"Renewable fuels like ethanol and biodiesel will improve air quality, strengthen national security, reduce the trade deficit, decrease dependence on Saddam Hussein for oil, and expand markets for agricultural products," Grassley said.
The amendment requires federal fleet vehicles to use 10 percent ethanol-blended gasoline. This requirement applies only in areas where there are enough supplies to make the ethanol-blend competitive in price. Federal agencies with centrally fueled fleets will be required to use at least a 2 percent biodiesel blend in their diesel fuel by 2007 and a 20 percent biodiesel blend in their diesel fuel by 2012.
Grassley has a long history of promoting expanded use of renewable sources of energy. In 1992, he authored the first-ever wind energy production tax credit. In 1997, he led the successful effort to extend the ethanol tax credit for ten years.
Last month, Grassley steered through the Finance Committee a bipartisan package of tax incentives to help further develop ethanol, biodiesel, biomass and wind energy. The pending legislation would make sure small cooperative producers of ethanol can receive the same tax benefits as large producers. This is important because at least eight of the ethanol plants in Iowa that are either operating or under construction are farmer-owned. The legislation also provides an income tax credit and excise tax rate reduction for biodiesel fuel mixtures. Iowa is the nation's largest producer of soybeans and home to two biodiesel plants.
Following is a summary of the Dayton/Grassley Renewable fuels amendment:
Ethanol
- requires federal fleet vehicles to use 10% ethanol-blended gasoline, or gasohol, wherever available.
Biodiesel
- requires federal agencies with centrally fueled fleets to use at least a 2% biodiesel blend (B2 or higher) in their diesel fuel by 2007, and
- requires federal agencies with centrally fueled fleets to use a 20% biodiesel blend (B20) in their diesel fuel by 2012.
Why do we need it?
The previous Energy Bill (passed in 1992) required federal agencies to purchase a certain proportion of vehicles capable of being fueled by alternative fuels each year. It did not require these agencies to use alternative fuels, however. In 2000, President Clinton issued an Executive Order aimed at closing this loophole, with the ultimate hope of reducing federal consumption of petroleum by 20% by the end of 2005. This is unlikely to happen; FY99 federal fleet consumption of alternative fuels was about 2%.
So while the Dayton/Grassley Amendment will not mandate the use of alternative fuels, it will mandate increased use of renewable fuels such as 10% ethanol blends and biodiesel. We need to begin to recognize the important role that renewable fuels can also have in reducing petroleum consumption. For example, by the end of 2002, the nation's ethanol capacity will be up 2.7 billion gallons; using this much ethanol would displace over 110 million barrels of imported oil.
What the Dayton/Grassley renewable fuel mandates will accomplish
This amendment makes it clear that the federal government is going to lead the way and be the first to start using renewable fuel blends.
Putting mandates on ethanol and biodiesel use will add momentum to the developing ethanol and biodiesel infrastructure.
Increasing the use of renewable fuels is consistent with the goals of the new nationwide Renewable Fuels Standard (RFS) in the pending Daschle-Bingaman Energy Bill. The RFS increases use of renewable fuels to 5 billion gallons (3.05% of total fuel consumption) by 2012. This would effectively triple the use of renewable fuels such as ethanol and biodiesel.
Many federal agencies have already taken steps to recognize the importance of renewable fuels. Under the previous Energy Bill (EPACT 1992), federal agencies are required to buy alternative fuel vehicles in increasing proportions. An amendment to this purchasing requirement allows agencies to use biodiesel (in blends of 20% or higher) to fulfill up to half of their EPACT requirement. In response, the use of biodiesel by the US Postal Service, USDA, Department of Energy, and Defense Department has increased rapidly. The Dayton amendment furthers this trend towards increased use of renewable fuels by federal agencies.