-to-wheels Coal to Liquid
emissions are 19-25 percent higher than conventional gasoline or
diesel.
I understand that all coal-to-liquids amendments are not created
equal my Democratic coal State colleagues have attempted to build
environmental safeguards into their amendments. And I thank them for
that. The Bunning amendment, by contrast, is full of loopholes and
hollow environmental mandates that crumble under scrutiny, leaving only
big subsidies for big coal. But ultimately neither should pass. This is
a question of priorities, and with limited Federal dollars available,
we need to support those technologies that promise the greatest oil
savings and the greatest emissions reductions.
We should be turning to increased fuel economy standards, increased
energy efficiency standards for commercial and residential buildings,
strong renewable electricity standards, and incentives for biofuels and
advanced vehicles.
Let me repeat--this is a question of priorities.
I would like to briefly address several of the arguments that are
being made by coal-to-liquids industry supporters. These arguments are
intended to confuse what is a very complicated process. I will do my
best to unmask their arguments and make the reality as clear as
possible.
First, many proponents cite the emissions reductions associated with
coprocessing coal and biomass at coal-to-liquids production facilities.
However, these benefits simply come from using a promising new clean
technology to mask the flaws of coal. These coprocessing facilities,
when equipped with carbon capture, may indeed result in lower emissions
than traditional fuels, but this has nothing to do with the coal and
everything to do with the biomass. We should be having a serious
conversation about biomass and how it can be best integrated into our
energy supply, which is a matter of some large debate, rather than
blindly buying into the coal industry's assumption that coprocessing
biomass and coal is the most direct road to a clean energy future.
Second, proponents focus on tailpipe emissions and argue that diesel
fuel produced from coal-to-liquids has fewer emissions than traditional
gasoline.
Again, we need to make sure we are comparing apples to apples. The
tremendous increase in well-to-wheels CO<inf>2</inf> emissions comes
during the production process, not at the point of tailpipe emissions.
In fact, tailpipe emissions from diesel generated from crude oil and
diesel generated from coal are roughly the same. Same story with
gasoline generated from crude oil and gasoline generated from coal.
Comparing diesel to gasoline is just a distraction diesel engines are
more efficient than gasoline engines and therefore emit less
CO<inf>2</inf>, regardless of whether you are talking about traditional
fuels or coal-to-liquids
Third, proponents talk about the environmental benefits associated
with coal-to-liquids. This is frankly laughable.
I have spoken about the doubling of emissions associated with the
coal-to-liquids production process. But if we are talking about the
environmental impacts of coal mining, we have to look even beyond the
emissions and consider the severe impacts to water quality. In
Appalachia alone, mountaintop removal has destroyed more than 2,500
mountain peaks and leveled more than 1 million acres. This waste is
dumped into river valleys and contaminates over 1,200 rivers and
streams throughout the region. That waste, combined with acidic mine
runoff, destroys habitat for fish and wildlife everywhere that coal is
mined today. Before we jump-start a new industry in this country and
ramp up coal production, we need to have a serious conversation about
these and other impacts.
There are too many unknowns associated with coal-to-liquids
technology, but here is what we do know: well-to-wheel emissions are
two and a half

[[Page S8051]]

times those of traditional fuels, and even when carbon capture is
applied which has not yet been demonstrated on a commercial scale
emissions are 19-25 percent greater than traditional fuels.
The cost of these plants is exorbitant MIT estimates that the cost of
constructing a coal-to-liquids plant is four times that of a
traditional refinery. The same study estimated that it would cost $70
billion to build enough plants to replace 10 percent of American
gasoline consumption.
Finally, I would like to close by saying a few words on another issue
that will be coming to a vote later this afternoon. Senators Cardin and
Mikulski have introduced an amendment addressing the siting of
liquefied natural gas terminals. This is an important amendment, and I
am proud to support and cosponsor it. This is a contentious issue in
Fall River, MA, where powerful interests are fighting to construct a
LNG terminal far too close to a major population center. This proposal
is strongly opposed by Governor Patrick and numerous State and Federal
representatives. I strongly support Senators Cardin and Mikulski's
amendment, which would require state approval of LNG siting decisions.
While LNG is an important part of our clean energy mix, it is essential
that these facilities be sited in safe and appropriate locations. This
amendment guarantees the state its appropriate and necessary role in
approving these decisions. I urge my colleagues to support it.
Mr. KENNEDY. Mr. President, I strongly support the important
legislation under consideration. Like many of the bills the Senate has
taken up this year, it is the product of Democrats and Republicans
working together, and I commend its authors for their hard work.
The bill before us does the things the Nation must do to become more
energy self-reliant, starting with raising fuel economy standards for
cars and trucks. Over 30 years ago I cosponsored Scoop Jackson's
legislation which first established fuel economy standards to improve
the fuel efficiency of automobiles. Unfortunately, very little progress
has been made since then.
There is no silver bullet for ending our dependence on foreign oil or
slowing the rate of greenhouse gas emissions, but raising CAFE
standards is the single most important step we can take to make
positive changes in this area. Increasing the average efficiency of
passenger cars by just over 5 miles per gallon would eliminate the need
for American oil imports from the Persian Gulf. The CAFE provision the
Commerce Committee reported will increase fuel economy in cars from
27.5 miles a gallon to 35 miles per gallon by 2020. It is the best
chance this Congress will have to raise fuel economy standards, and I
hope that the Senate will preserve the Commerce Committee's strong
provisions.
The bill will make more cars capable of running on biofuels. Ethanol,
in particular, has incredible promise as a biofuel, and it will emit
far less carbon dioxide than conventional oil. The bill will ramp up
production of biofuels over the next 15 years and mandate that a
growing number of new vehicles be able to run on these kinds of fuels.
It also provides funding to ensure that these new biofuels can reach
fuel stations across the country. This provision is particularly
important to New England, which has just one E85 pump located in
Chelsea, MA. Brazil has shown us the way by producing ethanol from
sugarcane in amounts equivalent to 300,000 barrels of oil each day. The
United States must invest in biofuels, so that we too can reduce our
dependence on foreign oil.
The bill also reauthorizes the Weatherization Assistance Program,
which is especially important for low-income families struggling with
high energy costs throughout the Nation. In Massachusetts, energy costs
are among the highest in the Nation, but this program has weatherized
more than 10,000 homes in the last decade. Vulnerable families can't
afford to make these expensive improvements themselves, so these wise
investments by the government will help families save on energy and
reduce the Nation's fossil fuel emissions.
Another critical issue is the inclusion of a strong renewable
electricity standard. The RES will provide the certainty the renewable
energy market needs to invest in innovative technologies. In April,
Senators Durbin, Snowe, and Reid led a bipartisan letter expressing
support for mandating that major utilities generate a percentage of
their electricity from renewable sources. I was one of the 50 Senators
who signed the letter, and I commend Chairman Bingaman for his work on
a renewable electricity standard.
I also commend the Finance Committee for its work to provide tax
incentives for renewable energy technology, and repealing tax breaks
for oil and gas companies. While most Americans are seeing less and
less in their paychecks, the Big Oil companies are making money hand
over fist. During the first quarter of this year, Big Oil reaped $29.5
billion in profits. Repealing these tax breaks will save taxpayers
billions of dollars in subsidies to Big Oil and allow the Nation to
invest in clean energy technologies.
Last week, I joined Senator Salazar, Senator Smith and several other
Senators in urging the Finance Committee to extend tax incentives for
fuel cell technology. Hydrogen fuel cells are an energy storage
technology, like batteries, that can deliver clean and reliable power.
They have a broad range of uses for vehicles, auxiliary power units,
and electronic devices, and they are helping us diversify our fuel
supply and find better ways to deliver clean energy. Massachusetts is
among the world's major centers of this technology, with more than 60
companies involved in fuel cell and hydrogen technologies. I commend
Chairman Baucus and the Finance Committee for allowing tax credits for
this important technology.
Overall, this bill brings us closer to a cleaner and more secure
energy future for our nation, and I look forward to its enactment.
Mr. President, I yield back the remaining time.
Ms. KLOBUCHAR. Mr. President, I ask to speak as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________