With a vote expected today on Sen. Tom Coburn's (R-Okla.) ethanol amendment to the "Economic Development Revitalization Act," the renewable fuels industry is pushing back, saying ethanol subsidy discussions should be held off until tax reform or energy measures are considered. During today's OnPoint, Bob Dinneen, president of the Renewable Fuels Association, explains why he believes the amendment is politically motivated. He also discusses why he thinks Coburn's move will hurt the economy.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Bob Dinneen, president of the Renewable Fuels Association. Bob, thanks for coming back on the show.
Bob Dinneen: Thanks for having me.
Monica Trauzzi: Bob, Senator Coburn recently introduced an amendment to the Economic Development Revitalization Act that would repeal ethanol subsidies and also the ethanol import tax. It's expected to be voted on Tuesday. Is this part of a backlash against ethanol or is it part of the discussion we're having here in Washington right now about reducing spending?
Bob Dinneen: I think this is part of the gamesmanship that the oil patch is using today to distract attention from the real issues about skyrocketing prices of oil. If this was really about legislating, I suspect Senator Coburn wouldn't be afraid of regular order. If it was about legislating, he probably would have found a bill that this was a germane issue for. He might have found a bill that had a revenue title so that it wouldn't be blue slipped. You know, at the end of the day, he might have found a bill in which energy policy could've been debated in a more comprehensive way. This targeting ethanol as the only way to balance the budget, that doesn't make a whole lot of sense.
Monica Trauzzi: But isn't this about cutting spending and aren't we going to have to cut it in many different places and isn't this one of those places where we could cut it?
Bob Dinneen: You know, this 16 senators that signed the petition for cloture, every single one of them last month voted against reducing the incentives for the petroleum industry. So, if this was really about fiscal responsibility, I suspect some of these would have at least said, you know, we need to be reducing subsidies everyplace. This is just about the farmers and let's make sure that we don't let this important industry continue to grow. And that just doesn't make any sense. The ethanol industry is the only viable alternative we have that is reducing our dependence on imported oil, that is actually having a beneficial impact on consumer gasoline prices. Monica, a study that was released last month showed that the ethanol that was produced and used in this country in 2010 alone reduced gasoline prices at the pump by $0.89 a gallon. So right now is the time that we want to be going at the ethanol industry? I don't think so. Look, our own industry has said we'll reform the tax incentive. We recognize that the industry has grown, but let's do this in a more comprehensive way. Let's figure out what we need to do to assure that the growth and evolution of this important domestic industry can continue. What is their plan for assuring next-generation biofuels? What is their plan for assuring reduced energy dependence on imported petroleum? Is it more fracking? Is it tar sands? Is it drilling deeper in the Gulf? There has to be a solution that looks at our energy issues in a more comprehensive way. The Coburn amendment isn't it.
Monica Trauzzi: So, the Coburn amendment would end the credits abruptly at the end of this month. Would you then be in favor of a gradual phase-out like Senator Grassley has talked about?
Bob Dinneen: Well, we support the Grassley amendment and I think we would support perhaps eliminating those incentives even earlier if there is a plan to continue the investment in biofuels in some way. Let's make sure that we are continuing to invest in infrastructure so that consumers have a choice. Let's make sure that we protect the investment that the taxpayer has made in this industry by providing tax incentives when they're necessary, if the price of oil collapses. You don't need it at $100 a barrel. We agree with that, but we're just 27 months removed from $39 a barrel oil. And so some incentive that's a safety net or a safeguard to the investment that's been made makes sense. And thirdly, we think there ought to be something to assure that there is still investment in next-generation biofuels, in cellulosic ethanol. That sector is at a critical crossroads right now and this is not the time to just be pulling out the rug from underneath that industry and saying, no, we're not going to invest there. No, this is a time for a new plan that extends those incentives and truly gets investment in that important sector moving forward.
Monica Trauzzi: It sounds like you feel that there are a lot of things up in the air right now for your industry. Do you believe that Republican support for ethanol is dwindling? Is that why there's so many issues right now?
Bob Dinneen: I don't think this is a partisan issue, this is largely a regional issue, and those in the Midwest understand the important economic and energy benefits of a growing renewable fuels industry. Having said that, all 16 that signed the discharge petition for the cloture motion were Republicans. There are also 16 members that have received a fair amount of campaign dollars from the oil industry and, again, they are all 16 members that voted last month to preserve the tax incentives for the oil industry. So I mean I think this is transparently the oil industry's efforts to undermine the continued growth and evolution of biofuels and that's just wrong.
Monica Trauzzi: You've spoken about the economic benefits of ethanol, but last week Taxpayers for Common Sense released a report on the ethanol subsidy, harshly criticizing it and saying it's costing taxpayers a lot of money and that it largely supports oil and gas companies. The report says that it will cost taxpayers $6.75 billion by 2015 for these tax credits. Is it that costly? Why is such a costly subsidy needed?
Bob Dinneen: They're only looking at one part of the ledger sheet. They need to look at the other side of the ledger that shows that the investment that the taxpayer has made in this industry is creating jobs, 400,000 jobs responsible because of this industry, have been created because of this industry. More than that, it's reducing farm program costs. This is a very cost-effective tax incentive. It's reducing energy imports. It is reducing consumer gasoline prices. It has stimulated jobs and investment across rural America and it is extraordinarily beneficial for the U.S. taxpayer.
Monica Trauzzi: Senator Coburn has said that ethanol is bad economic policy, bad energy policy, and bad environmental policy. What do you have to say to that?
Bob Dinneen: I would suggest that he looks just a little bit closer to home and see what the environmental consequences of fracking is to his part of the world or what the economic consequences of our continued dependence on imported oil is. Again, what's his solution? His solution is more petroleum and where are we going to get that? We get it from Canada and the tar sands and the environmental devastation that that creates. We'll get it from digging deeper in the Gulf of Mexico perhaps and the environmental risk that that entails, but we have to have a more mature, more comprehensive dialogue in this country about our energy supply.
Monica Trauzzi: But you're suggesting that if the subsidy is not in place that it will sort of stop or slow down the production of ethanol. Why can't the production of ethanol continue without it?
Bob Dinneen: Well, what I'm suggesting is the industry has agreed that we can reform our tax incentive. We need to continue to grow and evolve this industry, so let's have a really good conversation about how best to do that. But we're also saying, look, we're not the only ones here. Let's have everything on the table here. I think that's only right. It shouldn't all just be about whether you like the ethanol tax incentive or not. It ought to be what do we want our energy future to be? How are we going to commercialize these new technologies? And if the signal that the investment community gets is that the support for biofuels in Washington, DC, is eroding it's going to have a devastating impact on investment in the next generation of biofuels. And it will discourage marketers from investing in the infrastructure necessary to assure the consumers have choice at the pump for E15 or E85. We need to move our energy future forward, not backward. And Senator Coburn would have us moving backward.
Monica Trauzzi: So, in terms of votes, where do you see this going?
Bob Dinneen: I don't know. It's going to be a very close vote later on and we hope that members recognize that Senator Coburn is hijacking the process here with the way that he has gone about this and it doesn't make any sense in terms of process or policy and we certainly hope that he loses.
Monica Trauzzi: OK, we'll end it right there. Thank you for coming on the show.
Bob Dinneen: Thank you, Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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