US Senate to move on ethanol bill minus taxes

13 December 2007 18:20  [Source: ICIS news]

WASHINGTON (ICIS news)--Senate Democrats decided on Thursday to eliminate a $21bn (€14.3bn) tax on oil and gas production in their energy bill, clearing the way for approval of the legislation and its huge new mandate for biofuels.

 

Senate Majority Leader Harry Reid (Democrat-Nevada) said on the Senate floor that he would remove the oil and gas tax measure from the Democrat-sponsored energy bill and bring the measure back to the Senate later today for another vote.

 

The bill’s $21bn tax on oil and gas producers was supposed to fund new research on renewable energy technologies, such as solar, wind, geothermal and ocean currents.

 

Republicans and many in the energy and petrochemical industries had criticised the tax package, arguing that it would deter development of US domestic oil and gas resources at a time when the country’s energy demands are increasing steadily.

 

The American Petroleum Institute (API) hailed Thursday’s Senate vote to block the energy bill. “We applaud the Senate for recognising the adverse effect that increased taxes would have had on future energy supplies,” the institute said in a statement.

 

US chemical producers opposed the bill because they are heavily dependent on natural gas as both a feedstock and energy source. The measure also was widely opposed by other US manufacturing sectors.

 

Opposition to the tax package kept Reid from gathering the 60 Senate votes he needed to end debate on the energy bill, HR-6, and bring it to a vote. The vote to end debate was 59-40.

 

Reid had earlier cut from the bill a provision that would have required US electric utilities to produce at least 15% of their power output from renewable sources, such as solar, wind and geothermal. Chemical companies had warned members of Congress that the provision would only serve to drive electricity costs sharply higher for consumers and industry alike.

 

Speaking on the Senate floor, Reid said: “My intention is to eliminate the tax title, and we would vote then on a piece of legislation that deals with CAFE and deals with renewable fuel.”

 

CAFE is the corporate average fuel efficiency standard for US-made automobiles and would require that auto engines achieve an average fuel economy of 35 miles per gallon (mpg) by 2020, an increase of 10 mpg over the current CAFE standard of 25 mpg.

 

The bill’s renewable fuels standard (RFS) will mandate US production and consumption of 36bn gal/year of biofuels by 2022, a massive increase over the current mandate of 7.5bn gal/year set for 2012.

 

Current US bio-ethanol production, wholly corn-based, is around 7bn gal/year.

 

The new mandate anticipates that up to 21bn gal of the 2022 production target would be met with cellulosic ethanol production, but critics of the legislation argue that development of cost-effective cellulosic ethanol on a commercial scale is far from certain.

 

There also has been broad criticism of the much higher renewable fuels standard by US refiners, food manufacturers and even environmentalists who charge that the massive mandate will deter progress on conventional fuels and drive up corn and other food prices without producing any real environmental gains.

 

Despite those criticisms, the renewable fuels mandate remains popular with senators, especially those from farm states.

 

With only the new auto fuel efficiency and renewable fuels mandates as the bill’s core elements, the legislation is expected to pass the Senate on Thursday or Friday. The Senate bill would then have to be approved in the House, where the $21bn tax on oil and gas producers was popular.

 

($1.00 = €0.68)

By: Joe Kamalick
+1 713 525 2653

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