WASHINGTON -- An amendment to the Senate's energy bill (S.517) by Senator Dianne Feinstein (D-Calif.), that would delayed the Renewable Fuel Standard--the "ethanol mandate"--by one year and would require the Environmental Protection Agency to act more quickly in responding to any governor's petition to waive the standard, was defeated last week by a vote of 61 to 36 (3 abstaining).
Feinstein's amendment was supported by the Society of Gasoline Marketers of America, as well as the National Association of Convenience Stores. It was opposed by the National Corn Growers Association and the Renewable Fuels Association.
The RFS requires that, starting in 2004, 2.3 billion gallons of renewable fuel, such as ethanol, will be mandated for use in the U.S., increasing to 5 billion gallons by 2012. The Senate's energy bill currently includes provisions that would give the EPA 240 days to consider a waiver.
"The renewable fuel provisions in this legislation amount to a wish list for the ethanol industry, and the Senate has to consider the impact of these provisions on the rest of the nation," said Feinstein when she opened the debate. "It is egregious to require this nation to use more ethanol than we need in our fuel supply. This is terrible public policy. It amounts to a wealth transfer of billions of dollars from every state in the nation to a handful of ethanol producers…. This mandate amounts to a new gas tax."
She objected to the mandate on the grounds that despite limited clean air benefits, it will almost triple the amount of ethanol in our nation's fuel. Even if states don't use this ethanol, they will be forced to pay for it, and forcing more ethanol into gasoline will only drive prices up at the pump, she contended. Since over 98 percent of ethanol production is based in the Midwest, it will be extremely difficult to transport large amounts of ethanol to states where it is not produced. The limited number of U.S. ethanol suppliers may be able to exercise their market power and drive up price. And because ethanol is subsidized, mandating more of it will divert approximately $7 billion away from the Highway Trust Fund, which provides essential resources for states to reduce traffic congestion and improve road and bridge safety.
In her remarks, Feinstein cited a study by Hart Downstream Energy Services that indicates that gasoline prices in all 50 states will increase as a result of the ethanol mandate. Those most affected were predicted to be Connecticut, Delaware, Massachusetts and Rhode Island (9.7 cents per gallon increase); California (9.6 cents), Maryland and New Jersey (9.1 cents); New Hampshire (8.4 cents); Arizona (7.6 cents); and New York (7.1 cents).
Pushing back the requirement "will give states more time to make essential infrastructure, refinery and storage improvements," Feinstein added.
An amendment by Sen. Schumer (D-N.Y.) that would scrap the RFS has yet to be voted on. Given the negative vote on the more-moderate Feinstein amendment, it is highly unlikely the Schumer amendment could pass, speculated SIGMA in its most recent Weekly Report. The best hope now of killing the RFS is to have it removed from the bill in a Senate-House Conference Committee set up to work out differences between the bills passed by the two houses, said the group. The House version of the Energy Bill does not include an ethanol mandate of any type, SIGMA said.
John Eichberger, director of motor fuels for NACS, said his association has given support to Feinstein's amendments "not as a solution, but as something that at least would make the mandate not so bad…. It would give the distribution infrastructure and the ethanol industry one more year to ramp up their infrastructure to handle the mandate."
He added that Feinstein also plans to introduce an amendment that would reduce the first-year requirement of the RFS. "Right now, the ethanol industry can produce about 1.7 billion gallons a year." Feinstein wants to reduce the mandate's 2.3 billion gallons to that 1.7 billion gallons, he said. "We have given some support to that…. The letters we sent to the Hill endorsing those amendments stipulate that we don't think it is a solution; the only solution is to repeal the mandate, but in lieu of repeal, these will at least move us toward the direction that will hopefully mitigate some of the negative impacts."
Eichberger agreed with SIGMA's assessment that Schumer's bill is a long shot, he said.
Meanwhile, Senate Democrats were maneuvering for a quick vote on oil drilling in the Arctic National Wildlife Refuge in Alaska, says an Associated Press report. A proposal to allow oil companies to develop the 1.5 million-acre coastal plain of the ANWR was introduced Tuesday by Alaska's two Republican senators. A group of Democrats immediately made clear they intended to filibuster the amendment. With Republicans believed to be short of the 60 votes needed to end it, Democrats moved to force a vote on the filibuster by Thursday.
Sen. Frank Murkowski (R-Alaska) accused the Democrats of steamrolling the bill, noting that the Democratic maneuver to force a vote came "after only three hours of debate."
Administration officials acknowledged Tuesday they have been unable to peel away additional support among anti-drilling senators. The White House this week explored the possibility of avoiding a floor vote in fear of losing badly. A poor showing could hurt in negotiations with the House, which approved an ANWR drilling measure as part of its energy bill last summer.
Murkowski and Sen. Ted Stevens (R-Alaska) insisted that the Senate had to confront Arctic drilling as part of the broader energy bill that is close to completion. Trying to gain additional support, Stevens offered a proposal Tuesday to funnel more than $8.1 billion from expected oil lease sales in the refuge to programs that would help the ailing steel industry, steelworkers and coal miners. That proposal fell flat.
Pro-drilling senators hoped recent turmoil in the Middle East and rumblings from Iraq about cutting off oil shipments might sway some senators to their side. It's better to open the refuge to drilling "rather than rely on the likes of Saddam Hussein," Murkowski said. Iraqi President Saddam's government announced last week that it was stopping its oil exports for 30 days or until Israeli troops have withdrawn from Palestinian territories.
President Bush, who has made access to ANWR's oil a central part of his energy strategy, argues that the oil can be developed without harm to the environment.
