Proponents believe cellulosic ethanol is the answer to our oil addiction. It's smart to use renewable plant and animal materials that reduce emissions and other toxins. It also keeps our wealth and our jobs in the U.S. That frees us from the stranglehold of OPEC and other oil-producing nations and that, more than anything, will make our nation more secure.

Opponents say there is little value in ethanol. We have to subsidize it just to keep it going and it doesn't reduce price or enough greenhouse gases to make a difference. It takes enormous amounts of energy to produce and transport.  Plus, the high demand for crops has had an adverse effect on livestock feed and farmers and inflated the cost of food items worldwide.

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The American Fuels Act  
S. 133 - H.R.  2354

"To promote the national security and stability of the economy of the U.S. by reducing the dependence of the
U.S. on oil through the use of alternative fuels and new technology, and for other purposes."

Sen Sponsor: Barack Obama (D-IL) - 3 D&R Co-Sponsors
Status: Referred to the Finance Subcommittee

House Sponsor: Peter Visclosky (D-IN)
Status:  Referred to the Readiness Subcommittee

 

(Home)

Still driving? Then you know that gas prices have taken a wild roller coaster ride this year.  Today's price is still higher than last year's which is driving up the price of everything else that is made with or transported by machines that use oil.

Truth is, this crisis has been brewing for at least 30 years - dating back to the oil embargo of the 70's when we lined up for miles to fill up on gas that cost an outrageous 55 cents a gallon. Then, as now, it all boiled down to supply and demand.

Today, and every day - the U.S. consumes 21 million barrels of oil. 68% of that goes directly into our gas tanks. Trouble is, we produce less than 7 million barrels a day.  And even though our consumption has remained relatively flat the last few years, emerging nations like China and India have been increasing their demands, giving us more competiion for imports. 

This year, U.S. consumers will pay  some $700 billion to import 70% of the oil and gas we need -- a situation that will only get worse as millions of people around the world line up to buy their first cars.

There are other factors that influence price, like political instability in oil producing nations, natural disasters, corporate profits and investor speculation. But underlying it all is a simple imbalance between supply and demand, especially for the U.S. So in countries with oil reserves or processing capabilities or subsidies, you can fill up your tank for as little as 15 cents a gallon. In fact, the difference in oil prices around the world is fantastic.

U.S.
E.U.
Iran
Iraq
Japan
Mexico
Venezuela

Global Gas Prices
in June 08
(equivalent to gallons,
Per CBS News)

$  4.10
$  7.++
$  1.20
$  1.50
$  6.00
$  2.00
$    .15

This spike in gas prices has made Congress sit up and pay attention. And all options are on the table including conservation, drilling for oil in previously restricted areas, liquefying coal, vehicles that run on fuel cells or electricity, and ethanol.

Actually U.S. taxpayers have been subsidizing ethanol since 1978. This alcohol-based fuel is made by fermenting the sugars from organic materials like corn, sugar cane, switchgrass, paper, wood products and other waste. Animal fats can also be used. As a renewable energy source, ethanol has been embraced by many countries, most notably Brazil which now meets 40% of its fuel needs with home-grown ethanol.

In the U.S., ethanol has been used primarily as a gasoline additive. It's an excellent oxygenator, making the oil burn cleaner and more completely. This E-10 mixture (10% ethanol) can be found at many gas stations, especially during summer months.

There is also E-85 which is 85% or more ethanol. However, less than 2% of the cars in this country are Flex Fuel Vehicles designed to handle both ethanol and gasoline. Plus, less than half of 1% of the gas stations in this country are equipped to store and pump E-85.

There are other concerns about ethanol. The Miles-Per-Gallon from ethanol is 5-15% less than the MPG you get from petroleum. Ethanol is also heavier than gas and cannot be transported through pipelines. Plus it takes a great deal of energy and water to produce. All these factors have made ethanol a higher priced commodity than gasoline - until recently. That's why we taxpayers have been offering subsidies - to help develop the ethanol market and make this fuel more competitive.

Through the years, politicians of every persuasion have embraced ethanol. In fact, in his 2007 State of the Union address, President Bush set a goal of producing 35 million barrels a year by 2017. (BTW, that's less than 2 days supply.)

We're already ahead of schedule. In the last 5 years, our production has more than doubled, topping 6.5 million gallons in 2007. That's because we're also increasing our production capabilities. In fact, we now have nearly 200 biorefineries operating or under construction in the U.S.

The U.S. Leads the World
in Oil Imports

U.S. Ethanol Production
is Soaring

Of course, that has increased the demand for “feedstock” materials from which to make ethanol, and in the U.S. that means corn. 95% of the ethanol produced here is made from corn and this year, it's estimated that between 20 and 30% of the entire corn crop is going toward ethanol production. As a result, the price per bushel has more than doubled in recent years. As that higher price made its way up the food chain, the corn for livestock feed became more expensive and then meat and eggs and dairy as well as corn itself cost more at the grocery store. Is the fact that more farmers are growing fuel instead of food contributing to the global food shortage?  And is it worth it to become less oil dependant? 

It's a complicated issue. Something must be done, but there's great debate on the wisest course.

The Bill

Incentives to Manufacture Flex Fuel Vehicles. Almost any vehicle can be adapted to run on both gasoline and ethanol. In fact, it only costs about $100 a car to add the necessary sensor and couplings, which is why $100 is the maximum amount of the federal credit for the production of each new Flex Fuel Vehicle. (There's no incentive for retrofitting an existing vehicle.)

An Excise Tax Credit for the Sale of E-85. If you sell E-85 to the public, you can claim a credit of 35 cents for every gallon sold. Retailers can keep this credit or pass it along to customers. This credit declines to 10 cents a gallon before it expires in 5 years.

An Excise Tax Credit for Cellulosic Ethanol Production. Actually, ethanol made from materials like sugar cane, rice hulls, food waste, wood waste and switchgrass delivers more energy than corn based ethanol (although it also costs more to produce). So to protect the food supply and get a better energy yield, this legislation gives manufacturers a 51 cent per gallon tax credit for cellulosic fuels. (Corn ethanol gets 45 cents per gallon per the new Farm Bill.) In addition, biofuel companies can claim an investment tax credit of as much as $2 million dollars for developing facilities and technology that can produce at least 1 million gallons of cellulosic ethanol a year. This provision expires at the end of 2014.

Expanded Choices for State and Agency Fleets. Government organizations are already given incentives and mandates to invest in energy-efficient vehicles. This bill would expand those regulations to medium and heavy duty vehicles and amend the definition of qualifying vehicles to include those with electric drive and hybrid technologies.

There are also several mandates used as sticks to prod the various parties into compliance.

New Biodiesel Requirements. Previous legislation about ethanol has not addressed the 40 billion gallon a year diesel industry. This bill mandates that 250 million gallons of ethanol suitable for mixing with diesel be produced in 2009 and climb to 2 billion gallons (or 5% of the total diesel market) by 2016. If any refineries, distributors or importers exceed the mandated level, they are given credits which they can use the next year. If they prefer, they can also give or sell these credits to companies who fall short of their production requirements.

Expanded Consumer Access to E-85. Federal refueling stations will be required to add at least one pump for alternative fuels and to provide public access to that pump so ordinary citizens can buy E-85. This is designed to make sure there is access to the fuel until the commercial market develops. It's set to expire in 7 years or as soon as 5% of commercial gas stations carry alternative fuels.

No Oil Company Interference. This bill would make it illegal for oil companies to obstruct or punish gas station owners who want to offer ethanol. Instead, gas station owners are guaranteed the right to install or convert pumps and advertise and sell E-85. Plus, if the franchise agreement requires that station owners carry at least 3 grades of gasoline, the franchisor has to accept E-85 as one of those grades. This is designed to make it easier for station owners to expand the private distribution of ethanol.

Federal Leadership. Federal Fleets must become 100% alternative fuels by 2014. This does not mean they all have to be running on E-85. Vehicles that have electric transport technology and/or hybrid vehicles also qualify.

Clean Buses.  Communities who use Federal Mass Transit Dollars to purchase buses must purchase vehicles that use “any other fuel that is not substantially petroleum” and is proved to reduce emissions. This includes compressed natural gas (CNG), liquefied natural gas, liquefied coal, ultra low sulfur diesel, fuel cells, biodiesel, E-85, batteries and electricity.

Alternative Fuels for National Security. The Department of Defense must contract to “develop and operate production facilities for covered fuels” on recently closed military bases. These facilities would produce alternative fuels for national security use. In addition, the definition of “alternative” has been expanded to include ethanol in addition to coal, oil shale and tar sands.

All these programs will be administered by a new Office of Energy with a Director who will advise and consult with the President, Homeland Security, the National Security Council, the Domestic Policy Council, the National Economic Council and business and labor leaders. The Director has the authority to waive mandates if alternative fuels are not readily available, if it would compromise national security or if it would “severely harm the economy or environment of a state or region.” He of she will also be responsible for an annual consolidated energy budget.

Will The American Fuels Act help solve high gas prices and our economic woes?  

“This bill will help tilt our energy balance toward alternative fuels, moving these fuels into additional markets and making them more widely available for consumers.”
Richard Lugar (R-IN)
Sen. Bill Co-Sponsor

“We're importing oil from Saudi Arabia to produce ethanol in the U.S. at a net energy loss.”
David Pimentel
Professor, Cornell U

“To grant enormous subsidies for biofuel production is morally unacceptable and irresponsible.”
Peter Brabeck-Letmathe
CEO, Nestle

“By investing in alternative energy technologies, it will allow American innovation to create new economic opportunities throughout the entire energy industry.”
Pete Visclosky (D-IN)
House bill sponsor

”At current oil prices, we will send $700 billion out of the country this year alone. .. Projected over the next 10 years, the cost will be $10 trillion. It will be the greatest transfer of wealth in the history of mankind.”
T. Boone Pickens
Oil Magnet with a plan

“While there is more than one reason that food prices are rising, diverting 1/3rd of the U.S. corn crop to produce fuel rather than food is a significant factor and the American people know it.”
David A. Ridenour, V.P.
Nat'l Center for Public Policy Research

“We're putting the supermarket in competition with our corner filling station for the output of the farm. The result is more people will go hungry.”
Lester R. Brown
Earth Policy Institute

“”There is no conflict between food and fuel. We can produce both.”
Ken McCauley, Pres
Nat'l Corn Growers Assoc.

“The President's Council of Economic Advisors estimates that only 3% of the more than 40% increase we have seen in world food prices this year is due to the increased demand on corn for ethanol.”
Ed Schafer
Secy of Agriculture

“By a factor of 2 to 1, energy prices are the chief factor determining what American families pay at the grocery store.”
John Urbanchuk
Economist, Consultant

“There are multiple factors contributing to our skyrocketing grocery prices but a waiver of Reformulated Fuel Standards levels is the best, quickest way to reduce those costs before permanent damage is done.”
Rick Perry (R-TX)
TX Governor

“About 3,000 jobs in meat and poultry production alone have been eliminated so far in 08 because of the high input costs imposed by ethanol production.”
George Watts
Nat'l Chicken Council

“The bottom line is this. Concerns about the sustainability and environmental impact of biofuels are not misplaced. But they are absolutely not a reason to ignore the tremendous promise of biofuels.”
Samuel Bodman
Secy of Energy

© Voters Voice, Inc. 2008

(Per E.I.A.)

The America Fuels Act, has a “goal of achieving full energy independence” by eliminating our dependence on foreign oil and strengthening our investment in ethanol and other alternatives to petroleum. It was co-authored by Senators Dick Lugar (R-IN) and Barack Obama (D-IL) and first introduced in 2006, before Obama decided to run for President.

With a carrot and stick approach, this bill revises codes and offers tax incentives to make more ethanol (especially E-85 and cellulosic ethanol) and make it more accessible to American drivers. On the carrot side of the equation, The American Fuels Act would provide:

“In the middle of difficulty lies opportunity.”
Eleanor Roosevelt

Opposed To S.133 - H.R. 2354

In Millions of Gallons
(Per the Renewable Fuels Assoc)