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Senator Klobuchar Testifies before Senate Energy Committee

Testimony Highlights Minnesota's Leadership on Renewable Fuel Infrastructure

July 31, 2007

Washington, D.C. – Today, U.S. Senator Amy Klobuchar (D-MN) testified before the Senate Committee on Energy and Natural Resources, Energy Subcommittee.  Klobuchar’s testimony highlighted how Minnesota’s leadership in developing renewable fuel infrastructure can be a national model.  The testimony underscored the positive impact that policies, like Minnesota’s, can have in achieving America’s energy security.

To access radio actualities click on the links below:

For Sen. Klobuchar’s full testimony click here

Sen. Klobuchar Quote click here

Senator Klobuchar’s full testimony (as prepared for delivery) is below:

Thank you, Mr. Chairman, for holding this timely hearing on the topic of renewable fuel infrastructure, and for inviting me to testify.  As you know, ethanol and biodiesel are near and dear to Minnesota, but my interest in them goes far beyond that.  Our ability to produce a reliable, low-cost, domestic source of energy has become a question of national security.

The United States spends more than $400,000 per minute on foreign oil.  That money is shipped out of our economy, adding to our enormous trade deficit, and leaving us vulnerable to unstable parts of the world to meet our basic energy needs.

There are those who would have us believe that energy security is decades away, but any Minnesota farmer can tell you that renewable fuels are here and ready to use today.  However, in spite of the clear advantages of renewable fuels to our rural economy and our energy security, we face a chicken-and-egg type of problem when it comes to the challenge of making them available to more drivers.  The auto makers are reluctant to promote flex-fuel vehicles in areas where there are no E-85 pumps, and gas stations don’t want to put in E-85 pumps where there are no flex-fuel vehicles. 

So we need to tackle both ends of the problem.  On the issue of vehicles, Mr. Chairman, I was proud to work with you to include provisions in the Senate-passed energy bill that would require automakers to equip 50 percent of their new vehicles with alternative-fuel technology by the year 2015.

On the other end of the problem – the ability to find gas stations that sell E-85 and biodiesel -- it is crucial that Congress act to provide more American drivers with access to renewable fuel pumps.

As you know, Mr. Chairman, Minnesota ranks first in the nation in E-85 infrastructure – we have 320 pumps out of 1250 in the nation – far more than any other state.  And I know, Mr. Chairman, that it’s a question of particular interest to you – how did Minnesota come to be the leader in this area?  The answer, I believe, comes down to leadership:
• Leadership in state government in setting statewide ethanol standards and providing grants for E-85 pumps.
• Leadership of the Minnesota Corn Growers, who formed a coalition with the American Lung Association of Minnesota, the National Ethanol Vehicle Coalition, and others to promote E-85 across the state. 
• Finally, leadership on the part of the ethanol producers, who have developed innovative marketing arrangements, whereby they sell E-85 directly to gas stations, and cut out the oil company-owned middleman.  In Minnesota, about 2/3 of the gas stations that sell E-85 purchase it directly from the ethanol producer, and that’s why they can afford to sell it at a price that’s attractive to consumers.

So what can we, at the federal level, learn from Minnesota’s example?  First, wherever possible, we should encourage ethanol producers to sell directly to gas stations.  Outside of Minnesota, ethanol is generally sold under long-term contract to blending terminals, which are part of the oil company-owned pipeline system.  The terminals then re-sell the ethanol to gas stations.  In essence, the price that consumers pay for ethanol is usually set by ethanol’s biggest competitor, the oil companies.  When ethanol producers sell ethanol directly to gas stations without a middleman:
• drivers get the benefit of a low-cost fuel,
• the ethanol producers collect the 51 cent-per-gallon federal blender’s credit instead of the oil companies,
• and America’s energy dollars come right back to our rural communities.

We have seen this model work well in Minnesota, pioneered by the Chippewa Valley Ethanol Company in Benson.  They currently supply roughly a hundred gas stations that sell E-85 at 60 cents below the price of gas. That’s why I have introduced a bill that would help other states follow Minnesota’s lead -- the “Ethanol Education and Expansion Act” would provide tax credits for ethanol producers to install the kind of equipment they need to sell directly to gas stations, and I would like to thank you, Mr. Chairman, for cosponsoring this legislation.

Second, we should not allow oil companies to block their franchised gas stations from selling renewable fuels.  I have heard from gas stations in Minnesota that their franchise contracts make it so difficult to sell ethanol and biodiesel that many of them just can’t do it.  They have reported cases where: 
• they’re not allowed to sell renewable fuels under the main canopy that bears the oil company’s brand name,
• they can’t convert the pumps and tanks they already have, because of a requirement to sell all three grades of gasoline,
• and they’re not even allowed to put up signs to let customers know they have renewable fuel for sale, where the pump is, or how much it costs.

I offered a “Right to Retail Renewable Fuel” amendment to the Energy Bill that would prohibit oil companies from placing restrictions on where and how renewable fuels can be sold at gas stations.  I’m pleased to report that similar language was passed by the House Energy and Commerce Committee, which will give us an opportunity to examine this issue in conference.

The third and final thing we can learn from Minnesota’s example is that a modest investment of federal dollars can yield big results on the ground.  The coalition in Minnesota that raised $9 million for E-85 pumps was started with a grant of just $250,000 from the Department of Energy. 

In closing, I would simply state that the scarcity of pumps, caused in part by the oil companies’ unwillingness to allow for competition, is the single greatest factor limiting the positive impact that renewable fuels can and should have on our nation’s energy security.  If we are serious about finding alternatives to foreign oil, we should ensure that drivers in every state have access to E-85 and biodiesel.  Thank you, Mr. Chairman.

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