Senator Feinstein, Schumer and six other Senators Voice their Opposition to the Ethanol Amendment
May 7, 2003

Washington D.C. - U.S. Senator Dianne Feinstein (D-Calif.), Charles Schumer (D-NY) and six other senators today urged their colleagues to oppose an amendment, which will be offered this week to the Senate Energy Bill being considered on the Senate floor, that would mandate billions of unnecessary gallons of ethanol into our fuel supply.

The bipartisan group of senators include John McCain (R-AZ), Hillary Rodham Clinton (D-NY), Edward Kennedy (D-MA), Fritz Hollings (D-SC), Patrick Leahy (D-VT), and Jack Reed (D-RI).

In a letter to their Senate colleagues, the senators wrote: "We are concerned that the ethanol mandate will drive up the price of gasoline for consumers, have mixed environmental results, and do little to lessen America's dependence on foreign oil. Moreover, this mandate is simply unnecessary and amounts to a new hidden gas tax.

"The proposed ethanol mandate amounts to a new hidden gas tax because it will force each state (except Alaska and Hawaii) to use ethanol or pay for it anyway. Since the United States only produced 2.1 billion gallons of ethanol in 2002, we are deeply concerned that mandating 2.6 billion gallons to be used in 2005 could disrupt the fuel supply nationwide and cause exorbitant gasoline price spikes. An internal Bush Administration document reveals that the Federal Trade Commission and the Council of Economic Advisors have advised that the ethanol mandate is 'costly to both consumers and the government and will provide little environmental benefit.'

Furthermore, since 99 percent of the ethanol produced in this country comes from the Midwest, we believe all of our states will pay high costs to ship ethanol to our refineries. A report issued by the General Accounting Office indicated that, 'ethanol price spikes may occur... in the U.S. if a disruption at any point in the supply system causes a temporary supply shortfall relative to demand.' Since our states would be dependent on ethanol from the Midwest, we believe many factors threaten a stable fuel supply."

"Even under a best case scenario, in which there would be no ethanol-related disruptions of fuel markets, we are still greatly concerned that the ethanol mandate will force motorists to pay more at the pump. Due to the costs associated with transporting ethanol and blending it into fuel, the ethanol mandate could cause gasoline prices to increase throughout the country.

We are particularly concerned about the highly concentrated makeup of the ethanol market which is dominated by a single company -- Archers Daniels Midland (ADM). ADM has a 46 percent market share after recently purchasing its largest competitor, Minnesota Corn Processors which controlled 5 percent of the market. Furthermore, ADM admitted to price fixing in 1996 and its executives went to jail. If we have learned anything from the Western Energy Crisis, it is that prices will soar when there is not ample supply or adequate competition. The evidence suggests there may be neither in the ethanol market.

Evidence suggests that ethanol reduces carbon monoxide air pollution. However, evidence also suggests that mandating more ethanol will produce more smog in the summer months because ethanol produces Nitrogen Oxide (NOx) emissions. Studies also show ethanol accelerates the ability of toxic gasoline additives like benzene to break apart and seep into groundwater. Recently the Environmental Protection Agency disclosed that ethanol plants are emitting many more dangerous toxins than previously thought.

Since ethanol is already subsidized by the government and the domestic industry is protected from foreign competition by high trade barriers, we do not need to mandate a market for this unnecessary fuel additive. We oppose the ethanol mandate and ask for your support."

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