Opening Statement of Chairman Grassley Committee Consideration of the Energy Policy Tax Incentives Act of 2005
Opening Statement of Chairman Grassley
Committee Consideration of the Energy Policy Tax Incentives Act of 2005
Thursday, June 16, 2005
On Tuesday, June 14th, I put forward the chairman’s mark on the Energy Policy Tax Incentives Act of 2005.This mark was a bipartisan product formulated with Senator Baucus, after consultation with all members of theFinance Committee. This package, once reported out of the Finance Committee, will be offered as an amendmentto the underlying energy bill. In my estimation, the Energy Policy Tax Incentives Act reflects a fair balance of theinterests of the members and effectively supports the development of energy production from renewable andenvironmentally beneficial sources. I’d like to briefly describe these tax incentives that will become part of theenergy bill. For years, I have worked to decrease our reliance on foreign sources of energy and accelerate anddiversify domestic energy production. I believe public policy ought to promote renewable domestic production thatuses renewable energy and fosters economic development.
Specifically, the development of alternative energy sources should alleviate domestic energy shortages andinsulate the United States from the Middle East-dominated oil supply. In addition, the development of renewableenergy resources conserves existing natural resources and protects the environment. Finally, alternative energydevelopment provides economic benefits to farmers, ranchers and forest land owners, such as those in Iowa whohave launched efforts to diversify the state’s economy and to find creative ways to extract a greater return fromabundant natural resources.
Section 45 of the Internal Revenue Code currently provides a production tax credit for electricity producedfrom renewable sources including wind, biomass, and other renewables. The Energy Policy Tax Incentives Actextends the section 45 credit for three years. I have been a constant advocate of alternative energy sources. Sincethe inception 13 years ago of the wind energy tax credit, wind energy production has grown considerably. Inaddition, wind represents an affordable and inexhaustible source of domestically produced energy. Extending thewind energy tax credit through 2008 would support the tremendous continued development of this clean, renewableenergy source.
The Finance Committee’s amendment supports a maturing green energy source. Experts have establishedwind energy’s valuable contributions to maintaining cleaner air and a cleaner environment. Every 10,000 megawattsof wind energy produced in the United States can reduce carbon monoxide emissions by 33 million metric tons byreplacing the combustion of fossil fuels.
In addition, this proposal helps to empower our rural communities to reap continued economic benefits. Theinstallation of wind turbines has a stimulative economic effect because it requires significant capital investmentwhich results in the creation of jobs and the injection of capital into often rural economic areas.In addition, for each wind turbine, a farmer or rancher can receive more than $2,000 per year for 20 yearsin direct lease payments. Iowa’s major wind farms currently pay more than $640,000 per year to land owners, andthe development of 1,000 megawatts of capacity in California, for example, would result in annual payments ofapproximately $2 million to farm and forest landowners in that state.
Environmentally-friendly biomass energy production is a proven, effective technology that generatesnumerous waste management public benefits across the country. The biomass definition covers open loop biomass.Open loop biomass includes organic, non-hazardous materials such as saw dust, tree trimmings, agriculturalbyproducts and untreated construction debris. The development of a local industry to convert biomass to electricityhas the potential to produce enormous economic benefits and electricity security for rural America. In addition,studies show that biomass crops could produce between $2 billion and $5 billion in additional farm income forAmerican farmers. As an example, over 450 tons of turkey and chicken litter are under contract to be sold for anelectricity plant using poultry litter being built in Minnesota. This is a win-win; not only do the farmers not haveto pay to dispose of this stuff, they get paid to sell the litter. You could find similar examples throughout theMidwest and other farm regions across America. Finally, marginal farmland incapable of sustaining traditionalyearly production is often capable of generating native grasses and organic materials that are ideal for biomassenergy production. Turning tree trimmings and native grasses into energy provides an economic gain and servesan important public interest.
I am very proud of a long history of supporting new alternative energy concepts in the production ofelectricity. The chairman’s mark, as modified, continues that commitment. By using animal waste as an energysource, an American livestock producer can reduce or eliminate monthly energy purchases from electric and gassuppliers and provide excess energy for distribution to other members of the community.
Swine and bovine energy is truly green electricity, as it also furthers environmental objectives. Specifically,anaerobic digestion of manure improves air quality because it eliminates as much as 90 percent of the odor fromfeedlots and improves soil and water quality by dramatically reducing problems with waste run-off. Maximizingfarm resources in such a manner may prove essential to remain competitive in today’s livestock market. In addition,the technology used to create the electricity results in the production of a fertilizer product that is of a higher qualitythan unprocessed animal waste.
The Energy Policy Tax Incentives Act is important to agriculture, rural economies and small business, andit is also important for domestic supply and energy independence. Rural America can play an important part inenergy independence and domestic supply. In addition to the production of electricity, this amendment includesadditional tax incentives for the production of alternative fuels from renewable resources. We continue the smallproducers credit for the production of ethanol. We continue the incentive for the production of biodiesel. Biodieselis a natural substitute for diesel fuel and can be made from almost all vegetable oils and animal fats. Modern scienceis allowing us to slowly substitute natural renewable agricultural sources for traditional petroleum. It gives uschoices for the future and it can relieve the strain on the domestic oil production to fulfill those important needs thatagricultural products cannot serve.
Renewable fuels like ethanol and biodiesel will improve air quality, strengthen national security, reduce thetrade deficit, decrease dependence on the Middle East for oil, and expand markets for agricultural products. TheEnergy Policy Tax Incentives Act amendment is a balanced package. I would like to note, with some satisfaction,that today we have the opportunity to do the people’s business in the way they want us to do business. This energytax incentives amendment was crafted in a bipartisan way on an important initiative in a way that reflects thediversity of our views and the diversity of our nation.
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