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Floor Statements

Klobuchar Calls on Oil Industry to Give Up Subsidies, Follow Ethanol Industry’s Lead

July 12, 2011 | Watch

I'm here today to talk about the recent compromise that -- bipartisan compromise that we reached on biofuels. I have come to the Senate floor a number of times to talk about this country's biofuels policy, and in the last month I have worked on a bipartisan basis with Senator Feinstein of California and Senator Thune of South Dakota to develop a compromise agreement that represents a good-faith effort to improve energy policy under very difficult economic times. At a time of bitter budget debates and entrenched positions, we worked together to find common ground and we took a step in the right direction, and that is a step of reducing the debt immediately by $1.3 billion of the $2 billion remaining on a subsidy.

May I add, this was a subsidy that this Congress voted for just in January of this year. So the biofuels industry understands that this subsidy was going to end at the end of this year, but they didn't just let it whittle away toward the end of the year, knowing there was waning support for it. They actually came to the table and said let's see if we can do something smart here that's good for energy policy and good for this country's fiscal position. Under this deal, the volumetric ethanol act, the excise tax credit will expire at the end of this month instead of the end of 2011. I have continued to say that this debate is not about whether we end this tax credit. It's about how we do it, and this compromise agreement represents a responsible and cost-effective approach.

First, the compromise dedicates $1.3 billion, or two-thirds of remaining ethanol subsidy to savings toward the deficit. It actually just goes right into the coffers of the government to reduce the debt. At a time when our country is struggling with increasing debt and partisan bickering, the compromise represents a step forward, so two-thirds of the money goes towards the debt.

What happens to the rest of the third of the money? Well, normally it would be going into that tax credit, $400 million every month for the rest of this year. Instead, we take that existing $668 million, the other third, and use it to extend and expand the support for the production of cellulosic biofuels. As you know, Madam Chair, coming from New Hampshire, we have a lot of cellulosic biofuels in the Midwest, but it is something you can see all over the country. It is a commitment to a new generation of fuel, algae, biofuels, switchgrass, you name it. There are a lot of possibilities here when you look at what could be the next generation of cellulosic ethanol. Many of the first advanced biofuel plants are expected to be retrofitted onto existing corn-based ethanol facilities.

This compromise also extends a small producer tax credit for one year at a reduced rate. This tax credit benefits smaller plants which were some of the earliest pioneers in the industry and offer structured as farmer co-ops. Again, this is not new money. It simply takes a third of the existing money and used it in a smart way so that Congress won't have to spend any new money on very important areas like cellulosic biofuels. This extension helps provide small ethanol plants a glide path to adjust to the elimination of the volumetric ethanol excise tax credit.

Last, the compromise invests in the infrastructure we need to bring greater competition in the fuel market. This means extending tax credits, the existing money, to help gas stations install a variety of fuel dispensing technologies, including ethanol, hydrogen, natural gas, and electric charging stations.

So let me again repeat, this isn't just about biofuels. It's about all kinds of alternative energy that compete with oil. We should encourage our homegrown fuels to compete with foreign oil and this investment will help do just that and give consumers a real choice at the pump. I've always believed we should be investing in the farmers and the workers of our country instead of the oil cartels in the Mideastern countries.

The ethanol industry should be commended in coming to the table to offer up over $1 billion in savings during these difficult budget discussions, and I believe - and this I think is the most significant piece of the discussion Senator Schumer was having, that we've all been hearing about the debt, this compromise, while it may be a $1 billion instead of $1 trillion, but it is an example of what we can do if we are really serious about reducing our debt. It is a model for what can happen with government subsidies going forward.

Take, for example, the oil industry. Traditional ethanol is a maturing market providing only about 10% of Americans' fuel supply, 10% of the fuel supply. We're now at the point where we're actually making more biofuels than we import oil from Saudi Arabia. That's pretty significant. But we're still only 10% with biofuels. How about oil? Well, the rest is oil. The oil industry has been a mature industry and collected subsidies for nearly 100 years.

Americans have shouldered these costs for too long. The oil companies no longer need those tax breaks and we can't afford them when we look at the debt we're facing. The list of the oil production tax deductions includes one costing $18.2 billion over ten years, the expensing of intangible drilling, the percentage depletion allowance costing $11.2 billion over ten years, and the dual capacity rule for foreign tax credits costing $10.8 billion to taxpayers over ten years.

The question isn't about whether the oil companies deserve the profits. It is a question about whether the American people should pay the cost of providing preferential tax treatment to the five largest oil companies in the United States which have racked up over almost $1 trillion in profits in just the past decade. So that's the issue.

We're dealing with this debt. When we're dealing with the debt where middle-class families are paying multiple amounts every single year, multiple dollars into interest on our debt, should they also be asked to foot the bill to pay for these subsidies for oil companies when these oil companies are making almost $1 trillion in profits in the past decade? That's the issue.

It is a question about whether the mature oil industry should continue to receive billions in subsidies at a time when their profits are up 30% in the first quarter of 2011. I'm not against drilling at all. I'm pleased about what's going on in North Dakota right to our west. But when I look at what's happening with this debt right now, we have to be smart about this and this is clearly one place to look for savings.

It is a question about whether a hugely profitable industry should continue to enjoy lucrative tax advantages at a time when our nation can least afford it. With oil prices much higher than actual costs, the oil industry doesn't need extra money from the government. We must get serious about tackling the deficit and putting our country back on sound fiscal grown.

But the problem we're facing now is not only a crisis of dollars and cents. It is also a crisis of the divide and the deadlock. It is time we open that deadlock. We did it with biofuels. We came together for a compromise, with Senator Feinstein - who has spent her lifetime in the senate fighting against ethanol - and Senator Thune and I came together on a bipartisan basis and got it done. We did it, immediately two-thirds of their immediate subsidy going to debt reduction.

We know this deficit isn't going to fix itself. We all know that. We all know this debt isn't just going to go away. We all know we can't just close our eyes and click our heels and wish our debts away. In that report, the National Commission on Fiscal Responsibility wrote that every modest sacrifice we refuse to make today only forces far greater sacrifices of hope and opportunity upon the next generation. And they're right. A relatively small industry like ethanol is willing to put two-thirds of its tax breaks on the table for deficit reduction immediately. The much larger and much more profitable oil industry can certainly afford to do the same, if not more.

Thank you, Madam President. I yield the floor.