House, Senate Vote to Double Ethanol Fuel Requirement

Published August 1, 2003

The U.S. Senate on June 5 approved by a 67-29 vote a measure to double the ethanol requirement in the nation’s gasoline.

The ethanol requirement will likely become a part of the pending energy bill, but proponents vowed the measure would be enacted regardless of whether it is added to that behemoth legislation. The House passed similar ethanol legislation earlier in the year.

Under the Senate version of the bill, oil refiners will be required to increase the amount of ethanol blended with gasoline, from 2.5 billion gallons today to 5 billion gallons by 2012. The House version gives refiners until 2015 to meet the 5 billion gallons requirement.

The Senate legislation was spearheaded by Majority Leader Bill Frist (R-Tennessee) and Minority Leader Tom Daschle (D-South Dakota), and received bipartisan support. Midwestern Senators were almost unanimous in their support of the bill, while Senators from the East and West Coasts were more likely to oppose the measure.

Proponents Tout Benefits

Ethanol has been touted as a clean fuel that reduces reliance on foreign oil and creates American jobs. Ethanol opponents question the environmental benefits of the fuel and note the fuel is roughly twice as expensive as its gasoline equivalent.

“The Senate’s passage of a bipartisan amendment creating a renewable fuels standard as part of the comprehensive energy bill is a win for U.S. farmers, the environment, consumers, petroleum refiners, and, most importantly, our national security,” said Bob Stallman, president of the American Farm Bureau Federation.

“The renewable fuels standard will benefit national security and help lower the U.S. trade deficit by reducing the nation’s dependence on foreign oil,” Stallman added. “It will help create jobs in rural America through renewable fuels production and by strengthening the demand for agricultural commodities. It will help reduce auto emissions and protect air quality. It will phase out the use of methyl tertiary butyl ether, helping to protect groundwater. And it will provide flexibility to the nation’s petroleum refiners in meeting the oxygenate requirement of the Clean Air Act.”

Bob Dineen, president of the Renewable Fuels Association, predicted the measure will create more than 200,000 farm-related jobs.

Economists Wary of Costs

“The costs of this mandate, such as shipping ethanol outside the Midwest, will add some $8.4 billion to gas prices over each of the next five years,” responded a June 5 Wall Street Journal house editorial. “The ethanol and corn industry will roll up about $26 billion in farm subsidies over that period. And then there’s the 5.3 cents-a-gallon federal tax break for ethanol, a $122 million perk the first year alone.”

“Currently the production of ethanol is subsidized by a 52 cents per gallon waiver of federal excise taxes and a tariff which blocks most imports of ethanol,” reported the Wall Street Journal‘s John Fialka.

“Gasoline has been expensive enough in recent years,” added Ben Lieberman, director of clean air policy and associate counsel at the Competitive Enterprise Institute, “and the ethanol provisions can only make matters worse.”

“The problem with this mandate is that it isn’t clear that it will ever stop,” said Robert Slaughter, president of the National Petrochemical and Refiners Association. “What’s going to happen with this every year from now on is that somebody is going to put in a bill to increase the percentage.”

Subsidies Par for the Course

Senate opposition to the measure came from East and West Coast legislators, who objected to the price hikes expected to result. Their opposition surprised some observers, who noted the senators are typically willing to ramp up fuel prices by restricting the recovery of oil and other natural resources.

Meanwhile, the Senate continues to debate an energy bill that will provide billions of dollars in subsidies for even more costly energy sources with dubious environmental benefits, such as wind and solar power.

James M. Taylor is managing editor of Environment & Climate News. His email address is [email protected].

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