[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
         DIFFERENT APPLICATIONS FOR GENETICALLY MODIFIED CROPS

=======================================================================

                                HEARING

                               before the

      SUBCOMMITTEE ON RURAL ENTERPRISES, AGRICULTURE & TECHNOLOGY

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                     WASHINGTON, DC, June 29, 2005

                               __________

                           Serial No. 109-24

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri                  ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania           DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado           DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
STEVE KING, Iowa                     MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan          RAUL GRIJALVA, Arizona
RIC KELLER, Florida                  MICHAEL MICHAUD, Maine
TED POE, Texas                       LINDA SANCHEZ, California
MICHAEL SODREL, Indiana              JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska           MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania    GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas

                  J. Matthew Szymanski, Chief of Staff

          Phil Eskeland, Deputy Chief of Staff/Policy Director

                  Michael Day, Minority Staff Director

     SUBCOMMITTEE ON RURAL ENTERPRISES, AGRICULTURE AND TECHNOLOGY

SAM GRAVES, Missouri, Chairman       JOHN BARROW, Georgia
STEVE KING, Iowa                     TOM UDALL, New Mexico
ROSCOE BARTLETT, Maryland            MICHAEL MICHAUD, Maine
MICHAEL SODREL, Indiana              ED CASE, Hawaii
JEFF FORTENBERRY, Nebraska           RAUL GRIJALVA, Arizona
MARILYN MUSGRAVE, Colorado

                   Piper Largent, Professional Staff

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Huttenbauer, Mr. Sam, CEO, Agragen...............................     4
Parks, Ms. Dawn W., Public, Industry & Government Affairs 
  Manager, Arborgen..............................................     8
Dollar, Mr. Thomas H., II, Dollar Farm Products Company, Decatur 
  Gin Company....................................................    11
Deeter, Mr. Scott, President and CEO, Ventria Bioscience.........    14
Perry, Mr. Delan, President, Hawaii Papaya Industry Association..    18

                                Appendix

Opening statements:
    Graves, Hon. Sam.............................................    33
Prepared statements:
    Huttenbauer, Mr. Sam, CEO, Agragen...........................    34
    Parks, Ms. Dawn W., Public, Industry & Government Affairs 
      Manager, Arborgen..........................................    41
    Dollar, Mr. Thomas H., II, Dollar Farm Products Company, 
      Decatur Gin Company........................................    48
    Deeter, Mr. Scott, President and CEO, Ventria Bioscience.....    53
    Perry, Mr. Delan, President, Hawaii Papaya Industry 
      Association................................................    56

                                 (iii)
      



         DIFFERENT APPLICATIONS FOR GENETICALLY MODIFIED CROPS

                              ----------                              


                        WEDNESDAY, JUNE 29, 2005

                   House of Representatives
Subcommittee on Rural Enterprises, Agriculture and 
                                         Technology
                                Committee on Small Business
                                                     Washington, DC
    The Subcommittee met, pursuant to call, at 2:04 p.m. in 
Room 311, Cannon House Office Building, Hon. Sam Graves 
presiding.
    Present: Representatives Graves, Sodrel, Barrow, Udall, 
Case 
    Mr. Graves. We will go ahead and call this hearing to 
order. We have kind of got a little dilemma here. We have got 
to vote at any second now. It was supposed to be about 10 
minutes ago, and obviously it has been delayed, for whatever 
reason, but I think we are going to go ahead and proceed 
forward. We can get some of the opening statements taken care 
of by some of the Members and move forward from there.
    But I would like to welcome everybody to the Rural 
Enterprises, Agriculture and Technology Subcommittee, part of 
the overall Small Business Committee, and today we are going to 
be looking at different applications for genetically modified 
crops. Again, I want to thank everybody here today, our 
audience, and those who are participating in the hearing. Some 
of you have come from a long ways, and I appreciate you coming 
out to testify today.
    As a farmer by trade myself, I truly believe genetically 
modified crops are the future of American agriculture. As 
agriculture markets become more competitive worldwide, it is 
imperative that the United States keep an edge by offering 
continued superior quality product. Genetically modified crops 
allow agribusiness to increase profits and continue to uphold 
the United States' representation for excellence in 
agriculture.
    For centuries, farmers have been modifying crops to improve 
their growth rates and yields. We have seen technology, not 
only improve these yields, but also to create varieties 
resistant to pests and diseases. Such modifications have 
previously been made through cross-breeding plants with 
desirable traits and through hybridization. Thomas Jefferson 
himself was renowned for his work in cross-pollination and 
hybridization at Monticello.
    Already in this country, 85 percent of all of the soybeans 
we grow have been modified, followed closely by 75 percent of 
all of the cotton and half of the corn. Thirteen different 
plants in the U.S. today have been approved to be genetically 
modified, and, in fact, some 60 percent of all of the food that 
we grow and consume is genetically modified. Continued 
developments and research hold great promise for traditional 
agriculture not only when it comes to feeding the world but 
also to produce crops for medical purposes.
    Through advanced technology, scientists can modify specific 
genes for desired qualities and grow them within the plants. 
Commonly referred to as ``biofarming,'' this method of 
retrieving certain enzymes holds limitless potential and will 
allow the United States to retain its leadership role within 
the medical research community.
    Worldwide, genetically modified crops offer hope, 
incredible hope, as a matter of fact, for overpopulated 
countries when it comes to feeding and treating the people in a 
much more efficient and a much more effective way. I am greatly 
concerned that current regulations and a lack of knowledge for 
this science will not only hamper growth in this industry but 
will also allow other countries to surpass the United States' 
position as a world leader within the agriculture business 
industry.
    We have to continue to make policy decisions based on 
sound, scientific facts and help businesses to expand in this 
industry. I think we have a great potential to not only 
revitalize rural business communities but also offer an 
incredible product to consumers throughout the United States 
and throughout the world.
    Again, I am looking forward to hearing what all of the 
witnesses have to say--this is going to be a great hearing to 
talk about the great things when it comes to genetically 
modified crops--and learning more about this expanding 
industry. I am pleased to recognize now Ranking Member Barrow 
for his opening statement, and good to have you.
    [Chairman Graves' opening statement may be found in the 
appendix.]
    Mr. Barrow. Thank you, Mr. Chairman. Mr. Chairman, the 
agricultural sector has always played a central role in the 
success of the United States economy, and as the representative 
for Georgia's 12th District, I know how important agricultural 
interests are not only to my area of the country but to the 
entire country, and it is important for us to remember that 
farming and rural communities are a critical component of the 
history and landscape of our nation. Generations of Americans 
have relied on the strength of our agriculture through the hard 
work, dedication, and innovation of our farmers.
    The importance of the agriculture and farming industries 
has continued to evolve with the growth of our nation. From 
early farming techniques, such as crop rotation and irrigation 
systems, to 19th century inventions, such as the steel plow and 
the cotton gin, farmers have always looked for ways to increase 
productivity and maximize crop yields.
    Today, small family farms and other agriculture-related 
businesses help to meet our needs and contribute to local and 
national economies. With farmers having such a strong presence 
in my district, I know how important their success is to 
economic development. In Georgia, agriculture is our largest 
industry, contributing over $57 billion, or 16 percent of the 
state's $350 billion annual economic output. In fact, in many 
parts of my district, the farm economy is the economy.
    As we make our way through the early years of this century, 
biotechnology and genetic engineering our some of the advances 
leading the way in agriculture innovation. These methods may 
hold the promise to ensure the continued success of the farming 
industry, even as we face increased demands and especially as 
fewer people in each generation turn to farming as a 
profession. High-technology applications and improved crop 
yields are extremely important to the U.S. agricultural economy 
and the rural economy because they will help us meet the 
challenges facing the small farmer and reduce the risk to crops 
and the land itself.
    Today's hearing will give us an opportunity to learn more 
about genetically engineered crops and the scientific gains 
that are leading us in this direction. It will also provide an 
overview to the barriers that we face in bringing this science 
on line in the face of resistance around the world. This is an 
instance, Mr. Chairman, where scientists, businesses, and 
farmers need to work together to grow their own future.
    Genetically engineered crops were first introduced in 1996 
for commercial production. They are now planted on 167 million 
acres of farm land around the world. Of this, the U.S. accounts 
for nearly two-thirds of all biotechnology crops planted 
worldwide, including soybeans, cotton, corn, canola, tomatoes, 
potatoes, papaya, and squash. According to the Biotechnology 
Industry Organization group, 70 percent of all processed foods 
on our shelves today contain products enhanced by 
biotechnology. By selecting specific genes from one organism 
and transferring these desired traits to another, scientists 
have been able to produce new varieties that are stronger, more 
resistant, and better equipped to handle harsh weather 
conditions and withstand insects and other pests. American 
farmers, large and small, have been able to take advantage of 
our technology agriculture, and that is what is keeping the 
U.S. the world's leader in the field.
    This is an important hearing for the folks you represent, 
Mr. Chairman, and for mine. For farmers in Georgia and across 
the nation, it is important to hear what to expect in the 
future in terms of research and production of genetically 
engineered crops.
    I look forward to hearing all of the testimony of today's 
witnesses, particularly Tommy Dollar, a Georgia farmer who is 
the president and owner of Dollar Farm Products and the Decatur 
Gin Company. Thank you, Mr. Chairman.
    Mr. Graves. Thank you, Mr. Barrow.
    Mr. Udall?
    Mr. Udall. I do not have anything, Mr. Chairman. I look 
forward to hearing from the witnesses. Thank you very much.
    Mr. Graves. Mr. Case?
    All right. We will move forward, then, and it looks like we 
had a vote through voice vote. It is not going to be recorded, 
so that is good news. We can continue forward. I do want to 
make it clear that all of the statements made by the witnesses 
and the members will be placed in the record in their entirety. 
Also in front of you, you will notice that you have a little 
box. It is green. I think everybody has five minutes, and then 
it goes to yellow with one minute left, and it is red after 
that. Do not worry about it. If you have got something to say, 
I want to hear it, and do not pay too much attention to it. It 
is just, for the most part, to keep us on track and moving 
forward, so if it turns red, do not be too alarmed.
    We are going to start, and what I am going to do is I will 
introduce you as we move through. I will let everybody give an 
opening statement, and then we will come back through with the 
questions.
    First off, we have got Sam Huttenbauer, who is the CEO of 
Agragen in Cincinnati, Ohio. We have actually got both Sams 
here, senior and junior, I assume. I am a junior, so I 
understand how that is. We are looking forward to hearing your 
testimony, and please go ahead.

             STATEMENT OF SAM HUTTENBAUER, AGRAGEN

    Mr. Huttenbauer. Good afternoon, Mr. Chairman and members 
of the Committee. Thank you for giving me the opportunity to 
participate in this panel.
    My name is Sam Huttenbauer, and I am the president of 
Agragen, Inc., a biotech company working on the development of 
plant-made pharmaceuticals, otherwise known as ``PMPs.'' We are 
located in Cincinnati, Ohio, and are opening up a laboratory 
facility in Grand Forks, North Dakota, where we plan to grow 
and process our pharmaceuticals.
    I am pleased to testify today at this hearing regarding the 
future potential of PMPs and their tacit economic impact 
towards bolstering America's agricultural economy.
    Agragen was started three year ago with the express purpose 
of manufacturing pharmaceuticals utilizing the natural protein-
manufacturing capability of plants. The company has also 
concentrated since its inception on selecting molecular targets 
that require substantial agricultural acreage. Agragen is one 
of the new breed of agribusiness companies combining 
conventional agriculture with high-tech science. As such, it 
will work with farmers, employing their agronomic expertise and 
existent land. With America's agriculture undergoing change in 
the competitive world arena, Agragen and companies like it 
present one opportunity to move our country's great food-and-
fiber skills into a more profitable and stable system.
    Plant-made pharmaceuticals are the new, ultra-high-value 
farming for the 21s century. What are ``plant-made 
pharmaceuticals?'' PMPs are the result of the breakthrough 
application of biotechnology to plants to enable them to 
produce therapeutic proteins that will be used by the medical 
community to combat life-threatening illnesses. In this 
process, plants themselves become factories that manufacture 
therapeutic proteins. These proteins are then extracted, 
refined, and used in pharmaceutical production. These plants 
are grown under highly regulated conditions in defined growing 
environments and are strictly regulated by the U.S. Department 
of Agricultural, its animal and plant health inspection 
service, and by the Food and Drug Administration.
    Why do we want to use PMPs? Well, as the world's scientific 
technology increases, more and more drug therapies rely on 
recombinant proteins and less on traditional combinatorial 
chemistry. While this represents monumental breakthroughs in 
healing, it also presents significant problems of economics, 
efficiency, and safety. Consider this: Over 14 percent of 
treatments in clinical trials today require recombinant 
proteins. It takes five to seven years to build a biotech plant 
capable of producing recombinant proteins versus one to three 
years for a conventional pharmaceutical plant. And just four 
molecules currently consume 75 percent of the existing capacity 
to make recombinant proteins. Over 100 new, protein-based 
medicines are now in late-stage clinical trials.
    There are also many challenges to current recombinant 
production methodologies. From an economic standpoint, current 
biotech plants require five to seven years to construct, cost 
250 to $450 million, and must be individually approved and 
certified by the FDA prior to full-scale operation. From a 
supply standpoint, despite increased therapeutic use of 
recombinant proteins, there is a global shortage of production 
facilities, less than 12 worldwide for these new proteins. This 
greatly limits the movement of these proteins into therapeutic 
use, and from a safety standpoint, there is the possibility of 
cross-contamination with human or mammalian contaminants 
utilizing the current production methodologies.
    Plants provide a number of advantages over other production 
methods of biomedical materials. Cost, for instance. Plant 
vaccines and proteins are inexpensive to produce relative to 
the cost of traditional vaccines and proteins.
    From a safety standpoint, the use of plants for the 
production of biomedical materials eliminates the possibility 
of cross-contamination with human and animal pathogens.
    From an economic standpoint, farming is already an 
important and established part of our global economy, and from 
a practicality and flexibility standpoint, because one plant 
can express several antigens simultaneously, vaccines against a 
variety of pathogens can be produced in a single plant. In 
addition, plants producing therapeutics can be rapidly scaled 
up as demand increases simply by planting more acres.
    The industry needs a cheaper, more effective way to 
manufacture today's and tomorrow's pharmaceuticals. PMPs offer 
this alternative. Plants approved for the use of biotechnology 
can produce the essential building blocks or therapeutic 
proteins for innovative treatments for diseases such as 
Alzheimer's; cancer; chronic, obstructive pulmonary disease; 
Crohn's disease; cystic fibrosis; diabetes, and many others at 
a fraction of the cost of current manufacturing methods.
    Agragen is not currently what might be classified as a 
drug-discovery company, having chosen to focus on established 
therapeutics that are market limited, either due to extreme 
production costs or limited production capacity. Once we have 
established our production platform, this will lead to 
additional pharmaceuticals that will also require large 
acreage. The overall thrust of our technology is to insert 
genes into the plant, thereby permitting the plant to make and 
store the protein of interest in the seed where it can be 
stored indefinitely until it is purified.
    From a business standpoint, plant-made pharmaceuticals 
represent a means to reduce the production costs and to 
increase the availability of many new drug therapies with the 
downstream effect of dramatically reducing costs to consumers 
and allowing life-saving therapies to find their way into the 
hands of many patients who would not have access, either due to 
cost or availability.
    Agragen has selected two products for the initial stages of 
production and several additional candidate proteins. These 
initial products are in line with the company's goals, which 
are the utilization of a large amount of acreage and the 
passing of value-added agricultural profits back to the 
farmers, for three reasons.
    First, both represent $1 billion-plus, underserved and 
growing markets; second, both targets will ultimately require 
large acreage, in the neighborhood of 100,000 acres-plus, and 
spawn meaningful infrastructure in the areas where they are 
developed; and, third, both molecules are currently being 
utilized in the marketplace, which will reduce both clinical 
test costs and time to market. As recombinant-protein science 
becomes an increasingly important technique for the formation 
of new therapeutics, manufacturing capabilities must keep pace.
    Agragen is one of a number of companies that understands 
the capabilities and cost efficiency of plants serving as 
pharmaceutical factories. In addition, plants offer genetic 
mechanisms that may allow discovery and creation of molecules 
that cannot be constructed from any other source.
    To be truly beneficial for small rural business, plant-made 
pharmaceuticals must be tied to open-field production. PMPs 
utilizing plants created in laboratories or in greenhouses have 
little or no connection to the agribusiness system. While these 
operations can utilize plants' natural production mechanisms to 
produce life-saving therapeutics, they do not provide an 
opportunity for the American farmer.
    Large PMP farms, similar to what Agragen is creating, can 
be established around the country utilizing a large number of 
acres, either supplementing lost state farming acreage or 
establishing new growth. In many cases, there will be the 
opportunity for both. Farmers benefit from the production of 
PMP-producing crops via their provision of steady employment of 
their fields and by their greater cash-to-crop yield than is 
available via the current agricultural industry.
    In addition to supplying farmers with a new, high-value 
crop, Agragen envisions further rural economic involvement by 
potential farmer ownership of PMP processing and manufacturing 
facilities. Agragen's business model offers farmers and rural 
economies the opportunity to participate firsthand in this new, 
value-added family of crops. The goal of this novel form of 
agribusiness is to bring the farmer into the process of 
partner, which specifically means allowing operators to share 
in the profitability of what they are manufacturing.
    Agragen believes that it can double or possibly triple the 
bottom line of its partners with a market price that is far 
more stable than typical focused commodities. Furthermore, 
Agragen's impact will be felt in equipment sales, 
transportation and processing jobs, real estate values, et 
cetera. Facilities to handle the transformation of the large 
biomass from field crop to pharmaceutical will have to be 
located within proximity to actual growing areas. This means 
millions of dollars in construction and additional 
opportunities for skilled employees in rural locations. Our own 
initial projections allow--our first two output products show 
close to $80 million infused in the economy of the state that 
we will operate in.
    We see an instant opportunity to utilize American agronomic 
skills to help replace some farm products that might be 
rendered marginal by rapidly developing worldwide agricultural 
production. PMPs offer the possibility for the small farmer 
businessman to share in a potentially large profit market while 
providing tangential benefits to rural economies that would not 
be subject to new investment otherwise.
    However, being immersed in the standard farming arena is 
not without its problems. Typical agricultural challenges, such 
as weather and parasites, can be mitigated by the use of 
multiple growing regions and protein development in seeds which 
allow for long-term storage and thus the capability to 
stockpile. But the greatest immediate threat comes from public 
perception. Field production pits PMP companies against GM 
antagonists, organic farmers, particularly those who may have 
an interest in the crop species being transformed.
    There has been a call for all PMP crops to exclude any 
plants currently used for food or feed. Unfortunately, while 
many plants possess the potential for protein production, 
certain species are better matched with specific targeted 
proteins. Some plants may serve as excellent converters, i.e., 
tobacco, but require too high economic inputs or 
extraordinarily expensive processing procedures. The need to 
utilize the production capacity of food crops will be 
necessary, but these crops are solely used as a factor and will 
never enter the food chain.
    Unlike former GM plant transformations, including the now-
notorious Starling corn, where crops basically enter a side-by-
side handling and distribution system and one where the 
possibility of interchange with non-GM materials is always 
present, PMPs will never have the opportunity to mix with their 
commodity counterparts. PMPs must adhere to a close-loop system 
that will include dedicated equipment, transportation, storage, 
processing, and waste handling.
    Still, public perception issues exist. Chief among them is 
the fear that PMP crops will contaminate non-PMP fields vis-a-
vis pollen drift. This is not an insurmountable issue. A major 
step forward occurred recently in Missouri where government 
officials played a large role in resolving a similar PMP-
related controversy. In Missouri, the problem was untangled by 
diverse separation, essentially using large distances to keep 
PMP crops away from that being produced for the food system.
    Distance is an effective means to mitigate crop 
commingling; however, it might not always be enough. In 
addition to distance requirements, the USDA mandates that all 
PMPs must be grown using a tight, closed-loop system with 
dedicated equipment, shipping trucks, and plant material and 
pollen to prevent them from mixing.
    In Agragen's case, because of the ultimate magnitude of the 
acres projected, the solution might only be temporary. Other 
methods are being developed to take a more proactive approach 
to containing the PMP agriculture. For example, Agragen is hard 
at work developing novel, gene-control mechanisms that will 
make mixing with other plants a statistical improbability.
    In conclusion, Mr. Chairman, I want to reiterate that by 
working with established control mechanisms under the guidance 
of the USDA and other organizations, by working with state and 
local officials, and by incorporating the knowledge of the 
farmers themselves, PMPs can be safely grown throughout the 
states.
    According to a report by a consultancy, Frost & Sullivan, 
released in December 2004, the U.S. market for plant-made 
pharmaceuticals could be worth $2.2 billion by 2011, with the 
first products reaching the market by 2005-2006. Agragen 
believes that from that point, its growth will be restrained 
only by discovery science not keeping pace. This can translate 
into direct economic growth for U.S. agriculture as companies 
utilize more and more acres for PMP production.
    PMPs offer not only the promise of cheaper, more abundant 
pharmaceuticals but the establishment of a new, ultra-high-
agricultural venue for today and tomorrow's farmer. Agragen, by 
bringing the farm community into its business system, feels 
that it will economically benefit rural areas and individuals 
who otherwise would have no connection to the biotech 
revolution. Thank you, Mr. Chairman.
    [Mr. Huttenbauer's testimony may be found in the appendix.]
    Mr. Graves. Thank you. Next, we are going to hear from Dawn 
Parks. Dawn is public, industry, and government affairs manager 
for ArborGen in Summerville, South Carolina. Did I get that 
right?
    Ms. Parks. Yes, you did. Thank you.
    Mr. Graves. I look forward to hearing what you have to say.

              STATEMENT OF DAWN W. PARKS, ARBORGEN

    Ms. Parks. Thank you. Good afternoon, Mr. Chairman, members 
of the Committee, ladies and gentlemen. I am Dawn Parks. I am 
the director of public and government affairs for ArborGen.
    I am privileged to be here this afternoon on behalf of 
ArborGen, as well as on behalf of our trade organization, the 
Biotechnology Industry Organization. BIO represents more than 
1,100 companies, academic institutions, state biotech centers, 
and related organizations across the United States and in 31 
other nations. BIO members are actively involved in the 
research and development of new medicines, food, and industrial 
and environmental products to benefit the lives of people and 
the environment.
    I would like to thank Chairman Graves and members of the 
Committee for the opportunity to be with you today and for 
organizing this hearing. I would also like to thank you, Mr. 
Chairman, for your leadership on the Small Business Innovation 
Research program. Specifically, I want to take this opportunity 
to publicly express BIO's and BIO's member companies' 
appreciation for your introduction of H.R. 2943, the Save 
Biotechnology Innovative Research Act of 2005. This important 
legislation preserves venture capital-backed biotechnology 
small businesses' access to vital Small Business Administration 
grants.
    In this tenth year of growing crops enhanced through 
biotechnology, global acceptance continues to increase at a 
rapid pace. According to the International Service for the 
Acquisition of Agr-Biotech Applications, in 2004, global 
biotech crop plantings continued to grow at a sustained double-
digit rate of 20 percent, compared with 15 percent in 2003. The 
estimated global area of approved crop plantings was more than 
200 million acres in 2004.
    The United States is the world leader in the development 
and planting of these crops, and rural America is one of the 
chief beneficiaries. In 2004, American farmers chose to plant 
85 percent of the soybeans, 76 percent of cotton, and 45 
percent of corn with seeds improved through biotechnology that 
allow the plants to protect themselves from insects and disease 
and promote better weed management. The United States has also 
approved for commercial planting biotech varieties of canola, 
chicory, flax and linseed, melon, papaya, potatoes, rice, 
squash, sugar beets, tobacco, and tomato. The annual R&D 
investment of the six largest companies in this sector is $2.7 
billion, or 10.8 percent of sales.
    The rapid adoption of this technology by U.S. farmers is a 
testament to the solutions it provides to problems on the farm. 
Biotechnology enables farmers to reduce input costs and improve 
yields.
    My company, ArborGen, is a small business, but the research 
and development we are doing at our headquarters in 
Summerville, South Carolina, holds potential to improve 
forestry on a national and international scale. Forestry, of 
course, is a rural business that supports millions of jobs 
across America.
    Our goal at ArborGen is to use breeding techniques, 
including biotechnology, to improve the sustainability of 
forestry. According to the Food and Agriculture Organization, 
about one-third of the harvested wood is supplied from 
industry-owned, highly managed tree plantations. The rest comes 
from landowners that utilize a wide variety of management 
techniques, including natural forest management.
    As the worldwide population increases, so does the demand 
for wood and paper products. Rather than expanding the forested 
acreage under management to meet these wood and paper 
requirements in the future, we are developing faster-growing 
trees that will improve the productivity of forest plantations, 
and by producing more wood on less land, people can build the 
homes and buy the products they desire without cutting down our 
natural forests, which will be conserved for wildlife, 
recreation, biodiversity, and beauty.
    ArborGen also is developing trees with modified lignin. 
Lignin is a component of wood fibers that is removed during the 
pulping process to obtain the cellulose needed to make paper. 
The process involves intensive use of chemicals and energies. 
Reducing lignin content in the trees intended for pulp, or by 
making it easier to remove the lignin during the manufacturing 
process, will provide important environmental benefits.
    The area of forestry biotechnology has potential to bring 
many other benefits, and several institutions around the world 
are developing really exciting products that have significant 
social, environmental, and economic benefits. One key potential 
benefit is the production of cleaner burning fuels. Wood 
produced for ethanol or used directly as fuel by power 
companies would be a clean, renewable, and cost-effective 
energy resource.
    Phyto-remediation of Superfund sites or other toxic lands 
is another very promising possibility. Instead of spending 
billions of dollars removing and sterilizing impaired soils, it 
may be feasible to plant modified trees that can absorb and 
neutralize hazard wastes and heavy metals.
    Biotechnology can also help restore endangered species, 
such as the American chestnut, American elm, flowering dogwood, 
and the California oaks. A single disease-resistance gene added 
to chestnut could allow for these beautiful species to 
withstand the blights that have nearly obliterated them from 
the landscape. Field trials with American elm are underway now, 
and chestnut trials should begin soon.
    Another possibility is trees that can grow in harsh 
conditions, such as arid climates or salty soils. In areas 
where trees are an important part of the landscape, this 
technology could halt further encroachment of the desert and 
allow trees to grow in areas where they are now unable to grow. 
And the ability to grow important hardwoods more quickly on 
managed lands could halt the black market harvesting of these 
species in natural forests.
    Forest biotechnology is in its infancy, but it holds 
unlimited possibilities that would take generations to produce 
through traditional cross-breeding. Instead of waiting for 
trees to grow to sexual maturity so they can be cross-bred with 
one another, forest biotechnology can identify a desirable gene 
and transfer it to a tree. The success of failure of the 
transfer can be seen almost immediately. Then through high-
production, multiplication systems, we can mass produce 
plantlets and introduce large numbers of the improved trees to 
supply plantation foresters so they can begin to provide 
benefits to this generation of citizens and into the future. 
Perhaps adults living today will be able to stand beneath the 
shade of a spreading chestnut tree, just as their great-
grandparents did.
    Mr. Chairman, I hope you can understand from my testimony 
how excited I am to be part of this emerging industry. There 
are, however, threats to the continued success of the research 
I have just described, the most daunting being the exclusion of 
companies such as ArborGen, with majority private funding from 
companies, from participating in SBIR programs.
    While BIO does represent companies in the industry, the 
vast majority of its members, over 85 percent, are small, 
emerging companies with less than 500 employees. In fact, more 
than 50 percent of the companies in our industry have fewer 
than 50 employees. In our case, a company with 70 employees, it 
strikes us as unthinkable that we would be considered 
ineligible for an SBIR grant because we receive private funding 
for our core projects.
    Under the current interpretation of the eligibility, we are 
concerned ineligible because, as a start-up company, we did 
what virtually all early stage start-up companies do to 
continue their research: We received funding for early research 
and development projects from corporate investors. Funding 
partners often support the development of the critical 
platforms, technologies, and protocols that will lead to 
products for a particular kind of industry. But, for example, 
as we develop products designed for improving forest management 
and manufacturing efficiencies, we have identified genes that 
can provide significant values to industries outside of paper 
making and lumber.
    The SBIR program is ideally suited for this purpose because 
the company, our company, has already demonstrated that it can 
successfully raise follow-on financing, one of the key criteria 
in evaluating an SBIR Phase II grant proposal.
    To remove this barrier to participation in the SBIR 
program, BIO has urged SBA to revise the SBIR eligibility 
requirements and issue a proposed rule that reflects Congress's 
original intent to encourage awards to small businesses that 
have successfully attracted outside investors.
    The approach proposed by SBA in its December 3, 2004, 
advanced notice of proposed rulemaking to disregard affiliation 
is a step in the right direction. However, it does not address 
the fundamental obstacle, which is SBA's requirement that small 
businesses be majority owned and controlled, directly or 
indirectly, by individuals. The SABIR Act, however, clarifies 
that biotechnology small businesses receiving venture capital 
funding are, in fact, eligible for SBIR Phase II grants. We 
thank you so much, Mr. Chairman, for your leadership on this 
very important issue.
    Mr. Chairman, we appreciate your leadership on these issues 
and look forward to continuing to work towards a resolution. 
Thank you for giving me the opportunity to provide this 
information to you today. I look forward to answering any 
questions that you may have.
    [Ms. Parks' testimony may be found in the appendix.]
    Mr. Graves. Thank you, Ms. Parks, and thank you for 
mentioning the venture capital issue that we have got up. I 
actually testified on that yesterday in another Committee, and 
we are going to have a hearing on it in this Committee in about 
a month. So we might ask you for your input on that, too.
    I will let Mr. Barrow introduce our next witness.
    Mr. Barrow. Thank you, Mr. Chairman. I am pleased to 
introduce to the Committee Mr. Thomas Dollar. Mr. Dollar is a 
third-generation Georgia farmer. In addition to growing over 
3,000 acres of cotton and peanuts, he is the president of both 
the Decatur Gin Company and the Miller County Gin Company. Both 
businesses gin about 56,000 acres of cotton each year.
    Mr. Dollar sells materials and supplies to farmers. He is a 
grower and crop producer, and he is a crop processor as well. 
He is here to talk about the impact that agricultural genetic 
engineering is having on agriculture in my part of the country.
    Mr. Dollar, thank you for being here today.

    STATEMENT OF THOMAS H. DOLLAR, II, DOLLAR FARM PRODUCTS 
                  COMPANY, DECATUR GIN COMPANY

    Mr. Dollar. Thank you very much. Thank you, Chairman 
Graves, Ranking Member Barrow, and members of the Subcommittee. 
I am very grateful to be asked to speak to you on different 
application benefits of genetically modified crops. You have 
described myself tremendously. I appreciate the accolades, and 
I will not go through that on my speech, but I will go ahead 
and proceed to the next paragraph.
    I come before you today speaking as a producer and to speak 
for my producer customers about the benefits of growing 
genetically modified crops, namely, cotton. The general 
practice of growing crops of cotton has dramatically changed in 
the last 15 years. Since I started ginning consulting for the 
gins in 1988, the customary practices of growing cotton have 
changed in three major ways.
    During the 1988 growing season, it normally took five or 
six applications of residual-type herbicide to control weeds in 
cotton during the growing season. We sprayed 10 to 14 
applications of worm spray to control bollworms, budworms, and 
armyworms. Then we typically sprayed five to six applications 
of insects for boll weevils. The end result was 20 to 25 
applications of chemical on a cotton field in any given year. 
Many trips to the field were required, costing me and my other 
growers time and money.
    Now we use genetically modified cotton with the Roundup 
Ready and BT genes. Roundup Ready cotton has been genetically 
enhanced to provide herbicide tolerance that allows Roundup 
herbicide to be applied directly over the top of cotton in the 
field. Weeds that can negatively infect the field are killed 
while the cotton plants live. Because of this technology, 
Roundup has replaced the multiple herbicides I used to use. I 
also use Bollgard cotton, which contains the BT gene to control 
bollworms and budworms that can devastate a cotton crop.
    This year, in contrast to what I did in 1988, I will only 
apply two to three applications of Roundup, a nonresidual 
herbicide, spray two to three times for armyworms, which are 
not currently controlled by genetically modified cotton 
varieties suited to my region. Because of the success of the 
boll weevil eradication program, I will not have to apply any 
organophosphates that can be deadly to non-targeted pests. The 
result is four to six applications of a pesticide on any given 
field versus the 20 to 25 applications required in 1988.
    The benefits to me as a grower and to the community as a 
whole are significant. First, I have experienced cost 
reductions. I have reduced total sprays by approximately 15 
applications since 1998. These chemicals cost approximately $7 
per application, and the cost of applications covering things 
like fuel and labor and aerial application is $4.15, for a 
total of $11.15 per acre per application. Over the course of 15 
applications, that is a savings of approximately $167 an acre. 
While growers such as myself have to pay a technology fee for 
biotechnology traits that we use, I calculate that my savings 
are still more than $100 an acre, not to mention reduced wear 
and tear on my equipment and the time I save.
    The biotech cotton varieties I use require a refuge area of 
5 percent to ensure that pests do not become resistant to the 
technology, so 95 percent is biotech cotton. Over my 2,500 
acres, that means I save a total of $237,500.
    This reduced cost is helping my bottom line in an ever-
competitive cotton market. Globalization, a new farm bill, 
Brazil's WTO case, the World Trade Organization case against 
U.S. cotton programs and broader World Trade Organization 
negotiations continue to bring enormous uncertainties to my 
future business planning. But given all of these uncertainties, 
at least I know that my ability to adopt the latest 
agricultural technology, such as new biotech traits, will help 
me compete in these changing times.
    Reduced pesticide applications are providing a positive 
environmental impact. As I mentioned, I have switched from a 
variety of herbicides to using primarily just Roundup on my 
crops. Unlike many other herbicides that I have used in the 
past, Roundup is nonresidual. I have also seen a resurgence in 
fire ants in my fields because I am using fewer broad-spectrum 
insecticides. While that might not seem like a positive impact 
from biotech crops, it is actually a good thing for me. You 
see, fire ants eat eggs from other pests in cotton, which means 
less damage to my crops and even fewer pesticide sprays.
    The results on my farm are not unusual. Many other farms in 
the United States and the world have experienced similar 
positive results. A study by the National Center for Food and 
Agricultural Policy found that six biotech crops--corn, canola, 
cotton, papaya, soybeans, and squash--lifted growers' income by 
$1.9 billion and reduce agricultural chemical use by 46.4 
million pounds of active ingredients. Additionally, this study 
found crop yields increased 5.3 billion pounds. This is money 
in the pockets of U.S. farmers.
    Even more exciting for me is the prospect of new biotech 
crops yet to come. I traveled to Australia in January 2005 and 
saw growers there using Bollgard II on their cotton plants. 
This technology is on the market in the United States but is 
not currently in very many of the varieties that I use. Next 
season, this technology will be available to varieties suited 
to my region and will be stacked with the latest Roundup Ready 
technology. This new product will address the armyworm problem 
that currently requires two to three sprays per season in my 
area.
    I look forward to utilizing Bollgard II technology in 
varieties that are high yielding, specifically adopted for my 
growing area, and brought to me by U.S. seed companies such as 
Delta and Pineland Seed. This technology will reduce my 
pesticide sprays even more, making more a more efficient and 
cost-effective grower.
    In closing, I would like to note that we are experiencing 
extremely high fuel and fertilizer costs this year, and if it 
were not for genetically modified crops, many farms simply 
could not be profitable. In addition to agricultural 
biotechnology, I am using tools, such as strip till to weed 
cover crops on 100 percent of my acres, verberate soil sampling 
for fertilizer and lime application to most efficiently apply 
these inputs, aerial imagery to show extreme growth and lack of 
in crops which cannot be detected by the ground, and yield 
monitors to monitor yield variances in the field.
    While you can see that genetically modified crops are not 
the only strategy I use in my farming operation to reduce costs 
and improve my efficiency and bottom line, biotechnology is a 
key component of my operation. Without biotech cotton, I would 
have faced a tremendous shortfall in my operation. Therefore, 
continuing to encourage the development of new biotech traits 
for agriculture, continuing to seek global acceptance of these 
crops, and continuing to support the rigorous regulatory system 
that we currently have in place to ensure the safety of biotech 
crops that make their way to the market are critical to the 
success of my operation and of American agriculture.
    As you can see, I do not mind embracing new technologies or 
ideas. The day I do not adopt or try a new technology and ideas 
will be the day I retire. In fact, I think we have only seen 
the tip of the iceberg in agricultural biotechnology. I look 
forward to future products that can make me more efficient or 
help me address some of my most pressing problems, such as a 
aflatoxins in corn and peanuts and soybeans. I also understand 
that products that could help growers across the United States, 
such as drought-resistant corn and soybeans, are currently 
being researched.
    I encourage this Committee and Congress as a whole to 
promote new technology and to promote new ideas as we move 
forward in an ever-competitive, global, agricultural 
environment. Innovation is the key to the United States 
remaining competitive, and we need to be sure that we are aware 
of innovations so that new technologies continue to flow to 
farmers such as myself. The future of U.S. agriculture's 
ability to feed and clothe the world depends on it.
    Chairman Graves, Ranking Member Barrows, and members of the 
Subcommittee, thank you again for this opportunity to speak on 
the benefits provided to growers by agricultural biotechnology. 
I look forward to answering any questions you and the Committee 
have.
    [Mr. Dollar's testimony may be found in the appendix.]
    Mr. Graves. Thank you, Mr. Dollar.
    Next, we are going to hear from Mr. Scott Deeter, president 
and CEO of Ventria Bioscience in Sacramento, California. Scott, 
thanks for being here.

        STATEMENT OF SCOTT E. DEETER, VENTRIA BIOSCIENCE

    Mr. Deeter. Good afternoon, Chairman Graves, Mr. Barrow, 
members of the Committee, ladies and gentlemen. It is a 
pleasure to be here.
    My name is Scott Deeter. I am president and CEO of Ventria 
Bioscience, the company that I am representing today in this 
testimony. I appreciate the opportunity to address the 
Committee to describe some of the different applications of 
genetically modified crops. I will briefly describe the 
company, our technology, and our products in development, and I 
would be happy to answer any questions following the testimony.
    First, let me provide an introduction to Ventria 
Bioscience. Ventria was founded with the support and guidance 
of several leaders in biotechnology and agribusiness who formed 
the company's board of directors. Our chairman is Tom Urban, 
who was former chairman and CEO of Pioneer Hi-Bred. Other board 
members include Bill Rutter and Pablo Valenzuela, who were co-
founders of Chiron, one of the early biotechnology companies in 
the U.S.; and Hank Rutter, and entrepreneur and attorney by 
training. Also, Bill Crouse is a limited partner of Healthcare 
Ventures; Dean Hubbard, president of Northwest Missouri State; 
and Mel Booth, who was the previous president of Human Genome 
Sciences and MedImmune.
    These industry leaders have committed their resources, 
their time, their talents to realize the vision of improving 
health care on a global basis utilizing the tools of modern 
biotechnology combined with the industrial might of American 
agriculture.
    Ventria Bioscience is a plant-made pharmaceutical company. 
We utilize rice and barley as a factory to produce these 
biologic products. Ventria's initial products provide human 
health benefits; however, the company's technology has the 
potential to address many challenges faced by other sectors of 
the economy, including animal health, energy, food processing, 
and industrial processing.
    The company's core technology is a highly efficient and 
unsurpassed method of producing biological products in the seed 
of self-pollinating rice and barley. The technology was 
discovered in collaboration with the University of California, 
as well as other leading research institutions in the United 
States. Ventria believes this technology will lead to more 
affordable medicines for a broader patient population than what 
is possible today with conventional technology.
    Our technological innovation results in a substantial 
improvement in the economics of biopharmaceutical production. 
For instance, the capital investment required for Ventria to 
produce 500 kilograms of product per year is $4 million. To 
compare, to produce that same amount using conventional 
technology, such as mammalian cell culture, would cost $125 
million, a more than thirtyfold increase. In addition, the 
operating costs of Ventria's technology are less than one-tenth 
of conventional technology.
    Now, there are several reasons why this technological and 
economic advantage exists. First, we have been able to achieve 
extraordinarily high yields of the product in the seed of rice 
and barley.
    Second, barley and rice are self-pollinating. They can 
easily achieve the necessary geographic isolation from their 
food crop counterparts to eliminate any concerns of cross-
contamination with the food supply.
    Third, since processing cost is the primary component of 
cost of goods for biologic products, Ventria's technology has 
the advantage versus many other systems because it can achieve 
higher utilization rates for the processing facility. That 
makes the processing facility much more efficient. The reason 
for this improvement in efficiency is that these crops can be 
stored in ambient conditions for up to two years without 
degrading the protein or the biologic in the seed. By storing 
the grain and processing on a continuous basis, this allows for 
high processing capacity utilization and reduced cost of goods.
    And, fourth, because rice and barley are safe for human 
consumption, they are ideal for products that can be delivered 
orally, thereby eliminating the need for expensive separation 
technology that is required by conventional systems to remove 
infectious or toxic contaminants.
    These advantages paved the way for a paradigm shift in 
biopharmaceutical production for the benefit of patients 
worldwide.
    As an illustration of the strength of Ventria's technology, 
I would like to describe some of the human health products in 
development. Ventria's first two health products are proteins 
called Lactiva and Lysomin. These two proteins are found 
naturally in mother's milk, saliva, tears, and they contribute 
to the improved health status that has widely been reported for 
breast-fed children when compared to their infant formula-fed 
counterparts. These proteins are part of the reason why breast 
feeding is the best form of nutrition for infants and is highly 
recommended by pediatricians.
    Now, using Ventria's technology, we can produce these 
proteins cost effectively and incorporate them into a variety 
of products for improved human health. We currently produce 
Lactiva and Lysomin in the seed of rice through contract 
relationships with selected and well-trained growers. Ventria's 
field production is regulated under permits issued by the USDA 
Animal and Plant Health Inspection Service. In fact, last year 
alone, Ventria's field location was inspected eight times by 
APHIS inspectors with no compliance infractions. Once 
harvested, the seed is pulverized to a powder and transported 
to a dedicated facility where the final product is processed 
into either a concentrate or an isolate.
    The U.S. FDA has regulatory authority over Ventria's 
products for human health. As part of our premarket activity, 
we reviewed the safety of Lactiva and Lysomin with a panel of 
scientific and medical experts who have unanimously concluded 
that these products are generally recognized as safe for use in 
functional and medical foods. The results of the panel review 
were summarized and submitted to FDA where they are currently 
awaiting clearance prior to commercial sale for human health.
    Ventria has several products under development that will 
incorporate Lactiva and Lysomin. One product has been developed 
for children suffering from acute diarrhea. The World Health 
Organization estimates 1.9 million children under the age of 
five die every year due to diarrhea. To address this crisis, 
Ventria added Lactiva and Lysomin to an oral rehydration 
solution, which is a common therapy given to children suffering 
from diarrhea. By adding Lactiva and Lysomin, Ventria believes 
it can improve the recovery rate, reduce the severity, as well 
as the duration of the disease in these children.
    This hypothesis is the basis of a recently completed study 
and Peru with 150 children suffering from this disease. Ventria 
expects the results of this study to be published shortly.
    Our production technology enables the cost-effective 
addition of Lactiva and Lysomin to oral-rehydration solution 
for the benefit of millions of children worldwide.
    Ventria is also exploring the use of Lactiva and Lysomin 
for the prevention of diarrhea in the military. During 
Operation Iraqi Freedom, 70 percent of the deployed troops 
suffered a diarrheal attack, and 43 percent reported decreased 
job performance as a result of this attack. During the Vietnam 
War, it has been reported that hospitalizations due to diarrhea 
were four times more prevalent than malaria. This is a silent 
enemy attacking American troops.
    Ventria has set its goal to reduce the attack rate by 50 
percent with the preventive administration of Lactiva and 
Lysomin. If we achieve our objective, it would improve military 
morale, efficiency, and manpower. In terms of manpower 
productivity alone, this may pay for itself due to the cost 
effectiveness of Ventria's technology. Incidentally, this is a 
similar problem to that experienced by the millions of 
Americans who travel overseas.
    Another use of Lactiva that is being developed is for the 
management of inflammatory bowel disease, or IBD. IBD afflicts 
over one million Americans and over four million people 
worldwide. IBD is an extremely debilitating disease that causes 
severe abdominal pain, weight loss, poor absorption of 
nutrients, and chronic gastrointestinal ulcers. Ventria is 
testing the potential of Lactiva to improve the quality of life 
for the millions with this disease.
    Ventria is also working with the University of Cincinnati 
to develop a treatment for chronic lung infections caused by 
Pseudomonas, which is the leading cause of death for patients 
suffering from cystic fibrosis. Ventria and our collaborators 
have already shown successful inhibition of this infection, and 
we are jointly planning a preclinical program to further 
develop this product.
    Recently, Ventria was the recipient of an SBIR grant from 
the National Institutes of Health, National Institute on Aging, 
related to the use of one of Ventria's products to inhibit 
biofilms constructed by pathogenic bacteria. These types of 
infections affect more than 10 million Americans annually. 
Infections that are protected by biofilm are 100 to 1,000 times 
more resistant to antibiotics. So it is important to inhibit 
the formation of these biofilms before they can establish 
themselves in a wound site.
    Ventria has worked with scientists from the University of 
Iowa and Howard Hughes Medical Institute to develop a natural 
human protein that has been shown to inhibit the ability of 
pathogens to construct these biofilms. Using its plant-made 
pharmaceutical technology, Ventria produced and purified the 
protein and shown the effective inhibition. With the SBIR 
grant, Ventria will further develop this product, with the goal 
of improving patient recovery by reducing the establishment of 
biofilm infections.
    This concludes my testimony on behalf of Ventria Bioscience 
to describe some of the different applications of genetically 
modified crops. As you can see, combining the tools of 
biotechnologies with the capabilities of modern agriculture, we 
are able to make a significant difference to human health on a 
global basis.
    I would like to thank Chairman Graves, Mr. Barrow, and 
Committee members for your kind attention and the opportunity 
to testify. I would be happy to answer any questions following 
the testimony.
    [Mr. Deeter's testimony may be found in the appendix.]
    Mr. Graves. Thank you, Mr. Deeter. I apologize for the 
interruption. Everybody should be happy to know that if we do 
have an attack in Washington, that our system is working well.
    Next, I am going to turn it over to Mr. Case to introduce 
our next witness.
    Mr. Case. Thank you, Mr. Chair. Thank you for the courtesy, 
and also thank you for, first of all, highlighting through this 
forum something that is obvious to all of us but not so obvious 
sometimes outside of the Capitol, and that is that small 
business is agriculture, and agriculture is small business; in 
this country, most of agriculture is small business. Also, 
thank you for the subject matter of the hearing where I think 
legitimate concerns are often overshadowed by the wrong 
information and other concerns.
    I am really happy to introduce Delan ``Rusty'' Perry from 
my own home state, my constituent. Delan was born and raised on 
the island of Oahu and graduated from the University of 
California at Berkeley with a degree in political science. He 
immediately made two very good decisions. The first decision 
was to abandon the political track and go into agriculture. The 
second decision was to move to my home island, the island of 
Hawaii, where he went into agriculture 30 years ago now, 
focusing in the very rich, volcanic soil of east Hawaii on the 
island of Hawaii, which, if anybody knows that area, is literal 
a volcanic zone. In fact, where he grows papaya and other 
crops, I actually went down at eight years of age from the town 
of Hilo to watch the volcano erupt in 1960.
    He has owned Kapoho Grown, a diversified ag. farm, for 30 
years now. He grows a number of different crops as part of the 
diversified agriculture industry of our Hawaii. Papaya is his 
specialty. Papaya is our eighth-largest crop at the moment. By 
the way, if you want to get into some of the history, the four 
largest crops in Hawaii are pine sugar; seed corn, which is 
clearly intensive in the genetic engineering area; macadamia 
nuts, all of which have a very heavy component.
    He is the past president of the Big Island Farm Bureau. He 
is the president of the Hawaii Papaya Industry Association. He 
is the president also of the Big Island Banana Growers 
Association. We do a little bit of everything there, and I 
think he has a real story to tell about the reality of genetic 
engineering, and I am looking forward to your sharing the story 
with us. Thank you for being here.
    Mr. Graves. Mr. Perry, I, too, want to thank you for being 
here and appreciate the fresh papayas that you brought with 
you. It is not something we get in Washington or Missouri very 
often, and I do appreciate that. Very good.

  STATEMENT OF DELAN PERRY, HAWAII PAPAYA INDUSTRY ASSOCIATION

    Mr. Perry. Okay. Thank you very much, Mr. Chairman. Thank 
you, Representative Case, and thank you, members of the 
Committee. I am really honored to be here, although it is a 
little ways to come. Aloha and good afternoon.
    My name is Delan Perry. I have been a papaya grower on the 
Big Island since 1974, and I am here today representing the 
Hawaii Papaya Industry Association, which is a state-wide, 
voluntary association of growers, packers, shippers, of which I 
have been president for the last seven years.
    I am always happy to share our experience in 
commercializing virus-resistant papayas. We call it ``The 
Papaya Story.'' I am proud of the success that we have had 
using this new technology that was brought to our crop. We 
certainly did not choose to have papaya ringspot virus come 
into our farm and almost put us out of business, but we are 
happy that some visionary scientists recognized the potential 
for this technology in the late 1980's and that by the time 
this fatal papaya virus came to our major growing area, a 
transformation had been proven to be highly resistant. I also 
believe our experience can be useful to other specialty crops, 
both in the United States and throughout the tropics and 
subtropics.
    In 1992, as chairman of the Papaya Administrative 
Committee's Research and Development Subcommittee, it became my 
job to take a research project and find a way to put it into 
our growers' hands before everyone went out of business. The 
need of literally several hundred pounds of seeds, not hundreds 
of thousands of pounds of seeds, meant that there was really, 
in reality, little economic incentive for anyone else to do the 
job. Being farmers, we figured, yeah, we can do this.
    The period between 1992, when the virus moved to Puna, 
which is a district on the Big Island, and 1998, when the 
United States deregulation as well as licensing of the relevant 
intellectual properties was completed, was a very hard time for 
my farm, as well as hundreds of others of affected papaya 
growers. Our employees went from 17 to one, and I took a job 
managing an agricultural supply co-op for 27 months. I counted 
the months. We did not plant papayas for two years. If the 
transgenic papaya had not been in the works, I would never have 
gone back to growing papayas.
    One of the things, I think, that differentiates our 
experience with genetically modified crops is that our grower 
association, at that time, the Papaya Administrative Committee, 
which was a federal marketing order, and its successor, Hawaii 
Papaya Industry Association, with the help of a dedicated group 
of researchers, took all of the steps to bring this elegant 
solution to a fatal virus to our growers through several 
things: licensing the appropriate intellectual properties; 
deregulation with USDA, EPA, and FDA; production of seed--we 
got in the seed business; very importantly, demonstrating to 
both the growers and the wider community the efficacy and the 
need for the technology; development of a distribution plan; 
development of a marketing plan that had to come; and later, 
deregulating our papayas with Health Canada, so we deregulated 
into Canada, and now we are finishing up the deregulation 
process in Japan, a very important export market.
    Today, almost 60 percent of Hawaii's papayas have a 
resistant gene in several varieties chosen for their special 
micro-climates and markets. Over 200 growers have received a 
sublicense from our association to grow transgenic varieties. 
An important issue, segregation of varieties for the market, 
and the issue of pollen flow are related issues and an area 
that we continue to do research in. We believe an important 
future of our industry is to be able to market a variety for 
every taste. Papaya is also marketed as a whole food, which 
sort of sets it apart from other transgenic crops. It is not 
going to be blended.
    Thus, keeping varieties separate is an important key to 
market expansion. Also, Japan, for instance, has a zero 
tolerance for non-deregulated, transgenic products. For these 
reasons, segregation of varieties has become much more 
important. The Hawaii Papaya Industry Association, together 
with the Hawaii Department of Agriculture, developed and 
implemented an identity preservation protocol. Since 
implementation over two years ago, over 800 acres of 
nontransgenic papayas have been certified, and with careful 
handling requirements, no transgenic papayas have been shipped 
to Japan. Upon deregulation, we will expect the zero tolerance 
to be relaxed, but we have shown that it is achievable.
    We have also found that growers, especially inexperienced 
ones, have made mistakes in obtaining seeds or, in the case of 
organic growers, wanted tolerances less than five percent, 
which is the industry standard. Since our ongoing research 
shows that cross-pollination is very limited, I believe that, 
talking to your neighbor and using simple and reasonable 
practices, all papaya growers will be able to grow different 
varieties side by side without problems.
    We will have the scientific basis to make recommendations 
before long on optimal distances between varieties to ensure 
varietal integrity. In fact, most growers already successfully 
grow two or more varieties side by side to support new markets 
and hedge their virus risk. On our farm, we grow three 
different varieties.
    Papayas are a very important crop throughout the tropics 
and subtropics. Papaya ringspot virus is, likewise, a nasty 
problem most places. Many countries in South America, the 
Caribbean, Africa, and South and Southeast Asia are working on 
their own transgenic papayas using local scientists, local 
strains of papaya ringspot virus for protection of their local 
papaya varieties.
    The Hawaii papaya story is told in many places. Just in the 
last few months, we have had visitors from Thailand, the 
Philippines, and Vietnam wanting to see for themselves how well 
the technology has worked and what challenges we have overcome.
    Though consumer acceptance has been very good in Hawaii and 
the rest of the U.S. and in Canada, we will have a different 
challenge in Japan when deregulation is finished because of the 
labeling requirement. Even though transgenic and non-transgenic 
papayas are substantially equivalent, I want to acknowledge the 
great help of the Foreign Agricultural Service that has been 
providing market research, map and task funds, and much other 
support as we approached this challenge.
    Surprisingly, one of the most important consequences of our 
successful commercialization of transgenic papayas has been the 
attention of the scientific community on papaya research other 
than genetic engineering. It is particularly exciting that the 
Hawaii Papaya Genome Project will sequence the whole papaya 
DNA. Sometime next year, they will be completed. Not only has 
this sped up the answering of regulatory questions on molecular 
biology, but we will soon discover new neutriceuticals hidden 
in the genome that will be the basis for more papaya usage in 
the future.
    I want to leave you with two thoughts. As a commercial crop 
for domestic and export sales, Hawaii papayas would not have 
survived without this technology. And I hope you will agree 
that our papaya can be a model for other small specialty crops 
which need to overcome a similar challenge. I believe we have 
demonstrated this. Papayas are once more a growth industry 
seeking new premium markets.
    Thank you for this opportunity to testify on this important 
issue. I will be happy to answer any of your questions.
    [Mr. Perry's testimony may be found in the appendix.]
    Mr. Graves. Thank you, Mr. Perry.
    We will start with questions, and I actually have one for 
all of you, and just to give you a little bit of background on 
one of the reasons why I am so fascinated with this and one of 
the reasons I am so interested in this is this is actually my 
area. My degree was in plant physiology, and I had every 
intention after I got out of college--obviously, I went back to 
the farm, and I had every intention of getting a master's and 
possibly a doctorate in this field, in plant chemistry. 
Unfortunately or fortunately, however you want to look at it, I 
got sidetracked into politics, and that is where I am today. 
That was not my original track, but it is where I am going, and 
now I have an opportunity to see and help foster some of the 
advancements that are coming at us.
    When I was in school, which was in the early eighties, we 
were just talking about--in fact, Mr. Deeter touched on 
protieomics and breaking it down at the protein level and some 
of the wonderful opportunities of marrying plant science and 
human science together. And, of course, a protein, it does not 
matter if it comes from a plant or a human; it is the same 
thing.
    But I would be interested in knowing from your respective 
areas, and you are all experts and very knowledgeable in your 
areas, and it does not matter whether it is production outcomes 
you are looking for or human health outcomes or whatever the 
case may be; I would like to know what you think out there as 
to what is going to knock the public's socks off, what is one 
of the wonderful things that is going to happen? It may be 
production, it may be human health, but tell me what is 
fascinating on the horizon today, and, Mr. Huttenbauer, we will 
start with you.
    Mr. Huttenbauer. Thank you. From our standpoint, obviously, 
as a plant-made pharmaceutical company, the thing that we hope 
will ultimately knock the public's socks off is the ability to 
really produce high-quality and low-cost health care. But in 
particular, some of the targeted proteins that we are looking 
into are proteins that cannot be created in the abundance that 
they are needed to be created to address certain health care 
needs.
    I have one example of approach that we are working on. It 
is a disease that afflicts about 50,000 people worldwide, and 
because of current production constraints, and this is a 
particular blood protein, only about 14,000 patients can be 
treated on a yearly basis. In addition to that, the actual 
costs of those treatments are in excess of $30,000 per patient.
    So one of the advantages plant-made pharmaceutical has is 
to not only allow for the entire 50,000 patients to be treated 
but also to dramatically lower the cost of the health care. For 
some people, they just simply could not afford it even if it 
was available, and I think that is one of the greatest 
advantages that we can bring to the future.
    Mr. Graves. Ms. Parks?
    Ms. Parks. People, in general, have an extraordinarily 
personal relationship with forests, and they do not realize the 
number of products that actually derive from forests and all of 
the downstream products that come from the manufacturing 
processes. And I think one of the most exciting things that 
could be available for the public is if they could actually 
maintain that really strong personal relationship with the 
forest and have a mechanism to be able to produce a lot more 
wood on a lot less land so they could have the products that 
they want and be able to have the personal experience with the 
forest on a regular basis or whenever it is that they want that 
experience.
    Mr. Graves. Mr. Dollar?
    Mr. Dollar. One thing you say that would knock the socks 
off of biotech--I am in the rain belt, the southeast United 
States, but we do not get rain when we need it, so we have to 
have irrigation. I have 26 irrigation systems running most of 
the time when we need it. But water issues are becoming bigger 
and bigger, so if we could develop plants that are more water 
tolerant and do not have to have as much water, I think that 
would be one big item that would affect everybody.
    Mr. Graves. Mr. Deeter?
    Mr. Deeter. Well, my socks are already off. I am impressed 
with the papaya story. Actually, that, to me, is a major story 
that really is not out there, quite frankly. You do not hear 
about that in the press, that we would not be eating papayas 
today, but that knocks my socks off.
    But I would say that I think there is another item, and 
that is I am reminded when the human insulin gene was cloned, 
biotechnology--this was 20 years ago--biotechnology was a scary 
idea, and there was a lot of concern about biopharmaceuticals. 
But when we cloned the human insulin gene and were able to 
produce insulin for diabetics, all of a sudden we had a real 
product for real patients to solve a real, life-threatening 
problem. And I think that is the same for plant-based 
biotechnology, that as we have a story like the papaya 
industry, something that was saved by biotechnology, to me, 
that is important. But when we also have a mother that can 
stand up and say that my child is alive today because of plant-
made pharmaceuticals, and that I could neither maybe afford 
that product before, or I did not have that product before, to 
me, that is when the public stands up and says that is amazing.
    Now, in order to get there, we have to have a science-
based, regulatory process, and we have to have the research and 
development because, from the data that I am aware of, it takes 
10 years to get to that point, from the time you start until 
you actually achieve it. So that is what I see as the knock-
your-socks-off application in plant biotechnology.
    Mr. Graves. Mr. Perry?
    Mr. Perry. Well, I think, from a papaya grower's 
standpoint, having a papaya in every kitchen would be really 
great. But looking at the larger picture, I think, in our 
industry, the thing that is most exciting to me is the 
potential for not necessarily our industry but solving the 
papaya ringspot virus in places like Bangladesh where they 
really need an easy-to-grow crop full of Vitamin C to 
supplement their diet, and they cannot do it now because they 
have a virus, and this is something that they will be able to 
commercialize in the foreseeable future.
    And the same thing goes for Thailand where papaya is a very 
important fruit. They got ringspot in there, I think, 15 years 
ago, and now it is really hard to grow, and this is the same 
story you will find in a lot of places. In Brazil and Thailand, 
papaya farmers run into virgin forests, chop them down,--you 
have heard this before--running away. This is not something 
that has to be happening in the future for papayas anyhow.
    Mr. Graves. Thank you. I have got a lot of questions, but I 
am going to let some of the members ask theirs. Mr. Case?
    Mr. Case. Thank you very much Mr. Perry. Let me just ask 
you a couple of questions, going back to Hawaii ag., and I 
would like to have a few more questions after you, Mr. Chair, 
on some other aspects.
    You and I both know that in Hawaii we are doing some of the 
most advanced tropical and subtropical agricultural research in 
the world, whether it be the papaya story or other crops, 
through the USDA, which has major facilities in Hawaii, 
including the Pacific Agricultural Research Center right now in 
Hilo. Can you just outline perhaps some of the other 
applications of genetically engineered solutions in Hawaii, 
whether it be from a disease-resistance perspective or from a 
crop-yield perspective or, for that matter, the cotton water-
tolerant analysis? What are the other things that we are doing 
in GE?
    Mr. Perry. You may know the list better than I do. The ones 
I am familiar with are there is some work on sugar cane. I do 
not know exactly what they are looking for. In pineapple, they 
are looking for nemintode resistance, which is a serious 
problem that utilizes a whole lot of chemicals that is 
accomplishable using genetic engineering. Right now, there is 
some work on orchids, and in that area, they are looking at a 
nice, dark-blue orchid that has a gene that is not available in 
the regular population. The seed corn industry, as I think you 
mentioned, is a huge part of our agricultural sector now, and 
there are a number of companies doing a lot of developing new 
varieties using our multiseason growing conditions.
    Mr. Case. And then to go back, just briefly, to the 
comments you were making about the ringspot virus situation, 
the solution to that, as well as these other GE applications, 
is done in conjunction with the federal research facilities, 
USDA. Could you just talk a little bit about the relationship 
between the private sector and the federal government's 
agricultural research and scientific facilities?
    Mr. Perry. Well, we have been working with various 
research, USDA research, in the past. I think the ground 
breaking just last week for the facility in Hilo is a great 
opportunity to house everybody together in potentially a large 
facility serving not only Hawaii but the whole Pacific Basin. 
The director, Dennis Gonsalves, is the person that actually 
made the cassette that was inserted into the papaya back in 
Cornell in the eighties. He is one of these visionary 
scientists that I was talking about. We maintain a continuing, 
really good relationship with them. They have helped us out 
enormously in coming up with the microbiological research to 
finish our deregulation process in Japan.
    Mr. Case. Just so I can be clear on deregulation, 
``deregulation'' refers to the fact that they are going to let 
the product in and allow it to be marketed. Right? Is that 
essentially what that is?
    Mr. Perry. Well, you know, if you ask them, they say it is 
a safety review. We say it is deregulation, but that is what it 
is. Every country has their own set of rules that you have to 
go through, and, in some cases, they require extra research, 
things that we did not have to do for FDA, looking at different 
aspects, and that is what we think we have completed in Japan. 
So getting all of the safety information or data that they 
think is necessary to say, yeah, this something we want our 
people to eat.
    Mr. Case. Thank you.
    Mr. Graves. Mr. Sodrel?
    Mr. Sodrel. I heard a little bit earlier about the crop 
separation and making sure the genetically engineered crops did 
not get mixed in with other crops. What is the worst-case 
scenario, if they do get mixed together?
    Mr. Huttenbauer. To properly answer that question, I would 
have to say it would depend somewhat on what the actual output 
product is that is being engineered. The worst-case scenario in 
the two targeted outputs that we are going after would be that 
an organic flax farmer, for instance, would not be able to 
indicate that they actually had organic crops. The actual 
molecules themselves are completely harmless if ingested, so 
that would not be an issue in terms of contamination.
    I think it is interesting that even though there have been 
some instances of crop contamination that have been highly 
publicized, and I referred earlier to the Starlink corn, there 
has not been a single case of anyone being harmed from a 
genetically modified crop in the entire history that they have 
been developed. I think regulations are in existence that are 
doing a pretty good job of keeping that from happening. I think 
they are advancing.
    As technology advances, things such as gene containment can 
further advance that crop separation, but I cannot say that 
there is not something that is being devised right now in a 
plant that if it did get into a food system could not be 
harmful, but that is also why the systems for containment 
exist.
    Mr. Sodrel. So it is fair to say it is more a perception 
problem than it is a reality problem.
    Mr. Huttenbauer. I would say greatly so. In my experience, 
the Starlink corn gets brought up time and time again, and, you 
know, it was an unfortunate incident, and one of the problems 
perhaps with corn, because of the pollen transfer, and also the 
folks from Ventria mentioned that the use of self-pollinating 
crops is one way to mitigate that containment issue, as we go 
forward there are lots of new ways to do this well. But I would 
say, largely, it is a self-perception issue versus the reality 
of the dangers there.
    Mr. Sodrel. Thank you, Mr. Chairman.
    Mr. Graves. Thank you, Mr. Sodrel.
    My next question is probably for Mr. Deeter and Mr. 
Huttenbauer. Can you talk a little bit about how your 
technologies might be used in other areas of agriculture, 
animal agriculture, for instance? Go ahead, Mr. Deeter.
    Mr. Deeter. Sure. In fact, that is an interesting question 
because Ventria has been looking at the opportunity to replace 
antibiotics that are used in production agriculture today with 
a natural and a microbial protein that could be produced in the 
seed of barley, for instance. These could essentially eliminate 
the need for antibiotics in confined animal feeding operations.
    Now, today, antibiotics are used broadly, of course, 
because they not only promote growth, but they also keep at bay 
the pathogenic infections that can be devastating for a 
confined animal feeding program. But if we could deliver in the 
barley, ground, pulverized powder, say, of barley that contains 
an antimicrobial protein and eliminate the need for the 
antibiotic, that would be significant not only for animal 
health, but there is a significant impact to human health 
because these same antibiotics that are used in animal 
production agriculture can potentially cause resistance to 
develop in the human population and make the antibiotics that 
we use for human health less effective.
    So if we can eliminate pathogenic infections and do that 
without a loss of the benefits of antibiotics, that would be 
significant.
    Mr. Huttenbauer. Along with animal antibiotics, one of the 
things that we have been looking at in terms of the effects on 
animals is essentially enhancing animals' health effects on 
humans consuming them. One of the things that we have 
undertaken is a study of cattle being fed using DHA-enhanced 
flax in a feed program which ultimately translates the health 
benefits of the Omega 3's into the cattle so that humans 
downstream consuming them could take advantage of those healthy 
benefits which currently are basically limited to fish or fish 
oil supplements. As well, we have looked at programs involving 
chicken feed and the healthy benefits being imparted on the 
eggs as well, again, really around Omega 3. So that is one 
avenue in terms of animal health that could be applied with 
this.
    Mr. Graves. I am curious, real quick, Mr. Perry. You 
mentioned possible markets,--Europe, China, Korea--and Europe 
has traditionally resisted GMOs considerably, and it has been a 
little bit of an education process, but we are still not there 
yet. I know you are look at those as potential markets. Do you 
have any ideas on how you are going to combat that or work 
through that or what you are going to do to try to get them to 
overcome their fears, you might say?
    Mr. Perry. Well, to start with, one of the things that we 
have relied on is voluntary researchers, and that has slowed 
the process down a little bit, and for that reason, we are 
chewing these deregulation issues off country by country, one 
by one, and after we finish Japan, we do sell papayas to the 
EU. I think this is something that we believe we will have all 
of the basic research that they will ask for, and the same 
would be true of China and Korea.
    The future for us is looking at premium markets. We cannot 
compete with some of the South American countries for price 
because of our costs, but we can look at premium markets, and 
these, because it is so difficult to grow nonvirus-resistant 
papayas, these are things that the countries are going to have 
to look at, going through the same deregulatory process.
    Mr. Graves. Mr. Case, did you have a follow-up? If you have 
got a follow-up, go ahead, Mr. Sodrel.
    Mr. Sodrel. I just have a question. Ms. Parks, in my 
district, about 20,000 people make their living out of forest 
products, so trees are of great interest. The ash borer in 
Central Park in New York; they have got smoke jumpers crawling 
up the trees trying to find the trees that are infected.
    You talked a lot about growing the trees faster and the 
makeup of the tree, the pulp content and so on. Can we also 
look for disease-resistant or insect-resistant trees as well?
    Ms. Parks. Absolutely. ArborGen is currently not working on 
disease or pest resistance because we are working with more 
commercial species in the southern United States and in Brazil, 
but there are quite a few universities who are actually looking 
at different ways to manage pest and disease resistance, and, 
in fact, Syracuse University and the State University of New 
York are also looking at how can they expand their programs to 
try to address some of those issues as well.
    Mr. Graves. Mr. Case?
    Mr. Case. Thank you. Since we are in the Small Business 
Committee, let me ask you some questions related to federal 
programs available to small business. I have a suspicion that I 
have never actually checked out--perhaps it is just more 
anecdotal--that agriculture small businesses may tend to access 
our federal government programs at a lower rate than perhaps 
other kinds of small businesses, technology or whatever else.
    I do not know if it is true or not; it just occurs to me 
that it might be true, and I am not talking about USDA 
scientific because I think agriculture has been able to access 
that just fine, at least from my perspective. But I am talking 
about things like the EDA and the SBA and USDA rural 
development. Have each one of your companies utilized those 
programs of the federal government in the small business area 
for venture capital, start-up loans, basic advice, and how is 
it going from that perspective? I will just go right down the 
list. If you could just briefly give me a quick picture.
    Mr. Huttenbauer. From our standpoint, we have not utilized 
them, and the reasons were twofold. One was, as I think you 
alluded to, the relatively small size of the potential 
contribution, and, secondly, because we are dealing in biotech, 
and there is a degree of secrecy in what we are doing, the 
initial thoughts were to maintain some of the secrets, if you 
will, of what we were developing, so we chose not to go that 
route for initial funding.
    Ms. Parks. We have only just begun exploring some of those 
programs. In the first place, we started this with the SBIR and 
discovered that, at this point in time, those funds are not 
available to us. But forestry in general and forest 
biotechnology is very underfunded at this point in time, so we 
are trying to look at a lot of different options that we could 
approach the government for funding.
    Mr. Dollar. We currently do not use anything. We have 
looked at some SBA loans when we have had some hurricanes come 
through, and we were ineligible for those SBA loans. When we 
did start the first cotton gin in 1988, we used FHA business 
and industry loans, and other than about eight inches' worth of 
paperwork, they were very helpful for our gin because there had 
not been a gin in our county since 1922. So our bankers were a 
little reluctant to put a gin in without a little back-up help, 
so we were able to secure a business and industry loan from FHA 
in '88.
    Mr. Deeter. We have received recently an SBIR grant, Phase 
I, for $100,000, which is really our first foray into a 
collaborative program with the federal government, but that is 
something that we believe, especially with the case of the 
prevention of military diarrhea, that is obviously something 
for benefit for DARPA, so we will explore that opportunity. We 
will also explore other SBIRs. I think that is something that 
we have not done a lot of. We are only 15 employees today, but 
it is something that we would really like to do going forward.
    I must say, it does take some time. It takes the time of 
some of your best people, and the process to receive that type 
of funding is fairly significant. I think the first phase is 
$100,000. Of course, it can be larger than that going down the 
road. To put that in perspective, to date, our investors, which 
are all individuals, have invested $35 million in Ventria to 
get us to where we are. So $100,000 out of $35 million is the 
share.
    Mr. Perry. Well, I think I mentioned earlier that we have a 
very good relationship with the Foreign Agricultural Service, 
and we have utilized their programs for our papaya 
administrative Committee before and now the Hawaii Papaya 
Industry Association. Two years ago, we got a task grant to 
help us complete some of the research for our Japan 
deregulation
    Mr. Case. Thank you. Very helpful.
    Mr. Graves. Dovetailing on talking about the small business 
aspects, and I do want to change gears just a little bit, and 
this may be more for Ventria and Agragen, but as far as 
developing your technology, growing your technology, you might 
talk a little bit about the aspects of utilizing farmers, 
contracting with farmers to do that. Are you planning on doing 
that yourself? You just might explain what is happening there. 
Mr. Dollar, you may have some experience with that, too, but go 
ahead.
    Mr. Deeter. Actually, our technology, we use today contract 
growers that grow, and these are growers that have been 
certified, trained growers. They are monitored. There is quite 
an auditing process and inspection process. We will expand that 
grower base as the company grows and as our products develop 
and commercialize.
    Our first two products, Lactiva and Lysomin, represent tens 
of thousands of acres, so it is not millions of acres 
initially, but it is a start. We seek growers that have the 
skills and capabilities, and most importantly, the desire to 
learn the skills and capabilities for our type of production 
because this is a very different type of production than 
commodity food production, a totally separated, totally 
dedicated type of production with new skills, new capabilities.
    What is the payoff? We expect these growers will make 
double what they could make with their best alternative 
commodity production, so they will make two times what they can 
make with their next best alternative. They will not only make 
more money, but they will be trained in new areas, and those 
skills and capabilities will also, we believe, have value down 
the road.
    To put this in perspective, once we are fully 
commercialized, we expect the first two products that we are 
developing to increase, and this is an increase over what they 
could make in their best alternative--it will increase their 
income by $10 million every year. Now, this is, again, tens of 
thousands acres; it is not millions of acres. It will be very 
significant for those growers who elect to participate, but, 
again, our first products will not be millions of acres. That 
is really not our plan.
    I want to also mention, the amount of federal crop 
subsidies that Ventria receives is zero. These crops are not 
subsidized at all, so it is a 100-percent benefit to the 
grower.
    Mr. Graves. That is a good point.
    Mr. Huttenbauer. I think a lot of what we are doing is 
mirrored with Scott's commentary, and I should also point out 
that they are further down the road than we are. We are looking 
at also going with the contract grower system. We have 
commitments now for roughly the first 16,000 acres when we get 
to the stage when we are actually planting. Again, the 
importance of establishing a contract grower system, because of 
the closed-loop network of how this has to be contained and the 
regulatory environment, it is almost essential to have a 
preestablished network of farmers.
    As I pointed out in our testimony, we are truly looking at 
large-scale agriculture. The first two components that we are 
going to be making are upwards in the neighborhood of 100,000 
acres, so the potential for a rather large contract grower 
network exists.
    As PMPs advance, I can certainly see a lot of the learning 
that is derived from some of these initial companies being 
passed down and farmers forming actual PMP growing networks, if 
you will, going forward that are established exclusively for 
PMPs because there will be some isolation to that, and you 
could get to the stage where a certain portion of a state may 
be set aside for specific PMP farming.
    Mr. Graves. In agriculture, as profit margins get squeezed 
narrower all of the time, and that is happening all of the 
time, you know, we are obviously looking for more opportunities 
to make agriculture work. Unfortunately, we are price takers on 
both sides. We do it a little bit different than other 
industries. We buy everything retail and sell everything 
wholesale, so we are price takers at both ends, and we have to 
find opportunities, and I think these are wonderful 
opportunities to be looking at. Mr. Case, do you have any more?
    Mr. Case. Just a quick question. The federal government 
obviously regulates genetically engineered crops through a 
tripartite regulation structure. Last year, the secretary of 
agriculture opened up a docket to take comments on the 
potential revision of those regulations. Did any of you 
participate or make submissions on that docket or, through your 
trade industries, make any recommendations, and what were they 
if you did it?
    Mr. Deeter. We have been involved through the Biotechnology 
Industry Organization. First of all, as, I think, the history 
of mankind shows, when technologies like plant biotechnology 
first enter the public domain, there is often a violent and 
very emotional reaction, and it has been true for biotechnology 
in general, not only plant biotechnology but biotechnology in 
general. I would say, thanks to a scientifically driven, 
regulatory process, we have allowed the differences of opinion 
to surface. We have been able to consider the scientific facts, 
and we are not swayed as much by the emotional arguments that 
are really meant to stymie the innovator and arrest progress in 
these important areas.
    I think that we have got to keep steadfast in the science-
driven regulatory process, and with BIO's help,--Ventria is a 
small company, and we do not have a team that can spend a lot 
of time working with new types of regulations, so we work 
mostly through BIO--we have been able to improve upon the base 
of regulatory structure. We have been working with new 
regulations related to advantageous presence so that it is more 
of a scientifically sound approach.
    The member asked the question, what would happen if there 
was a contamination? Well, I cannot speak for every product, 
but I can speak for Ventria's products. You know, it is in 
mother's milk. These proteins are in saliva. They are in our 
tears. What would happen? You might be healthier.
    So I think we need to remove the emotion, focus on the 
scientifically driven, regulatory process and do not put in 
regulations that serve no other purpose if there is really no 
scientifically valid reason for it.
    Ms. Parks. ArborGen participated on behalf of ArborGen and 
as part of BIO and as part of a coalition that was developed 
for perennial and specialty crops, and our position had been, 
when we spoke with APHIS, is that the current regulations 
obviously demonstrate that there is a lot of safety in the way 
the regulations are currently enforced and that any new 
regulations should still continue to be developed so that 
decisions are made on a case-by-case basis based on the 
product, the trait, species of interest, and that APHIS should 
have the opportunity to streamline processes where the biology 
of the plant is well understood and where the application of 
the plant in the field is well understood.
    And so we have, in our conversations with APHIS, just 
strongly encouraged them not to create any kind of 
overburdensome regulations based on a particular type of plant 
or the nature of the plant as in a perennial crop simply 
because they are gaining experience with how that product or 
that crop works because the system to date has worked very 
well, and we would fully like to have our products go in under 
the current system or with modifications made for the specific 
trait or species of interest that we have.
    Mr. Graves. Mr. Barrow?
    Mr. Barrow. Thank you, Mr. Chairman. I apologize for my 
absence, but my other Committee is meeting and marking up a 
bill today, and so I had to be running back and forth, and I 
appreciate your indulgence and that of the witnesses.
    I would like to ask Mr. Dollar a couple of questions, if I 
can, that are matters that I do not think have been covered. 
First of all, I will preface this by saying, I am sure that the 
farmers here who farm for a living and some of the old hands on 
this Committee do not need an education in all of this stuff, 
but I am fascinated to learn the impact that biotechnology is 
having in such matters as fighting weeds in crop production.
    So, Mr. Dollar, for those of us who are not all that well 
versed, either by background or experience, could you help us 
have a better understanding of just exactly what biotechnology 
is helping you all do and making it easier for you all to 
manage crop production dealing with weeds?
    Mr. Dollar. Well, before Roundup Ready crops, we used 
several different methods, most of them called Blue Steel, 
which you had to have a good tractor operator and a good piece 
of equipment, and you would plow the fields, but you could not 
get all of the crops. Then with the advent of 24D's and 
atrizenes, we had not hard chemicals, so to speak, but 
chemicals that left a residual, and they would show up a couple 
of weeks later or may interfere with a crop that is planted in 
a rotation behind the crop that you are planting at a certain 
time.
    So with the advent of Roundup Ready crops, we do not have 
any residual left over, so we can plant a vegetable crop. In 
south Georgia, we are 20 miles from the Florida line, so we 
will have sweet corn following cotton, or we will have snap 
beans following cotton, or we will have peanuts following 
cotton. So with the advent of those crops following the crops 
that we are growing, we do not want to put a harsh or long-
residual chemical out there that may show up in a nontarget 
crop.
    So the Roundup has been efficient for that for us, and also 
sometimes you would have to spray a multitude of chemicals to 
kill a grass, to kill a broad leaf, certain types of monocot 
plants or dicot plants, you would have to use several different 
herbicides, and those would be very cost prohibitive on a low-
input crop like soybeans or field corn, and Roundup has leveled 
the playing field, so to speak.
    Mr. Barrow. In some of the testimony we heard earlier 
today, folks were talking about trying to segregate or keep 
new, innovative crops and products of biotechnology away from 
the larger population for a variety of reasons. That brought to 
mind something I wanted to discuss with you, and that is how 
are you in the industry, how are farmers and the folks who are 
supplying you all with biotechnology, how are you all 
responding to the concerns that folks have about growing a 
generation, if you will, of pests that have increased tolerance 
for the things we are engineering into the plants to make them 
resistant to the pests? What are you all doing to deal with 
that because I know that is a concern on the part of folks 
generally?
    Mr. Dollar. Well, in cotton, the crops, what we will do is 
we will have a 20-percent rule or a 5-percent rule that when we 
are planting a non-BT or non-Roundup Ready crop that we will 
basically let that crop go to waste so that, say, on BT cotton, 
we will not spray it with any type of chemicals so it will host 
a generation of pests or insects that may be tolerant at one 
time or another to BT, but then it will decrease its 
vulnerability to be more tolerant over the long term.
    Monsanto, which developed a lot of this technology, along 
with the EPA, mandate what we do as farmers and how much land 
we leave out and plant to a host crop so we will not have a 
problem later on down the line. We are very keenly aware of how 
beneficial this crop has been to us from the advent, so we, as 
farmers, adhere to those rules, the 100 percent, and Monsanto 
is also developing some crops. Bollgard II, that was a new type 
of crop that will work better on armyworm complex, and then 
eventually they will phase out the Bollgard I altogether so we 
will not build up any resistance.
    Mr. Barrow. It sounds to me like what you are saying is you 
will sacrifice, you will, by design and by practice, by good 
management practice, sacrifice a percentage of your crop for 
the greater good of making sure that you do not evolve or grow 
a whole generation of pests that will be able to overcome that 
engineering.
    Mr. Dollar. Correct.
    Mr. Barrow. Two questions as a follow-up to that. One, are 
you still able to make more? Does the increase in productivity, 
despite that sacrifice, still make it a good deal for you all? 
And, secondly, is this something you all are just doing on the 
buddy system, on the honor system, or is this something that is 
mandated and actually policed to make sure that these best-
management practices are actually followed?
    Mr. Dollar. It is mandated by EPA, and then Monsanto and--
    [Loudspeaker announcement.]
    Mr. Barrow. To return to my question, the concern I had was 
that while it is a good idea for everybody to do that in order 
to make sure that you do not grow up a generation of pests that 
have an increased tolerance of this, how are they making sure 
that everybody is doing that so that nobody is going to opt out 
of that system in order to get that extra 5 or 20 percent of 
capacity out of their crop ?
    Mr. Dollar. Monsanto and EPA; we have spot checks. They 
will come by and check fields randomly for the BT gene in the 
cotton plant. Probably the biggest policing person we have is 
your neighbor because your neighbor does not want you to get an 
edge up on him. So I think there has been more farmer-to-farmer 
tattle telling when there have been instances or occasions than 
the greater good that Monsanto or EPA can do because everybody 
wants to be treated the same, and everybody wants to make sure 
they get treated the same.
    Mr. Barrow. I understand. I appreciate that. And, finally, 
something you touched on in your testimony earlier, I want to 
return to, and that is the subject of what some folks refer to 
as the technology fees, the research and development costs, 
that are passed along for the products of biotechnology. Can 
you give us your assessment of whether or not they are 
reasonable in light of the benefits?
    Mr. Dollar. Well, in light of the testimony of the people 
to my right and the people to my left in talking about funding 
from other sources to try to develop this, developing 
technology is a very expensive way to make a living, and with 
that in mind, the technology that we pay as farmers is always 
too much. Anything we have got as farmers is too much fee, but 
with the farmers in mind and the amount of money that we spent 
prior to the 1988 or prior to 1995, when we started going to 
Roundup Ready and BT crops, it is a value. There is a lot of 
value. We are saving $167 an acre, and our technology fee is 
not even a third of that.
    It is grumbling when you look at your end of the year, your 
P&L, and you say, I paid X number of dollars to a technology 
fee, and that bothers you. It is like you look at the end of 
the year, and you see how much money you spent on groceries or 
anything else, and when you itemize it up, you say it is a lot 
of money, but if you turned around and itemized how many bills 
you would have had spraying all of these different chemicals 
and all of these application costs, you do not have that to 
look at now, so you tend to forget about it, and you tend to 
complain.
    Mr. Barrow. Thank you, Mr. Dollar.
    Mr. Dollar. Thank you.
    Mr. Graves. I apologize for the interruption again. Stay 
away from the Hart Building and welcome to post-9/11 
Washington, D.C., unfortunately. Sometimes we have those a lot; 
sometimes we do not. Unfortunately, that is part of the process 
today.
    I want to thank all of the witnesses for being here again. 
All of the statements made by members and the witnesses will be 
included in the record in their entirety. I do appreciate some 
of you came a long ways to be here, and I do appreciate it.
    I want to introduce one individual who is here, State 
Senator David Clint from Missouri, who is a leader in 
biotechnology as both a producer and as a member of the state 
Senate in Missouri. I am very pleased that he came out here to 
hear this hearing. David, thank you for being here.
    I also want to make sure everybody knows we are having a 
reception in this hearing room at 5 o'clock for all of the 
witnesses who are here, if you can stick around, and for the 
audience to know, too, if you can stick around, please come 
back and attend that. It will be right here in this hearing 
room on the balcony, if you can make it. I hope you will be 
here.
    Thank you all for coming, and I appreciate it very much. 
Very enlightening. This is cutting-edge technology, and it 
fascinates me, and I am looking forward to moving forward with 
it. Thank you.
    [Whereupon, at 3:49 p.m., the Subcommittee was adjourned.]

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