Copyright 2000 Federal News Service, Inc.
Federal News Service
June 28, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 1378 words
HEADLINE:
PREPARED TESTIMONY OF DOUG WILSON FARMER FROM NORTH CENTRAL ILLINOIS AND
IMMEDIATE PAST PRESIDENT THE ILLINOIS CORN GROWERS ASSOCIATION
BEFORE THE HOUSE COMMITTEE ON GOVERNMENT REFORM
BODY:
Mr. Chairman and members of the
committee, thank you for the opportunity to discuss the impact of rising
gas prices on farmers and our perspective on the right solution to this
preventable problem.
My name is Doug Wilson. I am a farmer from north
central Illinois and immediate past president of the Illinois Corn Growers
Association. I am also a former board member for the National Corn Growers
Association and I serve on the NCGA Public Policy Action Team. I am testifying
this morning on behalf of NCGA and more than 30,000 farmers in 48 states who
make up the association's membership.
Let me make one thing clear right
off the bat - no group suffers more from skyrocketing fuel prices than farmers.
This year, the typical corn farmer will pay a whopping $5,000
more for fuel than he or she did last year. For many of us, especially family
farmers like myself - that's a giant chunk out of our wallets. It will have a
devastating impact on our ability to make ends meet. Why has this occurred?
Because fuel costs have increased phenomenally since last year's harvest. At my
local petroleum supplier in Livingston County, Illinois, the price of gasoline
has increased 64 percent, and the price of diesel fuel is up 73 percent. Most of
our equipment is made to run on diesel - in fact, U.S. agriculture uses almost
four billion gallons of diesel fuel every year. Consequently, American farmers
will be spending approximately $2 billion more to plant and
harvest this year's crop.
And, as these higher fuel prices persist, we
are looking at higher costs for agricultural chemicals and farming fuels and
supplies as well. For instance, the cost of anhydrous ammonia, one of the most-
used fertilizers for corn, is up $50 per ton in my area just
the last five weeks. This is because of increasing demand for the natural gas
from which it is made.
Farmers are paying through the nose despite a
record in energy conservation that is second to none. By switching to more fuel-
efficient machinery, adopting conservation practices, reducing tillage and
becoming smarter about pest management, farmers' energy consumption has declined
by nearly 30 percent since 1978. At the same tune, corn yields have increased
more than 22 percent. We are doing everything we can - and then some - to be
environmentally responsible and hold down our costs while maximizing our
productivity.
So let me repeat - there is no one out there with a
greater stake in reducing energy costs than American farmers. Which is why we
want to be doubly and triply sure that any action Congress takes addresses the
real causes of the problem.
Let's start with what is most assuredly not
the cause of the problem - Phase 2 of the Clean Air Act's reformulated gas (RFG)
program.
Big Oil would have you believe that consumers have been paying
$2.30 a gallon and more for gasoline in the Midwest because of
the costs of complying with the more stringent Phase 2 clean fuel guidelines
that took effect this year, particularly in areas like Chicago and Milwaukee
where corn-based ethanol is used to make cleaner-burning RFG.
During the
summer months, refiners must use a special lower-volatility gasoline to blend
with ethanol to make Phase 2 RFG. Yes, this lower- volatility gasoline costs
slightly more, but the U.S. Environmental Protection Agency has repeatedly
emphasized that it should add no more than five to eight cents per gallon to the
total cost.
On the other hand, consider the fact that a gallon of
ethanol delivered to Chicago/Milwaukee market is currently selling for
$1.28 to $1.32 a gallon - well below the
current price of gasoline. This means that blending less-expensive ethanol into
gasoline actually reduces the cost of the finished gasoline. If we were not
using ethanol in RFG in places like Chicago and Milwaukee, gasoline prices could
be even higher than they are today.
But despite the economic and
environmental benefits of using ethanol in RFG, EPA hasn't helped matters
either. Despite our repeated urging, the agency has failed to make appropriate
regulatory changes that could reduce the cost of producing Phase 2 RFG. Current
EPA rules fail to give ethanol credit for its significant carbon monoxide
reduction benefits. If these environmental benefits were fully accounted for,
refiners could blend ethanol into their RFG much more cheaply and easily. But as
the rules stand now, there's actually a disincentive to use ethanol in RFG.
Corn growers and ethanol manufacturers long ago geared up to meet the
demands of Phase II RFG. With 58 facilities in 19 states, producers are making
ethanol at a rate that exceeds 1.6 billion gallons per year. That means the
United States is using 1.6 billion gallons LESS of gasoline than we would be
otherwise. And we can easily make more ethanol to meet increased demand.
So from both a price and supply standpoint, you reach the inescapable
conclusion: Ethanol is not the problem - it's the solution!
So why have
gasoline prices gone so high?
No one seems to know the answer. But one
thing we know for sure is this: Something smells in the barnyard.That's why we
asked the Federal Trade Commission to investigate. And why we applaud your
looking into the problem, too.
The facts just don't add up: Crude oil
prices have leveled off - so they cannot account for the recent price rise. The
supply of crude is plentiful, at least if you believe ExxonMobil's recent
statement that the company exceeded 100 percent replacement of its oil and gas
reserves for the sixth year in a row. But meanwhile, oil companies have allowed
gasoline inventories to drop to alarmingly low levels in many areas. And despite
having had five years to prepare for Phase 2 RFG, refiners failed to build
adequate supplies of low-volatility gas to blend with ethanol. Ethanol-blended
gasoline should be selling for less than conventional gasoline. But since April,
both RFG and conventional gasoline prices have risen at close to the same high
rate - 34 percent and 29 percent respectively.
So, are we looking at
price gouging by the oil industry? Or is this a cleverly orchestrated attempt to
create a so-called crisis in order to get rid of the RFG requirement - which Big
Oil has never liked despite RFG's proven benefits to the environment and
consumers? Or is something else is at work?
My hope is that your good
work and that of the FTC will get to the bottom of the matter.
I also
hope you will use this occasion as a unique opportunity to craft a more rational
national energy policy -- one that expands the use of renewable fuels such as
ethanol and domestic energy sources such as oil, coal and natural gas. By
reducing our dangerous dependence of foreign oil, we can benefit the environment
while increasing our energy security.
I'd like to read you a quote from
four individuals who are among America's most distinguished national security
leaders: Retired Air Force General Lee Butler, former National Security Advisor
Robert McFarlane, former CIA Director R. James Woolsey, and the former Chairman
of the Joint Chiefs of Staff, Admiral Thomas Moorer:
Sitting on only 3
percent of the world's reserves while using 25 percent of the world's oil,
nothing could be more short-sighted than for Americans to abandon the incentives
for producing transportation fuel from sustainable sources. Such an abandonment
would entrust the future of our energy supplies, and of key aspects of our
security, to the potpourri of psychopathic dictators, such as Saddam (Hussein),
and vulnerable autocrats who control over three-quarters of the world's supply
of oil.
Mr. Chairman and members of the committee, I hope you will heed
those wise words. And I hope you will recognize that ethanol remains the answer
- as the only fuel that is made from all-American sources, that is 100 percent
renewable, that is clean burning and improves the quality of our air, that does
not pollute the water, and that is eminently affordable. It benefits our
national security, our environment, our economy and the American people. And it
would be a tragedy if its use was impeded in any way as a result of what the oil
companies are doing today.
Thank you for your time and I will be pleased
to take your questions.
END
LOAD-DATE: July 1,
2000 
