[Senate Hearing 106-863]
[From the U.S. Government Publishing Office]
S. Hrg. 106-863
MTBE CRISIS AND THE FUTURE OF BIOFUELS
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
SUBCOMMITTEE ON RESEARCH, NUTRITION AND GENERAL LEGISLATION
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
ON
MTBE CRISIS AND THE FUTURE OF BIOFUELS
__________
April 18, 2000
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
U.S. GOVERNMENT PRINTING OFFICE
68-611 CC WASHINGTON : 2000
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
RICHARD G. LUGAR, Indiana, Chairman
JESSE HELMS, North Carolina TOM HARKIN, Iowa
THAD COCHRAN, Mississippi PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky KENT CONRAD, North Dakota
PAUL COVERDELL, Georgia THOMAS A. DASCHLE, South Dakota
PAT ROBERTS, Kansas MAX BAUCUS, Montana
PETER G. FITZGERALD, Illinois J. ROBERT KERREY, Nebraska
CHARLES E. GRASSLEY, Iowa TIM JOHNSON, South Dakota
LARRY E. CRAIG, Idaho BLANCHE L. LINCOLN, Arkansas
RICK SANTORUM, Pennsylvania
Keith Luse, Staff Director
David L. Johnson, Chief Counsel
Robert E. Sturm, Chief Clerk
Mark Halverson, Staff Director for the Minority
(ii)
C O N T E N T S
----------
Page
Hearing:
Tuesday, April 18, 2000, MTBE Crisis and the Future of Biofuels.. 1
Appendix:
Tuesday, April 18, 2000.......................................... 43
Document(s) submitted for the record:
Tuesday, April 18, 2000.......................................... 97
----------
Tuesday, April 18, 2000
STATEMENTS PRESENTED BY SENATORS
Fitzgerald, Hon. Peter G., a U.S. Senator from Illinois,
Chairman, Subcommittee on Research, Nutrition and General
Legislation, Committee on Agriculture, Nutrition and Forestry.. 1
----------
WITNESSES
PANEL I
LaHood, Hon. Ray, a U.S. Representative from Illinois............ 3
Shimkus, Hon. John, a U.S. Representative from Illinois.......... 5
PANEL II
Hampton, Joe, Director, Illinois Department of Agriculture,
Springfield, IL................................................ 14
Skinner, Thomas, Director, Illinois Environmental Protection
Agency, Springfield, IL........................................ 12
Zaw-Mon, Merrylin, Director, Transportation and Regional Programs
Division, U.S. Environmental Protection Agency, Washington, DC. 8
PANEL III
Corzine, Leon, President, Illinois Corn Growers Association,
Assumption, IL................................................. 20
Quandt, Larry, President, Illinois Farmers Union, Mason, IL...... 27
Vaughn, Eric, President, Renewable Fuels Associaiton, Washington,
DC............................................................. 25
Warfield, Ron, President, Illinois Farm Bureau, Gibson City, IL.. 23
PANEL IV
Brinkmann, Darryl, Illinois Representative, American Soybean
Association, Carlyle, IL....................................... 38
Donnelly, Brian, Executive Director, SIUE Ethanol Pilot Plant,
Edwardsville, IL............................................... 36
Holt, Donald, Senior Associate Dean, College of Agriculture,
Consumer, and Environmental Sciences, University of Illinois,
Urbana-Champaign, IL........................................... 34
----------
APPENDIX
Prepared Statements:
Fitzgerald Hon. Peter G...................................... 44
LaHood, Hon. Ray............................................. 48
Shimkus, Hon. John........................................... 49
Brinkmann, Darryl............................................ 94
Corzine, Leon................................................ 70
Donnelly, Brian.............................................. 92
Hampton, Joe................................................. 63
Holt, Donald................................................. 87
Quandt, Larry................................................ 85
Ryan, George................................................. 46
Skinner, Thomas.............................................. 67
Vaughn, Eric................................................. 76
Warfield, Ron................................................ 72
Zaw-Mon, Merrylin............................................ 56
Document(s) submitted for the record:
Position statement, submitted by Lynn Jensen, President, on
behalf of the National Corn Growers Association............ 98
Position statement, submitted by Hon. Richard J. Durbin...... 99
Position statement, submitted by Jim Ryan, Attorney General,
Springfield, Illinois...................................... 101
Position statement, submitted by Rudy Rice, President, on
behalf of the National Association of Conservation
Districts.................................................. 103
Position statement with attachments, submitted by Alvin M.
Mavis, Rochester, Illinois................................. 104
`Ethanol' Brief Report on it use in gasoline: Expected
Impacts and Comments of Expert Reviewers, submitted by
Sarah R. Armstrong, M.S., M.S., Cambridge Environmental
Inc. on behalf of the Renewable Fuels Association.......... 121
MTBE CRISIS AND THE FUTURE OF BIOFUELS
----------
TUESDAY, APRIL 18, 2000
U.S. Senate,
Subcommittee on Research, Nutrition, and General
Legislation, of the Committee on Agriculture, Nutrition,
and Forestry,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:10 a.m., in
room 400, State Capitol Building, 2nd and Capital Street,
Springfield, Illinois, Hon. Peter G. Fitzgerald, (Chairman of
the Subcommittee,) presiding.
OPENING STATEMENT OF HON. PETER G. FITZGERALD, A U.S. SENATOR
FROM ILLINOIS, CHAIRMAN, SUBCOMMITTEE ON RESEARCH, NUTRITION
AND GENERAL LEGISLATION, COMMITTEE ON AGRICULTURE, NUTRITION,
AND FORESTRY
The Chairman. I would like to call this meeting to order.
Thank you all for being here. This marks the opening of the
field hearing of the U.S. Senate Committee on Agriculture,
Nutrition and Forestry and this is a subcommittee hearing of
the Subcommittee on Research, Nutrition and General
Legislation, and I am Chairman of that subcommittee. Thank you
all for being here. I appreciate having so many people here
from Illinois as well as those from Washington who have come
here to testify.
In a few moments we will start with Congressman Ray LaHood
and John Shimkus from the heart of Illinois. I would just like
to open this meeting with a few comments.
We are now at a crossroads in the ethanol industry.
Illinois is the largest ethanol producing state in the Nation
and the second largest corn producing state in the Nation. I
think, in terms of yields per acre, we are still number one in
the Nation as I like to remind my good friends from Iowa, Chuck
Grassley and Tom Harkin. But right now there are competing
proposals on what to do with our Nation's air pollution
situation. And how to deal with the gasoline additive methyl
tertiary butyl ether [MTBE] . Going back to last summer, the
Environmental Protection Agency in Washington had a blue ribbon
panel that came out with a report suggesting that our Nation
should phase out and ultimately ban the use of MTBE as an
additive in our reformulated gasoline.
MTBE has been used for many years, probably going back to
the 1970's. It was first used a gasoline additive after the use
of lead was banned in gasoline. After lead was banned, oil
producers needed something that would enhance the octane level
of reformulated gasoline; and thus the oxygenated, MTBE, came
into popular production.
In 1990, Congress amended the Clean Air Act to require all
fuel sold in the Nation's largest, and most polluted cities to
contain an oxygenate additive that would help reformulated
gasoline burn more cleanly. In order to comply with these
regulations gasoline had to contain at least 2-percent oxygen
by weight.
Since 1990, reformulated gasoline has been required by the
Clean Air Act to be blended with an oxygenate, in all the large
smog-filled cities, or ozone non-attainment areas. Most
(roughly 85%) of the reformulated gasoline used in this country
is blended with the oxygenate MTBE. Ethanol is used in about 8-
percent of our nation's reformulated gasoline; primarily in the
mid-west. But for all intents and purposes, only Chicago and
Milwaukee are using ethanol as their oxygenate additive in
their fuel. Most of the rest of the country is using MTBE.
It turns out, however, that Illinois has been very lucky
that we have been using ethanol. It has recently come to light
that many of those cities 2nd municipal lines where gasoline
has been blended with are finding severe contamination in their
drinking water.
According to the Environmental Protection Agency's blue
ribbon panel, MTBE, in very small amounts, can yield water
undrinkable. One cup of MTBE can contaminate, and make
undrinkable, a 5-million gallon water tank. Additionally, MTBE
has properties that make it resist degrading. If gasoline
blended with MTBE leaks out of an underground storage tank,
most of the gasoline will just leak out and ultimately be eaten
by the microbes in the soil. But the MTBE will resist
degradation and rapidly seep into the ground water, where even
the smallest concentrations can make the ground water
undrinkable.
Even though MTBE is not popularly used in Illinois, it has
been found in many wells around the state. I believe 26 is the
number. Twenty-six wells in Illinois that have detected some
level of MTBE. In other parts of the country, California, for
example, MTBE has been detected large amounts. There are
numerous stories of cities that have almost shut down because
of MTBE in their drinking water. Sixty-Minutes did a report
about a small town in California that literally dried up when
they started detecting MTBE in their water.
Many seem to agree that we should ban MTBE. The question
now is, though, how do we go about doing that? Do we simply ban
MTBE and keep the oxygenate requirement in our fuel? If that
were to happen, would that mean that ethanol would simply
immediately capture the entire MTBE market? That is one
possible solution to this problem.
The other potential solution is to go in and amend the
Clean Air Act and do as the administration has suggested, and
repeal the oxygenate requirement in our fuel. The
administration has suggested that we should repeal the
oxygenate requirement, but replace it with a renewable fuels
requirement. Specifically, their proposal is that, of all the
gasoline sold in the United States, approximately 1.2-percent
of that gasoline should be a renewable source of fuel,
presumably ethanol. It looks to us that 1.2-percent of all the
gasoline sold in the country would be roughly the market
ethanol now has, where it is being sold for our nation's
reformulated fuels program.
Those are the issues we want to discuss. The other thing
that we are going to discuss today is should the EPA, or will
the EPA, grant the waiver request that the state of California
has made. California has requested that it waive out of the
Clean Air Act's requirement that their fuel be reformulated. My
understanding is Missouri has also requested such a waiver.
What would be the affect of such waivers be if we start
seeing those being granted by the EPA? With that, with those
opening comments, I am going to ask for unanimous consent to
submit a written statement to the record from myself. Since I
am the only Senator here, I will grant myself unanimous
consent. And I want to welcome my good friends and colleagues,
Representatives Ray LaHood and John Shimkus. I know they have
both been very active in Illinois agriculture for a number of
years now and they have been leaders in the House of
Representatives, fighting for Midwestern farmers. I welcome you
here. And thank you for having me in your district because both
of you represent different parts of the city of Springfield.
But thank you all for being here. And Congressman LaHood,
would you like to start first? We appreciate all that you have
done for agriculture. And thank you for showing your interest
in being here today.
[The prepared statement of Senator Fitzgerald, can be found
in the appendix on page 44.]
STATEMENT OF HON. RAY LAHOOD, A U.S. REPRESENTATIVE FROM
ILLINOIS
Mr. LaHood. Mr. Chairman, thank you very much. Let me begin
by saying that it is a treat for those of us on Agriculture
Committee of the House to have you in the Senate, on the
Agriculture Committee. For those people gathered here today who
do not know it, you and I have worked very closely on file bill
that you have passed in the Senate and we have now passed in
the House and I think it is a bill that can be signed by the
President that will really bring agriculture into the 21st
Century by allowing farmers to electronically file all the
paperwork with their FS offices and your leadership in the
Senate is very much appreciated.
And then our work on the crop insurance bill, where we are
trying to really make some sense out of a crop insurance
program that has not worked very well, and I know you have
spent some time on that, and we have now passed a bill that
hopefully, in a conference committee, which is going on right
now, we will get it back to both the House and the Senate. So I
think we have a number of good things that we have accomplished
for agriculture, and we could not have done it without your
leadership. And I am grateful to you for your service on the
agriculture committee, and the way that we have been able to
work so closely together on a couple of real, real important
bills that will have a tremendous impact on agriculture
generally, but certainly on our state of Illinois and on the
farmers that we represent. So thank you so much for your
leadership that you have provided over there. It is great to
have you there.
John and I represent, together between the two of us, 33
counties in Illinois, which is about a third of the state. And
a good part of what we represent is agriculture and farmers,
and I think I have more ethanol producing plants in my district
than any district in the country. I have two plants in Pekin,
Pekin Energy and Midwest Grain; the ADS facility in Peoria; and
I also represent part of Macon County which had a dominance of
ADM there, too. So when we talk about ethanol, it is something
near and dear to my heart because of the jobs that are provided
by the ethanol industry in the 18th District and then all of
the jobs that are provided for the raw material that is
provided through the corn that is used to make ethanol.
I would like to read in part my statement because I know
that this hearing is so important. And the recent reports over
MTBE, contamination of ground water wells, have provided us an
opportunity to insure that ethanol will emerge as the primary
oxygenate in the reformulated gasoline program. I am really
encouraged by the meeting that we had with Administrator
Browner and Secretary Glickman where it was really a meeting to
address the problem with MTBE and I believe that we need to
take the proposal a couple of steps further to insure that we
protect our ground water from MTBE, while at the same time
maintaining the clean air that we have achieved under the
reformulated gasoline [RFG] program.
I believe the best approach would be to amend the Clean Air
Act in order to allow oil manufacturers to address the
volatility of ethanol during warm weather and maximize the
blending formation of their gasoline. However, this approach
would be very difficult to achieve in the near term, which is
why I am supporting of efforts, I am very supportive of efforts
in Congress to ban MTBE. I know Congressman Shimkus will talk
about a bill that he and Congressman Ganske have introduced and
I know there is similar legislation in the Senate. And I
believe the administration.
And I have said this before, and I said it to Ms. Browner
and Secretary Glickman. This administration has had a good
record on ethanol, a very good record, for seven, 8-years. Vice
President Gore made the tie-breaking vote in the Senate to
extend the ethanol credit to 2007. Where it was a 50-50 tie, he
did make the tie-breaking vote, and so I give them a great deal
of credit.
But as I told Ms. Browner at the meeting that we had, Mr.
Chairman, I think it would be a terrible mistake for them to
allow California to opt out of this program. That will open the
flood gates to a lot of other northeastern states to make
application to opt out. California is a huge state. They have
made a lot of progress, but they can make a lot more progress
if they eliminate MTBE and begin to use alcohol, and to allow
them to opt out, I think would send a very, very bad message
all over this country, and I think it would destroy the good
record that they have had and maintained over the last 8-years.
So I am very much opposed to them doing that, and I made that
very clear.
Banning MTBE and encouraging greater use of ethanol in the
RFG program will benefit the environment. It will also help our
beleaguered farm economy at a time when commodity prices are at
a historic low. Increased use of ethanol will provide a
valuable market for corn. For every 100-million bushels of corn
used in the production of ethanol, the price of corn increases
by approximately five cents. This increase in price could mean
the difference between solvency or bankruptcy for many corn
producers in Illinois and throughout the country.
So again, I appreciate your bringing your hearing right
here in the heartland, right smack dab in the middle of
Illinois, where we produce so much corn. And say, again thanks
for your leadership and allowing us to sound off for a few
minutes on some aspects of ethanol. Thank you very much.
The Chairman. Well, thank you, Congressman LaHood, and
thank you also for convening that meeting with Secretary
Glickman and Administrator Browner last week. It was very
productive. And you bring up an excellent point about the
importance of the EPA denying California's waiver request. I
share your concerns. If they grant that request, there are
going to be a lot of states that may request waivers and that
could be trouble for the ethanol program. Thank you much.
[The prepared statement of Representative LaHood, can be
found in the appendix on page 48]
John Shimkus, thank you for being here. It is good to have
you here.
STATEMENT OF HON. JOHN SHIMKUS, A U.S. REPRESENTATIVE FROM
ILLINOIS
Mr. Shimkus. Thank you, Mr. Chairman, and thank you for
calling the hearing, and your efforts. Thank you for allowing
me to testify along with my colleague Ray LaHood about the
phasing out of the MTBE and increasing our use of bio-fuels
such as ethanol. And I say bio-fuels because, of course, our
personal favorite in Illinois ethanol produced by corn. But
there are other types of bio-fuels programs that can help meet
the demand, rice grown in California is an example of issues
that we deal with in the Congress committee as far as the bio-
fuels program.
But in my tenure as a member of Congress I have never seen
a better climate to increase the use of ethanol than we have
here and now. We really need to strike while the iron is hot.
With gas prices having reached almost two dollars a gallon and
corn prices just over two dollars a bushel, we can produce a
product that will help our energy supply, which is also a major
focus I think that we need to keep in mind, while increasing
the demand for our corn farmers.
With that in mind, I am here today to discuss recent
proposals to phase out the use of MTBE, a hazardous fuel
additive and an ethanol competitor. As you well know, the
administration recently offered its legislative principles in
response to the MTBE crisis. We talked about that at our
meeting just last week.
The administration is asking for three legislative
responses. They want to amend the Clean Air Act to provide the
authority to significantly reduce or eliminate MTBE use. As
MTBE use is reduced or eliminated, to insure that air quality
gains are not diminished. They call that the anti-backsliding
clause. They want to replace the existing oxygenate requirement
contained in the Clean Air Act with a renewable fuel standard,
as you mentioned, for all gasoline at a level that maintains
the current level of renewable fuel, 1.2-percent of the
gasoline supply and allows for sustained growth over the next
decade.
While I support the first two principles, I need to express
my reservations about eliminating the oxygenate requirement in
reformulated gasoline. And I agree with my colleague,
Representative Greg Ganske from Iowa when he said in a hearing,
we want to fix real problems like MTBE and water contamination
and not abandon real solutions like oxygenated fuels. We need
to understand that mathematically under the administration's
proposal, not as much ethanol would be used per gallon as the
current law, and that has a lot of us concerned.
And the debate in the Committee, as we have addressed this
now 2-years in a row, was you can have clean air and you can
have clean water. The solution is ethanol. Just to throw the
baby out with the bath water, eliminating the oxygenate
standard, it is an incredible debate, that what you are getting
is dirtier air. And so we have got to focus on a couple of
things. Clean air, clean water and also our energy security
which we deal with a lot in the Energy and Power Subcommittee
of the Committee.
As a result my colleague, which shares a large portion of
the district and borders, Congressman LaHood, is helping co-
sponsor the legislation that Greg Ganske of the chief original
sponsor of the Clean Air and Water Preservation Act of 2000.
Our bill currently has 37 other co-sponsors and is supported by
the American Farm Bureau, the National Corn Growers Association
and the Renewable Fuels Association.
This legislation bans MTBE within 3-years and urges
refiners replace it with ethanol; requires labels be placed on
all pumps dispensing MTBE-blended fuels, giving consumers
knowledgeable choice. I think that is always critical in this
debate. Directs the U.S. EPA to provide technical guidelines to
help states remove MTBE from ground water. We have to help fix
the program that MTBE has caused. Give refiners flexibility to
blend oxygen with the 2-percent requirement, thus addressing
some of the debate issues that we have with Chicago and the
warmer air. If it is averaged out, we see that as a better
solution.
Prohibits environmental backsliding by raising the
standards on emissions reductions and prohibiting an increase
in the use of the gasoline aromatics. In our debate about these
new gasoline standards, if you take out the oxygen, they are
talking about new mixes of fuels. And one issue that was
brought up in our hearings countless times was an increase in
aromatics which is toxic. So this anti-backsliding clause is a
very critical part of this debate. And the clean air standards
have to be maintained because they have been successful. Our
air is cleaner. The reason why it is cleaner is because of the
oxygen standard and the fact that it forced, it allows gasoline
to burn hotter and it burns up all that nasty stuff. And it is
a proven fact that the oxygen requirement cleans the air. We
have now polluted water, and that polluted water because of
MTBE and not ethanol.
Overall this bill will help clean up MTBE contaminated
water supplies. It will preserve clean air accomplishments of
the past decade and will provide a renewable energy source
which will decrease our dependence on foreign oil and improve
our agricultural economy.
Last week, with the leadership of Ray LaHood we had that
meeting that he mentioned with Secretary Glickman and the
Administrator Browner and members of the Illinois, Missouri
delegations, also we had colleagues from Nebraska and I think
Minnesota, too. I hope that in the future we can continue to
sit around the table and work on a solution to phase out MTBE
and increase demand for ethanol. I applaud all my colleagues
who attended the meeting. I think there was a consistent
message given to the administration.
Again the time is now to make changes, and I appreciate the
work that everyone has been doing. However, I must make special
mention of the work that you have done, Mr. Chairman, since
coming to Washington. For many of us from downstate, we were
watching anxiously as you moved to Washington, to see, to help
us fight for the interest of Illinois. We are all tickled pink
that you chose to lobby to get on the Ag Committee, as
Congressman LaHood has said, your work there has been
courageous and we needed a voice on the Ag side, on the Ag
Committee on the Senate, so much that I think Ray and I are
going to try to propose that we make you an honorary member of
the House Renewable Fuels Caucus. That is still up to debate,
based upon our success of the pending legislation in front of
us. But we do really appreciate your commitment to downstate
and the agricultural interest.
And as we continue to move forward, you have our commitment
to work with you to make sure that our agriculture sector, our
family farms are not left behind and that we accomplish what
was attempted to accomplish under the Clean Air Act. But we
want clean air. We want clean water. And we want, we no longer
want to be solely reliant on foreign oil by having renewable
fuels program and a national energy policy that can meet all
three needs, with working together, and pressuring the
administration. I think we can get there. Thank you for the
hearing. If you have any questions, I am sure Ray and I would
be happy to answer them.
[The prepared statement of Representative Shimkus, can be
found in the appendix on page 49.]
The Chairman. Well, Congressman Shimkus, thank you very
much. I appreciate your testimony. I just have one or two
questions for both of you. My understanding is that about 16-
percent of the corn that is sold in Illinois goes for ethanol
production. The figure nationwide is less. I think it more
like, 6-percent or below of all the corn nationwide goes for
ethanol.
In your districts and specifically Congressman LaHood, do
you think even more of your corn than 16-percent goes to
ethanol production with those ethanol plants you have?
Mr. LaHood. All I know is this. I know that ADM in Decatur
uses about 350, excuse me, ADM in Decatur uses about 500,000
bushels of corn a day. In Peoria it is about 250,000 bushels of
corn a day strictly for ethanol. And I have to believe that
what the administrator said about Chicago for the summer, that
will be very helpful for ethanol production. I do not know the
figure for Pekin Energy which is now Williams Company or
Midwest Grain, but I am sure it is significant and I think the
use of corn in Central Illinois I think would go up
dramatically, given the opportunity to make the standard
different.
The Chairman. Congressman Shimkus, do you have any ethanol
plants in your district?
Mr. Shimkus. We are working diligently to get an ethanol
pilot plant at SIU to help, you know, the industry have a
location in research and development to help lower the cost.
But of course, I border on all the other areas, and remember,
distance does equal cost. We benefit greatly just by being
close to the proximities of Peoria and Decatur.
And as far as the cost, I see your Agricultural Legislative
Director here Terry Van Doren, and he probably could answer
that question about my district better than I could. And it is
good to see him here. You are well served by him.
The Chairman. Well, Congressmen, thank you both very much
for being here and I look forward to working with you as we
resolve these issues in Washington. Thank you, all, very much.
And now it is time for the second panel, and you can please
come up there and take a seat. We will put your name tags up
there.
On this second panel we have Joe Hampton who is the
distinguished director of the Department of Agriculture. Joe,
you have been doing a great job. I visited with you many times
in Washington and here, and thank you so much for being here.
We have Tom Skinner who is doing an excellent job as
director of the State's Environment Protection Agency. Just as
I visited with Joe, I saw you in Washington just last week. You
were at that meeting with Administrator Browner and Secretary
Glickman. Thank you very much for being here.
And Merrylin Zaw-Mon from the Environmental Protection
Agency in Washington. You are the director of the
Transportation and Regional Programs Division of the U.S. EPA,
and you traveled from Washington to be here. Thank you very
much for making the trip. We appreciate it.
Merrylin, if you would like to begin first, we would
appreciate hearing from you, then we will go to Tom Skinner and
then Joe Hampton.
STATEMENT OF MERRYLIN ZAW-MON, DIRECTOR, TRANSPORTATION &
REGIONAL PROGRAMS DIVISION, OFFICE OF TRANSPORTATION AND AIR
QUALITY, U.S. ENVIRONMENTAL PROTECTION AGENCY, WASHINGTON, DC.
Ms. Zaw-Mon. Thank you, Mr. Chairman, for the invitation to
appear here today. I am pleased to have this opportunity to
share information with the Committee on the Administration's
recommendations and plans to reduce or eliminate MTBE and boost
the use of alternatives.
The Chairman. Would you speak into that microphone? Use the
other microphone and put that one right here. Thank you.
Ms. Zaw-Mon. Is this better?
The Chairman. That is better.
Ms. Zaw-Mon. OK. And also boost the use of alternatives
like ethanol that pose less of a threat to ground water. The
Administration's response includes taking regulatory action
under the authorities that it currently has available, and
working with Congress to implement the legislative principles
that we recently announced to protect ground water, maintain
clean air benefits and promote greater production and use of
renewable fuels.
Last month Administrator Browner and Secretary Glickman
submitted to Congress legislative principles which have been
discussed earlier, and I would like to reiterate that these
three principles, taken together, will lead to an
environmentally sound and cost effective approach.
The first principle is to ask Congress to amend the Clean
Air Act to provide the authority to significantly reduce or
eliminate MTBE. Second, as MTBE is eliminated we must preserve
the clean air benefits. This was the anti-backsliding provision
that Congressman Shimkus referred to earlier.
Third, the existing oxygenate requirement in the Clean Air
Act should be replaced with a renewable fuel standard for all
gasoline, not just the reformulated fuels. And we would expect
that this renewable fuel standard would grow over the next
decade. By preserving and promoting continued growth in
renewable fuels, particularly ethanol, this action will
increase farm income, create jobs in rural America, improve our
energy security and protect the environment.
Allow me to present a brief history of the Federal
Reformulated Fuels Program in order to put the issues
surrounding the use of oxygenates, MTBE and ethanol, in
perspective. As you know, the Clean Air Act amendments of 1990
put into place a number of programs to achieve cleaner air, and
these included cleaner motor vehicles and cleaner fuels. These
programs have been extremely successful in reducing air
pollution.
Congress stuck the balance between vehicle and fuel
emissions control programs after extensive deliberations, and
in order to serve several Congressional goals, including air
quality improvement, enhanced energy security by extending the
gasoline supply through the use of oxygenates and encouraging
the use of renewable energy sources.
The Federal Reformulated Gasoline Program introduced
cleaner gasoline in 1995, primarily to reduce smog levels or
ozone levels. Unhealthy ozone levels are still of concern in
many areas of the country, with over 30 areas still in non-
attainment of the current 1-hour ozone standard. Ozone has been
linked to a number of health effects concerns. Repeatedly
exposures may increase susceptibility to respiratory infection,
cause lung inflammation and aggravate preexisting respiratory
diseases such as asthma. Other effects attributed to ozone
exposures include significant increases in lung function and
increased respiratory symptoms such as chest pain and coughing.
The young and the elderly are particularly susceptible to
ozone.
The Reformulated Fuel Program is an effective way to reduce
smog precursors such as volatile organic compounds and oxides
of nitrogen. The Clean Air Act amendments of 1990 require that
RFG contain 2-percent minimum oxygenate content by weight. The
first phase of the Reformulated Fuels Program from 1995 to 1999
required average reduction of smog forming volatile organic
compounds and toxics of 17-percent each, and a minimum oxide
reduction of 1.5-percent. In practice, however, the clean air
benefits of this program have far exceeded the requirements,
and these are the benefits that we are seeking to preserve.
This year the second phase of the Reformulated Fuel Program
will achieve even greater air benefit, an average of 27-percent
reduction in volatile organic compounds, 22-percent reduction
in toxics and a 7-percent reduction in oxides of nitrogen
emissions.
These reductions for the Reformulated Fuel Program are
equivalent to taking 60-million cars off the roads. States rely
on the air quality benefits of the Reformulated Program, to
demonstrate in their state implementation plans that they can
achieve the ozone standard. 17 states and the District of
Columbia are relying on air quality benefits associated with
the Reformulated Fuels Program.
The Reformulated Fuels Program is required in ten
metropolitan areas that have the most serious ozone pollution
levels; however, many other areas of the country, including the
northeast, Texas, Kentucky and Missouri have elected to join or
opt into Reformulated Fuel Program as a cost effective measure
to combat the ozone air pollution they are experiencing in
their jurisdictions.
At this time approximately 30-percent of the Nation's
gasoline consumption is cleaning burning RFG. It should be
noted that neither the Clean Air Act nor the EPA requires the
use of specific oxygenates in the Reformulated Fuels Program.
The statute and subsequently EPA's regulations only specify the
oxygen content by weight. They do not specify which oxygenate
to use. Both ethanol and MTBE are used in the current RFG
program but as you pointed out, Mr. Chairman, many fuel
providers are choosing to use MTBE in about 85- to 87-percent
of the RFG, mainly because of cost and ease of transport
reasons.
Despite the air quality benefits of oxygenates in RFG there
is significant concern about contamination of drinking water in
many areas of the country including California and Maine. And
you are absolutely correct in that some areas of California
have had to go to an alternative water supply because the water
supply was contaminated by MTBE. EPA obviously is very
concerned about the widespread detection of MTBE in drinking
water. And current levels of MTBE in ground and surface waters
are at low levels.
The United States Geological Survey has found that the
occurrence of MTBE in ground water is strongly related to its
use as a fuel additive in that area. Low levels of MTBE were
detected in 21-percent of ground water in areas where MTBE is
used under the Reformulated Fuels Program as compared to 2-
percent detections in areas using conventional gasoline.
In response to concerns associated with the use of
oxygenates in gasoline, the Administration established the blue
ribbon panel that you referred to earlier. It included leading
experts from public health and scientific communities, water
utilities, environmental groups, industry and state and local
government, to assess issues opposed by the use of oxygenates
in gasoline.
The panel's recommendations have been used by the
Administrator and the Administration to formulate the
legislative principles that have been brought before Congress.
EPA has also initiated a number of actions to deal with the
panel's recommendations. These include developing a secondary
drinking water standard under the Safe Drinking Water Act
establishing a water quality standard under the Clean Water
Act, and enhancing underground storage tank program compliance
to 90-percent level this year. The agency is funding a grant to
evaluate the effectiveness of leak detection technologies and
we are conducting a million dollar technology demonstration for
the clean up of MTBE contaminated aquifers. EPA is committed to
working with those cities and states that need help cleaning up
ground water contaminated with MTBE.
In addition to the legislative principles that we have
discussed here, EPA has initiated a regulatory action aimed at
reducing or eliminating the use of MTBE in gasoline. Under
Section 6 of the Toxic Substances Control Act [TSCA], we
initiated an advance notice of proposed rule making which was
signed last month. This is now under a 45-day comment period.
This action is the best regulatory mechanism available to the
Agency.
TSCA gives EPA the authority to ban, phase out, limit or
control the manufacture of any chemical substance deemed to
pose an unreasonable risk to the public health or the
environment. However, the procedural burdens associated with
this statute can be complex and time consuming. And we are not
certain that we can prevail. Therefore, legislative action is
out first priority and we want to work with Congress to address
this issue.
Reducing or eliminating MTBE in no way diminishes the
continued role for other oxygenates such as ethanol to control
mobile source emissions. We recognize that a significant role
for renewable fuels is important to our nation's energy supply.
Thus, the Administration recommends that Congress replace the
2-percent oxygenate requirement in the Clean Air Act with a
renewable fuel average content for all gasoline at a level that
maintains the current use level of renewable fuel, and this was
the 1.2-percent that you referred to earlier. But also allows
for sustained growth over the next decade.
Mr. Chairman, in closing, we intend to move forward with
the rule making under TSCA. This action, however, cannot
substitute for Congressional action based on the legislative
principles I have discussed here. If we are to continue to
achieve the public health benefits of cleaner burning gasoline,
while avoiding unacceptable risk to our nation's water
supplies, it is essential that Congress acts. We remain
committed to working with you to provide a targeted legislative
solution. Americans deserve both clean air and clean water. One
should never come at the expense of the other.
With regard to the California waiver, we are doing a
thorough independent evaluation of the application that was
submitted by the state of California. We intend to make a
decision and propose our decision in early summer. After the
decision is proposed there will be a 30-day public comment
period. This concludes my prepared statement. I would be
pleased to answer any questions once the other panels members
have testified.
[The prepared statement of Ms. Zaw-Mon can be found in the
appendix on page 56.]
The Chairman. Thank you very much for that.
Director Skinner, thank you for being here. If you feel
comfortable summarizing your remarks, you can submit your
prepared remarks for the record, and if you could try and keep
it four or 5-minutes so we can keep the hearing moving, we
would appreciate it. Thank you very much for being here.
STATEMENT OF THOMAS V. SKINNER, DIRECTOR, ILLINOIS
ENVIRONMENTAL PROTECTION AGENCY
Mr. Skinner. Absolutely. I am glad to do that. Thank you
for your kind introduction a little bit earlier. I can tell
you, from my standpoint, your efforts on behalf of both the
MTBE issue and ethanol in Illinois are greatly appreciated. No
matter how capable Terry Van Doren is, and he is very capable,
I am quite confident that he is not a ventriloquist, and your
work and your understanding of these issues, issues that are
not all intuitive, obviously have taken a great deal of effort
on your part, but I think goes a very long way in dealing with
the Administration.
The Chairman. I will at least take credit for hiring Terry.
Mr. Skinner. It is a pleasure to see you again, Mr.
Chairman. The meeting last week seemed to be very productive,
although I think we have a ways to go. By the way, Governor
Ryan fully intended to be here this morning. He sends his
regrets. His schedule changed at the last minute and he asked
Director Hampton and me to represent him and to convey his
support for your proposed legislation phasing out MTBE as well.
To summarize my prepared remarks, the use of RFG in the
Chicago area has been an unqualified success. We estimate that
its use in 1999 reduced emissions of VOCs or volatile organic
chemical compounds by about 65-tons per day. RFG also reduces
air toxics such as benzine as compared to conventional
gasoline. These benefits have resulted in very measurable
improvements to the air quality in the Chicago area, as well as
it does in other large urban areas throughout the country.
As we have discussed this morning, and as others have
discussed, one of the two oxygenates in the RFG program, MTBE
which is the primary alternative to ethanol, however, has
proved to be problematic, particularly in recent years.
Contamination of drinking water supplies from MTBE has been
reported from New York to California, literally coast to coast.
It comes from underground storage tanks, from marine engines
that contain fuel with MTBE in it, and even at times auto
accidents have been linked to detections of MTBE in ground
water. As you have pointed out, it's highly soluble. It gets
into the water very quickly and is pervasive and is very
difficult to remove once it is there. Even here in Illinois
where we are, I believe, 95-percent ethanol RFG, we have had
detections of MTBE in, as you pointed out, 26 different water
supplies across the state. In fact, in three of those
communities, Island Lake, East Alton and Oakdale Acres, we have
actually had to discontinue use of drinking water wells as a
result of MTBE levels.
As Director Zaw-Mon pointed out, U.S. EPA appointed a blue
ribbon panel a while back, a little over a year ago or so to
examine the use of oxygenates in the RFG program. They did
recommend that MTBE be phased out. Since that time the states
of California and New York have banned its use or proposed
banning its use. Here in Illinois, the city of Chicago adopted
a resolution that state and Federal officials take action to
prevent the use of MTBE in the Chicago area. And on the state
level, a bill that will require that MTBE containing gasoline
be labeled is on its way to the Governor's desk, and the
Governor is expected to sign it into law shortly. The Illinois
General Assembly continues to discuss the possibility of
passing legislation that would immediately ban MTBE from
further use in Illinois.
Responding to these concerns and others, last month U.S.
EPA proposed, as Director Zaw-Mon pointed out, a legislative
frame work to encourage immediate Congressional action to
reduce or eliminate the use of MTBE. Among other things, U.S.
EPA recommended that Congress amend the Clean Air Act and
provide the authority to phase out MTBE usage and also call for
the removal of the oxygenate requirement from RFG.
We in Illinois believe that the most appropriate means to
address the MTBE issue is on the national level rather than on
a state by state piecemeal basis. We fully support a phase out
of MTBE of the type that you have proposed in your legislation.
We still disagree with the Clinton Administration's
recommendation to remove the oxygenate requirement, at least as
that proposal currently stands now.
The ground water contamination issue is an MTBE problem.
It's not an oxygenate problem. Ethanol, because it has a higher
oxygen content than MTBE, provides additional carbon monoxide
and toxic air emissions reductions benefits over MTBE. By
removing the oxygenate requirement we risk losing the current
level of emissions reductions being achieved, and I think that
is why U.S. EPA in fact has proposed their so-called anti-
backsliding provisions which we believe would be critical if
you were going to remove the oxygenate requirement.
We believe that implementation of your proposal, Mr.
Chairman, will both remove a risk to our nation's drinking
water supply and insure the continued air quality benefits of
the Reformulated Gasoline Program as envisioned in the Clean
Air Act. I would like to touch on at least one other issue in
closing. And that is that we would urge Congress to continue to
push U.S. EPA to adopt Illinois' proposal for an appropriate
carbon monoxide offset or credit with regard to ethanol blended
reformulated gasoline.
We estimate the use of ethanol in the Chicago area reduces
carbon monoxide emissions from vehicles by 780 tons per day,
compared to non-oxygenated gasoline. The scientific analysis
that we have submitted concludes that a minimum of 0.5 per
square inch Reid vapor pressure allowance is a reasonable
gasoline volatility offset. This would provide a long term
solution that more accurately recognizes the clean air
contribution of ethanol while avoiding the increased expense to
gasoline producers of a lower volatility based gasoline.
In summation, Mr. Chairman, we appreciate and applaud your
effort to address the MTBE problem in an expedited yet
reasonable time frame. We will continue to urge U.S. EPA and
the Clinton Administration to support your bill as well. It
strikes me that it would be strikingly inconsistent for the
U.S. EPA to attempt to phase out MTBE through TSCA, the Toxic
Substances Control Act, and complain about how lengthy, complex
and uncertain the TSCA process and yet not support your effort
to accomplish the same thing without the uncertainty and
without the delay. I will be glad to take questions.
[The prepared statement of Mr. Skinner can be found in the
appendix on page 67.]
The Chairman. Thank you very much, Tom. We appreciate that.
And Director Hampton, again thank you for being here. We
appreciate all your efforts on behalf of agriculture. And after
your testimony we will take questions from all the panelists.
STATEMENT OF JOSEPH L. HAMPTON, DIRECTOR OF AGRICULTURE, STATE
OF ILLINOIS
Mr. Hampton. Thank you, Mr. Chairman. I have done some
editorializing here, as Director Skinner gave his presentation,
realizing not to be redundant but I think there are a couple of
things we need to touch on.
First, we really appreciate you coming to Illinois. And on
behalf of the Governor, thank you for coming. And as Director
Skinner said, the Governor wanted to be here and I think you
have his written testimony. And it was unavoidable, that he
could not be here today. So with his apologies, we again thank
you.
It is very important that we state to you on behalf of
agriculture and more important on behalf of the citizens of
Illinois that you exercise the kind of leadership and courage
that you have as a member of the Senate, particularly as a
member of the Agriculture Committee. And we think the vision
that you have brought and your willingness to look at things
with a clear and open eye is very important to us and very
important to the future of the state and the country. We thank
you very much for that.
I also, as you listened to the testimony of Director
Skinner, I think that we in agriculture recognize the
importance of having, first, his competency and the Governor's
wisdom in using him and asking him to represent our interest in
ethanol and our interest, and I think this is a precedent that
other states have not had the luxury of having, and we truly
appreciate that.
One of the unexpected side effects of the renewable fuels
program has been that the ground water contamination caused by
MTBE, because it is a colorless liquid and it has an odor, it
contaminates our ground water and because it is non-
biodegradable and soluble in water, we agree that it should be
banned through a phase out program. It has entered ground water
wells and drinking water supplies across the country and
continues to cause future environmental problems and cost. I am
glad that the Clinton Administration has proposed rectifying
the MTBE problem. I am very concerned about their proposal in
two areas.
The first one is rescinding the oxygenate requirement in
gasoline and the second, a new renewable fuel program as it is
proposed. While the Nation's air pollution has improved with
the Clean Air Act oxygenate requirement, the increased negative
Nation attention directed toward MTBE is allowing critics to
question the oxygenate standard. Your bill, Mr. Chairman
Fitzgerald, Senate 2233 not only recognizes the problems with
MTBE in Illinois but also the importance of maintaining our air
quality with an oxygenate requirement. I also want to commend
Senator Durbin for his co-sponsorship of this bill. We pledge
our support to both of you for its passage.
As you know, Governor Ryan and other Illinois officials and
organizations, some of which are here today, and the 23-member
Governor's Ethanol Coalition have repeatedly asked the White
House and U.S. EPA to maintain a role for ethanol and renewable
fuels program. With Illinois farmers facing some of the lowest
commodity prices in years, there needs to be an assurance for
ethanol in the future. And second, a need to increase their
market share. Ethanol, whether produced from corn or other bio-
fuels should not be overlooked because it benefits the
environment, the Ag economy and is a bio-renewable fuel for the
future.
The ethanol blended gasoline has been projected to reduce
carbon monoxide emissions by some 700-plus-tons in the Chicago
air shed each day. This is the equivalent of over 30 semi loads
of carbon monoxide. And as I heard Director Zaw-Mon talk about
removing 15-million cars from the highway, and you think about
the need to do that and then having an alternative that is
falling off a log simple, like ethanol. That does not make for
a very hard decision. And you know, we recognize people
actually spend their own money to buy carbon monoxide detectors
so this becomes pretty clear how significant this is to us.
I also might add there is almost three semi loads each day
of organic compounds that are not introduced in the Chicago air
shed because we currently use ethanol. Illinois corn growers,
if ethanol or the oxygenate requirement is eliminated, would
forfeit a market of at least 160-million gallons of ethanol and
70-million bushels of grain usage. As I said in here, as I
heard Congressman LaHood about the usage, and 150 bushels, that
is 5,000-acres a day. 5,000-acres a day, as I best remember,
365 in a year, we are talking about a fair amount of corn. That
is important to all of us including the people who build grain
bins.
That elimination could translate into investment losses by
the ethanol industry in excess of a billion dollars, a loss of
800 jobs in ethanol plants, 4,000 jobs in industry related jobs
and a decrease in the national market price of corn by 25 cents
a bushel. Our Illinois legislators should also be complimented.
Their recent efforts to pass a consumer right to know about
what is being purchased at the gasoline pump is a first step to
addressing MTBE. The bill requires retail motor fuel gas pump
dispersement that contains 2-percent MTBE to display a label
identifying it. This piece of legislation now awaits the
Governor's signature.
I think it is a mistake to allow states to opt out of any
oxygenate. This discredits the entire clean air effort and all
history of the clean air effort. We think that the oxygenate
and the credit offset that Director Skinner talked about are
reasonable and should certainly be given attention. Thank you
again, Mr. Chairman, for your leadership here today.
In closing, I think it was Representative Greg Ganske who
said, the solution is simple; if you want clean water, ban
MTBE. If you want clean air; use oxygenated fuel. If you want
both clean water and clean air; use ethanol. Thank you for your
time today. I will try to answer any questions you may have.
Thank you.
[The prepared statement of Mr. Hampton can be found in the
appendix on page 63.]
The Chairman. Well, that's a great close, a quote from
Representative Ganske. Thank you very much, Director Hampton.
I have a question that I have wondered about it a lot. And
anybody on the panel who knows this can answer. I only see that
MTBE has about 85-percent of the Nation's reformulated fuel
market. Ethanol has about 8-percent. Who has the remaining
percent of the oxygenate reformulate fuel? Is there another
oxygenate additive out there?
Ms. Zaw-Mon. Yes, Mr. Chairman, there are other oxygenates
out there that can be used and they are used in very small
quantities. There are other ethers. There is one called TAME,
and I have to admit I cannot remember what it stands for, but
there are other oxygenates that are used on much lesser volume
than MTBE.
The Chairman. They are not cost competitive I take it; is
that why they are not used as much? or are they not as
effective? Do you know the answer?
Ms. Zaw-Mon. Both. They are not as effective in that their
oxygenate value, their octane value is not as good as MTBE and
ethanol. And then also in terms of production costs, they are
not produced in the amounts that MTBE is produced.
The Chairman. Well, thank you. That answers my question.
That kind of leads to another one, though. Some people
criticize the idea of just banning MTBE and retaining the
oxygenate requirement, suggesting that will give ethanol the
better market. But it turns out there are other competitive
oxygenates out there that are used now, and potentially could
compete with ethanol for the oxygenate market. So if you banned
MTBE, you would be banning not one of two oxygenates but one of
many oxygenates out there. And you wouldn't necessarily being
giving the whole market to ethanol. Does that make sense?
Ms. Zaw-Mon. It does, Mr. Chairman. But one of the concerns
raised by the blue ribbon panel was to look at the
environmental impacts of those other oxygenates. In fact, TAME
is an ether like MTBE and probably possesses very similar
qualities to MTBE. So there is a concern that you were to ramp
up the usage of this ether we might see similar ground water
contamination problems. So one of the blue ribbon panel's
recommendation was to thoroughly address the health impacts and
the environmental impacts of the other oxygenates and the
Agency is in the process of looking at some of the other
oxygenates.
The Chairman. Has there ever been a study that has found
any problems with ethanol contaminating ground water, are there
similar health problems that we are finding with MTBE?
Ms. Zaw-Mon. No, there are not, because as you pointed out,
ethanol does degrade. It is liked by the little organisms in
the soils and they tend to consume ethanol over the other
components of gasoline. Nonetheless, we have been asked to also
address the environmental and health effects of ethanol and it
is something that we do need to be looking into.
The Chairman. Director Skinner, you said in your testimony
that 95-percent of your reformulated fuel used in Illinois is
with ethanol, and yet you pointed out we have detected MTBE in
the underground water supplies in 26-communities, three of
which have been forced to discontinue use of wells and switch
to another source of water.
If 95-percent of the fuel we are using has ethanol, where
is this MTBE that we are finding in Illinois, where we did not
think we used it, where is this coming from? Is it coming from
boats or lawnmowers or something else that we are not really
thinking about; do you know?
Mr. Skinner. It is both of those. MTBE was used as an
octane enhancer historically. So it may be fuels that leaked
out prior to the Reformulated Gasoline Program coming into
effect and remaining in either the soils or migrating from the
soils to the water supplies. As we discussed, MTBE degrades
very slowly and has a relatively long life.
Representative Ganske I know has premised or suggested that
MTBE in fact can come from automobiles traveling through a
jurisdiction, going from one jurisdiction with MTBE RFG through
Illinois to another jurisdiction. Now, he uses Iowa as an
example. But Iowa has apparently no MTBE in their fuel supplies
and yet they have found some levels of MTBE as well. So it
probably comes from a number of sources. But it shows you how
diligent we really need to be with regard to this particular
contaminant.
The Chairman. To Merrylin Zaw-Mon, I am wondering, the
California fuel refiners have argued that they can refine fuel
that can burn as clean as an oxygenated fuel without an
oxygenate additive. Do you know if that really is possible? And
if so, at what kind of added cost? I presume it would add a
substantial cost to the price of a gallon of gasoline.
Ms. Zaw-Mon. We are reviewing all that information right
now. It is my understanding that with cleaner cars, California
has adopted a cleaner car program, very similar to the tier two
cleaner car program that the Agency recently adopted. But with
cleaner cars the use of oxygenates is less effective because
the emissions from the vehicles are reduced considerably. But
California refiners believe they can still meet the VOC, the
volatile organic compounds reduction as well as the toxics
reductions by reformulating fuel without all of the oxygenates
that were required under the Clean Air Act. That is the 2-
percent oxygenate.
But in any event, a study that California required showed
that even with the repeal of the 2-percent requirement we would
expect that 60-percent of the fuels used in California would
contain oxygenates to some extent.
The Chairman. Is it not true that the gasoline refiners
need something like an oxygenate in order to enhance the
octane? Even if we did not have the oxygenate requirement, they
would be using an MTBE or an ethanol to give it more octane. Is
that correct?
Ms. Zaw-Mon. You are absolutely correct. But you use it at
much lower volumes, and lower weight percentages. But you are
absolutely right, it is used as an octane enhancer, especially
in premium fuels.
The Chairman. Director Skinner, maybe you can comment on
the issue of the phase two of the Reformulated Fuels
regulations taking effect in Chicago. I know you have been
talking to the oil refiners who deliver in Chicago. We are
currently awaiting to find out whether the carbon monoxide
credit that the EPA has proposed to the administration will be
granted for ethanol. If it is not granted, that would pose a
potential problem for ethanol. Has a decision been made by the
petroleum producers who supply the Chicago market? Are they
going to use MTBE even in the face of lawsuits that have been
filed asking them to clean up the pollution that has been
caused by it? Or do you think they will just go ahead and use
ethanol in summer and do whatever they have to do to make sure
it complies with the phase two regulations?
Mr. Skinner. We have had discussions with the refiners in
Illinois, and actually the answer I am going to give you goes
to the last question you asked, as well as in a sense how does
MTBE get into a state which does not have much MTBE. Literally
yesterday I was driving down 294, the tollway outside of
Chicago on the way to a speech to a bunch of chemical
manufacturers. And at one point I looked over and I was passing
a tanker truck, and on the tanker truck was, it was like a
billboard. Huge letters that said, this tanker contains high
quality MTBE, blah, blah, blah. And two thoughts occurred to me
at the time.
One was, who designed the marketing scheme for this
trucking company? Why would you put that on your trucks, given
the controversy lately? Second, where was the truck going? Was
it just passing through Illinois? Was it in fact heading toward
an Illinois refinery? We have been assured by the main
producers in Illinois that at least for this summer season they
intend to continue to use ethanol. I believe in part it is
because of this potential for litigation that is out there.
There have been a couple of class action lawsuits filed in Long
Island. There was one, as I understand it, that was filed in
Madison County very recently. I think it is in part because of
the regulatory uncertainty. They are hopeful that there will be
some sort of CO offset that is coming out of Washington at some
point in the next 6-months or so and it is difficult to switch
ethanol to MTBE and back to ethanol.
So for reasons that may be related to wanting to do the
right thing environmentally, but may be related to economics,
for this summer we are hopeful that ethanol will continue to be
used. There is no assurance that after this summer, that in
subsequent years, that situation will continue unless we get
some sort of CO offset that equalizes the economic disparity
between MTBE and ethanol. It is cheaper to use MTBE now. If you
are a for profit company, ultimately that is something that you
are going to have to take into account. I would think the
Nation as a whole, and certainly Illinois, wants to avoid an
economic incentive to switch to a contaminant that greatly
concerns everybody, that we find almost impossible to get rid
of.
The Chairman. Director Hampton, I think you touched upon
this in your opening remarks. You talked about the effects on
farm income and rural employment if we were to ban MTBE and
replace some of that market with ethanol. I know that Secretary
Glickman's office has done studies at the USDA that suggested
that the annual increase in farm income nationwide could be as
much as a billion dollars if you banned MTBE and replaced it
with ethanol. Do you have any idea what the specific effects on
farm income might be in Illinois if we were to ban MTBE and
phase it out over 3-years and replace it with ethanol?
Mr. Hampton. Mr. Chairman, my response would be that the
estimate along with the million dollars is some 13, 000 jobs
nationwide. The only thing I can think here in Illinois that
15-percent of the market will kill the market. It is having the
last 10-percent or so of the crop or not having that last ten
percent that makes the value on the other 90-percent. So that
truly it is significant.
One other thought I had, I would like to, this is not going
to shed a lot of light on this, but I think it is probably
right to the point. A gallon of the MTBE contaminated 25-
million-gallons of water contracted to maybe a gallon of
Everclear making 25 people pretty happy. To really tell this
whole story, and that sometimes, you know, I think as we look
at the real answers for this, as Director Skinner pointed out,
looking at something that is a contaminant and trying to find
economic incentives to make this program work I think is the
real challenge for us. We would try to be more patient and more
effective, and as far as meeting the demand, you know, I since
I was a small child, I have heard that we would never raise
enough food to feed the world, and we are selling corn and
beans even less than I was a small child. So I think we would
really like to accept the challenge to be able to do this as an
industry and as a state.
The Chairman. Thank you very much, Director Hampton. One
final question for Merrylin. I am wondering, I am sure you saw
that 60-Minutes report on MTBE that aired a couple months back.
In that report, they claim that there was an EPA memo that went
as far back as 1987 that stated that, quote, ``known cases of
drinking water contamination have been reported in four states
affecting 20,000 people. It is possible that this problem could
rapidly mushroom due to leaking underground storage tanks. The
problem of ground water contamination will increase as the
proportion of MTBE in gasoline increases.''
Now, that was an internal EPA memo circulated in 1987,
according to that 60-Minutes report. Certainly that was before
you or the current administration were there. But I am
wondering, how could it be that the EPA could have overlooked
that kind of memo and have allowed the problem to mushroom,
just as that memo predicted, and it is only now really that the
EPA is suggesting that we initial action under the Toxic
Substances Control Act?
Ms. Zaw-Mon. That memo was written as part of a health
effects and environmental effects, a study that is required for
fuel additives. And in 1988 I think this memo laid out some of
the concerns and the need for additional studies.
Subsequent to that, the fuel additive MTBE was approved
because there is a provision in the Clean Air Act that allows
for substantially similar components of gasoline to be approved
at certain levels. And MTBE actually is a by-product of
gasoline. And given the fact that it is substantially similar
to gasoline it was approved as an additive. And in the
meantime, you know, the studies were ongoing and we really only
had inhalation studies as opposed to ingestion studies. And
that is one of the reasons, and we are doing the ingestion
studies now, close to completing them.
I know that is no excuse for the fact that there is this
widespread contamination of ground water. But these studies do
take a long period of time because you have to look at all the
available data. They have to be peer reviewed and we based our
decision to move forward on the inhalation studies.
The Chairman. Well, that is a pretty good answer and that
clears that issue up for me. I appreciate so much all of you
being here. And Director Zaw-Mon, for traveling all the way
from Washington to be here.
Ms. Zaw-Mon. Thank you, Mr. Chairman, it was my pleasure.
The Chairman. You are welcome any time on Capitol Hill.
Ms. Zaw-Mon. Thank you.
The Chairman. And Director Skinner, Director Hampton, you
were wonderful, as always. And thank you very much for your
hard work on behalf of the state, and I give Governor Ryan
credit for hiring you two gentlemen, too. Thank you very much.
We will take a quick break. Then we will come back to the
final panel. My hope would be that we could try and wrap up by
noon, so that everybody has time to get lunch. But let us just
take a quick, no more than 5-minute break. Thank you.
[Recess.]
We are going to get going with the third panel. We do have
one panel after this third panel. So we are just going to keep
moving forward. I want to thank all of the panelists for being
here. We have Leon Corzine, the President of the Illinois Corn
Growers Association. Leon, thank you very much for being here.
We have Ron Warfield, who is the President of the Illinois
Farm Bureau. Eric Vaughn, who is the President of the Renewable
Fuels Association. Eric, thank you for being here. And Larry
Quandt, who is the President of the Illinois Farmers Union.
Larry, it is good to see you, and thank you for being here.
Why don't we start from my left to right. Leon, why don't
you go ahead. Corn growers are the ones who make it, ethanol,
and make it possible. So why don't we start with you, and thank
you again for being here.
STATEMENT OF LEON CORZINE, PRESIDENT, ILLINOIS CORN GROWERS
ASSOCIATION
Mr. Corzine. Thank you, Mr. Chairman. I would like to start
with thanking you for providing us this forum to talk about
this very important product ethanol. My name is Leon Corzine
and I am a corn and soybean grower from Assumption, Illinois,
which is in Christian and Shelby County. I am testifying today
on behalf of the Illinois Corn Growers Association.
Let me start off by addressing ICGA's concerns about the
recent recommendations made by the U.S. EPA with the blessing
of the Clinton Administration in regard to ethanol and MTBE. It
is our sentiment that this plan to fix the Nation's clear air
program is offered with good intent but it is really lacking in
substance.
EPA's plan will phase out MTBE. This is a positive step
considering it does contaminate water and damages the
environment. But it also eliminates the oxygenate requirement
which is key to the continued use of ethanol and the market
growth that we need. ICGA opposes this strategy because
eliminating the oxygenate requirement due to the failure of
MTBE also constitutes backsliding in our efforts to address air
quality. We can document the clean air success of this program
and ethanol's ability to keep it viable.
As was stated earlier, Chicago offers a perfect example. We
have used ethanol almost exclusively in Chicago to meet the
clean air standards and the results really have been
remarkable. ICGA concurs with you, Mr. Chairman, that Illinois
citizens should not have to choose between clean air and clean
water. Ethanol is proven to reduce emissions, especially carbon
monoxide which is the number one contributor to air pollution,
and it can do so without water contamination associated with
MTBE.
MTBE, as it was stated, has contaminated water resources
from Maine to California, including the 25 known sites in
Illinois. So it must be addressed as soon as possible. That is
why we are supporting your bill wholeheartedly.
Ethanol provides the means to reach our environmental goals
quickly and painlessly, by also providing jobs to boost our
economy. Ethanol provides these clean air benefits in a cost
competitive manner, compared to highly refined gasoline and
other additives which might be used in lieu of MTBE. Petroleum
companies continue to tell the EPA, the Administration and
Congress that they can meet the Federal clean air guidelines
without using oxygenates; however, no one is asking at what
cost to consumers and the environment.
The volume of gasoline increase without oxygenates has not
been talked about. They have to replace it with something by
sheer volume and what that means if more foreign oil. The
bottom line is that consumers will pay more for gasoline
without ethanol, probably a lot more. Even before the recent
price spike of gasoline, I am running an E-85 pick up truck and
my E-85 gasoline at the pump is ten cents a gallon cheaper,
even before this price spike, cheaper than conventional
gasoline.
Environmental benefits of oxygenates is clear long term
environmental and public health benefits, resulting from the
use of these oxygenates and reformulated gasoline when compared
to non-oxygenated gasoline that meet the RFG include the fewer
aromatics in the gasoline, the lower potency weighted toxic
emissions and thus lowering long term cancer risk, the reduced
emissions of carbon monoxide that we have talked about, and
this also reduces the ozone pollution due to the carbon
monoxide reductions and fewer fine particles in the exhaust
emissions. This is what oxygenates do for us all.
The oxygenate standard must not be compromised in any way.
ICGA is asking the Senate and U.S. Congress as a whole to make
a real statement about our government's commitment to clean
air, fighting high fuel prices and energy self-sufficiency. The
administration proposal also encourages establishment of a
renewable fuel standard and this proposal sounds good at first.
It is similar to a bill offered by Senator Tom Daschle of South
Dakota and it would require gasoline sold in the U.S. to
contain a small amount, estimated at one to 2-percent, of
renewable fuels.
There is nothing wrong with the concept except the
projected market potential for ethanol would be little improved
in its early years and would be far less than leaving the
oxygenated requirement in place.
I could not believe that Tom Daschle made the comments that
he did last week in the public. His comments questioning the
ability to supply enough corn or ethanol are unexcusable and in
my opinion we cannot ignore that kind of verbiage. The USDA has
done a study. The Governor's Ethanol Coalition had a study
done. California has done several studies. They have all said
the same thing, the supply of ethanol will be there.
What we need now is a Federal Government commitment to
phase in ethanol, replacing all the MTBE in our Nation. All
these studies have said we will supply, we can supply the
ethanol within a three to 4-year time frame. And what about the
corn supply?
Senator Daschle mentioned that also and I would challenge,
no, maybe better, I would dare him to come to Illinois and talk
about corn supply to me as an Illinois corn farmer. I would
like to bring him to my farm and have a talk about that.
Today ethanol also means $20,000 to every 500-acre corn
farmer in the U.S. We can double ethanol usage in the next 4-
years or less. And that would also help our rural development.
Corn growers also question why the U.S. EPA's proposal did
not address the concept of a carbon monoxide credit for
ethanol. EPA director Tom Skinner presented this concept to the
U.S. EPA, as he mentioned earlier, and a way to use science to
resolve ethanol's role in the U.S. energy policy. And we agree
with Mr. Skinner, that ethanol should receive the carbon
monoxide credit which will allow its use year round in the
Chicago market. The carbon monoxide credit is not some kind
favor or special concession to the growers that we are asking
for but it is a natural response to the National Academy of
Science's study on RFG. They concluded about 20-percent of the
ozone or smog produced in non-attainment areas is caused by
carbon monoxide. Ethanol cuts carbon monoxide pollution by up
to 20-percent, 25-percent, excuse me.
We are at a watershed moment for ethanol. Years of
research, building of infrastructure and expanding corn supply,
high gas prices and growing public support leave us well
positioned to finally make a national commitment to our only
domestically produced renewable fuel supply. Expanded ethanol
product would give agriculture, which is in the economic
doldrums, a much needed lift, provide jobs in processing and
transportation and help us reach our environmental goals
responsibly.
ICGA applauds you, Mr. Chairman, Congressman Shimkus,
Congressman LaHood, Governor Ryan's administration and others
for their efforts to provide clean air and clean water for all
of us, and at the same time providing a sound rural development
policy that will work for agriculture. Thank you very much.
[The prepared statement of Mr. Corzine can be found in the
appendix on page 70.]
The Chairman. Leon, thank you very much. I have enjoyed
working with you and the corn growers in Washington. And I look
forward to working with you in the months and years to come on
this issue and others.
Mr. Corzine. My pleasure.
The Chairman. Ron, thank you for being here. Feel free to
go ahead with your testimony and we will wait on all the
questions until all of you have had an opportunity to provide
your testimony. Thank you very much.
STATEMENT OF RONALD R. WARFIELD, PRESIDENT, ILLINOIS FARM
BUREAU
Mr. Warfield. Thank you very much, Mr. Chairman. Thank you
for coming here and having this hearing and the leadership that
you have shown on this and other agricultural issues that we
have had an opportunity to visit about. I am Ron Warfield,
president of the Illinois Farm Bureau, the state's largest
general farm organization.
I believe right now we in agriculture are facing two of the
most important pocketbook issues that we will face that are
going to impact us in the next 5-years. Number one is what we
do with PNTR and increase our markets through expanding trade;
and number two, how we expand our market through the use of
ethanol which is a renewable fuel that provides environmental
qualities that many people have already attested to today.
I am going to have many of the same notes in my written
testimony that have already been presented. So I am just going
to summarize and give an overall view on some points that I
think are very important because many of the points I would
make have already been made.
It was interesting to me that the U.S. EPA comes in and
makes a presentation talking about the fact that we have
actually exceeded the requirements under the reformulated gas
program through the oxygenate requirements that we have put
forward. We have exceeded the requirements. Now, that just says
oxygenates work. The fact is, first of all, don't question
whether whatever oxygenates work, they worked, they cleaned up
the air and the fact that has been extremely significant, we
have exceeded what we have set out to do.
Second now, because of the health and the environmental
aspects of the water contamination, it has prompted the EPA and
others to talk about eliminating MTBE. Now, this action has or
will prompt several states to ask the Government to grant them
a waiver from the oxygen requirements of the Clean Air Act. EPA
has responded by seeking Congressional action to eliminate the
oxygen requirement and replace it with renewable fuels
standard.
Now, I sit as a farmer here kind of scratching my head
because I'm saying, on the one hand we are saying oxygenates
work. They have cleaned up the air. We have on the other hand,
a product that has contaminated the water, so we are going to
eliminate the oxygenate requirement, when actually all we are
trying to do is clean up the water. Quite frankly farmers sit
here scratching their head and say let us use a little common
sense, the approach I want to use.
As Leon has already indicated, the further scientific
studies show that clean air rules do not take into account our
ability to cut the carbon monoxide emissions which reduce
pollution. And he quoted the statistics that show the effect
that, that has in cleaning up the emissions and the situation
here in Chicago. As you met with the EPA Carol Browner last
week, she told the Illinois Congressional delegation that
legislation granting an ethanol carbon monoxide credit and thus
allowing ethanol use in the Chicago market would be finalized
by Memorial Day. Well, again farmers say we believe the
administration could solve this not only now, but could have
done it in January, granting the carbon monoxide credit,
clearing up any uncertainty, any uncertainty about ethanol's
role in the Chicago market.
All of these actions are particularly puzzling to farmers,
especially again in the light of the proven track record that
we have with ethanol. While MTBE has very significant human
health and environmental impact, as you have questioned the
panelists here this morning, in the last 10-years none, I
repeat, none have surfaced with the use of ethanol. Ethanol has
a proven track record of reducing air pollution without any
negative environmental or health effects.
The Farm Bureau along with the Farmers Union, the Renewable
Fuels and National Corn Growers and other organizations have
been meeting in a summit, to come together with common
legislative strategy, that we have all put together a national
solution to the ethanol issue. It is Farm Bureau's belief that
any legislation addressing MTBE, one, must be national in
scope. We know about states individually banning MTBE. It does
not make an industry that can operate effectively or
efficiently. All action should be taken on a national level.
In addition, we ought to have legislation or ruling that
would not allow any state or regional waivers from the
reformulated gasoline oxygenate standard. We believe that
national standards, we should not reduce the progress we made
and certainly has been well documented in terms of what we have
accomplished in clean air.
Three, we must retain the oxygen standard, not allow any
reduction in air quality standards and not allow any
backsliding to occur. Four, we must protect the real world
environmental and public health benefits of Phase 2 of the RFG
program nationwide.
As a group we support H.R. 4011 with an amendment to
prohibit state or regional waivers of the RFG oxygen
requirement based on current law, and protects the environment
and public health. We would also support a companion bill in
the Senate that does the same thing.
These legislative principles reflect a united strategy that
expands ethanol use while preserving and enhancing the
environmental and public health benefits. It is a win-win-win.
It is win for the environment, for energy and for the
economics. Cleaner healthier air while no water quality
problems would exist. For energy policy it would increase
domestically produced renewable fuel, relying less on imported
fuel. And economics, it increases the market and market prices
for agriculture, increases jobs and improves the trade deficit.
We unapologetically believe that we will expand the use of
ethanol by two times and the use of corn by two times in the
production of ethanol in the next 5-years. And that is good for
the farm economy and creating jobs in the process and we urge
your support in making that happen. Thank you.
[The prepared statement of Mr. Warfield can be found in the
appendix on page 72.]
The Chairman. Mr. Warfield, thank you very much for that
testimony. Good to have you here.
Eric Vaughn, thank you for being here, and we look forward
to hearing what the Renewable Fuels Association has to say.
Thank you.
STATEMENT OF ERIC VAUGHN, PRESIDENT, CHIEF EXECUTIVE OFFICER,
RENEWABLE FUELS ASSOCIATION.
Mr. Vaughn. Mr. Chairman, thank you very much. It is indeed
an honor to be here. Thank you for the invitation to appear
before you, Mr. Chairman, and your committee here in Illinois.
The Senate Agriculture Committee over the last 14, 15-years has
played a prominent role in the development of renewable and
alternative energy sources. Your current chairman, Senator
Lugar, in neighboring Indiana has been a stalwart defender and
promoter and expander of the notion of ethanol from corn and
arange of other the bio mass feed stocks.
I represent the Renewable Fuels Association, the national
trade association for the domestic ethanol industry. There are
58 ethanol production facilities in operation today, and within
about 2-days there will be another one in neighboring Missouri,
a farmer owned co-operative.
In 1990, when the Clean Air Act amendments were being
debated and discussed, a great Illinois legislator by the name
of Ed Madigan teamed up with another legislator from the great
state of California. I probably should say great legislator as
well, Mr. Henry Waxman, to promote, produce and develop a new
standard, a reformulated gasoline standard that would require
for the first time the oil companies would produce cleaner
burning fuels. It was historic. I was there for many, if not
all, of those hearings. I watched Mr. Madigan work tirelessly
as he promoted the ethanol and oxygenate content requirement of
reformulated gasoline.
Now, it didn't come out of the air. It came out of
Colorado. It came out of the Rocky Mountain West, where it was
tried and succeeded by adding oxygen, the simple addition of
oxygen greatly reducing toxic emissions, and reduced carbon
monoxide emissions. And it was included in that program as a
compromise, a 2-percent weight oxygen requirement, in order to
encourage competition. If Representative Madigan were alive
today, I think he would be spinning on the floor in front of
us, the thought that 85-percent of that program turned into an
MTBE program. That is not what was anticipated.
It was farm leaders, people at this very table, certainly
those in this room who worked tirelessly for the adoption of
that initiative in the Clean Air Act amendments of 1990. It
worked then and it works today. Chicago, and Northern Illinois
is the envy of the Nation in terms of reformulated gasoline.
The leadership of your Governor, the Mayor of the great city of
Chicago Mr. Daley, Mr. Chairman you, Mr. Durbin and your entire
Congressional delegation have worked to provide a very solid
political base. The oil industry in the state has worked very
aggressively to produce clean burning reformulated fuel with
ethanol. The ethanol industry and the corn farmers have worked
to promote and produce the cleanest burning renewable
alternative fuel supply in the country. The program works. It
exceeds all toxic emissions standards required under Phase 1
and will do so under Phase 2. But most importantly, it is done
without any harm or degradation to the rest of the environment,
namely the water.
You have already recounted and many of the witnesses have
already told you all the terrors and woes of MTBE. I cannot
tell you it is going to cause cancer. I cannot tell you it is
going to cause an increase in the instances of leukemia. I can
tell you MTBE stinks. It just flat out stinks and people are
tired of it, and they do not want to trade off some air toxic
reduction for water contamination.
The Chairman of the powerful Environment of Public Works
Committee, where by the way, a hearing has not been held on the
ethanol issue in 7-years, has stated recently that 3,865 wells
in his state of New Hampshire are contaminated with MTBE and he
wants it out of their gasoline. We join with him in that. We
want it out as well. It was never intended, it was never
thought of as the Nation's primary oxygenate choice, but it was
a mistake and we need to reverse that mistake.
The two major questions before us today are confronted by
your legislative initiative, S. 2233. I like Ron Warfield's
point, a common sense approach. It is about time we had some
leadership in Washington like yours, Mr. Chairman, that is just
flat out common sense. We have an MTBE contamination problem,
so deal with it, address it and your bill does. I also note
with a great deal of pride, because I was there the day it was
on the Senate floor. 15-days later the Federal EPA issued a
notice of intent to accomplish your legislative objective under
TSCA. The Federal EPA has it within their authority to act and
act aggressively and they should do so. Your legislative
initiative will help move them along just that much more
quickly. And I congratulate you, Sir, on your initiative.
In addition, the Federal EPA has the authority, in fact,
they have made the promise to the Illinois delegation for three
and a half years to provide a carbon monoxide credit for
ethanol blends in reformulated gasoline. There will be no
carbon monoxide credit on Memorial Day or any other day because
what the EPA is currently working on is not a carbon monoxide
credit. I know they say it is, but when you see it, it will
surprise you, hopefully shock you. They are not considering
what Illinois EPA Administrator Tom Skinner proposed. If they
would simply adopt the Skinner plan, in fact, allow it to be
used in experimental purposes, your air will be cleaner, the
product will be a much more powerful one and the economic
implications would be tremendously powerful.
In addition, the California waiver has now become a major
hot topic of debate. The Federal EPA has it within their
authority to deny that waiver for one very specific reason. The
California waiver request fails to prove its stated concern
which is that the use of ethanol will prevent or interfere with
the attainment of another national ambient air quality
standard. That is not the case. A politically motivated waiver
can be granted. A technical and environmentally focused one
cannot be, and should not be.
Lastly, the Federal EPA has the authority today to adopt
oxygen averaging in the Federal reformulated gasoline program
which provides tremendous flexibility assistance to the oil
industry as it phases out of MTBE and begins the marketing and
production and use of ethanol.
Mr. Chairman you asked earlier and I would like to submit
for the record a study that was done for the Federal EPA by one
of the most experienced and professional organizations in the
country on air toxic and toxic emissions in the environment,
Cambridge Environmental. We submitted this study to the Federal
EPA at the hearing on ethanol last week in Washington and I
would like to submit it for the record, because it identifies
extensively, in an exhaustive fashion the environmental, health
and fate of ethanol entering the environment, the ground water
and the soil.
What it says is ethanol is a benign, efficient, effective,
very consumer friendly and health friendly additive with
approximately a 6-hour half life. In other words, it will break
down completely in 6-hours. And I would ask that the report be
entered into the record.
The Chairman. We will introduce that into the record. Thank
you.
Mr. Vaughn. Thank you, Sir. And I would like to just close
with this. In traveling here today from Washington, and on my
way to California, the stark contrast is almost beyond belief.
That while there is concern here in the Midwest about MTBE
contamination, one of the greatest concerns is that should this
administration deliver to California a waiver, I would believe
and tell you today, a politically motivated waiver, that would
allow California to be out of the oxygenate program and in
their case, that is a MTBE program. There are 1.5-billion
gallons of MTBE sold in the state of California. Providing one
state, with a resolution to their MTBE problem presents an
unacceptable risk to the rest of the country. Where will those
MTBE barrels go? And how will they be dealt with when they end
up in Kansas City or St. Louis or Chicago if trucks are moving
along your highways? We need a national solution to this
problem, not a regional one. And we believe ethanol ought to be
part of, in fact, we are confident it will be part of a
national solution to the MTBE contamination crises.
Again Mr. Chairman, I want to congratulate you for S. 2233
and pledge our strong support and commitment to you as you
pursue a success of that legislative action back in Washington.
Thanks for the opportunity to be here.
[The prepared statement of Mr. Vaughn, can be found in the
appendix on page 76.]
The Chairman. Mr. Vaughn, thank you very much. I appreciate
your testimony. It was very enlightening. And we will have some
questions for you after Larry Quandt, the President of the
Illinois Farmers Union, testifies.
Larry, thank you very much for being here. It is good to
see you again.
STATEMENT OF LARRY QUANDT, PRESIDENT ILLINOIS FARMERS UNION
Mr. Quandt. Good morning, Mr. Chairman. Thank you for the
opportunity to testify here this morning. As you said, my name
is Larry Quandt and I am president of the Illinois Farmers
Union. And I would particularly like to thank you, Mr.
Chairman, and your co-sponsors, especially Senator Durbin for
introducing Senate Bill 2233. I think it shows vision and
leadership that we need in Illinois, and it continues the
ongoing debate on ethanol and MTBE and I think we now have
learned enough about MTBE that we have to get it out of our
fuel market and out of the ground.
The Illinois Farmers Union would support any legislation to
insure expansion of the ethanol industry because out here, all
over the United States, not just in rural Illinois, but there
is a price crisis. It is an income price we will see, commodity
prices that are at a decade long low period. The increase in
ethanol would have a dramatic effect on it.
It is also an environmental issue. We know now that MTBE is
bad for the ground water and it contaminates it. We don't know
what the other health effects might be and they are just now
being studied, and I think it is safe to assume that they are
probably not good. Agriculture plays a big role in protecting
the environment, not just in the clean air by helping produce
clean burning ethanol, but our conservation practices and the
chemical reduction and what the different practices will put in
place on the farm to preserve all the water, not just ground
water.
I think this debate centers around another thing, too, as
well that has just been brought to our attention in the last
few months, is energy security. We are spending too much of our
money on foreign oil and it puts us in the dictates of
governments and people that really do not have our best
interest at heart anymore. So if we would increase the use of
ethanol we reduce our dependence on foreign oil. I know we
cannot eliminate it, but we can reduce it and if we reduce it
1-percent, that has an effect in the market.
Everyone I believe in this room anyway is supporting the
expansion of the ethanol industry, whether it be the corn
growers or the people that grow the corn, the ADMs, the
environmental people. I think part of why we are here is what
is the best way to do that.
We have heard some discussion about replacing the oxygenate
mandate with a national renewable fuel standard. I know that
this debate is just now breaking out. I know that virtually all
the proposals say we start at the base level. What I have not
been able to discover yet is what kind of growth factor anybody
wants to put into it, whether we take 10-years to double which
I think that is the projection we get, in three or four if we
maintain the oxygenate standard.
I would assume that it would have some increase in growth
over a 10-year period, it would more than double it. Which is
the best way to go? I do not think we have enough information
to answer that question. There would be some advantages to
both. We would have larger growth I think versus any renewable
standard. We could have larger quicker growth maintaining an
oxygen standard. But with renewable standard it might be slower
but it might wind up larger at the end of 10-years and with the
slower growth, might offer the opportunity for farmer owned
value added co-opts to pick up part of this demand.
I think along with that we should study the possibility of
including a renewable energy security reserve. I think
everybody can probably remember back in 1996 some of us
farming, there was a pretty good price, but it also shut down
the ethanol plants. So a renewable energy security reserve
would do two things. Increased ethanol production would raise
prices. Creating this reserve would also raise prices. Seeing a
reserve of any kind is very cost effective, reduced not only in
the Treasury and would also guarantee a supply of seed stock
for this extra ethanol demand. This also has to be coupled with
strict, and this has been covered by some of the experts, a
backsliding for the air quality standards we have had.
I know you want to get done, so I am going to close. I
would like to thank you for this opportunity again, Mr.
Chairman. And the question you asked earlier about any knowing
intentions of ethanol contaminated water, I think if you ask
some people in this room they might confirm that occasionally I
have deliberately consumed water contaminated with ethanol.
[The prepared statement of Mr. Quandt can be found in the
appendix on page 85.]
The Chairman. Well, Larry, thank you very much for your
testimony, and all of you. It is good to have you all here and
on the same panel. Seeing you all together, all saying pretty
much the same thing, brings to light one issue we have in
Washington. I am a little bit worried that the different
associations might get divided and go in different directions
supporting different bills. Senator Daschle and I have worked
very well in the last year and a half. We have always agreed on
farm issues. I am concerned that there seem to be two main
competing ways of going about this, one banning MTBE and
keeping the Clean Air Act unchanged with the oxygenate
requirement. And the other replacing the Clean Air Act
requirement of an oxygenate with the renewable fuels. I think
it is really important that we all unite on this, or we are
going to lose out all together. We may not get anything because
the forces against us will be united.
Last year when Senator Boxer proposed a resolution to ban
MTBE and replace it with ethanol, we passed it by just two
votes in the U.S. Senate. So the Senators from farm states
cannot afford to be divided on this issue, And we appreciate
all of you working together.
I think it was Leon, mentioned that MTBE really started
being used in Denver. Was that right? or was it you, Eric?
Mr. Vaughn. Actually I said MTBE was first used in Denver.
The Chairman. It is oxygenate.
Mr. Vaughn. But that is actually true. It was the National
Corn Growers Association and others that went to the front
range of Denver and established in 1988, the first in the
Nation oxygenate content requirement in the winter months for
carbon monoxide. And after about 8-months of debate, over the
strong opposition of the oil industry at the time, the content
requirement was established. It was a huge victory, and ethanol
got completely shut out of that market. For the first 3-years
it was all MTBE.
Since that time it has become virtually an entire ethanol
market. In fact, just last week I believe the Senate in
Colorado approved a bill to ban MTBE. So it has come around
completely full circle to where ethanol, I believe, is the only
oxygenate today used in the front range of Colorado.
The Chairman. OK. But they started experimenting with MTBE
in Denver as an oxygenate. And that is how that was. You
mentioned, Eric, in your testimony that you do not believe that
the EPA is proposing a carbon monoxide credit. You think that
it is going to be something else. Have you seen what the EPA
has proposed? My understanding is they have sent something to
the Office of Management and Budget that is winding its way
through the process. Administrator Browner described it to me,
Ray LaHood and Senator Durbin. She described what they had
proposed as a carbon monoxide credit. What do you think their
proposal really is?
Mr. Vaughn. Well, as you know in Washington, all you have
to do is say that something is sensitive or secret or
confidential and then everybody gets a copy of it. We have been
reviewing this informally with administration officials now for
months. I do not think, I am absolutely certain it is not a
carbon monoxide credit. Essentially they have come up with a,
the only word I can use is convoluted, but it is a scheme that
allows those in the state of Illinois, in Chicago, Illinois, in
the RFG covered areas, reasonable further progress credits will
essentially be allowed in a 1-percent VOC credit to an oil
company using ethanol. It may have carbon monoxide as its
underpinnings, but the reality is Tom Skinner, one the
brightest State EPA Administrators in the country, and I am not
just saying that because I am here, but he has just really dug
into this issue.
If you simply read his plan, you will understand the
technical and scientific approach he brings to this debate. And
the five-tenths VOC offset is fully documented by the air shed
models that you incorporated in that plan. I would tell you, I
do not think the Federal EPA even read his proposal, because
they certainly did not act on it and they did not incorporate
his suggestions into their proposed. And Sir, again it is not
going to be a carbon monoxide credit once it comes back out of
the OMB. It just is not going to happen that way.
The Chairman. It is going to be something else. A question
for all the panelists. It has occurred to me that with the
lawsuits being filed in Long Island, recently in Madison
County, and I guess a class action suit was filed against oil
companies all over the country by plaintiffs from all over the
country who are alleging that their water supply was
contaminated by MTBE.
Is it possible that if Washington did nothing the oil
industry would be thinking twice about continuing their use of
MTBE based on now the studies coming out showing that it is a
problem in the water, the lawsuits, and the mounting legal
challenges that they face? Do you think there is any
possibility that they might just of their own accord stop using
MTBE and start gradually shifting over to ethanol?
Would anybody care to comment on that?
Mr. Warfield. I guess speculating with you in terms of the
direction they might go. Although we know that when it comes to
this issue and certainly the opposition we faced over the last
decade that they seem to have nine lives when it comes to this
issue. But certainly is going to put a great deal of pressure
upon them. There is a very broad based understanding, common
understanding that the fact is there is a problem with that.
I guess the concern I have, even if that is true, even if
that is true, that will we have allowance by EPA for certain
states to opt out and say well, we can do it without the
oxygenate requirement, and we start moving down that path. So
even if that scenario does follow, it seems to me I still have
the concern about the direction and the policy we pursue
because of that. And again I say that in mind of the fact that
every time, it seems like this one has nine lives. I hesitate
to say that, but it seems like it is common understanding by
everyone that there is a water quality problem here that needs
to be dealt with and so it is broad based enough that it seems
to me that is a possibility.
The Chairman. Larry.
Mr. Quandt. I am not sure these are right, but that way we
can get them in the record and somebody maybe can help verify
them, if I cannot. I think in this discussion, like what do
they call the fuels in California that they are trying to meet
both designer fuels that contain no oxygen, additive. The
nearest I can tell from what I have read, the cost of that
product is like 12 to 14, 15-cents a gallon more. And that
would be RFG, too.
If you upgrade the blend stock to use ethanol without any
waiver it is a couple cents. So there is an economic incentive.
But I do not know, based on history, whether you want to assume
that would drive it, because there seems to be a great
hesitancy for the oil companies to relinquish any share of the
market for ethanol.
Mr. Vaughn. Let us take this hypothetical. Let us say you
lived in a progressive state with a progressive governor and a
greatly advanced and progressive state legislature that adopted
an MTBE label and let us say you put that label on the pump.
Apparently there is hardly any MTBE blending going on here so
there won't be many labels up. We will find out. But let us say
you identify where the stuff is and you give the consuming
public some information about the oxygenate that is out there.
We have had to have an ethanol label on the pump for years. It
does not seem to have any serious negative effects. My guess is
an MTBE label will.
Second, if the Federal Government were to be as progressive
as the state of Illinois and provide the oil companies with a
carbon monoxide benefit in the terms of the oil that they are
producing, the gas that they are selling, you are getting the
credit, you are getting the benefits for air quality, so
provide that to the oil industry to make the blending of
ethanol that much more economic and efficient. Then Mr.
Chairman, with those two caveats, I would say there is no
question that the oil companies are responsible. They do not
want to be in MTBE blending, and when you think about how the
MTBE might get here, you are crossing the Great Lakes with
shipments of MTBE. Nobody wants to take on that responsibility.
So I think you are right, almost doing nothing, those being the
two caveats, I think you have a very powerful incentive to move
out of MTBE and back into cleaning burning renewable ethanol.
Mr. Corzine. Mr. Chairman, the only other thing that I
could add would be that one thing that is not talked about very
much is that if we were to eliminate the oxygenate or eliminate
MTBE without replacing it with ethanol, we are talking about a
large volume of more gasoline that we would need. Also if the
gasoline could be further refined without oxygenates it would
also mean less gasoline per barrel of oil. So all that boils
down to, more barrels of oil. And what that means to me is more
foreign oil and increases our dependency on foreign oil.
What we really need in conjunction with what you might say
is a real initiative for a renewable initiative by the Federal
Government to help us reduce our dependency on foreign oil and
keep all those dollars on our shores.
The Chairman. Well, thank you. It just occurs to me, being
a lawyer, that the legal liability the oil industry may face
now, makes it very clear that MTBE is a problem, and it may
enhance their liability for any future contamination. They may
have a defense to any cases of past contamination, they may say
that they did not know that it caused ground water
contamination. They may say the EPA required the use of it. But
going forward, now they are on notice and continuing to use
MTBE with it continuing to leak into the soil and into the
ground water would potentially enhance their likelihood of
being found guilty in the future. I just throw that out there
as something to think about.
Now, on this waiver issue, this is a very serious matter.
Most of you alluded to it in your testimony. If the California
waiver is granted I think we can expect to see more states
applying for waivers. My understanding was the Governor of
Missouri Mel Carnahan said that he was going to apply for a
waiver, but now he is saying he was misinterpreted. Does
anybody know if any other states are thinking about applying
for a waiver from the oxygenate requirement?
Mr. Vaughn. Mr. Chairman, I will do it from memory, but the
states of Maine, New Hampshire, New York, Connecticut, New
Jersey, Alaska did some time ago, getting out of MTBE,
California.
The Chairman. They applied for a waiver?
Mr. Vaughn. Actually at the time Governor Hickle simply
banned MTBE and the Federal Government decided not to take him
on, and the MTBE was in there for about a week.
The Chairman. This is what state?
Mr. Vaughn. The state of Alaska.
The Chairman. The state of Alaska. The previous Governor?
Mr. Vaughn. It is also the CEO program in Alaska. Yes, Sir,
back in about 1991, 1992 time frame. I can get the specifics.
The Chairman. They banned MTBE?
Mr. Vaughn. They banned MTBE. Ethanol now has the entire
Alaskan market.
The Chairman. Wow.
Mr. Vaughn. We satisfied that relatively easily. I think it
is 14 states currently have applied for relief from either the
Federal RFG oxygen standard and also considering MTBE ban bills
in their state legislatures. Governor Carnahan has asked the
Federal Government for relief on the Federal standard and would
like to replace the Federal program with the state RFG program
that would require the use of ethanol. That was his change of
position that was announced about a day later or so.
Mr. Chairman. OK. Well, that is something we are going to
watch. If any of these waivers are granted, it could have a
domino effect and we will have to watch that issue very
closely.
Thank you all, for your testimony. I do have another panel
that will be testifying. One final question. I guess the
Petroleum Institute has argued that states do not have the
authority to ban MTBE. You just pointed out, Eric, that Alaska
has banned it. Other states have also banned it.
Do you have any comments on the authority of states?
Mr. Vaughn. Mr. Chairman, that is a very good question. The
former, the previous 2 counsels of the EPA that are now in
private practice in Washington, DC. are working with several
senators, one in fact your colleague from Iowa, Senator
Grassley and others, to make it clear what authority the
governors have. When a governor was either placed in a program,
as Chicago was placed in the gasoline program because of air
quality concerns, or opts into that program because of the
objective of achieving air toxic reductions, they did not
obviate or eliminate their responsibility to their citizens to
protect the environment. There is nothing that prevents a
governor acting against any chemical in any program if it is
affecting water quality.
I realize there is a tight legal definition, and since you
have got something that is covered under the Clean Air Act,
some have contended that the governors do not have the
authority to remove that chemical of that product under the
Clean Air Act. I would agree with that. However, if other
environmental contamination, in this case water contamination
results, the governors absolutely not only have the right, they
have the responsibility to move on that product and my guess,
my comment would be that the Federal EPA ought to provide that
guidance to the state that they can move out of that product to
protect their water resources in their states.
The Chairman. Thank you. That answers that question. All of
you have been very helpful and I appreciate your testimony. I
look forward to working with you on this issue and others.
Thank you all very much.
While that panel is coming up I am going to ask unanimous
consent that the following letters and written statements be
included in the record as if read. The National Corn Growers
Association letter of support for S. 2233; the National
Association of Conservation District's letter of support for S.
2233; letter of support from Mayor Daley and Governor Ryan;
statement of United States Senator Durbin; statement of
Illinois Attorney General Jim Ryan; statement by Al Nathis,
long time ethanol supporter.
[The information referred to can be found in the appendix
on page 97.]
The Chairman. The Committee record shall remain open for
five business days after the conclusion of this hearing for
additional written testimony. And with that I want to welcome
the fourth panel. We have here Donald Holt, the Senior
Associate Dean of the College of Agriculture, Consumer
Environmental Sciences at the University of Illinois at Urbana-
Champaign. Mr. Holt, thank you for being here.
Brian Donnelly. Brian is the Executive Director of Southern
Illinois University at Edwardsville ethanol pilot plant, which
we have been working very hard to get funding to construct that
plant, from Edwardsville, Illinois.
Darryl Brinkmann. Darryl is the Illinois representative in
the American Soybean Association. Darryl, you are from
Carlisle, Illinois. Thank you all for being here.
Don Holt, if you would like to begin, we would appreciate
your testimony.
STATEMENT OF DONALD A. HOLT, SENIOR ASSOCIATE DEAN, COLLEGE OF
AGRICULTURAL, CONSUMER AND ENVIRONMENTAL SCIENCES, UNIVERSITY
OF ILLINOIS
Mr. Holt. Thank you, Mr. Chairman. I bring greetings to you
from our Dean and also to Terry.
The Chairman. Did you have Terry as a student there?
Mr. Holt. Yes, we did.
The Chairman. You did, okay.
Mr. Holt. He was a good student.
The Chairman. Thank you.
Mr. Holt. As you indicated, I am Don Holt, Senior Associate
Dean of the College of Agricultural Consumer and Environmental
Sciences. I hope you will pardon my scratchy voice today. We do
greatly appreciate this opportunity to provide testimony on
issues facing ethanol and the bio-fuels industry.
You specifically requested to hear our views on the Clinton
Administration's recently released proposal to ban the use of
methyl tertiary butyl ether, MTBE, rescind the oxygenate
requirement of the Clean Air Act and replace the oxygenate
standard with a renewable fuels requirement. Likewise, you
requested our views on your bill S. 2233, described as the MTBE
Elimination Act, and other relevant legislation.
Needless to say, measures that encourage use of ethanol as
a fuel, fuel additive and for other purposes stand to benefit
Illinois, which is a major producer of both ethanol and the
most important raw material for ethanol production, namely
corn. Likewise, measures that would reduce and eventually
eliminate the use of MTBE as a fuel additive would have several
benefits for Illinois and the other speakers have outlined
outline the reasons for that.
The logical substitute for MTBE in gasoline is ethanol.
Ethanol is the Nation's head start in the bio-based economy of
the future. I want to repeat that statement. Ethanol is the
Nation's head start into the bio-based economy of the future.
Ethanol provides oxygen to insure complete oxidation of
gasoline components in internal combustion engines, and the
benefits of that have been outlined by other speakers today.
Further, ethanol enhances octane levels thus improving
engine performance and fuel efficiency. We do not see a benefit
for eliminating the oxygenate requirement, as some propose.
Ethanol can provide the environmental benefits of oxygenate
without the drawbacks and dangers of MTBE. And according to
USDA, by 2004 ethanol could successfully replace MTBE in
meeting oxygenate demands with negligible effects on gasoline
prices and supplies.
I am going to talk mostly about the science involved in
ethanol production. The major steps in ethanol production
include corn production, corn harvest and drying, corn milling,
ethanol production and sidestream processing. Thanks to
research, ethanol production is now an energy efficient
process, yielding net energy benefits and a number of other
benefits to the U.S. economy. This development was the result
of improvements at all stages in the overall ethanol production
process.
The University of Illinois has a long history of interest
and contributions in all facets of producing and utilizing
corn-based ethanol. The Illinois Corn Marketing Board, which
administers the check-off funds, has been a key partner in
ethanol related research, along with other Illinois
universities, neighboring state universities, state and Federal
Government and several private firms.
Decades of corn breeding and genetics research have
increased the yield of corn and consequently of starch,
contributing greatly to the efficiency of the overall process.
In the mid-1980's the energy required to produce corn was
sharply reduced by introduction of no-till technology that was
pioneered by Professor George McKibben of the University's
Dixon Springs Agricultural Center. Recently, University of
Illinois scientists, including Professor Marvin Paulsen and
colleagues developed a rapid accurate test for extractable
starch, the key variable for ethanol production.
Research facilitated by the quick test is focused on
genetic improvements, harvest protocols and artificial drying
equipment and procedures leading to higher levels of
extractable starch. University of Illinois scientist Steve
Eckhoff and colleagues improved the milling step by pioneering
the so called ``quick germ'' and ``quick fiber'' processes in
which relatively inexpensive dry milling equipment is used to
separate the corn germ, starch and fiber for further
processing.
With this equipment corn processors can gain many of the
benefits of wet milling while using the simpler, less expensive
dry milling process. An especially exciting recent development
is the finding that there are important cholesterol-lowering
agents, known as stanol esters, in an oil fraction associated
with corn fiber produced by the quick fiber process. These
ingredients alone are worth about three dollars a bushel, even
though they make up a small fraction of each bushel of corn.
University of Illinois scientists pioneered important
changes in the ethanol fermentation process. Through the 1980's
and 1990's Professor Munir Cheryan and colleagues developed and
perfected continuous membrane bioreactors, that is CMBs, for
ethanol production. This continuous fermentation approach
offers many advantages over the traditional batch processes.
Successful large scale CMBs were first operated in Illinois
at the world's second largest ethanol producer Pekin Energy,
now William's Energy. Continuous membrane bioreactors were also
developed by University of Illinois scientists for production
of improved dextrose, that is, glucose, which is key to almost
all fermentation processes, as well as corn oil, zein, which is
corn protein, and zanthophylls. CMBs will be key components of
corn processing in the future and will be used to produce many
diverse corn based products safety and efficiently and
profitably. Brian Donnelly will address some of the interesting
scale-up problems associated with this kind of research.
University of Illinois research on aspirating ethanol into
both gasoline and diesel engines continues to yield engine
design criteria and specifications. In addition, literally
hundreds of studies were conducted on the use of various co-
products as food, feed, fiber, fuel and chemical feedstocks.
This work will continue and increase in the future.
Functional genomics, which is part of the bio-technology
revolution, will continue to make corn a better raw material
for manufacturing ethanol and many other products. Bio-
technology will create totally new products, including
pharmaceuticals and neutraceuticals, that can be produced in
and manufactured from corn and soybeans. Functional genomics
will also improve the microorganisms and enzymes used in
production and processing of the various fractions of the corn
kernel, leading to even more diverse and useful products that
can be obtained from corn in profitable commercial operations.
In my written testimony I reported on our research on all
of the major stages of ethanol production and use. Because the
overall viability of the ethanol industry is improved by
advances in each of these dimensions, no one factor makes or
breaks the strong case for ethanol. Ethanol is one part of a
very complex bio-based production and utilization system.
Analyses of its strengths and weaknesses must reflect all of
these dimensions.
Legislation that encourages public and private investment
in research and development in support of a bio-based economy,
including your MTBE Elimination Act and Senator Lugar's
National Sustainable Fuels and Chemicals Act, S. 935, will
benefit the ethanol and bio-fuels industries and their
customers. We applaud your efforts in that direction. Thanks
for this opportunity to provide information for the Committee.
[The prepared statement of Mr. Holt can be found in the
appendix on page 87.]
The Chairman. Dean Holt, thank you very much.
Brian Donnelly from SIUE and the Executive Director of the
ethanol pilot plant there. Thank you for being here and I look
forward to your testimony.
STATEMENT OF BRIAN E. DONNELLY, EXECUTIVE DIRECTOR, UNIVERSITY
PARK, SOUTHERN ILLINOIS UNIVERSITY, EDWARDSVILLE
Mr. Donnelly. Thank you, Mr. Chairman. Good afternoon. I am
Brian Donnelly, Executive Director of University Park, Southern
Illinois University, Edwardsville. I am here to represent the
site that has been chosen for the National Ethanol Research
Pilot Plant. I would like to begin by complimenting you, Mr.
Chairman, and the Senate Committee on Agriculture for holding
this hearing and for the commitment to the development of the
safe dependable cost effective fuel to meet the clean air needs
of our Nation. Particularly I would like to compliment the
Committee and the entire Senate for the passage of S. 935, to
promote the conversion of bio-mass into bio-based industrial
products. This legislation, thanks to an amendment offered by
you, Mr. Chairman, includes a Federal authorization for the
construction of the National Ethanol Research Pilot Plant at
SIUE.
The pilot plant holds the potential to provide a bright
future for ethanol and the environmental and energy security
that it provides.
University Park is a 330 acre research and technology park
located on the campus of Southern Illinois University-
Edwardsville. The state of Illinois has invested $3.1 million
in University Park, building concrete roads and installing
utilities to support more than one million square feet of
building space. The park exists to foster regional, state and
national economic development by making tracts of land
available to corporations, nonprofit organizations and
government agencies that could benefit from its strategic
location. This site is at mid-continent, next to a
comprehensive university, just 30-minutes away from Lambert-St.
Louis International Airport.
Scores of researchers are engaged in discovering new ways
to produce ethanol more efficiently. Some are examining
processes for grinding corn, hydrolyzing starch, fermenting
glucose, distilling and dehydrating alcohol or converting corn
fiber to ethanol. Others are interested in engineering the corn
kernel, altering enzymes, breeding or genetically engineering
new strains of bacteria, yeast and fungi or in producing or
recovering valuable co-products of the ethanol production
process.
However, these research efforts share a common problem.
Encouraging results have not been tested on a commercial scale
because of the prohibitive costs and risks of injecting an
exploratory technology into an existing facility. These costs
and risks have created a log jam of research projects waiting
to go forward to commercialization. In 1995 SIUE received a
$500,000 grant from USDA to study the feasibility of
constructing the pilot ethanol plant. As part of this study,
engineers from the Fluor Daniel Company succeeded in producing
a preliminary design for a pilot plant that would emulate full
scale corn wet mill and corn dry mill production facilities and
be a very flexible platform for testing of many different types
of technology.
The benefits of the facility were clearly demonstrated.
Representatives of the fuel ethanol industry were asked to
select several research projects from a list of 102 that hold
the greatest potential for reducing the cost of manufacturing
ethanol from corn. Ten projects were selected. Stanley
Consultants, Inc. conducted an economic analysis of these
projects and reached a dramatic conclusion. If just five of
these technologies are sped to commercialization through the
ethanol pilot plant, the cost of converting corn to ethanol
could be reduced by approximately ten cents a gallon. In 1999,
1.56 billion gallons of ethanol were produced in the United
States.
In 1996 Congress appropriated $1.5 million for final design
of the pilot plant. Using these funds, Raytheon Engineers and
Constructors was employed to finish designing the plant and
produce bid packages. These bid packages are prepared and ready
to mail. Construction can begin within a few months. The State
of Illinois believes so strongly in this $20 million project
that it has already appropriated $6 million. If the additional
$14 million Federal share becomes available within a year or
so, this major national asset will be on line.
In closing I would like to thank you, Mr. Chairman, for the
opportunity to appear today, and would be pleased to answer any
questions you might have. Thank you.
[The prepared statement of Mr. Donnelly can be found in the
appendix on page 92.]
The Chairman. Mr. Donnelly, thank you very much.
Next is Mr. Brinkmann from the American Soybean
Association, thank you for being here and we look forward to
your testimony.
STATEMENT OF DARRYL BRINKMANN, ILLINOIS SOYBEAN ASSOCIATION
Mr. Brinkmann. Thank you, Mr. Chairman. It is indeed an
honor to be here today to share some comments of what the
soybean industry can contribute toward our bio-fuels effort.
Good morning. My name is Darryl Brinkmann. I am a corn and
soybean farmer from Carlisle, Illinois. I am past president of
the Illinois Soybean Association. I currently serve on the
Board of Directors of the American Soybean Association. I also
serve on the Board of Directors of the National Bio-Diesel
Board. I am pleased to be here today to commend you, Mr.
Chairman, for holding this hearing on bio-fuels. I am going to
shift the focus a bit from the earlier panels and use this
opportunity to discuss bio-diesel and some of the issues our
industry our industry is working on.
Mr. Chairman, I know you understand bio-diesel, but for the
record bio-diesel is a cleaning burning fuel for diesel
engines. It is produced from renewable resources such as
soybean oil. Bio-diesel is an ideal alternative fuel because it
operates in diesel engines just like petroleum diesel and
requires little or no modifications while maintaining the
payload capacity and range of petroleum. Because its chemical
characteristics are very similar to petroleum diesel, bio-
diesel blends well at any level. The most commonly used blend
is 20-percent bio-diesel and 80-percent diesel blend, B20. One
of the reasons this is the most commonly used blend is due in
large part to legislation sponsored and shepherded through
Congress in 1998 by my Congressman John Shimkus.
Congressman Shimkus' bill amended the Energy Policy Act,
EPACT of 1982 to allow Federal and state fleets to earn credit
under this program by using B20. The major change in this law
has resulted in record growth of bio-diesel use and I believe
we are just beginning to take advantage of the potential of
that market. So I thank you, Mr. Shimkus, and other members of
Congress in the room for your strong support of this effort and
of our industry.
Bio-diesel is simple to use, renewable, domestically
produced and readily available. Other advantages of bio-diesel
include superior lubricity for smoother operation and reduced
engine wear and a high flash point, making it safer to store
and handle.
The use of bio-diesel in a conventional diesel engine
results in substantial reductions of unburned hydrocarbons,
carbon monoxide and particulate matter compared to emissions
from diesel fuel. Pure bio-diesel does not contain any sulfur
and therefore reduces sulfur dioxide result from diesel engines
virtually to zero.
Of course, there are other reasons to use bio-diesel fuel
right now. With agriculture prices at record lows and petroleum
prices approaching record highs, it is clear that more can be
done to utilize domestic surpluses of renewable oils such as
soybean oil while enhancing our energy's security. Because bio-
diesel can be used with existing petroleum infrastructure it
provides immediate opportunity for addressing our dependence on
imported petroleum and helping our farm economy.
There are many reasons for our transportation sectors to
use more renewable fuels like bio-diesel, but there are still
hurdles and obstacles to making this a reality. Congressman
Shimkus has introduced legislation in the House to amend the
Congestion Mitigation Air Quality or CMAQ program to allow
funds in this program to be used to buy down the cost of bio-
diesel. The Shimkus bill does not create a new program for bio-
diesel nor does it earmark funds in the current program for
bio-diesel. It just levels the playing field for bio-diesel by
making the funds eligible in the CMAQ program. Senator Bond of
Missouri and Senator Johnson of South Dakota have sponsored
similar legislation in the Senate, and I am sure we can count
on your support, Mr. Chairman of that bill.
For long term support of bio-diesel the industry is
considering a number of options including a national renewable
standard. In other words, all diesel transportation fuel would
contain a very small percentage of bio-diesel. Some petroleum
distributors are already offering premium diesel that includes
a low blend of bio-diesel as an additive. For example, Koch
Industries is offering a product, U.S. Soy Field Diesel in bulk
at over 20 terminal locations across the midwest. A similar
product, Soy Master is being marketed by Country Energy, a
joint venture between Farmland and Cenex/Harvest States co-
operatives. We think this concept has merit and will work with
industry to further develop expansion and use of low level
blends bio-diesel. An upcoming rule making process by EPA which
will lower sulfur content in diesel fuel and consequently
necessitate inclusion of a lubricity additive makes this all
the more attractive. Because bio-diesel contains no sulfur it
can serve as a domestically produced renewable oxygenated
lubricity additive in the ultra-low sulfur diesel fuel.
Mr. Chairman, we think the future looks bright for bio-
diesel and with the help of members of Congress like you and
Representative Shimkus we know that many of the current
obstacles will soon be opportunities. Again, I appreciate the
chance to talk about several key issues facing the bio-diesel
industry and look forward to working with you on these matters
and others of importance to Illinois soybean farmers. Thank
you.
[The prepared statement of Mr. Brinkmann can be found in
the appendix on page 94.]
The Chairman. Thank you very much, Mr. Brinkmann. If I
could just stay with you for a couple of questions and then I
will go back to Dean Holt and Brian Donnelly.
You mention in your testimony the use of bio-diesel is
enhanced by the Energy Policy Act of 1992, EPACT. Can you
explain how this program fosters the market for bio-diesel?
Mr. Brinkmann. Well, it is like ethanol, making the exhaust
of the diesel, the diesel exhaust cleaner. It lowers
hydrocarbons and particulate matter emissions. And you know,
gives us cleaner burning air. Actually soy diesel contains
about 11-percent oxygen by weight, and that is the big point
that we are trying to do.
The Chairman. It helps the oxygen content. So it is very
similar to ethanol in that context.
I know many transit authority buses, state government
trucks and mowers, as well as other municipal vehicles are
powered by diesel. What kind of success has bio-diesel had in
these markets?
Mr. Brinkmann. Well, in these kind of markets you can come
in with bio-diesel and there is absolutely no modifications
that need to be made as far as fueling facilities or engine
changes or anything. It can be burned in an engine just like
diesel fuel. That is one advantage we have over some of the
infrastructure changes that natural gas would have to make or
something like that.
The Chairman. Now, the CTA in Chicago, the Chicago Transit
Authority, they were using some bio-diesel buses, weren't they,
for a while?
Mr. Brinkmann. Yes, they were. They tried those along with
the Chicago police department on their water boats on the
riverfront. And they were very happy with the results. Again,
people could notice the difference in the exhaust. It was no
black as straight diesel and it smells a little bit like french
fries.
The Chairman. What happened? They are not using those
anymore?
Mr. Brinkmann. There is some going on, but until the EPACT
was amended these transit authorities did not get credit for
using bio-diesel as if they were converting vehicles to natural
gas or something. So that was why we really had Congressman
Shimkus' bill.
The Chairman. Well, I look forward to working with you. And
let us know what we can do to assist you on that. I think it is
a very promising area and we have got to continue to promote
it.
Back to Mr. Holt and Mr. Donnelly. The need for research on
improving the efficiency of producing ethanol is only going to
increase, even though we have made great strides already. And
as Dean Holt pointed out, we have made strides in every step of
the production of corn all the way to ethanol. But if we ban
MTBE and part of that MTBE market is replaced with ethanol and
market for ethanol doubles, we are going to need even more
research to improve the efficiency and effectiveness of the
ethanol production.
I am wondering what steps will your universities take to
fill this role? Obviously SIUE is committed to managing the
corn to ethanol pilot research plant and we are trying to get
funds for that. But beyond the research plant itself and
specifically at the Champaign-Urbana campus of U of I, what
steps will the U of I be taking to help fill this important
research role?
Mr. Holt. Incidently I should point out that we have worked
closely with Brian and others at SIU and see ourselves as
cooperators in that effort. We will need to make the best use
of all of our research facilities.
There are many initiatives underway that I think bear on
this, probably the biggest one, the one that has the most
potential for the future, is what has come to be known as I-bio
or the bio technology initiative in Illinois. Of course, there
are similar initiatives at the Federal level.
In the future, biological research, and most of the
research that is going to be done relative to ethanol is
biological research, will essentially be done under this
umbrella of genomics, comparative genomics and functional
genomics. It is a relatively recent development that grew out
of the progress that was made in structural genomics that is,
the mapping and sequencing of enzymes. The success in that is
building on itself. I think your imagination is just above the
limit on how that is relevant to ethanol. It is relevant to
increasing the yield of ethanol from a bushel of corn, which is
very important for us, and it is relevant to increasing the
yield of corn overall. It is relevant to being able to tailor
corn and soybeans and other crops to be ideal raw materials for
manufacturing a number of different products. In the past, of
course, one of our problems has been that corn and soybeans
were essentially commodities and they were not differentiated
for various uses. Genomics will make it possible to
differentiate corn and soybean for all the uses, including
ethanol, and to tailor that raw material so that you start out
with something that has great value and that value can be there
as ethanol and some of the co-products and by-products.
I wish we could somehow emulate the bio-medical and
pharmaceutical industries. I recently attended the Bio meetings
in Boston and I was impressed that the various participants
were unanimously enthusiastic in their support for the National
Institutes of Health. They are supporting an effort to double
the research budget in the National Institutes of Health. They
see that effort pouring new disclosures and patents into the
private sector and into the medical and pharmaceutical
industries. It will do that. It is going to be the biggest game
in town in terms of biological research. We need to get the
same degree of energy and focus among stakeholders in
agriculture.
The Chairman. We will continue to work on that. Now,
ethanol can be made, not just from corn, but from any plant
that has starch. Is the research just not that very advanced on
making ethanol out of potatoes or out of rice stalks or out of
meat? What is the state of all that research and do you do any
of that research in your universities?
Mr. Holt. Well, we focus primarily on corn. I think the
reason is that corn has such a tremendous advantage in terms of
the yield of starch per unit of input, I think the only plant
that comes close in that regard is casava. It grows tubers and
does produce a tremendous weight of starch, but is hard to
harvest. To make comparisons you have to look at all the
dimensions of the process.
The Chairman. The bottom line is that nothing is likely to
threaten a dominance of corn in producing ethanol.
Mr. Holt. I do not think so because it is very hard to find
any biological system that is as productive as growing corn in
Central Illinois.
The Chairman. That is right. Well, that is good. One final
question and then we will conclude this hearing. I am just
wondering how the public research universities such as SIUE and
University of Illinois, are doing on interfacing with the
ethanol industry and with the corn growers to insure that your
research is well targeted?
Mr. Donnelly. One of the things we did as part of
evaluating the feasibility of the ethanol plant, the pilot
ethanol plant, is we did an inventory of the, inventoried all
the current ethanol research projects underway in the United
States. We managed to identify 102 active research projects at
that time, incidently more than half of which were coming out
of the big public research universities in the midwest,
institutions like University of Illinois, Purdue and Iowa State
University. We then, through the Renewable Fuels Association,
ordered a study in which the major ethanol companies were asked
which of those research projects held the greatest promise for
increasing the cost effectiveness of producing ethanol from
corn. And they identified through that process ten research
projects which were particularly high yield projects.
The pilot plant was then designed to make sure that it
accommodated those ten research projects as an example of the
mechanism we have used to try and stay in touch with industry
and its needs.
The Chairman. Well, all of you, thank you very much for
being here. I appreciate your testimony. I appreciate your
traveling to Springfield. And to everybody who has been here in
the audience, thank you for your attendance and your interest
in this issue. And with that, I am going to conclude this
meeting of the Senate's Agriculture Committee, and thank you
all for being here. This meeting is adjourned.
[Whereupon, at 12:45 p.m., the Subcommittee adjourned.]
=======================================================================
A P P E N D I X
April 18, 2000
=======================================================================
[GRAPHIC] [TIFF OMITTED] T8611.001
[GRAPHIC] [TIFF OMITTED] T8611.002
[GRAPHIC] [TIFF OMITTED] T8611.003
[GRAPHIC] [TIFF OMITTED] T8611.004
[GRAPHIC] [TIFF OMITTED] T8611.005
[GRAPHIC] [TIFF OMITTED] T8611.006
[GRAPHIC] [TIFF OMITTED] T8611.007
[GRAPHIC] [TIFF OMITTED] T8611.008
[GRAPHIC] [TIFF OMITTED] T8611.009
[GRAPHIC] [TIFF OMITTED] T8611.010
[GRAPHIC] [TIFF OMITTED] T8611.011
[GRAPHIC] [TIFF OMITTED] T8611.012
[GRAPHIC] [TIFF OMITTED] T8611.014
[GRAPHIC] [TIFF OMITTED] T8611.015
[GRAPHIC] [TIFF OMITTED] T8611.016
[GRAPHIC] [TIFF OMITTED] T8611.017
[GRAPHIC] [TIFF OMITTED] T8611.018
[GRAPHIC] [TIFF OMITTED] T8611.019
[GRAPHIC] [TIFF OMITTED] T8611.020
[GRAPHIC] [TIFF OMITTED] T8611.021
[GRAPHIC] [TIFF OMITTED] T8611.022
[GRAPHIC] [TIFF OMITTED] T8611.023
[GRAPHIC] [TIFF OMITTED] T8611.024
[GRAPHIC] [TIFF OMITTED] T8611.025
[GRAPHIC] [TIFF OMITTED] T8611.026
[GRAPHIC] [TIFF OMITTED] T8611.027
[GRAPHIC] [TIFF OMITTED] T8611.028
[GRAPHIC] [TIFF OMITTED] T8611.029
[GRAPHIC] [TIFF OMITTED] T8611.030
[GRAPHIC] [TIFF OMITTED] T8611.031
[GRAPHIC] [TIFF OMITTED] T8611.032
[GRAPHIC] [TIFF OMITTED] T8611.033
[GRAPHIC] [TIFF OMITTED] T8611.034
[GRAPHIC] [TIFF OMITTED] T8611.035
[GRAPHIC] [TIFF OMITTED] T8611.036
[GRAPHIC] [TIFF OMITTED] T8611.037
[GRAPHIC] [TIFF OMITTED] T8611.038
[GRAPHIC] [TIFF OMITTED] T8611.039
[GRAPHIC] [TIFF OMITTED] T8611.040
[GRAPHIC] [TIFF OMITTED] T8611.041
[GRAPHIC] [TIFF OMITTED] T8611.042
[GRAPHIC] [TIFF OMITTED] T8611.043
[GRAPHIC] [TIFF OMITTED] T8611.044
[GRAPHIC] [TIFF OMITTED] T8611.045
[GRAPHIC] [TIFF OMITTED] T8611.046
[GRAPHIC] [TIFF OMITTED] T8611.047
[GRAPHIC] [TIFF OMITTED] T8611.048
[GRAPHIC] [TIFF OMITTED] T8611.049
[GRAPHIC] [TIFF OMITTED] T8611.050
[GRAPHIC] [TIFF OMITTED] T8611.051
[GRAPHIC] [TIFF OMITTED] T8611.052
[GRAPHIC] [TIFF OMITTED] T8611.053
=======================================================================
DOCUMENTS SUBMITTED FOR THE RECORD
April 18, 2000
=======================================================================
[GRAPHIC] [TIFF OMITTED] T8611.054
[GRAPHIC] [TIFF OMITTED] T8611.055
[GRAPHIC] [TIFF OMITTED] T8611.056
[GRAPHIC] [TIFF OMITTED] T8611.057
[GRAPHIC] [TIFF OMITTED] T8611.058
[GRAPHIC] [TIFF OMITTED] T8611.059
[GRAPHIC] [TIFF OMITTED] T8611.060
[GRAPHIC] [TIFF OMITTED] T8611.061
[GRAPHIC] [TIFF OMITTED] T8611.062
[GRAPHIC] [TIFF OMITTED] T8611.063
[GRAPHIC] [TIFF OMITTED] T8611.064
[GRAPHIC] [TIFF OMITTED] T8611.065
[GRAPHIC] [TIFF OMITTED] T8611.066
[GRAPHIC] [TIFF OMITTED] T8611.067
[GRAPHIC] [TIFF OMITTED] T8611.068
[GRAPHIC] [TIFF OMITTED] T8611.069
[GRAPHIC] [TIFF OMITTED] T8611.070
[GRAPHIC] [TIFF OMITTED] T8611.071
[GRAPHIC] [TIFF OMITTED] T8611.072
[GRAPHIC] [TIFF OMITTED] T8611.073
[GRAPHIC] [TIFF OMITTED] T8611.074
[GRAPHIC] [TIFF OMITTED] T8611.075
[GRAPHIC] [TIFF OMITTED] T8611.076
[GRAPHIC] [TIFF OMITTED] T8611.077
[GRAPHIC] [TIFF OMITTED] T8611.078
[GRAPHIC] [TIFF OMITTED] T8611.079
[GRAPHIC] [TIFF OMITTED] T8611.080
[GRAPHIC] [TIFF OMITTED] T8611.081
[GRAPHIC] [TIFF OMITTED] T8611.082
[GRAPHIC] [TIFF OMITTED] T8611.083
[GRAPHIC] [TIFF OMITTED] T8611.084
[GRAPHIC] [TIFF OMITTED] T8611.085
[GRAPHIC] [TIFF OMITTED] T8611.086
[GRAPHIC] [TIFF OMITTED] T8611.087
[GRAPHIC] [TIFF OMITTED] T8611.088
[GRAPHIC] [TIFF OMITTED] T8611.089
[GRAPHIC] [TIFF OMITTED] T8611.090
[GRAPHIC] [TIFF OMITTED] T8611.091
[GRAPHIC] [TIFF OMITTED] T8611.092
[GRAPHIC] [TIFF OMITTED] T8611.093
[GRAPHIC] [TIFF OMITTED] T8611.094
[GRAPHIC] [TIFF OMITTED] T8611.095
[GRAPHIC] [TIFF OMITTED] T8611.096
[GRAPHIC] [TIFF OMITTED] T8611.097
[GRAPHIC] [TIFF OMITTED] T8611.098
[GRAPHIC] [TIFF OMITTED] T8611.099
[GRAPHIC] [TIFF OMITTED] T8611.100