Senators on the Energy and Natural Resources Committee recently voted 21-1 to increase the amount of ethanol to be blended in to motor fuels by 2012 to 8 billion gallons, up from the 5 billion agreed to in last year’s Energy Bill (H.R. 6) in the 108th Congress.
The amendment was co-sponsored by Senators Jim Talent (R-MO) and Tim Johnson (D-SD). It included an exception for California, allowing the state to raise and lower the amount of ethanol added to gasoline on a seasonal basis. The state cannot go below a 35% limit.
Senate Environment and Public Works Committee Chairman James Inhofe (R-OK) wrote Energy Committee Chairman Pete Domenici (R-NM) a letter dated May 24, asking that the committee not raise the ethanol mandate above the 5 billion gallon level reported by the EPW committee. Inhofe cited an Energy Information Agency finding that it would raise gasoline prices 2.4 cents per gallon, a positioned echoed by the American Petroleum Institute (API).
The Renewable Fuels Association maintains the increased amounts of ethanol will lower gasoline prices, help make the U.S. less reliant on foreign sources of fuel and develop domestic industry. Currently the industry annually produces roughly 3 billion gallons of renewable fuels, but the association maintains that the industry can expand to handle the additional production.
API issued a statement saying, “by doubling the amount of ethanol now in the marketplace, the proposal would overtax refineries and transportation systems.”
Until last year ethanol and gasoline blends were taxed at a significantly lower rate than gasoline, impacting the revenue to the Highway Trust Fund by billions of dollars. However, congress last year enacted legislation to change the way ethanol tax benefits are provided, shifting the burden to the General Fund, rather than taking the revenue out of the Highway Trust Fund.
Chairman Domenici indicates he hopes to bring the bill to the Senate floor shortly after the Memorial Day recess. In contrast to earlier versions that failed to pass Senate, this bipartisan effort is expected to win support. A conference with the House may prove difficult, however, since the House bill contains several controversial provisions permitting oil exploration in the Alaska National Wildlife Refuge and a liability waiver for producers of fuel additive methyl tertiary butyl ether (MTBE) which has been found to pollute groundwater.