April 25,2002

Grassley Scores Major Victories in Energy Tax Bill

WASHINGTON -- Key alternative energy production tax incentives from Sen. ChuckGrassley, ranking member of the Committee on Finance, passed today as part of a comprehensiveenergy policy bill.

“It makes sense to use the tax code to develop alternative energy,” Grassley said. “Cuttingtaxes is an effective incentive to encourage positive, environmentally conscious ways to produceelectricity. I’m glad to work with Senate leaders to advance a good, green energy package.”In February, the Finance Committee on a voice vote passed an energy tax incentives packageput together by Grassley and Sen. Max Baucus, committee chairman. This week, Senate leadersagreed to accept the tax package as an amendment to the energy policy bill after negotiations withGrassley and Baucus. Today, the full Senate approved the energy tax package as part of the broaderenergy bill. Next, the Senate-passed and House-passed energy bills will go to a conferencecommittee, where members will reconcile differences between the two bills.

The tax package includes numerous alternative energy tax incentives that Grassley haschampioned for years, such as:

< Wind energy. The package includes Grassley’s pending legislation, the BipartisanRenewable, Efficient Energy with Zero Effluent (BREEZE) Act (S. 530), to extend theproduction tax credit for energy generated by wind through Dec. 31, 2006. Grassley authoredthe Wind Energy Incentives Act of 1993, which established the first-ever wind energyproduction tax credit.

< Biomass. The package includes Grassley’s bill, the Growing Renewable Energy forEmerging Needs (GREEN) Act (S. 756), which extends the tax credit for the production ofbiomass, which Grassley authored and which became law in 1992, and expands thedefinition of biomass to include saw dust, tree trimmings, agricultural byproducts anduntreated construction debris. Also included is the extension of the tax credit for theproduction of electricity from poultry waste and closed loop biomass co-fired with coal,including an important Iowa switch grass project.

< Biodiesel. The package includes a proposal from Grassley and Democratic Sen. BlancheLincoln, with support from non-committee members Republican Sen. Tim Hutchinson andDemocratic Sen. Mark Dayton, to provide an income tax credit and excise tax rate reductionfor biodiesel fuel mixtures. These new incentives will encourage the production of biodiesel,a clean-burning alternative fuel made from domestic renewable sources, such as soybean oil.A Grassley-Baucus amendment expanded the income tax credit to biodiesel made fromvegetable oil and animal fats.

Grassley noted that Iowa is the nation’s largest producer of soybeans and is home to twobiodiesel plants. “Our vegetable oils are plentiful, and our energy needs are great,” Grassley said.“Biodiesel is an environmentally sound way to fill the gap between energy supply and demand.”< Small ethanol producer credit. The legislation expands the definition of an eligible smallethanol producer so small cooperative producers of ethanol will receive the same tax benefitsas large companies. It also clarifies that the tax credit can flow through to the patrons of thecooperatives. Grassley’s legislation, the Tax Empowerment and Relief for Farmers andFishermen Act (TERFF) (S. 312), includes these provisions.

Grassley has a long history of promoting ethanol as a clean-burning, renewable, domesticallyproduced energy source. He scored a major victory for the Midwest when he not onlyblocked anti-ethanol efforts, but also countered by orchestrating congressional approval toextend the ethanol excise tax exemption to 2007.

< Fuel taxes. The bill moves a portion of the taxes from gasohol – gasoline blended withethanol – from the general fund into the Highway Trust Fund to ensure that fuel taxes areused for highways, not unrelated government programs. Grassley and Baucus agreed on thisissue after an energy hearing last July.

< Energy-efficient appliances. The package includes legislation Grassley originally authoredand co-sponsored in this Congress, the Resource Efficient Appliance Incentives Act (S. 686),to encourage the manufacture and use of super energy-efficient washing machines andrefrigerators with a tax credit for the production of those appliances.

< Swine and bovine waste. The package includes Grassley’s legislation, the ProvidingOpportunities With Effluent Renewables (POWER) Act of 2001 (S. 1219), which providesnew opportunities for energy production, a useful method of waste disposal and increasedfarm income by creating a production tax credit for electricity generated from swine andbovine waste.

< A new renewable fuels standard. Grassley worked with Sen. Chuck Hagel of Nebraska tohelp win support for a renewable fuels standard that has become part of the comprehensiveenergy bill. The standard calls for using 5 billion gallons of renewable fuels by 2010.< Government use of ethanol and biodiesel. The package includes a bipartisan amendmentsponsored by Grassley and Dayton of Minnesota that requires the federal government toincrease the use of ethanol and biodiesel fuels in its vehicles. The requirement will help thegovernment lead by example in using renewable fuels.

“There are few issues more important right now than America’s energy needs and the needto reduce our dangerous dependence on foreign oil and expand our use of alternative sources ofenergy,” Grassley said. “Ethanol is a particularly good alternative because ethanol can make animmediate difference for national security. We can start using more ethanol tomorrow and ramp-upquickly. It can have an impact this year and next year rather than five or ten years down the road.”