Today, I am introducing, along with Senators Lugar, Johnson, Dorgan and Biden, tax legislation that is designed to complement the Biofuels Security Act of 2006, also being introduced today. I will…
Today, I am introducing, along with Senators Lugar, Johnson, Dorgan and Biden, tax legislation that is designed to complement the Biofuels Security Act of 2006, also being introduced today. I will walk through these provisions very briefly.
The legislation amends the existing tax credit for installing alternative fueling infrastructure, such as E85 fueling pumps and tanks which was enacted as part of last year's energy bill. That existing provision allows a tax credit of 30 percent of the cost of installation, with a maximum credit of $30,000. Our bill modifies this credit in three ways. First, we would eliminate availability of the credit for the large oil companies that would be required to install such E85 pumps under the companion Biofuels Security Act. These companies have the financial wherewithal to install these pumps without the need for a tax credit. Second, for retailers who would not be required to install E85 pumps and tanks under our proposed legislation, our bill would enhance the tax credit to 50 percent of the cost of installation, with a maximum credit of $30,000. Third, for small retailers, that is, those with 5 or fewer stations, our bill would increase the credit to 75 percent of the cost of installation, up to a maximum credit of $45,000.
This tax legislation would also create a new consumer tax credit for the purchase of flexfuel vehicles if the vehicles have no fuel efficiency loss from the use of E85 as compared to regular gasoline. Current flex-fuel models do have some mileage loss. We understand that there is technology available--for example, a Saab ``biofuel'' flex- fuel E-85 vehicle on the market in parts of Europe--allowing vehicles to have no fuel efficiency loss when burning E85 in comparison to gasoline, and perhaps even some mileage gain. The tax incentive we propose here will help foster further development of biofuels-related technology and promote better fuel efficiency as well.
I urge my colleagues to support this important legislation.
Mr. President, high prices for gasoline, diesel fuel and other petroleum-based energy continue to cause pain for millions of people, in Iowa and all across the country. Our dependence on foreign oil is a clear and present danger to our national security.
If we are serious about national security, we need a bold national commitment to renewable energy--a commitment on par with the Apollo moon-shot program in the 1960s. Today, I am pleased to be joined by my colleague from Indiana, Senator Lugar in proposing a major component of such a program--the Biofuels Security Act--a comprehensive plan to ramp-up ethanol and biodiesel production, and to make it available and usable at the pump in every State in America.
Perhaps Senator Lugar said it best earlier this year when he commented that energy is the albatross around the neck of U.S. national security. The distinguished senior Senator from Indiana has been a thoughtful, prescient thinker about the national security implications of our addiction to foreign oil, and I am delighted to be joining with him, today.
Senators Johnson, Dorgan and Biden are also original cosponsors of this legislation, for which I am grateful. The Senators have been outspoken champions of biofuels for many years now, and strong advocates for their home States.
The goal of this legislation is to help restore America's energy security--which, in this day and age, is synonymous with national security. Transportation fuels, accounting for two-thirds of our oil imports, are the place to start this transition.
Our plan has three key components. First, we are proposing a substantially higher, but achievable, renewable fuels standard or RFS, requiring that our Nation blend into the gasoline supply 10 billion gallons of renewable fuel annually by the year 2010, 30 billion gallons of renewable fuel annually by the year 2020 and 60 billion gallons annually in the year 2030. The current RFS is 7.5 billion gallons of renewable fuels in 2012. At the time we enacted the present RFS in last year's energy bill, many of us believed this was a reasonably ambitious schedule. However, it is now evident that biofuels growth will outpace this figure within the next couple of years--well in advance of the 2012 target date. This is very good news.
Second, our plan would make E85--the blend of gasoline and 85 percent ethanol--available at gas stations all across America. Major oil companies would be required to increase the number of E85 pumps at their stations by 5 percentage points annually. Within a decade, approximately 25 percent of gas stations nationwide would be required to have E85 pumps.
The major oil companies have the financial wherewithal--and the ability--to provide E85 infrastructure at a growing percentage of gasoline stations over the next decade. This is a reasonable, responsible reinvestment of a fraction of their recent earnings in the many billions of dollars. The bottom line is that our domestic oil companies have a shared responsibility to help enhance our energy security, and this is one excellent way for them to contribute.
Third, our plan would make flex-fuel vehicles nearly universal in the United States. Automakers would be required to increase the production of flex-fuel vehicles--capable of using both gasoline and 85 percent ethanol blends--by 10 percentage points annually, until nearly all new vehicles sold in the U.S. are flex-fuel within a decade. Our legislation calls for all of the auto manufacturers to produce increasing numbers of FFVs, rising to 100 percent of vehicles 10,000 pounds or less over the next decade. This is eminently achievable, and probably easy enough to do much sooner than that.
Recent estimates for the extra cost of manufacturing an FFV are as low as $30. It is a matter of modifying the engine, fuel line and adding a fuel sensor, which most vehicles have anyway. That is less expensive than many other federal requirements for the auto industry. Air bags are more expensive, for instance. And the bottom line is FFVs are being sold for the same price as regular cars.
America's dependence on foreign oil is the source of so many of our problems, today. We are transferring vast amounts of wealth to regimes that are not friendly to our interests. We are vulnerable to price hikes and embargoes. Millions of petrodollars are finding their way into the hands of terrorists and other extremists. And we are accelerating the pace of global warming.
Substituting biofuels for oil in the transportation sector won't solve these problems overnight, but it will make a difference, and a potentially dramatic one in the longer run.
Let me mention a few eye-opening facts and figures to illustrate these points. The United States has less than 5 percent of the world's population, but we consume 25 percent of the world's oil. If crude oil prices remain above $60 a barrel this year, we will spend well over $300 billion on oil imports. Projections indicate that, over the next 25 years, world demand for energy will grow by 50 percent. All of this growth in energy use, of course, contributes to dangerously rising levels of greenhouse gas emissions.
The reality is that gasoline is much more costly than most Americans realize, even at $3 a gallon. According to a recent study entitled the ``The Hidden Cost of Oil,'' gas really costs more than $10 a gallon. This is because of all the costs we don't factor into its price at the pump, including wars, other military expenses, subsidies, and so on.
There is no question that the ambitious goals set forth in this bill are achievable.
Several decades ago, Brazil committed itself to a similar course. Renewable fuels have played a big part in Brazil's achieving energy independence. Currently, ethanol production in
the U.S. is increasing by 25 percent annually. If we sustain that rate of increase, we will be able to reach the aggressive renewable fuels standard in the Harkin-Lugar plan. In fact, we will be able to beat it.
For example, Brazil, years ago directed that all gasoline stations carry ethanol as an alternative fuel. Our legislation would require the major oil companies to do their share by installing E85 pumps over the next decade. This should not pose too much of a challenge or burden.
Another key to Brazil's success is the fact that, in just 3 years' time, nearly 70 percent of new vehicles sold there are flex-fuel vehicles. We are asking the auto companies to accomplish a similar goal of nearly universal production, only we are giving them a decade to phase in the production and sale of flex-fuel vehicles. Most of the companies that sell vehicles in the United States also sell them in Brazil. If they can produce flex-fuel vehicles for Brazil, they can also produce them for the United States.
Let me explain in more detail why what Senator Lugar and I are proposing can be accomplished.
The 10 billion gallon goal can certainly be met by 2010. The ethanol industry will produce more than 4.5 billion gallons this year. There are 97 ethanol plants in operation, with 35 more coming on-line in the near future. Biodiesel production is growing remarkably, as well, at more than 60 plants nationwide.
The 30-billion-gallon and 60-billion-gallon targets are attainable, as well. A joint study by the Department of Agriculture and the Department of Energy found that biofuels could supply 60 billion gallons of renewable fuels a year--30 percent of current U.S. gasoline consumption--on existing lands without any disruption to our food or feed supply.
The key to ramping-up production will be commercializing ethanol made from feedstocks in addition to corn and other grains, including corn stover, straw from wheat and other crops, switchgrass or even trees. There are a host of provisions that I and others authored in the energy bill-- ranging from loan guarantees to increased biomass research and development--to make cellulosic ethanol production a reality.
Currently, at least three companies are planning commercial-scale cellulosic ethanol plants. They could be operating within the next 2 to 3 years. One company, Iogen, has the backing of Shell Oil. Just 2 weeks ago, according to reports, Iogen received a cash infusion from Goldman Sachs. By setting an ambitious new RFS, with a sufficient lead time, I believe the 60-billion-gallon threshold is not only attainable, but beatable.
In any case, should something unexpected happen to interfere with reaching these benchmarks, the Environmental Protection Agency has, within the existing RFS, authority to waive the requirement in whole or in part based on a finding of insufficient supply.
If we take bold actions to guarantee the fuel supply, if we increase the number of flex-fuel vehicles capable of running on E85, and if we increase the infrastructure ofE85 pumps, we will be poised to usher in a new era of energy security much sooner than previously imagined. That is the foundation we lay in this legislation.
This bill would also require that 100 percent of new vehicles purchased for federal fleets be alternative-fueled vehicles, which could include flex-fuel vehicles. The current requirement is 75 percent. I do not see why we shouldn't expect the federal government to be as aggressive as possible in this area.
Last year's energy bill closed a loophole in the purchasing requirement that had allowed agencies to buy alternative-fuel vehicles but not use alternative fuels such as E85. That was a step forward. Requiring all the federal fleet to be alternative fueled is yet another step forward in having the Federal Government lead by example when it comes to alternative fuels.
We also update the Gasohol Competition Act of 1980, legislation designed many years ago to ensure the reasonable availability of ethanol at the pump, so it applies to high blends such as E85 and so that oil companies cannot prevent a franchisee from installing E85 pumps.
The concern back then, and still today, is that petroleum companies were unreasonably preventing or prohibiting ethanol-blended fuels from being offered at gasoline stations. The Gasohol Competition Act did two things. First, it made it unlawful to charge additional credit card fees for gasohol. Second, it prohibited unreasonable discrimination against the sale of gasohol. Our legislation would update the Gasohol Competition Act to prohibit discrimination against E85.
We are also proposing several relatively modest tax components designed to bolster this legislation which will be introduced as stand- alone legislation.
The oil-producing countries think they have us over a barrel, but they will soon get the message: We have had enough. And we are dead serious about determining our own energy future.
I urge my colleagues to cosponsor this important legislation.