Securing America’s Future – From Farm to Fuel

Recently I had the pleasure of sharing the podium with Federal Reserve Chairman Ben Bernancke in Greenville, South Carolina at a Leadership South Carolina event attended by over 700 South Carolina Business leaders. It was a welcome home for the newly appointed Fed Chair, who hails from South Carolina’s Dillon County, and I was asked to make closing comments after the Question and Answer period. In his remarks, Bernancke told the audience that, “If the recent gains in productivity growth are to be sustained, ensuring that we have a work force that is comfortable with and adaptable to new technologies will be essential.”

The first question the new Fed Chairman received from the audience was about the economically depressed I-95 corridor, which includes his hometown. He admitted that the communities along the corridor present significant economic challenges to South Carolina, a state that in the past, relied heavily on agriculture. He also remarked that educational attainment in these communities is also of great concern. These communities are in counties that are not only rural and poor, but in many instances, predominantly African American and have been neglected or ignored by state leaders for decades.

In my closing remarks I recalled growing up in Sumter when tobacco, cotton and sugar cane fields stretched for miles and miles throughout these counties that are now bisected by Interstate 95. I continued that some years ago decisions were made to toss sugarcane in favor of cotton and tobacco. Today, however, we can no longer rely on tobacco or textiles to contribute to the economic future of the nation or this region, but sugar cane and other cellulosic plants like soybeans, switchgrass, sweet potatoes, and corn definitely could.

Biofuels present a huge opportunity for America’s rural economies and energy needs, and I applaud the alternative fuel research that is underway at many of our nation’s leading colleges and universities, such as the hydrogen technology project at the University of South Carolina and the International Center for Automotive Research (ICAR) at Clemson.

While I support these initiatives, I believe their potential is more long-term. I also believe that America’s rural communities currently have the resources at their disposal to be leading forces in alternative fuel production in the near term, and they should no longer be ignored.

The 200-mile stretch of I-95 that crosses South Carolina is part of an interstate that runs the length of the East Coast from Maine to Miami, Florida. As Chairman Bernancke would agree, these communities offer a good fit to jumpstart sagging rural economies, because it won’t take much workforce retraining to transition from tobacco to cellulose crops that can be converted to biofuels.

The market is developing. One South Carolina Company, Carolina Soya and Energy in the Hampton County town of Estill, is already capitalizing on this emerging market. The company currently processes one out of every three bushels of soybeans produced in Georgia and South Carolina into meal that is used as an ingredient in animal feed. They are now investing $8 million to add a soybean oil refinery that will extract the crude oil from soybeans that can be used as biofuel. This is expected to be completed by the end of the year and the company will add 15 to 20 employees to its current workforce of 40. The company is already making plans for an expansion that will double its staff. This is a success story that can be duplicated hundreds of times over along the I-95 corridor from Maine to Florida, and around the country in rural agricultural regions in the West and Midwest.

As Chair of the House Democratic Caucus, I have been urging my fellow Democrats to support an agenda that promotes the use of home grown, American owned biofuels that could end America’s dependence on foreign oil within 10 years. The recently enacted Energy Security Act (ESA) calls for the use of at least 7.5 billion gallons of renewable fuels by the year 2012. This is meager compared to the capacity we are capable of producing and utilizing if we make a commitment to this emerging market. South Carolina alone has used over 8 million gallons of ethanol since 2003, without such an initiative in place. A celebration was held in October 2005 to commemorate one billion gallons of gasoline being displaced by alternative fuel sources. It is clear the goal set by the ESA will be met without any government action if this trend continues. In addition, at the proposed 7.5 billion gallon level, the United States will not be able to significantly reduce its dependence on foreign oil.

Some states, including South Carolina, have already enacted tax incentives for the production, distribution and use of alternative fuels. This must become part of the national agenda if we are to achieve our goal of American owned and home grown energy. To succeed in this effort, Democrats want to enact legislation that would require a phase-in of flex-fuel vehicles until 100 percent of the domestic vehicle fleet is equipped with flex-fuel capability.

In order to support these flex-fuel vehicles, House Democrats support increasing tax incentives for the conversion of gasoline pumps to biofuels or the installation of new biofuel pumps at retail stations. The phase-in would coincide with the vehicle conversions, and all stations would be required to have a flex-fuel pump by 2016. Again, South Carolina is among the top ten states in the country with retail outlets offering biofuels. The first such station in the nation opened in 2001 in Aiken, and today there are 35 stations in South Carolina and that number is growing annually. Part of the reason, South Carolina is a national leader in this emerging market is because it offers a comprehensive tax incentive package:

State law provides for a $0.20 per gallon tax credit for production of biofuels up to 25 million gallons per year. The incentive goes up to $0.30 per gallon for the first 3 million gallons each year and $0.20 per gallon for the next 22 million gallons annually for biofuels produced from yellow grease, animal renderings or any feedstock except soybean oil.

$300 sales tax rebates for all in-state purchases of flex-fuel vehicles
five cents per gallon incentive payment to retailers for each gallon of ethanol or biodiesel sold.

These state incentives are in addition to current federal law, which allows small ethanol producers a 10 cent-per-gallon production income tax credit up to 15 million gallons of production annually. Thus, the credit is capped at $1.5 million per year per producer. A small ethanol producer is defined by the production of 60 million gallons per year or less. This tax incentive is set to expire in 2010, but House Democrats want to extend it through 2015.