Feinstein Calls Ethanol Mandate 'New Gas Tax'- Offers Amendments to Limit Impact on California

Feinstein Calls Ethanol Mandate 'New Gas Tax'
- Offers Amendments to Limit Impact on California -
April 11, 2002

Washington, DC - U.S. Senator Dianne Feinstein (D-Calif.) today offered the opening salvo in the fight against a provision in the Energy Bill mandating states to use 5 billion gallons of ethanol annually by 2012.

"I rise today to open the debate on the ethanol mandate in the Senate Energy Bill," Senator Feinstein said in a speech on the Senate Floor. "I believe that 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."

"Frankly, I believe that 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. I believe this mandate amounts to a new gas tax."

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.

Forcing more ethanol into gasoline will only drive prices up at the pump.

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 ethanol suppliers in the United States may be able to exercise their market power and drive up price.

There may not be enough ethanol produced in the United States to meet future demand.

Almost tripling the amount of ethanol we produce raises serious health and environmental concerns.

Because ethanol is subsidized, mandating more of it will divert approximately $7 billion away from the Highway Trust Fund which provides essential resources for our states to reduce traffic congestion and improve the safety of roads and bridges.

In her remarks, Feinstein pointed to a study by Hart Downstream Energy Services which indicates that gas prices in all 50 states will increase as a result of the ethanol mandate. Those most affected were predicted to be:

California - 9.6 cents per gallon	Rhode Island - 9.7 cents per gallon
New York - 7.1 cents per gallon	Arizona - 7.6 cents per gallon
Maryland - 9.1 cents per gallon	New Hampshire - 8.4 cents per gallon
Connecticut - 9.7 cents per gallon	New Jersey - 9.1 cents per gallon
Delaware - 9.7 cents per gallon	Massachusetts - 9.7 cents per gallon

Feinstein offered two measures to limit the impact on California and other states affected by the mandate. The amendments would:

Delay the implementation of the ethanol mandate from 2004 to 2005; and

Require the EPA to respond within 30 days to an emergency request by a state for a waiver from the ethanol requirement, if prices should spike or an inadequate supply of gasoline result. The Energy Bill currently includes provisions that would give the EPA 240 days to consider a waiver.

"Pushing back the requirement to use 2.3 billion gallons of ethanol from 2004 to 2005 will give states more time to make essential infrastructure, refinery, and storage improvements." Senator Feinstein said. "This is a major item for California since all ethanol comes by tank, not pipeline, from the Midwest."

"In addition, by reducing the time period the Administrator of the EPA has from 240 days to 30 days to decide whether or not an emergency waiver should be approved, we can ensure any price spikes or supply shortages will be as temporary as possible." Feinstein said. "Two hundred forty days is a ridiculous amount of time in an emergency."

Furthermore, Feinstein is extremely concerned about the repercussions the mandate may have on the price and supply of gasoline in the State.

"By straining California's gasoline supply even further with a federal ethanol mandate, this bill risks plunging California and other states into the next energy crisis. Every indicator I have seen points to this ethanol requirement as having unanticipated side effects, such as supply problems and resulting in higher gasoline prices for the consumer.

By passing this legislation, the Senate will be making California's and the nation's gasoline more expensive by mandating a fuel additive with a negative value as an energy source and a mixed value for the environment. On balance, it makes no public policy sense.

So I want to make clear my strong opposition to this greedy and misguided renewable fuels requirement. The mandate is a dangerous step that could force gasoline prices to soar, cause shortages of fuel, create more smog, and usher in the next energy crisis.

Mr. President, plain and simple, it is bad policy to charge all consumers more to benefit a collection of very few ethanol producers. I hope this will begin an honest debate about what the ethanol provisions in the Senate Energy Bill will really do."