U.S. Senate Committee on Environment & Public Works
U.S. Senate Committee on Environment & Public Works
Hearing Statements
Date:   03/20/2003
 
Fred Yoder
President
National Corn Growers Association

Alternative fuels and fuel additives

Chairman Voinovich, Ranking Member Carper, thank you for giving me the opportunity to testify before this subcommittee talk to you about a key issue in our world today – energy independence.

My name is Fred Yoder, President of the National Corn Growers Association (NCGA). I farm 1,100 acres of corn, soybeans and wheat, Mr. Chairman, in our home state of Ohio.

NCGA BACKGROUND:

As a little background, the National Corn Growers Association is a federation of state organizations, corn boards, councils and commissions.

The National Corn Growers Association’s mission is to create and increase opportunities for corn growers in a changing world and to enhance corn's profitability and usage across this country.

NCGA was founded in 1957 and today represents more than 32,000 dues-paying corn growers from 48 states, with 25 affiliated state corn grower organizations and hundreds of thousands of growers who contribute to state checkoff programs. NCGA, and its member states, have made passage of a renewable fuels standard the organization’s number one legislative priority for 2003.

For more than 20 years, the NCGA has worked side by side with farmers, industry and government to build the ethanol industry from the ground up. There can be little debate that the results add up to a bona fide success story.

RENEWABLE FUELS STANDARD:

The number one legislative priority for NCGA for this year is the implementation of renewable fuels standard (RFS) legislation.

The NCGA has long been a proponent of the expansion of ethanol, and encourages grower investment as new facilities come online -- and we will continue to educate growers on the process required to build an ethanol facility.

Over the last few years, the NCGA has worked hard in Washington, DC, to get an RFS. In fact, this week, NCGA sponsored a rally where members of Congress, growers throughout the country, and industry leaders united around a specific message. The message being, an RFS can help us fix some of our long-term obstacles facing agriculture, while at the same time playing a critical role in our nation’s comprehensive energy policy, thus making us less dependent on foreign oil.

There are other positive impacts an RFS will have. With an RFS we will reduce the cost of the Farm Bill by raising the price of corn, creating more value added opportunities through farmer owned cooperatives, making us less dependent on foreign oil, and strengthening our sagging rural economy.

NCGA believes ethanol provides energy security for the United States and we have the necessary resources to make a significant contribution to our domestic fuel supply. If successful, an RFS will more than triple the size of the ethanol market within the next ten years.

On February 13, we took one step closer to making that priority a reality, Mr. Chairman, when you joined Sens. Tom Daschle (D-SD), and Dick Lugar (R-IN) to introduce the Fuels Security Act of 2003.

The NCGA is encouraged by this legislation, which was introduced by a bipartisan group of Senators who are united in supporting a bill that bans MTBE nationwide, strengthens air quality regulations, provides refiner flexibility, establishes an RFS, and marketplace provides certainty to our nation’s farmers. Under the leadership of Reps. Collin Peterson (D-MN) and Tom Osborne (R-NE), the House of Representatives introduced companion legislation.

One part of this legislation is a national RFS, which will triple the use of ethanol over the next 10 years. The key provisions of this bill are identical to RFS legislation introduced in the 107th Congress. The legislation is the Fuels Security Act of 2003 (S. 385/H.R. 837).

Specifically, these key provisions are:

Ø An RFS in which part of our nation’s fuel supply, growing to 5 billion gallons by 2012, is provided by renewable, domestic fuels such as ethanol and biodiesel;

Ø Eliminating the federal reformulated (RFG) oxygen requirement;

Ø Phasing down the use of MTBE in the U.S. gasoline market over four years; and

Ø Enhancing the air quality gains of the reformulated gasoline program.

BENEFITS:

There is an evolution-taking place across America’s corn belt. A vision is being created to enhance value added agriculture. Investments in value added agriculture will foster a healthier agricultural structure and are necessary for thriving rural communities.

Time and time again we see boosts in local economies when renewable fuels come into the picture. Investment capital comes to “Rural-Town USA” when an ethanol plant is built. Local labor is hired. Local supply industries are tapped. And crops from local producers are consumed and made into ethanol.

Paid wages paid, and extra income from crops come back into the community, stimulating economic growth needed to create opportunities and revitalize many sagging rural economies.

A study by the Minnesota Department of Agriculture estimated that the state’s push to blend 10 percent ethanol in all gasoline created about 5,000 new jobs in less than a decade, and boosted payrolls by $115 to $124 million. Overall, the state’s ethanol production, which is produced largely through farmer co-ops, generates $403 million to $437 million for the local economy.

The passage of the renewable fuels legislation is a start in this process. Increasing the use of renewable fuels from the current 1 percent to 5 percent of motor vehicle fuel would displace 302 million barrels of crude oil annually between now and 2016.

Farm income and the economies of rural communities would receive a significant boost in the process. As investments in farmer-owned ethanol co-ops and higher grain prices generate new income, farmers could receive an extra $6.6 billion of net cash income over the next 15 years.

FARMER OWNED COOPERATIVES:

Growth in farmer owned cooperatives continues to expand vastly. Coupled with an RFS, we must also continue to expand incentives for smaller ethanol producers.

Under current law, small ethanol producers are allowed a 10-cents per gallon production income tax credit on up to 15 million gallons of production annually. The credit is capped at $1.5 million per year per producer. The provision applies to all small ethanol producers except those organized as farmer cooperatives.

Unfortunately, due to their unique structure, farmer cooperatives are precluded from taking advantage of this credit. Farmer cooperatives are businesses, owned and controlled by farmers. The credit was created as an incentive for farmers' involvement as small ethanol producers.

Unfortunately, the effect of the credit as currently designed actually works as a disincentive to farmers organized as a cooperative.

At the beginning of the 108th Congress, a stand-alone measure was introduced by Sens. Peter Fitzgerald (R-IL), and Tim Johnson (D-SD) that would allow small ethanol producer cooperatives to take advantage of this tax incentive. You may recall, similar legislation that would modify the Small Ethanol Producer Tax Credit was included in the Senate's energy bill during the 107th Congress.

Specifically, this legislation would:

Ø Allocate the ten-cents-per-gallon production income alcohol fuels credit to the members of a farmer cooperative;

Ø Change the definition of a "small ethanol producer" from 30 million gallons per year to 60 million gallons per year;

Ø Allow the credit to be claimed against the alternative minimum tax; and

Ø Repeal the rule that the amount of the credit is included in the income of the small ethanol producer.

Additionally, I am very encouraged that recently the Chairman of the Finance Committee, Sen. Charles Grassley (R-IA), and Sen. Max Baucus (D-MT) made this part of their energy tax package, which will be part of the next energy bill. They deserve credit for this important and key step.

HIGHWAY TRUST FUND:

Mr. Chairman, as we approach this year’s debate on TEA-21 reauthorization, there is one issue of great interest to the NCGA. That issue is the preservation of the tax incentive for those producers who blend ethanol with gasoline.

As you know, in order to encourage the use of renewable fuels, Congress provided blends of gasoline and ethanol with a lower rate of tax than that imposed on gasoline. More specifically, refiners and gasoline marketers using 10 percent ethanol blends receive a 5.2 cent per gallon reduction from the tax paid on straight gasoline.

This tax incentive has made a tremendous contribution in rebuilding rural America through the building of farmer-owned cooperatives, which has provided localities with jobs and extended the tax bases, while increasing the value of corn. Taxpayers benefit because reduced farm program costs and increased income tax revenue attributable to the federal ethanol program provide a net savings to the U.S. Treasury of $3.6 billion a year.

Since federal motor fuel taxes are a primary source of funding for highway programs, the issue has arisen as to the revenue impact of ethanol-blended fuels on the Highway Trust Fund (HTF). The NCGA fully understands the concerns members of Congress may have about retaining this tax incentive, as it may divert funds from the HTF.

Our members strongly support full funding of the HTF and are committed to resolving this matter. The NCGA is working with members of Congress to retain the important tax incentive, while also making sure the HTF is whole.

CLOSING:

As I stated earlier, passage of an RFS is the number one legislative priority of the National Corn Growers for 2003.

I know we can work together in developing a comprehensive energy package that includes possibilities for renewable fuels like ethanol. I believe we can work together to make the RFS part of America’s long-term energy policy. Together, we can continue to grow a healthier U.S. economy. And work toward greater energy security and a cleaner environment.

In closing, energy independence is a vital component to our national security. The NCGA stands ready to play its part. Renewable fuels like ethanol can contribute to that security, by making us less dependant on foreign oil.

Chairman Voinovich, Ranking Member Carper, and members of the Committee, thank you for the opportunity to testify today on this timely and important issue. The NCGA looks forward to working with you in advancing ethanol friendly legislation during the 108th Congress. Thank you.