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


 
                        A BILL TO AUTHORIZE THE 
                        NATIONAL HIGHWAY TRAFFIC 
                      SAFETY ADMINISTRATION (NHTSA) 
                        TO SET PASSENGER CAR FUEL 
                             ECONOMY STANDARDS

============================================================================
                                 HEARING

                                BEFORE THE

                         COMMITTEE ON ENERGY AND 
                                 COMMERCE

                         HOUSE OF REPRESENTATIVES


                        ONE HUNDRED NINTH CONGRESS

                               SECOND SESSION

                                   -------

                                 MAY 3, 2006

                                   -------

                              Serial No. 109-95

                                   -------

         Printed for the use of the Committee on Energy and Commerce


Available via the World Wide Web:  http://www.access.gpo.gov/congress/house


                                   -------

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                      COMMITTEE ON ENERGY AND COMMERCE
                        JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas                      JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida                  Ranking Member
  Vice Chairman                           HENRY A. WAXMAN, California
FRED UPTON, Michigan                      EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida                    RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                     EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                      FRANK PALLONE, JR., New Jersey
ED WHITFIELD, Kentucky                    SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia                  BART GORDON, Tennessee
BARBARA CUBIN, Wyoming                    BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois                    ANNA G. ESHOO, California
HEATHER WILSON, New Mexico                BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona                  ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,  Mississippi ALBERT R. WYNN, Maryland
  Vice Chairman                           GENE GREEN, Texas
VITO FOSSELLA, New York                   TED STRICKLAND, Ohio
ROY BLUNT, Missouri                       DIANA DEGETTE, Colorado
STEVE BUYER, Indiana                      LOIS CAPPS, California
GEORGE RADANOVICH, California             MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire            TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania             JIM DAVIS, Florida
MARY BONO, California                     JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                       HILDA L. SOLIS, California
LEE TERRY, Nebraska                       CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey                 JAY INSLEE, Washington
MIKE ROGERS, Michigan                     TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho                 MIKE ROSS, Arkansas                       
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                     BUD ALBRIGHT, Staff Director
                    DAVID CAVICKE, General Counsel
       REID P. F. STUNTZ, Minority Staff Director and Chief Counsel



                               CONTENTS


                                                                     Page
Testimony of:

     Boehlert, Hon. Sherwood, Member, U.S. House of Representatives	42
     Mineta, Hon. Norman Y., Secretary, U.S. Department of 
          Transportation	                                        48
     Webber, Frederick L., President, Alliance of Automobile 
          Manufacturers	                                                79
     Sharp, Hon. Philip R., President, Resources for the Future	        86
     Pizer, William, A., Senior Fellow, Resources for the Future	98
     Reuther, Alan, Legislative Director, International Union, 
          United Automobile, Aerospace and Agricultural Implement 
          Workers of America	                                       113
Additional material submitted for the record:
     Reuther, Alan, Legislative Director, International Union, 
          United Automobile, Aerospace and Agricultural Implement 
          Workers of America, response for the record                  132
     Sharp, Hon. Philip R., President, Resources for the Future, 
          response for the record	                               134
     Pizer, William, A., Senior Fellow, Resources for the Future, 
          response for the record	                               135
     Webber, Frederick L., President, Alliance of Automobile 
          Manufacturers, response for the record	               138
     Mineta, Hon. Norman Y., Secretary, U.S. Department of 
          Transportation, response for the record	               140
     Cohen, Edward B., Vice President, Government and Industry 
          Affairs, Honda North America, Inc.., submission for the 
          record	                                               142
     Association of International Automobile Manufacturers, Inc., 
          submission for the record	                               144

                     A BILL TO AUTHORIZE THE NATIONAL 
                          HIGHWAY TRAFFIC SAFETY 
                      ADMINISTRATION (NHTSA) TO SET 
                   PASSENGER CAR FUEL ECONOMY STANDARDS

                                  -------
                          WEDNESDAY, MAY 3, 2006

                        HOUSE OF REPRESENTATIVES,
                     COMMITTEE ON ENERGY AND COMMERCE,
                                                          Washington, DC.


        The committee met, pursuant to notice, at 10:04 a.m., in Room 2123 
of the 
Rayburn House Office Building, Hon. Joe Barton (chairman) presiding.
	Present:  Representatives Barton, Bilirakis, Upton, Stearns, Gillmor, 
Cubin, Shimkus, Wilson, Bass, Pitts, Terry, Ferguson, Rogers, Myrick, 
Sullivan, 
Murphy, Burgess, Blackburn, Dingell, Waxman, Pallone, Brown, Rush, Eshoo, 
Stupak, Engel, Wynn, Green, Strickland, DeGette, Capps, Allen, Schakowsky, 
Solis, Gonzalez, Inslee, and Baldwin.
	Staff Present:  David McCarthy, Chief Counsel for Energy and 
Environment; 
Kelly Cole, Counsel; Peter Kielty, Legislative Clerk; and Jonathan Cordone, 
Minority Counsel.
CHAIRMAN BARTON.  The committee will come to order.  If members will take 
their 
seats at the dais, the audience will find their seat.  The Chair would 
recognize himself for an opening statement.
	Today, we are going to have a hearing on the committee print to 
authorize 
the National Highway Traffic Safety Administration to set passenger car fuel 
economy standards.  This committee print is the first of many steps that this 
committee intends to take to foster the goal of minimizing dependence on 
foreign 
sources of energy, and over time, to make it possible for us to have energy 
independence in the United States of America.
	In the wake of the 1973-74 Arab oil embargo, Congress passed the 
Energy 
Policy Conservation Act, which established Corporate Average Fuel Efficiency, 
which we know more commonly as CAFE standards, for passenger cars and light 
trucks sold in the United States.  Under the CAFE system, we have come a long 
way with our light truck fleet.  The Department of Transportation took a major 
step forward in March, announcing a reformed CAFE program for light trucks.  
This new program will save the United States nearly 11 billion gallons of fuel 
over the lifetime of the vehicles sold between 2008 and 2011.
	We cannot say the same thing for passenger cars.  In 1975, Congress 
set a 
goal of doubling fuel economy for passenger cars, by 1985, to 27.5 miles per 
gallon.  According to my math, that was 31 years ago.  Yet today, the fuel 
economy mandate for passenger cars is unchanged.  It continues to be 27.5 
miles 
a gallon.  What makes this static fuel economy number even more striking is 
that 
under the new light truck rule, there are now SUVs required to meet stricter 
CAFE standards than passenger cars.  It really does appear that the time has 
come to at least allow for the possibility of change in the passenger car 
standard.
	Today's committee print authorizes the Department of Transportation to 
set 
CAFE standards for passenger cars.  Under current law, the DOT may modify the 
system for light trucks, but it lacks clear, explicit authority to alter 
requirements for passenger cars, since Congress sets that standard.  The bill 
would give the Department of Transportation clear authority.
	We may need to go further.  Aside from just giving the Department of 
Transportation the authority to set passenger fuel economy standards, I would 
like for the NHTSA to take a hard look at reforming the entire structure of 
mileage estimates for passenger cars.  The current outdated system hampers the 
potential for energy savings, raises vehicle safety concerns, and fails to 
treat 
competitive players fairly.  Without question, our constituents want us to 
give 
the Department of Transportation statutory authority to fully reform the 
passenger car fuel economy program.
	As Chairman of this committee, I plan to answer that need.  This 
hearing 
is the first step in accomplishing that goal.  I plan to ask each of our 
witnesses how we can best craft language to revamp the current passenger car 
system.  How do we make the changes necessary to the passenger CAFE program to 
ensure that it is safe, fair, and reliable?  It would be nice if we could have 
somebody explain what harmonic averaging really is.
	I have no doubt that there will be calls by some in Congress to 
dramatically raise the fuel economy of passenger cars.  For Congress to 
arbitrarily set a number, in my opinion, would be a mistake.  As Secretary 
Mineta can tell us, establishing fuel economy standards is a complex and 
complicated process.  If we get it wrong, it can create perverse incentives 
that 
result in more dangerous vehicles, reduced competition, and lost jobs.  I do 
not want that to happen.
	In advance, I want to thank our witnesses here today.  We are going to 
have the Chairman of the Science Committee, Congressman Boehlert of New York; 
a former Member of the House of Representatives, the Secretary of 
Transportation, 
Norman Mineta.  Those are both excellent men and excellent witnesses.  We look 
forward to hearing their testimony.
	[The prepared statement of Hon. Joe Barton follows:]

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY AND 
COMMERCE

        This Committee Print is the first of many steps we plan to take toward 
energy independence. 
In the wake of the 1973-74 Arab oil embargo, Congress passed the Energy Policy 
Conservation Act, which established corporate average fuel efficiency, known 
as 
``CAFE,'' standards for passenger cars and light trucks sold in the United 
States. 
        Under the CAFE system, we've come a long way with our light truck 
fleet. The 
Department of Transportation (DOT) took a major step forward in March, 
announcing a ``reformed'' CAFE program for light trucks.  This new program 
will 
save the United States nearly 11 billion gallons of fuel over the lifetime of 
the vehicles sold between 2008 and 2011.  
        Unfortunately, we can not say the same for passenger cars.  In 1975, 
Congress 
set a 1985 goal of doubling fuel economy for passenger cars to 27.5 mpg.  
According to my math, that was 31 years ago. And today, the fuel economy 
mandate 
for passenger cars is unchanged.  It continues to be 27.5 mpg.   What makes 
this 
static fuel economy number even more striking is under the new light truck 
rule, 
there are now SUVs required to meet stricter CAFE standards than passenger 
cars.   The time has come for a change.
        Today's Committee Print  authorizes the Department of Transportation 
to set CAFE 
standards for passenger cars.  Under current law, the DOT may modify the 
system 
for light trucks but it lacks clear authority to alter requirements for 
passenger cars, since Congress set that standard .  This bill would give DOT 
that clear authority. 
        But I want to go farther.  Aside from just giving DOT the authority to 
set 
passenger fuel economy standards, I also want NHTSA to take a hard look at 
reforming the entire structure of mileage estimates for passenger cars.  The 
current, outdated system hampers the potential for energy savings, raises 
vehicle safety concerns, and fails to treat competitive players fairly.  
        Without question, our constituents want us to give DOT statutory 
authority to 
fully reform the passenger car fuel economy program.  As Chairman of this 
Committee, I plan to answer that need.  
        This hearing is the first step to accomplishing that goal.  Today, I 
plan to ask 
each of our witnesses how we can best craft language to revamp the current 
passenger car system.  How do we make the changes necessary to the passenger 
car CAFE program to ensure that it is safe, fair, and reliable?
        I have no doubt there will be calls by some in Congress to 
dramatically raise 
the fuel economy of passenger cars. For Congress to arbitrarily set a number, 
however, would be a mistake.  As Secretary Mineta can tell us, establishing 
fuel 
economy standards is a complex and complicated process.  And getting it wrong 
can create perverse incentives that result in more dangerous vehicles, reduced 
competition, and lost jobs.  That will not happen on my watch.
        In advance, I want to thank our witnesses here today, in particular, 
Chairman of 
the Science Committee, Rep. Boehlert, and a former member of the House of 
Representatives, Secretary of Transportation Norman Mineta.  Thank you all for 
being here today.  I look forward to hearing from all of our witnesses.

	CHAIRMAN BARTON.  Now, I would like to recognize the gentlelady from 
California, Ms. Eshoo, for an opening statement.  Three minutes,  I think.  Is 
it three or one?  I beg your pardon?
	MS. ESHOO.  I'm going to get closer to the microphone here.  I am 
sorry.
	Good morning, Mr. Chairman, and is Secretary Mineta here?  Not yet.  I 
was 
going to say welcome back to the House.  But it is good to have our colleague 
that we respect so much, Mr. Boehlert, here this morning.
	I think this is really quite a day for our committee, because we are 
finally taking a cursory interest in fuel economy standards.  Despite climbing 
oil prices and oil imports, the truth of the matter is, is that the Republican 
Congress and the Administration have done little to create more efficient 
vehicles.
	Consequently, the fuel economy of the new vehicle fleet that came onto 
the 
road in 2005 was worse, it was worse than the fleet produced in 1985, and 
consumers are paying for this at the pump.  The Administration has claimed 
that 
it wanted to reform the CAFE system for years.  The truth is they have 
actually 
stood in the way of Congressional efforts to improve fuel economy, arguing 
that those efforts were ``arbitrary."
	In 2001, the Administration argued against Senate language to raise 
fuel 
economy standards.  In 2005, they opposed legislation calling on the President 
to enact policies to cut oil consumption by one million barrels of oil per day 
because they said that might require an increase in fuel economy standards.  
In the House, the Administration has never stood with Representatives Markey, 
Boehlert, and myself in our efforts to raise fuel economy for cars and light 
trucks.
	Now, with the President in his sixth year of office, gas has soared 
past 
$3 a gallon.  Suddenly, we are hearing an urgent appeal to give the National 
Highway Transportation Safety Administration additional authority to raise 
CAFE 
standards for cars.  So much time and so much has been squandered with the 
time and the opportunity it presented.
	In my view, the Administration has all the authority it needs.  In the 
1990s, the Republican leadership was so concerned that the Federal government 
would raise fuel economy standards they actually passed appropriation riders 
blocking new standards.  If the Federal government didn't have the authority 
to 
promulgate any CAFE rules, why were appropriation riders needed to prevent the 
Government from acting?
	The Administration, sadly, has done little with the authority it clearly 
has.  It touts its recently announced revised fuel economy standards for light 
trucks and SUVs as saving 10 billion gallons of gas.  This sounds like a big 
number, but the savings amount to less than a month's supply of fuel, and it 
will take us 15 years to achieve the savings.  We need a major increase in 
fuel 
economy standards if we are going to decrease dependence on foreign oil.
	So I hope the Administration's rediscovered interest in this issue is 
actually sincere.  I am not so sure that it is, and I am afraid that based on 
prior experience, this could be a high form of pandering at the pump.
	I yield back.
	[The prepared statement of Hon. Anna Eshoo follows:]

PREPARED STATEMENT OF THE HON. ANNA ESHOO, A REPRESENTATIVE IN CONGRESS FROM 
THE STATE OF CALIFORNIA

        Good morning, Mr. Chairman, and welcome back to the House, Secretary 
Mineta. 
        This is quite a day for our Committee because we're finally taking a 
cursory interest in fuel economy standards.
        But let's be honest, today's Committee activity and the legislation on 
House 
floor are just exercises in political damage control not serious policymaking.
        Despite climbing oil prices and oil imports, this Republican Congress 
and this Administration have done little to create more efficient vehicles.  
        Consequently, the fuel economy of the new vehicle fleet that came onto 
the road 
in 2005 was worse than the fleet produced in 1985, and consumers are paying 
for it at the pump.
        The Administration has claimed that it wanted to reform the CAFE 
system for 
years.  The truth is they've actually stood in the way of Congressional 
efforts 
to improve fuel economy, arguing that those efforts were ``arbitrary."
        In 2001, they argued against Senate language to raise fuel economy 
standards.  
In 2005, they opposed legislation calling on the President to enact policies 
to 
cut oil consumption by 1 million barrels of oil per day, because, they said, 
that might require an increase in fuel economy standards.  
        The Administration has never stood with Representatives Markey, 
Boehlert, or 
myself in our efforts to raise fuel economy for cars and light trucks.
        Now, with the President in his sixth year of office, gas has soared 
past $3.00 a 
gallon.  Suddenly, we're hearing an urgent appeal to give the National Highway 
Transportation Safety Administration additional authority to raise CAFE 
standards for cars.
        The Administration has all the authority it needs.  In the 1990's, the 
Republican leadership was so concerned that the federal government would raise 
fuel economy standards, they passed appropriations riders blocking new 
standards.
        If the federal government did not have the authority to promulgate any 
CAFE 
rules, why were appropriation riders needed to prevent the government from 
acting?
        The Administration has done little with the authority it clearly has.  
It touts 
its recently announced revised fuel economy standards for light trucks and 
SUVs 
as saving 10 billion gallons of gas.  This sounds like a big number, but the 
savings amounts to less than a month's supply of fuel - and it will take us 15 
years to achieve this savings.
        We need a major increase in fuel economy standards if we're going to 
decrease dependence on foreign oil.   
        I hope the Administration's rediscovered interest in this issue is 
sincere, but I'm afraid that based on prior experience, this is just a high 
form of pandering at the pump.

	CHAIRMAN BARTON.  We thank the gentlelady.  The gentleman from 
Florida, Mr. Bilirakis, is recognized.
	MR. BILIRAKIS.  Thank you, Mr. Chairman.  I do commend you for 
scheduling this hearing.
	As we know, Congress first established car fuel economy standards as 
part 
of the Energy Policy and Conservation Act of 1975, after the Arab oil embargo 
led to the tripling of the price of oil in the early 1970s.  And just as it 
did in the early '70s, our Nation is facing a dramatic spike in oil, and 
consequently, gasoline prices.  Higher prices certainly have the attention of 
all of our constituents, and like all Americans, we all painfully put gas into 
our car, and suffer the painful awareness of the cost.
	It is important, I think, Mr. Chairman, that Congress and the 
Administration revisit this issue at a time when we are working to lessen our 
dependence on foreign oil.  For some time now, I have supported increasing 
fuel 
efficiency standards for vehicles.  I think I should add in there that we do 
it 
in a responsible, accountable manner.  In fact, I voted for several floor 
amendments which would have raised CAFE standards in this country, and I am 
pleased that we are reviewing legislation that will give NHTSA the authority 
to raise those standards for passenger cars.
	However, I am not certain that the draft bill goes far enough--and you 
said as much, Mr. Chairman, and I agree with you--but as I understand it, the 
committee print before us today is intended to be a discussion vehicle, and 
modifications are expected as the bill moves through the legislative process.  
And I would say, probably better sooner than later in that process, Mr. 
Chairman.
	I am withholding judgment on the committee print until all interested 
parties have had an opportunity to weigh in on the proposal, and like you, I 
am 
anxious to hear from today's witnesses, and look forward to working with you 
and with the others on this very important issue.
	Thank you, Mr. Chairman.
	[The prepared statement of Hon. Michael Bilirakis follows:]

PREPARED STATEMENT OF THE HON. MICHAEL BILIRAKIS, A REPRESENTATIVE IN CONGRESS 
FROM THE STATE OF FLORIDA

        Thank you, Mr. Chairman.
        I want to commend you for scheduling today's hearing on draft 
legislation 
pertaining to the setting of corporate average fuel economy standards (CAFE).  
Congress first established car fuel economy standards as part of the Energy 
Policy and Conservation Act of 1975 (EPCA) after the Arab oil embargo led to 
the tripling of the price of oil in the early 1970s.  
        Just as it did in the early 1970s, our nation is facing a dramatic 
spike in oil, 
and consequently, gasoline prices.  High gasoline prices certainly have the 
attention of my constituents and the rest of the American public.  Like all 
Americans, I am painfully aware of rising gasoline prices every time I go to 
fill my car's gas tank.  Although NHTSA recently established new CAFE 
standards for light trucks, the current passenger car standard of 27.5 miles 
per gallon (mpg) was set in statute in 1990.  Therefore, I think it is 
important for Congress and the Administration to revisit the issue of CAFE 
standards at a time when we are working to lessen our dependence on foreign 
oil.
        For some time now, I have supported increasing fuel efficiency 
standards for 
vehicles.  In fact, I have voted for several floor amendments which would have 
raised CAFE standards in this country.  I am pleased that we are reviewing 
legislation that will give NHTSA the authority to raise CAFE standards for 
passenger cars.  However, I am not certain that the draft bill goes far 
enough, 
but as I understand it, the Committee print before us today is intended to be 
a 
discussion vehicle and modifications are expected as the bill moves through 
the 
legislative process.  Therefore, I am withholding judgment on the Committee 
print until all interested parties have had an opportunity to weigh in on the 
proposal.  
        Consequently, I am anxious to hear from today's witnesses, and I look 
forward to working with my colleagues on this important issue.  
        Thank you, Mr. Chairman.

	CHAIRMAN BARTON.  Thank you, Mr. Bilirakis.  We have our distinguished 
Ranking Member, the Dean of the House from Michigan, Mr. Dingell, with us.  He 
is recognized for an opening statement.
	MR. DINGELL.  Mr. Chairman, thank you for those gracious comments, and 
thank you for holding this hearing.
	I would like to bid an especially warm welcome to our dear friend, Mr. 
Mineta, the Secretary of Transportation.  He is an outstanding public servant, 
and a former member of this committee.  Welcome, Mr. Secretary.
	Mr. Chairman, thank you for holding the hearing, and I hope that this 
is 
the first in a series of hearings on a very complex issue that will thoroughly 
examine the difficult issue of motor vehicle fuel economy.  It is a matter of 
national importance that affects our environment, the security of our Nation, 
and our economic wellbeing.  It must be addressed deliberately and with 
extraordinary care.
	The circumstances under which we receive testimony this morning, 
however, 
give rise to questions.  It is my hope that our witnesses will shed light on 
some of these matters throughout the morning.
	First, the President has asked Congress to give him authority to 
increase 
passenger car fuel economy standards, yet that authority exists under current 
law.  The Departments of Justice and Transportation have continuously opined, 
over a 20-year period, that the Supreme Court's decision in Chadha did not 
invalidate that authority.
	This committee, in which the underlying law originated, has conducted 
hearings and received testimony from the Department of Transportation 
maintaining the authority of that agency to increase standards, and as one of 
those who has authored the Energy Bill of which CAFE is part, it is my 
recollection, and a clear one indeed, that this was the intent of the 
Congress, 
that the President at later times, and the Administration, would have 
authority 
to increase the CAFE requirements on passenger automobiles.
	The question, then, is why is it that the President requests such 
authority?  Second, the Secretary of Transportation, for whom I have great 
respect and affection, has asked the Congress to allow his Department to 
reform 
the CAFE system.  I am anxious to be of assistance, and it may well be that 
this 
is a good thing.  But we need to learn how this reform will take place, and 
what 
effects it will have on safety, fuel consumption, and manufacturing, and is it 
necessary to do this, and if it is done, how will it be done, and what impact 
will it have upon American manufacturing, American jobs, and American workers?
	So why, then, has the Administration not yet offered legislative 
proposals 
for us to examine?  We have seen nothing of this kind, and to me, not having 
legislation clearly before us at the time we begin to focus on questions of 
this 
kind is an invitation to serious danger and peril.  We need to know what it is 
the Administration wants, so that it can be properly tested, not only before 
the 
members of this committee, but also before the public at large, before the 
industry, before the unions, and before others.
	Changing our system of regulating fuel economy is not a simple 
exercise.  
Rather, it is very complicated.  Even for the best-intentioned persons, there 
are pitfalls and potential for mischief throughout the process of reform, and 
of 
course, the law of surprises and unintended consequences will work splendidly 
here.
	Details and nuances matter greatly, and we cannot sufficiently 
evaluate 
the merits of major changes without an adequate opportunity to examine the 
legislative language line by line with extraordinary care.  The Chairman did 
circulate a draft bill on Friday of last week, and I thank you, Mr. Chairman, 
for this.  But I note that the three pages of text did not address the thorny 
issue of reform.  I note that the witnesses on the third panel have already 
identified technical errors in the draft that was submitted on Friday which, 
quite simply, sought to restate existing law.  This should serve as a very 
important cautionary note and warning to all concerned.
	Fourth, I find it most curious that the committee addresses these 
matters 
in an apparent attempt to stem the tide of gasoline prices.  Stated clearly, 
increasing CAFE standards will not reduce gasoline prices, at least over the 
next 6 to 10 to 15 years.  New CAFE standards will not begin to improve fuel 
economy of vehicles until the model year of 2010 or beyond.  It would then 
take 
another 10 to 15 years for these more efficient vehicles to reduce the demand 
for fuel, and any reduction of gas prices remains to be seen.  If increased 
fuel 
economy standards have any effect on fuel price, it would be minimal, and as 
much as 20 years in the offing.
	I am troubled about the reform, and I would note that there is great 
risk 
here.  The current situation is one in which we calculate these matters on a 
fair, objective, and scientifically sound basis.  To move to something new, 
like 
footprints or some other thing which is undefined, and perhaps unattached to 
responsible science, may be a very dangerous matter.  And I would--
	CHAIRMAN BARTON.  If the gentleman could--
	MR. DINGELL.  --extraordinary care.  These are perilous times for 
American 
auto industries, workers, and the American consumers.  I ask my colleagues on 
the committee and the House to approach matters of CAFE with great care and 
close attention to detail.  Much depends on it.
	Thank you, Mr. Chairman.
	[The prepared statement of Hon. John D. Dingell follows:]

PREPARED STATEMENT OF THE HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS 
FROM THE STATE OF MICHIGAN

        Mr. Chairman, thank you for holding this hearing, which I hope is the 
first in a 
series of hearings that will thoroughly examine the complex issue of motor 
vehicle fuel economy.  It is a matter of national importance that affects our 
environment, our security, and our economic well-being.  It should be 
addressed deliberately and with great care.  
        The circumstances under which we receive testimony this morning, 
however, give 
rise to some most curious questions.  It is my hope that our witnesses will 
shed light on some of these matters throughout the morning.
        First, the President has asked Congress to give him authority to 
increase 
passenger car fuel economy standards, yet that authority exists under current 
law.  The Departments of Justice and Transportation have continuously opined 
over a twenty-year period that the Supreme Court's decision in Chadha did not 
invalidate that authority.  This Committee, in which the underlying law 
originated, has conducted hearings and received testimony that the Department 
of 
Transportation maintains its authority to increase standards.  So why is the 
President now requesting such authority?
        Second, the Secretary of Transportation, for whom I have great respect 
and 
affection, has asked Congress to allow his Department to reform the CAFE 
system.  
I am anxious to be of assistance and to learn how this reform might take place 
and what effects it may have on safety, fuel consumption, and manufacturing.  
So 
why has the Administration not yet offered legislative proposals for us to 
examine?  
        Changing our system for regulating fuel economy is not a simple 
exercise.  Even 
for the well-intentioned, there are pitfalls and potential for mischief 
throughout the process of reform.  Details and nuances matter greatly, and we 
cannot sufficiently evaluate the merits of major changes without an adequate 
opportunity to examine legislative language line by line.   
The Chairman did circulate a draft bill on Friday of last week, but the three-
pages of text did not address this particularly thorny issue of reform.  I 
note 
that witnesses on our third panel have already identified technical errors in 
the Chairman's draft, which quite simply sought to restate existing law.  This 
should serve as a cautionary note to all concerned.
        Third, I find it most curious that the Committee addresses these 
matters in an 
apparent attempt to stem the tide of rising gas prices.  Stated plainly, 
increasing CAFE standards will not reduce gas prices.  New CAFE standards will 
not begin to improve the fuel economy of vehicles until model year 2010 or 
beyond.  It would then take another 10 to 15 years for those more efficient 
vehicles to reduce demand for fuel, and the significance of any reduction in 
gas 
prices remains to be seen.  If increased fuel economy standards have an effect 
on fuel prices, it could be minimal and as much as 20 years in the offing.
        These are perilous times for the American automobile industry, the 
American auto 
worker, and the American consumer.  The matters we consider today are serious. 
I ask that my colleagues on the Committee and in the House approach changes to 
CAFE with great care and with close attention to detail.  Much depends on it.

	CHAIRMAN BARTON.  We thank the gentleman from Michigan.
	Mr. Upton.
	MR. UPTON.  Mr. Chairman, I am going to defer and would like my 
additional 
time for panel two, as I get to see Mr. Boehlert all the time.
	CHAIRMAN BARTON.  All right.  We will go to Mr. Ferguson, then since 
Mr. Upton deferred.
	MR. FERGUSON.  Thanks very much, Mr. Chairman.  Thank you, Mr. Upton, 
for deferring.
	Thanks for holding this important and timely hearing on passenger car 
fuel 
economy standards, as well as thanks to the witnesses for coming to testify on 
this important topic.
	In recent months, our country has reached a turning point in our 
Nation's 
approach to using our energy resources.  We have never realized how crucial it 
is to our energy security that we begin to work our way towards energy 
independence in the upcoming years.  The recent rise in gas prices has made 
every American take notice of how our Nation uses its energy resources, and 
we, 
as leaders, must do all that we can to ensure that our Nation is using our 
energy wisely, whether it is imported or domestic energy.  We must realize 
that 
we can't drill our way to energy independence.  It is essential that we not 
only 
devote an unprecedented amount of resources to alternative energy research and 
development, but also that we ensure that we are conserving our natural 
resources by using them in the most efficient manner.
	I appreciate the committee's commitment to alternative energy and 
diversifying our Nation's energy portfolio.  It is important that we, as 
Americans, begin to realize the potential these alternative fuels hold for 
lowering energy bills for all Americans, and conserving our own resources.  
Aside from increasing our commitment to alternative energy, we also have to 
put 
in place numerous provisions to help citizens and manufacturers efficiently 
use our Nation's energy resources.
	CAFE standards have done well to save fuel and protect the 
environment.  
Over the past two decades, manufacturers have nearly doubled the fuel 
economies 
of their car fleets.  CAFE standards also slash urban smog by reducing 
carcinogenic hydrocarbon emissions, a key ozone smog precursor.  This is an 
especially important issue in my home State of New Jersey, which struggles to 
meet our clean air standards.  I have a strong record of supporting stronger 
CAFE standards in the past.  I will continue to support responsible CAFE 
reform 
for the sake of our Nation's energy security.  I am anxious to see what 
reforms 
the final legislation will contain, and hope that it will take steps to allow 
our Nation to become more energy efficient.
	Again, I would like to thank you, Mr. Chairman, for your work on this 
issue, and I appreciate our witnesses for coming before the committee today.  
I yield back.
	MR. BILIRAKIS.  [Presiding]  The Chair thanks the gentleman.  Mr. 
Waxman?
	MR. WAXMAN.  Thank you, Mr. Chairman.
	Gasoline prices have been skyrocketing throughout the country, from 
Florida to California to Connecticut to Wisconsin.  Consumers are now paying 
more than $3 a gallon for gas, and as the prices rise, we are spending more 
and 
more of our Nation's wealth, sending it overseas to purchase foreign oil.  
This 
problem has been building for years under the Republican Congress and the Bush 
Administration's energy policies.  From day one, this Administration and the 
Congress have bestowed on the big oil companies subsidies, exemptions, 
loopholes, and tax breaks.
	Upon taking office, Vice President Cheney convened an energy task 
force 
that secretly met with energy executives to develop the Nation's energy 
policy.  
He never even met with consumers and environmental groups.  The result is a 
national energy policy that fails to restrain energy prices, that fails to 
plan 
for the future, and fails to take into account our environmental and national 
security.
	Congress endorsed and expanded these misguided policies in the energy 
bill 
we passed last year.  Five years later, we are reaping the fruit of the 
Administration's energy policy.  Gasoline prices have doubled, home heating 
prices have soared, natural gas prices have risen to unprecedented levels.  
Now, 
with these consequences coming home to roost, the President plays to the 
press, 
and urges the Congress to give him the authority to raise CAFE standards for 
passenger automobiles.
	Well, Mr. Chairman, I would like to place in the record a letter from 
David Vladeck, a professor of law at Georgetown University.  Professor Vladeck 
has 30 years of experience in complex Federal legislation, and at my request, 
he 
reviewed the CAFE law in light of the President's statement.  After review of 
the statute and its history, he concludes that the Department of 
Transportation 
already has the authority to revise fuel efficiency standards for passenger 
automobiles.
	The reality is that this Administration has exhibited no serious 
interest 
in reducing the Nation's dependence on oil.  They opposed CAFE increases in 
the 
energy bill.  They opposed oil savings provisions in the Energy Bill.  They 
adopted an increase in fuel efficiency standards for light duty trucks so 
small 
as to be negligible, and they worked to pass lopsided tax subsidies to promote 
sales of the least efficient vehicles.
	The Republican Congress took a similar approach.  The Republican 
Congress 
repeatedly passed appropriation riders to ensure that when Clinton was 
President, he did not use this power to increase fuel economy standards.  We 
have got to reduce our dependence on foreign oil.  CAFE is the best tool we 
have 
for doing it.  The Administration could have used authority under CAFE years 
ago 
to address this issue.  Now, we ought to get on with it.  The President ought 
to 
just do it, and it is hard to hear the Republicans say they want it when they 
voted over and over and over again against raising the CAFE standards.
	MR. BILIRAKIS.  The gentleman's time has expired.  Mr. Murphy, for an 
opening statement?
	MR. MURPHY.  Thank you, Mr. Chairman.  I appreciate the committee 
taking 
on this important issue, as this committee has done on so many things with 
energy.
	When it comes to dealing with the cost of gasoline and oil, there are 
three things that this committee has, and there are differences between 
different sides of the aisle, but I think the issue of conservation and 
improving efficiency has to be an area that we come together, for unless we 
reduce our consumption, we are going to continue to be dealing with that old 
issue of supply and demand.  And demand will go up, supplies can't meet it, 
and 
as we all know, we continue to be more and more dependent upon sources of 
foreign oil.
	But we must also continue our work on exploration, and that means we 
have 
abundant supplies of petroleum products here in the United States off our 
Atlantic Coast, our Gulf Coast, our Pacific Coast, Alaska, and the Rocky 
Mountain range, and many of those areas are already approved, but it is taking 
so long for the permitting process.  But as it is, unless we move forward with 
getting some of our own oil out of our own land, we continue that dependence 
upon foreign countries who oftentimes have their volatile politics, which 
keeps the noose around our neck for the cost of gasoline.
	And the third area, the diversification, which we have touched on 
here--
and we are moving forward, as we do with the energy bill, and some things such 
as using nuclear energy, clean coal technology, but unfortunately, we are also 
in a situation with some of the renewables that although we may support them 
in 
word, when it comes to building windmills in someone's district, or 
hydroelectric plants, et cetera, it usually becomes an issue that there used 
to 
be NIMBY, not in my back yard, and now, it is that term BANANA that is used, 
build absolutely nothing anywhere near anybody, and that is not going to work 
for us, either.
	If we are going to be serious about reducing the cost of gasoline, 
this 
issue of conservation is important.  I am told that if each citizen reduces 
driving, and cuts as much as one gallon a day, or one gallon a week, the 
savings 
are so massive that the price of gasoline starts to go down at the pump, 
because 
now, we are meeting some of our needs, and so even though we are talking today 
about improving efficiency in vehicles, and I would like to see us do that in 
a 
significant way, we have to recognize that the immediate thing we can do is 
encourage citizens to be themselves the best conserver of energy, to look upon 
how they can save gasoline, how they can reduce their own miles consumed, how 
they can combine trips into such ways that they are driving less and wasting 
less.  
	That is the immediate thing we can do, but the purpose of this hearing 
hopefully will give us some information on those age-old questions, can we 
have 
safe cars and better mileage at the same time?  Is this achievable with 
gasoline 
cars, or do we have to use hybrid engines or hydrogen-based engines, and can 
we 
do all this in a way that brings this to the marketplace fast and in 
affordable 
way for citizens?
	These are questions that I will have today for the panel, and I look 
forward to hearing their testimony on these, and as always, Mr. Chairman, I 
appreciate your leadership on these issues.
	I yield back.
	MR. BILIRAKIS.  The Chair thanks the gentleman.  Mr. Markey, your 
opening statement.
	MR. MARKEY.  Thank you, Mr. Chairman.
	In 1961, President Kennedy challenged America to put a man on the Moon 
within 8 years, by 1969, because the Soviet Union was threatening to control 
outer space, the high frontier.  The American people responded 
technologically, so that we could leapfrog the Soviet Union and Communism.
	Unfortunately, a new challenge that confronts us today has not seen a 
similar response from a Republican President or a Republican Congress.  Thus 
far President Bush's claim that it is impossible, rocket science, President 
Kennedy 
was able to master, using the will and the skill of the American people, but 
auto mechanics, President Bush and the Republican leadership have said, is not 
possible to be conquered.
	In 1975, in response to the first oil shock, President Ford and the 
Congress passed a law which doubled the fuel economy standards of the American 
automotive fleet over a 10-year period.  It doubled it from 13 miles per 
gallon 
to 27 miles per gallon.  It actually reduced, over that 10-year period, the 
importation of oil from 36 percent of all of our oil down to 27 percent of all 
of our oil.  It was a powerful response to OPEC.
	But since then through President Bush I, through the Newt Gingrich 
Congress, which prohibited each year, legislatively, President Clinton from 
acting to improve the fuel economy standards, prohibited President Clinton, 
right through the entire Bush Administration, where they have refused to act on 
fuel economy standards, we are now 60 percent dependent upon imported oil.  We 
have gone from 44 percent dependency on the day the Republican Congress took 
over in '95 to 60 percent dependent today with no action by the Republican 
President or by the Republican Congress.
	Sherry Boehlert and I have made an amendment each year, each Congress, for 
the last three Congresses.  Last Congress, we received 177 votes.  We started 
with 160 in 2001; it went up to 162 in 2003.  Now, it is 177 votes.  At 33 miles 
per gallon, which is what our amendment does, it backs out all of the oil from 
the Persian Gulf, all 2.5 million barrels a day.  This is the year to do it.  
This is the year to vote for it.  But we don't need that authority.  The 
President has it.
	So I call on the President to use his authority and issue a challenge 
to America.  Tell us, Mr. President, what the number for the fuel economy 
standard 
should be.  Pick a number, Mr. President.  Don't duck.  Don't pass the buck.  
Pick a number.  Because in the end, it is not a lack of authority that is 
missing, it is a lack of leadership from President Bush.  Pick a number.  Is 
it 
33 miles per gallon, 35 miles per gallon, 40 miles per gallon?  Until you name 
a number, Mr. President, there will be no leadership--
	MR. BILIRAKIS.  The gentleman's time has expired.
	Mr. Waxman has asked for unanimous consent that a letter from the 
Institute for Public Representation at Georgetown University Law Center, dated 
May the 2nd, 2006, be inserted as part of the record.  Without any objection, 
that will be the case.
	[The information follows:]



        MR. BILIRAKIS.  Mr. Bass for an opening statement.  Mr. Bass is 
passing.  Ms. 
Myrick for an opening statement.  And you're passing?  Mrs. Wilson, opening 
statement.
	MRS. WILSON.  Thank you, Mr. Chairman, and thank you for holding this 
hearing today.
	I think all of us believe that we need a balanced long-term energy 
policy 
to make America more energy independent, and I look forward to this hearing 
today.  I have read some of the information from the Department of 
Transportation, and the question seems to me here is, is there a smarter way 
to 
do the CAFE standards, so that we save fuel without compromising safety?  And 
the Department of Transportation approach to how they changed the light truck 
standard using the footprint of the vehicle, which encourages people who make 
light trucks to try to put fuel efficient technologies on the whole line, and 
not just looking at the average in their fleet, seems to make a lot of sense 
to me.
	The question is whether we could do the same thing for passenger cars and 
other kinds of vehicles, and gradually increase fuel economy for every kind of 
vehicle, as opposed to just having somebody make more small cars to compensate 
for the fact that they have big cars on the road.  This kind of innovation and 
looking, thinking outside the box, and trying to do something differently to 
improve the fuel economy of the entire fleet of vehicles that is on our road 
in 
America seems to make a lot of common sense, and I look forward to hearing the 
testimony today, the different ideas, and listening to the Department of 
Transportation, and what you want to do, and how that will help us save fuel 
without compromising safety.
	And I really appreciate this hearing and the background work that went 
into it.  Thank you, Mr. Chairman.
	MR. BILIRAKIS.  The Chair thanks the gentlelady.  Ms. Capps, for an 
opening statement?
	MS. CAPPS.  Thank you, Mr. Chairman, and welcome to Transportation 
Secretary and fellow Californian, Mr. Mineta, particularly to our esteemed 
colleague for his testimony, Mr. Boehlert from New Yorker, and former Member, 
Mr. Sharp, for being at this hearing today.
	Nevertheless, I find this whole hearing rather strange, rather 
bizarre.  
First, as has been said, the Administration can already raise fuel efficiency 
standards.  It doesn't need any change in the law, and it is surprising to me 
that the Administration cares about what we are going to be debating about 
anyway.  We have all read about the President's signing statements that give 
his 
rather unique interpretation of the laws he has just signed.  For example, the 
signing statement to the McCain anti-torture law, which allows him, actually, 
to 
ignore the law.  Maybe it would be faster for the President to use a signing 
statement to the next bill that crosses his desk.  It could say he understands 
that new law, whatever it happens to be, gives him the right to adjust CAFE 
standards.  It would save us a lot of time and debate.
	And the history been stated, but I want to repeat it.  The 
Republican-led 
Congress banned CAFE increases during the latter half of the '90s through 
appropriation riders.  Apparently, Representative DeLay and others believed 
the 
Clinton White House could and would raise CAFE standards.  Miraculously, once 
President Bush came into town, the concern vanished and the riders 
disappeared.  
And during the last 5 years, this Republican-led House has repeatedly voted down 
CAFE increases, and the Bush Administration has supported that decision.
	But now, with record gas prices and their oil company supporters 
reporting 
record profits and executive payouts, the Republicans are scrambling.  Last 
week, it was a $100 rebate.  Quickly ridiculed for shameless pandering, the 
Senate leaders have since reconsidered.  And right about now the Republicans 
are 
putting on the floor, on the suspension calendar to keep debate limited, of 
course, useless price gouging and refineries legislation.
	And here we have a hearing on a bill to let the Administration do 
something it can already do, but doesn't want to, and it is being pushed by 
people who oppose what the bill would let the Administration do anyway.  In 
fact, the new House Majority Leader is quoted in today's Washington Post 
dismissing the Administration's newfound religion on CAFE, saying ``the market 
can handle this much better than some kind of government regulation.''  At 
least 
the Majority Leader is being up front about his views.  I think he is wrong, 
but at least he is being honest.
	Mr. Chairman, over the last decade, Republican actions on energy have 
been 
without vision.  They have continued to place faith in increasing supplies, 
while paying only fleeting attention to demand reduction.  They have shoveled 
billions in taxpayer subsidies to industries awash in profits.  Today, gas is 
at 
$3 a gallon and rising.  Today's hearing, like the ill-fated $100 rebate, is 
about nothing more than panic.  Republicans want to look like they are doing 
something, anything, to address a mess they have helped create.  It would be 
funny if the results weren't so tragic.
	Americans are hurting from high prices.  The economy may well stumble 
over 
them, and all we get are gimmicks.  The American people deserve better.  I 
yield back.
	MR. BILIRAKIS.  The gentlelady's time has expired.  Mr. Shimkus, for 
an opening statement?
	MR. SHIMKUS.  Thank you, Mr. Chairman.  Thanks for having this 
hearing.  I 
was over on the other side, talking to my friend, Mr. Markey, and that is why 
Washington is a great place to be, because what comes around goes around, and 
we have had this debate numerous times.
	As maybe we are latecomers to the debate on CAFE, I would hope my 
colleagues and friends would start accepting some of the needs for new supply. 
And maybe, new supply, with more CAFE standards, would help address Economics 
101, which is a supply and demand issue.  That is why, on the Energy 
Committee, 
we continue to talk, and we are going to have it on the floor today, an issue 
on 
coal to liquids, and here is a great idea, and I hope my friends join me: 
taking 
coal--we are the largest country to have large reserves of coal.  We can take 
that coal, mined hopefully in southern Illinois, put a refinery on top of it, 
a 
coal-to-liquid refinery, to produce fuel that is cleaner than any fuel that we 
could refine today.
	So I know they are welcoming us to this debate on CAFE standards.  I 
know 
the Secretary of Transportation has already addressed this on the light trucks 
concern.  The Administration has asked us to look at that, to give the 
Secretary 
of Transportation additional authority.  I think we are ready to do that, Mr. 
Secretary, and we are really willing to address the demand side.  I would hope 
my colleagues on the other side of the aisle would also help us address the 
real supply needs we have for this country.
	And with that, Mr. Chairman, I yield back my time.
	MR. BILIRAKIS.  Mr. Allen.
	MR. ALLEN.  Thank you, Mr. Chairman, for holding this hearing, and 
thank you to my friends, Chairman Boehlert, Secretary Mineta, and to the 
distinguished 
panel for joining us today, including three people I consider friends, Mr. 
Webber, Mr. Sharp, and Mr. Reuther.  If only the three of them could agree, we 
would be well on our way.
	I am pleased that the Administration has come to the conclusion that 
we 
need to do something about fuel economy standards.  Better late than never, I 
suppose.  I am, however, surprised, Secretary Mineta, that you do not feel you 
have the legal authority to raise CAFE standards.  During the Clinton 
Administration, the Majority inserted riders into transportation 
appropriations 
bills that prohibited your Department from raising CAFE standards, but under 
the Administration's interpretation, the Clinton Administration couldn't have 
raised CAFE standards even if it wanted to.
	Mr. Secretary, I don't buy it.  I am convinced that you could have 
raised 
CAFE standards at any time over the past 5 years.  You just didn't want to do 
it.  And if you had raised CAFE when you first came into office, we might 
today 
be seeing the benefits.  Certainly, if the Majority had not tied the hands of 
the Clinton Administration, we would definitely have a more fuel-efficient 
vehicle fleet today.
	I am not opposed to a reasonable revision of CAFE standards, but for 
years, the auto industry and the Bush Administration have preferred to do 
nothing than to make difficult decisions, to the great disadvantage of this 
country, and certainly, to the great disadvantage, ultimately, of the U.S. auto 
industry.  I believe raising CAFE standards is sound long-term energy policy, 
and I am pleased the Majority is considering it, despite my concerns about 
some aspects of the draft bill.
	But let us be frank.  We have waited far too long to deal with this 
issue, 
but now, let us do something that will have a significant long-term impact on 
public health and fleet fuel efficiency.  Those are public values that require 
public policy decisions that cannot be left solely to individual consumer 
choices.  We in Congress can no longer ignore our responsibility to deal in a 
serious way with our energy crisis, the cost of illness from auto pollution, 
and the threat to the planet from climate change.
	And Mr. Chairman, I yield back.
	MR. BILIRAKIS.  The Chair thanks the gentleman.  Mr. Rogers, opening 
statement?
	MR. ROGERS.  Thank you, Mr. Chairman.
	Mr. Chairman, as you know, first of all, let me appreciate having this 
hearing, but as you and many of the members of the committee know, I have long 
had concerns with the CAFE system.  It is old, it is arbitrary, and it has 
proven time and time again that you really can't make a fat person skinny by 
mandating smaller pants sizes.
	If we could, it would be a great solution, and that is exactly what we are 
talking about doing with this arbitrary CAFE system.  It was instituted in the 
1970s.  The system was supposed to dramatically improve fuel efficiency, and 
more importantly, wean America off foreign oil.  Hasn't happened.
	What CAFE has done is distort the marketplace, and provide some 
companies 
with an unfair advantage over others, thanks to arbitrary Federal guidelines.  
The people in Michigan know all too well about unfair advantages or 
disadvantages.  Automakers, auto suppliers, and autoworkers in my district and 
across Michigan are suffering, and I am exceptionally concerned with the 
threat that any new, arbitrary CAFE standards may pose to the American auto 
industry.
	You know, CAFE has done more than cost jobs, Mr. Chairman.  It has 
also 
cost lives.  As several witnesses state in their written testimony today, 
arbitrary CAFE standards have forced companies to down-weight cars, making 
them 
less safe.  Thousands of Americans have died because politicians in Washington 
want to be the ones who pick what that CAFE standard ought to look like, and 
plug it into a very antiquated formula.
	That said, in recent years, Congress has, in a bipartisan way, worked 
to 
improve and rationalize the CAFE program, while maintaining the original and 
valid purpose of CAFE, to lessen America's dependence on foreign oil.  Credits 
for alternative fuel vehicles and fundamental reform of the light truck CAFE 
system are two excellent examples of progress that Congress has made.  I hope 
we 
are able to use this debate surrounding this draft legislation to identify 
further improvements to the CAFE system.
	I look forward to the hearing today.  I look forward to hearing the 
witnesses, and how Congress can lessen our dependence, help in lessening our 
dependence on foreign oil, and rein in high gas prices through the use of more 
fuel-efficient vehicles.
	And with that, Mr. Chairman, I would yield back the remainder of my 
time.
	CHAIRMAN BARTON.  We thank the gentleman from Michigan.  The Chair 
would 
like to inquire on the Minority side; apparently, there is a difference of 
opinion on the order of speaking.
	I show Congresswoman DeGette, but my understanding is Congressman 
Green indicates that he was here.
	MS. DEGETTE.  Mr. Chairman.
	CHAIRMAN BARTON.  Have you all worked that out?
	MS. DEGETTE.  There is a problem with the whole list, but one thing I 
have learned in 10 years in Congress, always to defer to your elders.  So I--
	CHAIRMAN BARTON.  What elders?
	MR. GREEN.  Mr. Chairman, you know, where we come from, we defer to 
our 
fair sex, which I know Diana would really--but I would be glad to defer.  But 
let me explain something.  I think there is a problem with how these lists are 
compiled, because this is not the first time, in the full committee or the 
subcommittee, and I know it is based on seniority sometimes.  Sometimes, it is 
on who shows up, and so if our side is giving the wrong information, I need to 
know that, but if it has changed somehow, we need to know, because as you can 
see, members have a lot of schedules.  Instead of sitting here for 40 minutes 
to 
do an opening statement, then going, doing your appointment, or whatever else. 
So--
	CHAIRMAN BARTON.  I understand.  That is why I am asking.  We do--
	MR. GREEN.  I am going to defer to Ms. DeGette, but I would hope that 
the 
leadership on both sides would make sure who signs up is there, who shows up, 
or whatever the rules are, we will comply with them.
	CHAIRMAN BARTON.  All right.  Well--
	MS. DEGETTE.  All right.
	CHAIRMAN BARTON.  Mr. Engel, did you have something that you wanted to 
add?  You were raising your hand, too.
	MR. ENGEL.  Mr. Chairman, just wanted to let you know that I wanted to 
make an opening statement as well.
	CHAIRMAN BARTON.  Oh, okay.
	MR. ENGEL.  Okay.
	CHAIRMAN BARTON.  Got you.  We are going to go--
	MS. DEGETTE.  Mr. Chairman--
	CHAIRMAN BARTON.  --to Ms. DeGette.
	MS. DEGETTE.  I will just seize control here.
	CHAIRMAN BARTON.  You can always defer, and then we can get on to our 
witnesses, you know.
	MS. DEGETTE.  Thank you, Mr. Chairman.  I just want to say that I 
appreciate having this hearing.  I guess I appreciate some of my respected 
Republican colleagues seeming to have a change of mind, although, when I look 
at 
the bill that we are talking about today, it doesn't really seem to do much to 
actually increase CAFE standards.
	I have been on this committee now for almost 10 years, and the energy 
bill every year, last year, no exception, has been the low point of my 
Congressional 
year, because it has been a backward-looking piece of legislation.  There has 
been a group of us trying to increase CAFE standards every year, and every 
year, we are shot down, both in the committee, and on the floor.
	Now, I found it interesting that my colleague from Illinois, Mr. 
Shimkus, 
was passionately arguing for a bill increasing supply, because I thought that 
is 
what we did, in not one but just two energy bills last year, in which again, 
this committee and the majority on the floor shot down increased CAFE 
standards.  
Increasing the fuel economy of our vehicles would be the quickest, cheapest, 
and most efficient way to reduce our dependence on fossil fuels.
	Now, if you look at the committee print that we are discussing today, 
it doesn't do anything about gas prices.  It doesn't do anything about the 
reliance on foreign oil, and ironically, it does nothing about fuel economy.
	Congress has the authority to increase CAFE standards.  A group of us, 
and 
as Mr. Markey points out, an increasing numbered group, has the authority to 
do 
this.  The President, by all of the legal opinions we have today, has the 
authority to increase CAFE standards.  So what is Congress doing?  We are just 
dinking around debating whether or not we should give the Department of 
Transportation authority to look at this.
	Even if we pass this legislation right away, which it doesn't look 
like we 
will, the Department of Transportation will spend more than a year developing 
a 
rule.  The rule would likely mirror President Bush's recent light truck 
regulations, which overhauled the system,  but only made marginal increases in 
fuel economy, and then the automakers would have a couple of years to comply, 
meaning that even tiny little increases in fuel economy would still be 4 or 5 
years away.
	This is just not good enough.  I think that Congress should take the 
initiative hand in hand with the Administration, to increase CAFE standards, 
to 
really make this work, because several people on the other side were right.  
It 
will take a couple of years to make this really work.  So let us start right 
now.  If we are so interested in CAFE standards, let us get it done.  It 
doesn't 
take a legal mastermind to see the flaws in the draft legislation in front of 
us.
	The bill just simply gives the Administration authority.  It doesn't 
say 
what the standards would be.  It doesn't even say if the standards would be 
higher or lower.  So let us get together, let us do something meaningful, and 
let us start chipping away at this problem of high gas prices and reliance on 
foreign oil now.
	Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  Thank you, Ms. DeGette, and we go to Congresswoman 
Blackburn.
	MRS. BLACKBURN.  Thank you, Mr. Chairman, and thank you to our 
witnesses 
for being here.  We appreciate your time, and we appreciate also, Mr. 
Chairman, that you would call the committee today.
	Reauthorization of the way we develop our fuel economy standards is 
another important step for our country in reaching a point where we can one 
day 
celebrate an energy independence day, and as all of you can hear, this is 
going 
to be a feisty little debate, and the focus today is on fuel economy, but I 
think the real issue that we are here discussing is the high price of fuel.  
And 
while we address the legislation that is before us, I think it is critical 
that 
we not ignore the reasons for the fuel prices being as high as they are.  
Worldwide demand for oil has increased, hurricanes in the Gulf have knocked 
out 
some of our refining capacity.  Thirty years of environmental extremism has 
brought domestic oil exploration to a virtual halt in its tracks.
	If we want to see gas prices stabilized, then we need to build on our 
achievements that we have included in the Energy Policy Act, and open up areas 
like ANWR to oil exploration, and encourage refinery construction.  We all 
know 
that there was a Presidential veto of drilling in ANWR in the mid-90s.  I 
think 
today, many people would say that was an unfortunate occurrence.  Prices 
wouldn't be so volatile had we been exploring for oil on American soil, and 
expanding our refining capacity as our population has grown, and as our needs 
have increased.  And I know that there are those across the aisle who like to 
put the emphasis on environmental concerns.  They blame us for putting the 
emphasis on American drivers and the American economy, and it sounds like we 
are 
going to hear more of that today.
	While we are considering giving authority to the Department of 
Transportation to set CAFE standards, I think it is important to keep the big 
picture in mind.  Mrs. Wilson and Mr. Shimkus both made reference to the light 
truck standards that have previously been used by the industry.  It is a smart 
move, and with Nissan North America and Saturn headquartered in my district in 
Tennessee, I do understand how CAFE standards can have an impact on the 
production line.  I talk to those constituents of mine that run that 
production line.
	I also understand the need for a conservationist approach to fuel 
economy, 
and the importance of lowering emissions.  And further, I think it is crucial 
that we keep car passenger safety as a top priority.  Mr. Chairman, as this 
issue is debated, I think it is imperative that we look at sound scientific 
data, and not political polls and rhetoric as we have in our discussion.
	Thank you.  I yield back.
	CHAIRMAN BARTON.  I thank the gentlelady.  The gentleman from Texas, 
Mr. Green.
	MR. GREEN.  Thank you, Mr. Chairman, and I want to thank you and our 
ranking member for holding the hearing on the proposals to clarify NHTSAs 
authority to increase CAFE standards for passenger cars.
	I understand the sense of urgency to act to address fuel prices after 
we 
have seen rapid increases, especially over the last month.  But I am concerned 
about this proposal, may be shortsighted, that it would not decrease fuel 
consumption for 10 or more years.  Now, I understand we need to do something 
about energy consumption, but there are two ways you can do it.  You either 
increase production, or you reduce demand, and frankly, I don't know if we are 
doing either of them.  The last energy bill that we had opened up very few 
things for more exploration.  There were some things in there, but nothing for 
opening up newer areas, whether it be ANWR or even the Eastern Gulf of Mexico, 
which is mostly gas, I assume, but may find oil.
	But we also didn't do much for saving gas.  This plan could also 
American 
jobs and compromise automobile safety.  The committee defeated an amendment 
last 
summer, when we marked up H.R. 6, that would have mandated higher CAFE 
standards 
for both passenger cars and light trucks, and we should not hastily give 
unlimited decision direction to the Administration on CAFE standards now, due 
to 
rising gas prices.  We need a comprehensive approach, both increased 
production, refining capacity, but also a reduction in demand.
	Today's gas prices are hard on consumers.  Many of my constituents 
drive 
larger cars and trucks that consume more fuel, that they work hard to make 
their 
car payments and their fuel payments, but this proposal will not reduce their 
fuel costs, because it does nothing to effect current fuel consumption, and 
will 
not take effect on new cars until at least 36 months, until model year 2010.
	One of the serious consequences of increased CAFE standards may be 
loss of 
American jobs at automakers like GM, Ford, and Chrysler, because their fleet 
is 
larger than competitors like Toyota, Honda, and others.  In addition, heavier 
cars are safer cars, and requiring lighter, more efficient fuel cars would 
lead 
to sacrificing passenger safety in an attempt to conserve fuel 10 years down 
the road.
	Both the United Auto Workers and the National Academy of Sciences both 
stated before, when we addressed CAFE issues, that the more CAFE increases 
sacrifice safety, and that is not a sacrifice many people are willing to make. 
If they are, then there are already numerous smaller and lighter 
fuel-efficient 
cars to buy.  If the Administration were serious about increasing CAFE 
standards, if they were concerned about the lack of authority by NHTSA to do 
so 
this could have been addressed 6 years ago.  But funding for NHTSA has 
continually been cut by the Majority, first under President Clinton, so that 
CAFE standards could not be increased.  Despite Secretary Mineta's request for 
the DOT authority in 2002, Congress has not taken this up.
	Now that gas is $3 a gallon, people are already buying more 
fuel-efficient 
cars, so we should not rush to pass a bill without considering its impact on 
American manufacturing and consumer safety.  If we are going to use CAFE to 
address fuel economy, we must ensure it is not to the detriment of the 
manufacturing or the safety of Americans.
	I yield back my time.
	CHAIRMAN BARTON.  The gentleman yields back.  Mr. Stearns.
	MR. STEARNS.  There we go.  Thank you, Mr. Chairman, and I appreciate 
this hearing.
	You know, this whole business about CAFE standards is almost targeting 
the 
wrong issue here.  It is not Secretary Mineta's fault for not increasing CAFE 
standards.  It is not the fault of anybody.  The consumer is king here.  
Today, 
in Florida, you can buy a Jetta TDI Diesel VW, and you can get almost 50 miles 
per gallon on the highway.  Now, please, tell me why we need CAFE standards 
when you can get something going 50 miles a gallon.
	The consumer is king here.  The consumer decides whether to buy the 
most 
fuel-efficient hybrid car, which is ideal for stop and go driving, or a huge 
sport utility.  Now, I have a supporter who spent 30 years building a 
business.  
He sold his business, he made a little money.  He is going to buy a large car 
to 
make himself feel good, SUV, or it might be a Hummer.  He is not going to get 
the VW Jetta TDI.  It is a consumer decision, and perhaps he wants to tow his 
boat, or perhaps he wants to do something else with it.
	So in the end, Mr. Chairman, consumers decide the vehicles they drive, 
the 
number of annual miles they drive with, and how they drive those vehicles, so 
you cannot go ahead and blame anybody for this.  The consumer is deciding 
this.
	CAFE is dependent upon what vehicles consumers buy in the market, and 
not 
upon what the manufacturer produces.  We are in a global economy.  If it was 
very important to have a very high mileage car, like a Jetta TDI in a large 
vehicle, it would be done, but they can't do it.  So the global economy is 
dictating how these people are going to make money at the same time they can 
bring in low gas mileage.
	And the consumers can also make a decision to conserve, and frankly, 
Mr. 
Chairman, we could have a hearing just on the advanced technologies, like 
hybrid 
power trains, clean diesels, fuel cells, all require sort of an integrated 
approach to conservation that could easily be embraced by our consumers today. 
This integrated approach looks at how the existing transportation 
infrastructure can be made more efficient, as well.
	For example, hybrids and car poolers on HOV lanes can help us 
conserve, 
but not if they are trapped in traffic jams.  Information technologies like 
RFIDs, the radio frequency identification in products, the E-ZPass that 
sometimes you use to get through the tolls can improve the efficiency of the 
entire system by reducing congestion.  The net effect is the same, and the 
real 
attraction here is that these technological advances that we put in the cars 
will help improve not only the gas mileage, but the quality of life.
	In conclusion, Mr. Chairman, I applaud NHTSA for their reforms to the 
CAFE 
standards for light trucks, an approach that will improve flexibility and 
product planning and technology, and it gives greater credence to consumer 
choice in the market.  The consumer is the king.
	Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  And I thank the gentleman.  The gentleman from 
Washington, Mr. Inslee.
	MR. INSLEE.  Thank you.
	This hearing does have a bit a Twilight Zone feeling about it.  The 
President has fought us tooth and tongue on virtually every fuel efficiency 
thing we have had to do, tried to do for several years, but nonetheless, I 
think 
it is important to be magnanimous at this apparent epiphany, but it is also 
important to be realistic, and that we need more than a rhetorical flourish of 
a 
bill such as this, to give the President, which he already has, which is 
authority to do something here, but we also have to insist a number, and we 
are 
going to hear from Representative Boehlert, that he has a bill that will 
actually give us a number, and will give us something in America that will 
work, in H.R. 3762, a meaningful way to move ahead.
	And I want to point out this is a replication of success America has 
already had.  We had success doing this from the mid-'70s to the early '80s.  
I 
want to point out if we had simply continued the course we were on in the late 
'70s, we would be free of Middle Eastern oil today.  If we simply had not 
fallen 
off the wagon of fuel efficiency, we would be free of that today.  We would 
not 
have $3 a gallon gas today.  I point this out, as we are really not inventing 
a 
new technology.  We are simply going to use what our common sense that we were 
using before, and we know that it will.
	Now, let me point out that this is not the only game in town on fuel 
efficiency.  H.R. 2820, the New Apollo Energy Project, I have introduced with 
others, to say we ought to have a new, aggressive fuel efficiency.  Mr. 
Kingston 
and Mr. Engel have H.R. 4409, which will simply call for flex fuel vehicles, 
which I hope this committee eventually will have a hearing on, because it is 
not 
just about squeezing out more mileage of gasoline.  It is about creating what 
Brazil has done, which now has energy independence, with 40 percent of their 
transportation needs being met by biofuels, and I hope that we will have a 
hearing on our ability to guarantee that Americans have flex fuel vehicles.  
It 
is about time Americans have the freedom to choose what fuel they are going to 
use, and H.R. 4409 will do that.  It is about H.R. 4370, a bill I have 
introduced with a companion bill by Senator Obama, which will help our auto 
industry with what they need with their legacy health care costs, in exchange 
for giving us more fuel-efficient vehicles.
	We know we have got some auto industries with some real legacy health 
care 
problems.  In a real life, realistic, common sense approach for this Congress, 
is to assure Americans have more fuel-efficient cars, and assure that we 
continue to have a vibrant auto industry.  By helping them through these 
health 
care costs, we will have a healthier environment.  We will have a healthier 
auto 
industry, and we will have some healthier public policy if we adopt these 
bills.
	Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  I thank the gentleman, and remind him we are going 
to 
have a vote this afternoon on a refinery bill that expedites permitting for 
refineries, including biorefineries, which the gentleman supports.  And we 
encourage him to support that bill.
	Mr. Burgess of Texas.
	MR. BURGESS.  Thank you, Mr. Chairman, and thank you for holding this 
hearing today.  I am anxious to hear from the witnesses, so I will be very 
brief.
	But I do think we need to address the supply side of this equation, 
and 
this morning, thankfully, we are also addressing the demand side.  I am a big 
believer in the hybrid technology.  I have owned a hybrid car for about 2 
years.  
In my part of North Texas, I originally bought this vehicle because, or got in 
line to buy a vehicle, because of air quality concerns, and then with the 
miracle of redistricting, I was given a very long, narrow district.  So I have 
got to log a lot of miles across North Texas, and now, I look positively 
brilliant for having a vehicle that gets in excess of 50 miles a gallon.  And 
of 
course, that vehicle came to us without any additional change in the CAFE 
standards, but we are here today to talk about the corporate average fuel 
economy standards, and it is appropriate to do so.
	The committee has issued a discussion draft of legislation that would 
direct the National Highway Traffic Safety Administration to revise these 
standards for passenger cars, and I am looking forward to hearing the panel's 
recommendations on this draft.
	I want to thank each of the witnesses before us today.  Secretary 
Mineta, 
last term, I was on the Transportation Committee, and it was always good to 
work 
with you on that committee, and of course, Chairman Boehlert was my Chairman 
on 
the Science Committee during the 108th Congress, and certainly I'm interested 
in what you have to tell us this morning.
	So with that, Mr. Chairman, I will yield back.
	[The prepared statement of Hon. Michael Burgess follows:]

PREPARED STATEMENT OF THE HON. MICHAEL BURGESS, A REPRESENTATIVE IN CONGRESS 
FROM THE STATE OF TEXAS

        Thank you, Mr. Chairman for holding this important hearing.
        I think by now my fellow committee members know that I believe our 
best bet to 
decrease consumption of gasoline, at least in the short run, would be to 
increase the number of hybrid cars on the road.  
        I've owned my Prius now for about 2 years.  I've logged a lot of miles 
across 
North Texas during the course of that time and there's no telling how much 
money I've saved on gasoline.  
        But we're here today to talk about CAFE standards.  
        The Committee has issued a discussion draft of legislation that would 
direct the 
National Highway Traffic Safety Administration to revise the CAFE standard for 
passenger cars and I am looking forward to hearing the panel's comments on 
this draft.  
        I'd like to thank each of the witnesses that will be testifying before 
us today.  
Secretary Mineta, it was always a pleasure to work with you while I served on 
the Transportation and Infrastructure Committee, so I am please to welcome you 
here in Energy & Commerce.  

	CHAIRMAN BARTON.  I thank the gentleman, and we now go to the gentleman 
from New York, Mr. Engel.
	MR. ENGEL.  Well, thank you, Mr. Chairman.
	We all remember how Nero fiddled while Rome burned.  Today, the 
President 
and the Congress are fiddling while the American people are paying more than 
$3 
per gallon of gasoline.  Big Oil is making record profits.  ExxonMobil just 
gave 
its departing CEO a $400 million golden parachute, and the American people are 
angry and frustrated, and so are we.
	The President needs to call the oil executives into the White House 
and 
bang some heads together, and say gentlemen, this really has to stop.  Despite 
decades of advancements in vehicle technologies, and the efforts of many 
Members 
of Congress and concerned citizens, passenger cars have had the same fuel 
economy standard of 27.5 miles per gallon for over 20 years.  It just doesn't 
make sense.
	As an article in the Washington Post noted today, about the 
Administration 
and Congressional leadership, the response so far has been ``profiles in 
panic,'' 
to quote them.  A New York Times editorial today calls it ``Foolishness on 
Fuel.''  
It certainly would explain the $100 gas rebate idea, which would barely touch 
a family's monthly gas bill.
	If the President really believes NHTSA doesn't have the authority to 
increase passenger car CAFE standards, why did he wait 6 years into his 
Administration to get around to asking for that authority?  At this point, the 
earliest that this new legislation could affect cars' fuel economy standards 
is 
model year 2010, which will be nearly 10 years after the President took 
office.  Talk about a waste of time.
	Most everyone in this room recalls that throughout the '90s, the 
Republican leadership annually attached riders to spending bills to prevent 
NHTSA from increasing fuel economy standards, and we certainly had 
opportunities 
to improve CAFE standards in the Energy Policy Act passed in August, but all 
attempts in this committee to change that were voted down.
	Despite the claims of the Administration that it has already made 
significant changes to the light truck CAFE standards, the prevailing view is 
that these reforms are weak, at best, and likely dangerous.  Yesterday, nine 
states, including my State of New York, and New York City, sued the Bush 
Administration on this rule, for promoting a system that ``creates incentives 
to 
build larger, less fuel-efficient models, which will jeopardize air quality 
and 
the climate, and for failing to meet Federal laws requiring the government to 
determine the impact of the regulation on fuel conservation and the 
environment.''  New York was proud to adopt California's landmark law 
requiring 
reductions in vehicle emissions that contribute to global warming, but the 
Bush 
CAFE standard also seeks to undermine these laws, once again moving in the 
wrong direction.
	American energy policies are at the crossroads, and our national 
security 
is being compromised daily by our dependence on foreign energy supplies.  That 
is why Jack Kingston and I have introduced the bipartisan Fuel Choices for 
American Security Act, which enjoys wide bipartisan support in the Congress.  
We 
need to pass that.  It encourages production and consumer purchase of 
oil-saving 
technologies and fuels nationwide, without adversely impacting air quality.  
The 
most effective means to achieve these goals is by providing incentives to 
encourage manufacturers, distributors, and consumers to utilize domestic 
resources, to bring to the market a full range of 21st Century vehicles and 
fuels.
	If the President is serious about this, Congress can reduce our 
addiction 
to oil through a comprehensive package of conservation policies, with a real 
improvement in CAFE, and the rapid development and deployment of alternative 
fuels.  We have no more time to waste.
	I look forward to hearing Secretary Mineta and Congressman Boehlert, 
and I 
want to just say about Congressman Boehlert, we are going to miss you greatly, 
Sherry, when you retire, and we appreciate the wonderful work you have done 
all 
these years.
	Thank you.  Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  The gentleman from Nebraska, Mr. Terry.  Mr. Terry 
waives.  Let us see.  Mr. Gillmor, do you wish to make an opening statement?
	MR. GILLMOR.  I waive, Mr. Chairman.
	CHAIRMAN BARTON.  All right.  Does Ms. Myrick wish to make an opening 
statement?  So you have already waived?  Has Mr. Murphy been given a chance?  
Well, then we go to Ms. Schakowsky.
	MS. SCHAKOWSKY.  Thank you, Mr. Chairman, for holding today's hearing 
on CAFE standards, which I have consistently supported raising.
	We should have taken action 6 years ago, when the President took 
office, 
or even before, when President Clinton proposed it, but instead, the 
Republican 
Congress has rubber-stamped the Bush Administration's energy policies, which 
has 
helped the oil and gas companies earn record profits, even as they raise 
gasoline prices to record levels.
	I just came from Chicago, where my constituents are paying over $3 a 
gallon for regular gasoline.  It is no wonder that gasoline prices have gone 
up.  
This committee passed an energy bill that the Energy Information 
Administration predicted would raise the prices, and it did.
	The Bush Administration has now launched a PR campaign to distance 
himself 
from the energy crisis it created.  In his more of the same campaign, 
President 
Bush recently announced a series of energy policies that were already 
happening.  
Twice last year, Congress directed the FTC to investigate price gouging.  This 
committee is expecting this report within the month.  Ignoring that action, 
last 
week, President Bush directed his Administration to investigate for price 
gouging.  However, after issuing this directive on Tuesday, three days later, 
the President said that his inclination and instincts assure him that there is 
no ``rip-off taking place.''  Quick investigation.
	Now, the Bush Administration is asking Congress to grant it authority 
it 
already has.  If President Bush was willing, it could today raise fuel economy 
standards for passenger cars.  We should be debating how quickly and to what 
level the Bush Administration should raise CAFE standards for passenger cars.  
If the Administration raised CAFE standards to 33 miles per gallon, and helped 
auto manufacturers reach that goal, over 2.5 million barrels of oil would be 
saved each day, eliminating the need for all of the Persian Gulf oil right 
now.  
Today, we find that the Bush Administration did not believe it had the 
authority 
to raise CAFE standards for passenger cars, but it took 6 years to request the 
authority to act.
	President Bush is dragging his feet.  There are several ways to keep 
gas 
prices down in the short term:  holding individual oil and gas companies that 
price gouge accountable, and ensuring that oil companies do not make windfall 
profits off the backs of consumers.  The American people shouldn't pay $400 
million, $3 per every American household, to fund the golden parachute of oil 
executives.  These record gasoline prices go far beyond supply and demand.
	Consumers are being exploited.  After covering all their costs last 
year, 
oil companies took profits from consumers that amounted to nearly $1,000 from 
every household in America.  A comprehensive energy to reduce gasoline prices 
must include efficiency and conservation.
	President Bush has cut funding for major efficiency programs in his 
fiscal 
year 2007 budget, including weatherization, Energy Star, and the Clean Cities 
program.  The President's commitment to efficiency should be judged by his 
deeds, not by his words.
	Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  Thank you.  Mr. Pallone of New Jersey.
	MR. PALLONE.  Thank you, Mr. Chairman.
	The problem that I see is that the Bush Administration and the 
Republican 
Majority simply talk about fuel efficiency when there is a crisis in gas 
prices.  
That is the only time they bring it up, and then they are all talk and no 
action.
	And I would ask initially, Mr. Chairman, why we need to pass this 
legislation at all, when there is little legal reason to believe that the 
Administration lacks the authority to raise passenger car standards.  I also 
wonder why, as Secretary Mineta will testify, the Republican Majority rebuffed 
the Administration's 2002 request for this type of legislation.  Again, the 
Republicans wait until gas prices have gone through the roof to even talk 
about 
the issue, and even then they don't do anything about it.  And I would be 
remiss, I know my other Democratic colleagues have said it, but I will say it 
again, and point out that since the committee print requires rulemaking within 
1 
year to create standards 18 months prior to the beginning of each model year, 
it will simply punt CAFE increases for at least 4 years from now.
	Mr. Chairman, I have to say I fail to understand why giving the 
President 
blanket authority to completely redo our CAFE system to change standards 
several 
years from now is a more prudent option than simply urging the Administration 
to 
take prompt action, using their existing authority.  That is what we should 
do.
	The simple fact of the matter is that increasing fuel economy 
standards 
and reducing our oil consumption will go a long way towards addressing major 
problems that face our country:  volatile gas prices, our dependence on oil 
imported from unfriendly countries, and the looming threat of global warming.  
And while increasing CAFE will not bring down gas prices right now, it will 
allow American families to buy the type of car they need, with fuel economy 
they can afford.
	So let us just do it.  We don't need this legislation.  We simply need 
for 
President Bush to take action.  I am pessimistic that he will, but I would 
certainly hope that we would all urge him to do so.
	Thank you.
	CHAIRMAN BARTON.  We thank the gentleman from New Jersey.  The floor is 
about to bring up two of our energy bills, the Wilson price gouging bill, or 
anti-price gouging bill, and the Barton-Bass refinery permitting process bill.  
I am going to go start that debate, and try to be back before our first panel 
of 
witnesses comes forward, so that we can do that as expeditiously as possible.
	Our next opening statement should be from Mr. Brown, who is not here. 
Mr. Gonzalez?
	MR. GONZALEZ.  Waive opening.
	CHAIRMAN BARTON.  He waives.  Mr. Strickland, who is not here.  Ms. 
Baldwin.
	MS. BALDWIN.  Thank you, Mr. Chairman.
	Last year, Congress passed an energy bill that supporters proclaimed 
was 
the most comprehensive energy legislation in the history of Congress.  It 
would 
solve our most pressing energy needs, they said.  Yet, a year later, our 
energy 
situation is even worse.  It is reaching crisis levels, as proclaimed by 
Department of Energy Secretary Bodman, and we, again, are evaluating our 
energy policies.
	Today, rising gas prices are affecting city budgets, small businesses, 
operating farms, and Wisconsin families.  Average gas prices in my area have 
reached $2.90, up almost $0.70 per gallon from this time last year.  Clearly, 
the energy bill did not go far enough to providing energy assistance for those 
other than the big oil companies recording record profits.
	I remain skeptical that passing a bill giving the Administration the 
authority to change CAFE standards will bring real relief to family 
pocketbooks.  
First, as we have already heard this morning, arguments are made that the 
Administration already has this authority.  Second, rules will not be 
available 
for at least a year, and even then the cars are at least 18 months away from 
showrooms.  And third, I remain concerned that the standards set by this 
Administration, without any input from Congress, will fall short on meeting 
our most pressing energy needs.
	This was evidenced just recently, as the Administration moved forward 
with 
what I considered meek and minimal changes to CAFE standards for light trucks.  
They only increased fuel economy by 1.8 miles per gallon over a period of 4 
years, and exempting pickup trucks.  Technology exists to achieve a higher 
standard, and I know we can do better.
	As I said, I am skeptical, and I hope that the panelists will address 
some 
of the concerns today.  I look forward to your testimony, and yield back the 
remainder of my time, Mr. Chairman.
	MR. ROGERS.  [Presiding]  Thank you.  Mr. Pitts for an opening 
statement.
	MR. PITTS.  Waives.
	MR. ROGERS.  Mr. Stupak.  Mr. Wynn for an opening statement.  Waives.  
Ms. Solis, opening statement.
	MS. SOLIS.  Thank you, Mr. Chairman.
	Mr. Chairman, thank you for holding this hearing today.  It is a 
pleasure 
to have Secretary Mineta here with us, and other witnesses, to join us to 
discuss fuel economy standards for passenger cars.  Today, we will hear about 
whether the Administration has or does not have the authority to raise fuel 
economy standards.
	In this regard, I hope that the Secretary will clarify a number of 
issues 
for us today.  First, if the Administration believes it does not have the 
authority to fuel economy standards for passenger vehicles, why has it not 
already asked for it?  This body has passed a number of energy bills it could 
have been included in.
	Second, if the Administration were to receive this authority, would it 
increase fuel economy standards immediately?  And over the last several years, 
the Administration has consistently opposed increases in fuel economy 
standards and oil-saving plans.
	In its statement of Administration policy on H.R. 6, the Bush 
Administration stated, and I quote, that it ``strongly opposed a proposal to 
reduce U.S. demand for oil by one million barrels per day.''  This statement 
of 
Administration policy also stated it strongly opposed any amendment to 
legislate 
an increase in fuel economy standards.  The Bush Administration and Republican 
leadership has continuously failed to adequately respond to the growing impact 
of gas prices on working families, and the energy security of our Nation.
	The Administration's energy policy, 95 percent of which has been 
implemented, has done nothing to reduce the prices for gas.  In fact, the 
Energy 
Information Administration predicted last year's energy bill would actually 
increase the costs of gasoline to its consumers.  In my district, as you know, 
gasoline prices have been well over $3 for the past six months.  
Transportation 
costs have increased by more than $1,400 per family, an increase of almost 75 
percent since 2001.
	This increase acts as a tax on our small businesses, which we know are 
critical to America's economy, and also are impacting our local school 
districts.  The Los Angeles Unified School District, as a matter of fact, had 
to 
budget an additional $2 million for its fuel budget for busing and 
after-school 
activities.  School districts across the country are being forced to choose 
between fueling buses, funding construction, hiring new teachers, or taking 
children on field trips.
	These problems have existed for a while, yet time after time, this 
body 
has rejected increases in fuel economy standards.  I strongly support 
increased 
fuel economy standards, and believe that this tactic is yet another attempt by 
the Administration to defer attention from the lack of action on this 
important 
issue.  It is past time now for this Administration and the Congress to take 
real steps to protect our consumers, our families, our school districts, and 
national security.
	Secretary Mineta, I look forward to hearing from you, your responses 
to my inquiries, and yield back the balance of my time.
	[Additional statements submitted for the record follows:]

PREPARED STATEMENT OF THE HON. SHERROD BROWN, A REPRESENTATIVE IN CONGRESS 
FROM THE STATE OF OHIO

        Thank you, Mr. Chairman.
        I was glad to hear President Bush last week, talking about increasing 
automotive fuel efficiency standards.
        It's long overdue.
        The Bush Administration's been in power for nearly 51/2 years.  And 
the White 
House has just now realized that the gasoline price equation has a demand 
side, as well as a supply side.
        This is not news to anyone but the White House and the Republican-led 
Congress.
        I also welcome the President's newfound commitment to protect 
consumers from 
gasoline market manipulation.  Democratic legislation that would give federal 
regulators broad new power to identify and eliminate market manipulation has 
languished in this House since November.
        We could have had a cop on the beat by now, policing the gasoline 
market.  But 
the White House is still trying to remember the phone number for 9-1-1.
        And the President has finally realized that pumping oil into the 
ground during 
the summer driving season might drive up prices.  Congresswoman Baldwin and I 
offered an amendment to reform the Strategic Petroleum Reserve's fill policy a 
year ago.
        And Energy Secretary Sam Bodman testified over on the Senate side last 
November 
that the Bush Administration is considering gasoline reserves similar in 
concept 
to the SPR.  That's a good idea too.  And I've had a bill to do it for 3 
years, now.
        And the President and Republicans in Congress are falling all over 
themselves to 
call for repeal of the energy bill's billions of dollars in taxpayer subsidies 
for Big Oil.  I couldn't agree more.  But wouldn't it have been better to have 
voted - as I did - against creating those subsidies in the first place?
        The facts are clear and simple.  American consumers are hurting at the 
pump 
today, because Republican leadership rejected common-sense reforms that could 
have protected consumers and strengthened our economy - in favor of an energy 
policy written by - and for the benefit of - Big Oil.
        I am glad President Bush has at least begun to talk about reform.  And 
I am glad we are here talking about it in Congress.
        But talk is cheap, and gas is not.  The American people need action.

PREPARED STATEMENT OF THE HON. MARY BONO, A REPRESENTATIVE IN CONGRESS FROM 
THE STATE OF CALIFORNIA

        Mr. Chairman, thank you for holding this hearing today.
        I am pleased we are considering this legislation.
        There is no single bill Congress can pass that will ease the pain at 
the pump.  
It needs to be a collective solution of encouraging more alternative fueled 
vehicles, increasing the use of diesel, further developing renewable sources 
of 
energy, building new refineries and expanding our domestic exploration, to 
name 
just a handful of actions we can take. Increasing CAFE standards needs to be 
in this mix and is integral in lowering our overall demand of gasoline.
        We have made great strides in how gasoline burns - it is much cleaner 
than 
before. However, It is now time to challenge auto manufacturers to burn 
gasoline more efficiently.
        Many will take shots at the recently passed Energy Policy Act.  But 
this bill 
was meant to look forward and its benefits will take a long time to be 
completely realized. Even what we are discussing today, giving the President 
the 
authority to increase the CAFE standards on automobiles, will have a have an 
impact in the new few years.  But, just like with the Energy bill, we need to 
look forward and take action now.
        However, while government can play its role, consumers have choices to 
make as 
well. We can opt to use public transit more and purchase hybrid fueled 
vehicles.  
Eventually, it will be up to the American consumer to make that leap from gas 
to 
another source of energy.  The government can certainly help, but the consumer 
has to be willing to go along. 
        Again Mr. Chairman, thank you for holding this hearing today.  I look 
forward to 
hearing from our witnesses and to moving head with this piece of legislation.

PREPARED STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS 
FROM THE STATE OF WYOMING

        Thank you, Mr. Chairman.
        In today's climate of oil demand significantly exceeding our domestic 
supply, 
Congress needs to be aggressive in how we address our rising energy 
consumption.  
We need to provide incentives for new technology development and promote those 
innovations already off the starting blocks.  We need to encourage the 
diversification of our nation's energy portfolio.  We need to better conserve 
the energy we have.
        In late March of this year, the National Highway Traffic Safety 
Administration 
(NHTSA) reformed the corporate average fuel economy (CAFE) for light trucks, 
which is forecast to save nearly 262 million barrels of oil over the lifetime 
of 
trucks sold between 2008-2011.  These reforms were significant not only for 
the 
oil savings, however, but because of the structural changes the new rule made 
to 
the CAFE program, providing for a ``continuous curve'' standard based on a 
vehicle's size.  
        Congress set the current CAFE standard for passenger cars in 1990 and 
I do not 
believe that an arbitrary increase in CAFE standards for these vehicles is the 
right solution.  Many of my constituents in Wyoming are often forced to drive 
over rugged terrain in harsh weather conditions.  The risks to human safety 
that 
would go along with setting an arbitrary CAFE increase is simply not worth 
what 
we could save in consumption.  
        Further, it is unclear if raising the CAFE standards would be an 
effective way 
to reduce emissions of carbon dioxide, another argument often heard in support 
of raising CAFE.  On one hand, improvements in fuel economy should enable the 
same vehicle to burn less fuel to travel a given distance.  However, 
technologies to improve fuel economy will add cost to new vehicles, which may 
cause consumers to retain older, less efficient vehicles.  
        The legislative draft before us today takes a different approach by 
clarifying 
NHTSA's authority to promulgate new CAFE rules based on a number of key 
factors, 
including technological and economic feasibility, as well as consumer safety.  
I 
hope today's hearing will help us learn if this is the right approach and I 
look 
forward to hearing the valuable testimony of the witnesses before us today.  
Conservation is a goal we all share, but not at the cost of vehicle safety for 
American consumers.
        I thank the Chairman for holding this important and timely hearing 
today and I yield back the balance of my time.

	MR. ROGERS.  Thank you very much.
	We are going to go to our first panel, the Honorable Sherwood 
Boehlert, from New York's 24th District.  Mr. Boehlert, welcome.

STATEMENT OF HON SHERWOOD BOEHLERT, A REPRESENTATIVE IN CONGRESS FROM THE 
STATE OF NEW YORK

	MR. BOEHLERT.  Thank you very much, Mr. Chairman.  It has been 
instructive 
sitting through these opening statements, and I want to thank everyone for 
them.
	I only rarely seek to testify before committees, but I wanted to 
appear 
today because I think that raising fuel economy standards is the single most 
important step the Congress can take to reduce what the President has 
correctly identified as the U.S. addiction to oil.
	Reducing that addiction is a national security imperative.  We have to 
look for our oil fix in some pretty dark and dangerous alleyways, and the 
people 
awaiting us there are not always our friends.  Moreover, our dependence on 
oil, 
with its erratic but generally rising prices, puts our economy at risk, if not 
today, then over the long haul as international demand continues to rise.  Our 
oil problems are only going to get worse.  Our trade balance is only going to 
get worse.  So we have to slow the growth of U.S. oil consumption, 
particularly imported oil consumption.
	Over time, there is really only one way to do that, and that is to 
limit 
demand.  Dealing with domestic supply can provide only very limited, 
short-term 
relief, often at a very high environmental cost.  Demand is the primary 
problem, and demand is where we must direct our solutions.
	And if we are going to address demand, transportation is the place to 
look 
for savings.  About 60 percent of the oil consumed daily by Americans is used 
for transportation, and about 45 percent is used for passenger cars and light 
trucks.  
	There is no way--no way--the U.S. can limit future demand unless we 
limit how much fuel we use for transportation.
	So what can we do?  Clearly, relying on the marketplace isn't working, 
and 
it won't be sufficient even at current prices.  That is because while, as a 
society, we all want to limit fuel consumption significantly, as individual 
car 
buyers, we also want our vehicles to have other attributes.  So if I want an 
SUV, and automakers choose not to put a fuel efficient one on the market, 
there 
is nothing I can do, as an individual consumer, to signal my disappointment.  
This is a classic market failure.  The Government has to act.
	And the Government has two tools, taxes and regulations.  I don't 
sense a 
groundswell of people willing to raise gas taxes.  That leaves fuel economy 
standards as the only effective tool we have as a Nation to make a dent in our 
dangerous and ever growing consumption of oil.
	I have been pointing this out for years, and I am pleased to see that 
the 
message is finally getting through, now that gasoline prices are at 
near-record 
highs.  Better late than never.  I think it is real progress that the 
Administration is now seeking, and that this committee is now considering, 
legislation.  We ought to remove any doubt about whether the Administration 
can increase CAFE standards for passenger cars.
	But we ought to do far more than that.  Congress should set new CAFE 
standards right now.  We have already waited too long.
	If we just give the Administration authority, we know what will 
happen.  We will get a long rulemaking process that likely would produce 
tepid results.  
Our politically appealing call for strong and immediate action will be met 
with 
the faint echo of weak results over a protracted time period.  That is what 
happened in the recent rulemaking for light trucks.
	I would urge this committee to support our bipartisan bill, H.R. 3762, 
which is fully consistent with the recommendations of the National Academy of 
Sciences.  It would raise fuel economy standards to 33 miles per gallon by 
2015.  
It would get rid of the baseless distinction between passenger cars and light 
trucks.  It would permit reform of the CAFE system by allowing size 
classifications and credit trading in a way that would prevent backsliding.
	Such a bill is really the minimum step Congress should take right now, 
if 
we are serious about addressing fuel consumption.  At current prices, the 
Academy recommendations would actually suggest that we could press for even 
greater fuel economy.
	It is equally important to point out what the bill would not do.  It 
would not lead to a reduction of safety.  The National Academy report makes it 
clear, 
as you will hear today, that written properly, fuel economy standards can be 
tightened, and I quote directly from the report, ``without degradation of 
safety.''  And our bill does not assume that we will make some grand 
technological breakthrough.  The technologies needed to meet the standards our 
bill sets already exist.  They are on the shelf gathering dust.  Indeed, some 
of 
them have already been surpassed since the report from the Academy was issued 
in 2002.
	So we in the Congress have a very clear choice.  We can take largely 
symbolic action, and sit back and fiddle while Americans burn more gasoline, 
or 
we can pass concrete, effective legislation that will save consumers money 
while 
significantly reducing U.S. oil consumption.  We have all the information, all 
the studies, all the technology we need to take that step.  We just need the 
political will.
	Simply giving authority to the Administration is the bare minimum we 
can 
do.  Are we prepared to tell the American people that we are just doing the 
bare minimum with gasoline at $3 a gallon?
	Mr. Chairman, I look forward to working with you and the committee as 
you 
decide how to proceed, and I will continue to press the House to take real 
action to address our most serious national security threat, our oil 
addiction.
	Finally, in closing, I have sat through all of the opening statements, 
and 
I have listened to the principal argument, that in order to get fuel 
efficiency, 
you have to sacrifice safety.  Those arguments are clever.  Those arguments 
are 
interesting.  Those arguments sometimes have been amusing.  But they are all 
wrong.  We live in a town where everybody likes to say they are for science-
based decision-making, until the overwhelming scientific consensus leads to a 
politically inconvenient conclusion.  Then they want to go to Plan B.  Stick 
with Plan A.
	Thank you very much, Mr. Chairman.
	[The prepared statement of Hon. Sherwood Boehlert follows:]

PREPARED STATEMENT OF THE HON. SHERWOOD BOEHLERT, MEMBER, U.S. HOUSE OF 
REPRESENTATIVES

        Mr. Chairman, Ranking Member Dingell, and Members of the Committee,
	I appreciate the opportunity to testify before you this morning.  I 
only 
rarely seek to testify before Committees, but I wanted to appear today because 
I 
think that raising fuel economy standards is the single most important step 
the 
Congress can take to reduce what the President has correctly identified as the 
U.S. ``addiction'' to oil.  
        Reducing that ``addiction'' is a national security imperative.  We 
have to look 
for our oil ``fix'' in some pretty dark and dangerous alleyways and the people 
awaiting us there are not always our friends.  Moreover, our dependence on 
oil, 
with its erratic but generally rising prices, puts our economy at risk, if not 
today, then over the long haul as international demand continues to rise.  Our 
oil problems are only going to get worse.  Our trade balance is only going to 
get worse.  So we have to slow the growth of U.S. oil consumption, 
particularly imported oil consumption.
        Over time, there's really only one way to do that, and that's to limit 
demand.  
Dealing with domestic supply can provide only very limited, short-term relief, 
often at a very high environmental cost.  Demand is the primary problem and 
demand is where we must direct our solutions.
        And if we're going to address demand, transportation is the place to 
look for 
savings.  About 60 percent of the oil consumed daily by Americans is used for 
transportation, and about 45 percent is used for passenger cars and light 
trucks.  
There is no way - no way - the U.S. can limit future demand unless we limit 
how much fuel we use for transportation.
        So what can we do?  Clearly, relying on the marketplace isn't working, 
and it 
won't be sufficient even at current prices.  That's because while, as a society, 
we all want to limit fuel consumption significantly, as individual car buyers, 
we also want our vehicles to have other attributes.  So if I want an SUV - and 
I 
drive one - if I want an SUV and automakers choose not to put a fuel efficient 
one on the market, there's nothing I can do as an individual consumer to 
signal 
my disappointment.  This is a classic market failure.  The government has to 
act.
        And the government has two tools - taxes and regulation.  I don't see 
a 
groundswell of people willing to raise gas taxes right now.  That leaves fuel 
economy standards as the only effective tool we have as a nation to make a 
dent in our dangerous and ever growing consumption of oil.  
        I have been pointing out all of this for years, and I'm pleased to see 
that that 
message is finally getting through now that gasoline prices are at new 
heights.  
Better late than never.  I think it is real progress that the Administration 
is 
now seeking and that this Committee is now considering legislation.  We ought 
to 
remove any doubt about whether an Administration can increase CAFE standards 
for passenger cars.      
	But we ought to do far more than that.  Congress should set new CAFE 
standards right now.  We have already waited too long.   
If we just give the Administration authority, we know what will happen.  We 
will 
get a long rulemaking process that produces tepid results.  Our politically 
appealing call for strong and immediate action will be met with the faint echo 
of weak results over a protracted time period.  That's what happened in the 
recent rulemaking for light trucks.
	I would urge this Committee instead to support our bipartisan bill, 
H.R. 
3762, which is fully consistent with the recommendations of the National 
Academy 
of Sciences.  It would raise fuel economy standards to 33 miles per gallon by 
2015.  It would get rid of the baseless distinction between passenger cars and 
light trucks.  It would permit reform of the CAFE system by allowing size 
classifications and credit trading in a way that would prevent backsliding.
        Such a bill is really the minimum step Congress should take right now 
if we're 
serious about addressing fuel consumption.  At current prices, the Academy 
recommendations would actually suggest that we could press for even greater fuel 
economy.
	It's equally important to point out what our bill would not do.  It would 
not lead to a reduction of safety.  The National Academy report makes it clear, 
as you will hear today, that written properly, fuel economy standards can be 
tightened (and I quote) ``without degradation of safety.''  And our bill does not 
assume that we will make some grand technological breakthrough.  The 
technologies needed to meet the standards our bill sets already exist; indeed, 
some of them have already been surpassed since the report was issued in 2002.
	So we in Congress have a very clear choice.  We can take largely symbolic 
action and sit back and fiddle while Americans burn more gasoline.  Or we can 
pass concrete, effective legislation that will save consumers money while 
significantly reducing U.S. oil consumption.  We have all the information, all 
the studies, all the technology we need to take that step.  We just need the 
political will.
	Simply giving authority to the Administration is the bare minimum we 
can 
do.  Are we prepared to tell the American people that we're just doing the 
bare minimum with gasoline at $3 a gallon?
	I look forward to working with this Committee as you decide how to 
proceed.  And I will continue to press the House to take real action to 
address 
our most serious national security threat, our oil addiction.  Thank you.
	   
	MR. ROGERS.  Thank you, Mr. Boehlert.  I understand you have a 
committee to get to, so we will--
	MR. BOEHLERT.  And I am over on the floor trying to help you get some 
legislation passed.
	MR. ROGERS.  All right.  We will hurry up.
	MR. BOEHLERT.  Thank you.
	MR. ROGERS.  In that case, you could have left about 8 minutes ago.  
It would have been okay with me.  But I--
	MR. MARKEY.  And in that case, Mr. Boehlert, I have about a hundred 
questions to ask you.
	MR. ROGERS.  Actually, we are not going to take questions for Mr. 
Boehlert.  We are going to get right to the next panel.  We do understand that 
you have another commitment, and--
	MR. BOEHLERT.  You are the Chairman.
	MR. ROGERS.  --in keeping with tradition, I think we are going to do 
that, and get with the Secretary.
	MR. MARKEY.  Can I just throw out--I just wanted to thank you, Sherry, 
for 
your leadership over the years, and I echo your hope that they allow the 
Boehlert-Markey amendment onto the House floor this year, so that a number can 
be established, that America can have a goal.
	MR. BOEHLERT.  Thank you very much.  It was a great Golden Oldie by 
Ruby and the Romantics.  Our day has come.  
        MR. ROGERS.  That was--not only was it bad singing, it was off-key as 
well.  Our 
next panel, the Honorable Norman Mineta.  Mr. Secretary, thank you for your 
patience, and we will engage as soon as you are ready, sir.

STATEMENT OF HON. NORMAN Y. MINETA, SECRETARY, UNITED STATES DEPARTMENT OF 
TRANSPORTATION

	SECRETARY MINETA.  Mr. Chairman and Congressman Dingell, and to the 
members of the committee, let me thank you all for inviting me to discuss 
reforming the corporate average fuel economy standards for passenger 
automobiles.
	Last week, at the President's request, I sent a letter to 
Congressional 
leaders asking for the authority to reform the structure of the current CAFE 
program for passenger cars, and Mr. Chairman, at this time, I would like to 
ask 
unanimous consent that the letter that I addressed to Speaker Hastert be made 
a part of the record.
	MR. ROGERS.  Without objection, so ordered.
	[The information follows:]



        SECRETARY MINETA.  This is an important step toward reducing America's 
oil 
demand, since passenger cars account for some 23 percent of domestic oil 
consumption, and this Administration has a good record on improving CAFE.  
Members may recall that in the year 2001, at my request, Congress ended the 6 
year freeze on CAFE rulemaking, and later that year, the National Academy of 
Sciences issued a Congressionally mandated study that was critical of the CAFE 
program.  Among the report's criticism was that CAFE had probably cost between 
1,300 and 2,600 lives in one year alone, namely 1993, because it encouraged 
automakers to build smaller vehicles.
	Paul Portney, the chair of the committee which wrote this landmark 
study, 
said upon its release, and I quote:  ``No matter what Congress decides 
regarding 
specific fuel economy targets, our committee is adamant that changes should be 
made to shore up the deficiencies in the program.''
	To help correct these deficiencies, I sent a letter to Congress in 
February of 2002, urging passage of legislation to provide the Department of 
Transportation with the statutory authority to reform CAFE.  However, absent 
Congressional action, I did direct NHTSA to begin reforming CAFE for light 
trucks.
	On March 29 of this year, we completed a rulemaking that replaced the 
single fuel economy standard with an innovative size-based system, and allow 
me 
to explain why basing a fuel economy standard on a vehicle's size is 
important, and superior to the current one size fits all approach.
	First, a size-based system preserves vehicle choice.  Instead of 
forcing 
manufacturers to produce smaller vehicles to comply with regulations, this 
approach takes the automakers' own product mix projections, and applies 
separate 
fuel economy targets to each vehicle, based on its footprint.  Under a size-
based system, automakers will still be able to build cars that consumers want 
to buy, but those cars will have to be more fuel-efficient across the board.
	Secondly, a size-based system eliminated the incentive for automakers 
to produce smaller, and consequently, less safe vehicles, by encouraging 
manufacturers to add fuel-saving technologies to boost fuel efficiency.  And 
thirdly, a size-based system ensures all automakers are encouraged to use 
fuel-saving technologies, and not just the manufacturers of larger vehicles.
	Now, our new light truck standards, under the reformed CAFE, will save 
a record 10.7 billion gallons of fuel.  All told, the Administration has 
raised 
CAFE standards for light trucks for 7 consecutive years, from the year 2005 to 
2011.
	And today, because of our successful reform of the light truck CAFE 
program, we have the capacity to establish a far more precise, equitable, and 
safe CAFE program for passenger cars.  However, we currently lack the legal 
authority to do so.
	The original CAFE standard for passenger cars was set at 27.5 miles 
per 
gallon more than 30 years, back in 1975.  Neither Congress nor the Department 
of 
Transportation has ever increased this standard beyond the level set in the 
original standard and statute as it relates to passenger vehicles.  So it is 
important that if passenger car fuel economy standards are raised, that we 
make 
the necessary structural reforms to avoid compromising safety and causing job 
loss.
	If given the authority to reform CAFE for passenger cars, we will 
replace 
the one size fits all system with a size-based system, as we did with light 
trucks.  Based on the automakers' confidential product plans, our experts at 
NHTSA can objectively measure how much fuel-saving technology we can require 
because the cost outweighs the benefit.  This method of formulating a fuel 
economy standard is science-based, subject to review, and is free from the 
deficiencies that were identified in the National Academy of Sciences study.  It 
is also far more likely to produce an optimal result, than if Congress were to 
prescribe a standard in a statute, and for this reason, we will not accept an 
arbitrary statutory increase under the current passenger car system.
	Mr. Chairman, the President does not ask for this authority lightly, 
and I 
am aware that certain automakers are having a rough time financially and that 
thousands of hardworking Americans have lost their jobs as a result, but this 
Administration has already made great strides in improving fuel economy for 
light trucks without harming the economy or compromising safety.  And so I 
respectfully ask for the authority to achieve similar gains to the passenger 
car fleet.
	Thank you very much, Mr. Chairman, and I am now willing to go ahead 
and proceed with the Q&A period.
	[The prepared statement of Hon. Norman Y. Mineta follows:]

PREPARED STATEMENT OF THE HON. NORMAN Y. MINETA, SECRETARY, U.S. DEPARTMENT OF 
TRANSPORTATION

        Mr. Chairman, thank you for inviting me to appear before this 
committee today to 
discuss reforming corporate average fuel economy (CAFE) standards for 
passenger cars.
	Last week, the President asked Congress for the authority to reform 
the 
structure of the current CAFE program for passenger cars for the first time in 
the program's 30-year history.  This is an important step to reduce America's 
dependence on foreign oil, and is consistent with President Bush's call to 
replace more than 5 million barrels per day of oil imports by the year 2025.  
Currently, passenger cars account for 23 percent of domestic oil consumption.
        Mr. Chairman, this Administration has a good record on improving CAFE. 
Members 
may recall that in 2001, at my request, Congress ended the six-year freeze on 
CAFE rulemaking.  Later that year, the National Academy of Sciences (NAS) 
completed a report, at Congress's request, that was highly critical of the 
current CAFE program.  Among the criticisms contained in the NAS report was 
the 
contention that the CAFE program probably had cost between 1,300 and 2,600 lives 
in one calendar year alone (1993) because it encourages automakers to build 
smaller vehicles in order to ``average out'' fuel savings across their fleets.  
The chair of the committee wrote, ``...no matter what Congress decides 
regarding 
specific fuel economy targets, our committee is adamant that changes should be 
made to shore up deficiencies in the program.''  To correct these longstanding 
safety and other deficiencies in the CAFE program, I sent a letter to Congress 
in February 2002 urging passage of legislation to provide the U.S. Department 
of 
Transportation (DOT) with the statutory authority to reform the CAFE program.
	On March 29, DOT completed its second light truck CAFE rulemaking in 
the 
past four years by replacing the one-size-fits-all system with an innovative 
size-based system.  Allow me to explain why this reformed system that bases 
fuel 
economy standards on a vehicle's size is superior to the current 
``one-size-fits-all'' approach.  
        * First, a size-based system preserves vehicle choice:  Instead of 
forcing 
manufacturers to produce smaller vehicles for purposes of regulatory 
compliance, 
this approach takes the manufacturers' own product mix projections and then 
applies separate fuel economy targets to each vehicle based on its dimensions.  
Under a size-based system, automakers will still be able to build the cars 
consumers want, but those cars will have to be more fuel efficient across the 
board.
        * Second, a size-based system eliminates the perverse incentives for 
manufacturers to produce smaller and more dangerous vehicles instead of 
introducing fuel-saving technologies.
        * Third, a size-based system ensures that all manufacturers are 
introducing 
fuel-saving technologies, not only the manufacturers of larger vehicles.
These new light truck standards will lead to a safer, more efficient CAFE 
program and will save a record 10.7 billion gallons of fuel.  This rule also 
included large sport utility vehicles (SUVs), such as the Hummer H2, under 
CAFE 
for the first time.  All told, this Administration will have raised CAFE 
standards for light trucks for seven consecutive years, from 2005 to 2011.
	Today, following our successful overhaul of the light truck CAFE 
program 
and consistent with the recommendations of the NAS, we have the capacity to 
establish a far more precise, efficient, and safe CAFE program for passenger 
cars, but we do not have the legal authority to do it.
	The passenger car fuel economy standard was set in law at 27.5 miles 
per 
gallon in the original 1975 CAFE statute.  Some of the more senior Members may 
recall that the 27.5 miles per gallon standard was arrived at by simply 
doubling 
what the average fuel economy was in 1975.  The passenger car standard was not 
then, and certainly is not now, based on sound science or economics.
The original statute did not authorize DOT to change the way the standard 
applied to different size cars.  Neither Congress nor DOT has ever increased 
the 
passenger car standard beyond the level set in the original statute.  So it is 
important that if we embark on this course, we do it right to avoid 
compromising safety and to avoid causing economic damage and job loss.
	If we are given the authority to reform the CAFE system for passenger 
cars, we can improve fuel efficiency by requiring manufacturers to apply fuel 
saving technologies rather than giving them an incentive to build smaller 
cars.  
Based on the automakers' confidential product plans, our experts at the 
National 
Highway Traffic Safety Administration (NHTSA) can objectively measure how much 
fuel saving technology we can require before the costs outweigh the benefits.  
This method of formulating a fuel economy standard is objective and subject to 
review during the rulemaking process.  It is also far more likely to produce 
an 
optimal result than if Congress were to prescribe a standard in a statute.
	The President and I are committed to improving fuel economy across the 
board through an open regulatory process built upon sound science and 
economics, 
but we will not accept an arbitrary statutory increase under the current 
passenger car system. 
        Mr. Chairman, I know that whenever CAFE is debated, it can turn 
divisive.   When 
the original CAFE statute was debated, I was a freshman Member of Congress.  I 
recall well the debates of the 1970s on how best to conserve fuel and what the 
impacts would be on the economy.  I remind Members that CAFE reform will not 
be 
without cost.   And I am aware that certain automakers are having a rough time 
financially, and that thousands of hard-working Americans have lost their jobs 
through no fault of their own because of these financial difficulties.  
        Mr. Chairman, the President did not ask lightly for this authority.  
But this 
Administration has already made great strides in improving fuel economy for 
light trucks.  We have the expertise and experience to boost fuel economy 
responsibly without needlessly sacrificing safety or American jobs.  I now 
respectfully ask for the authority to achieve similar gains for the passenger 
car fleet.

	MR. ROGERS.  Thank you, Mr. Secretary.  I am going to yield to the 
Chairman of the Energy and Commerce Committee, Mr. Barton.
	CHAIRMAN BARTON.  Thank you, Mr. Chairman.  It is good to have you in 
the 
chair.  Thank you, Mr. Secretary, for being here.  We need to set the clock on 
5 minutes so that I don't expand my time.  Hit the repeat and then the start 
button.  There you go.  You've got Chairman potential right there.  It is 
working, though?  It worked.
	My first question, Mr. Secretary, I want to put to bed this issue that 
you 
already have the authority to set the standard, and so why haven't you done 
it.  
There was a court case on the situation of the one-House veto that says it is 
debatable now.  Is that not true?
	SECRETARY MINETA.  Well, Mr. Chairman, there is little question that 
we 
have the authority to set the stringency of the CAFE standard,  in other 
words, 
the miles per gallon.  But our fear is that by setting that in terms of 
without 
a reform in the structure of the program, that we will then go to a statutory, 
or go to a miles per gallon target.  And the way to then get to that would be 
to 
lighten the vehicle, and generally, when you lighten the vehicle, then 
fatalities and serious injuries go up.
	So what we are saying is we believe we have the authority to set the 
stringency of the miles per gallon, but that is not the complete picture. 
What 
we need with it is the statutory ability to reform the structure of the program.  
And we did that with the light truck program, but we don't have that same 
capability on the passenger car side, since Congress has reserved that for its 
own.
	CHAIRMAN BARTON.  You are certainly, and the President is very 
supportive 
of this, the draft bill, that clarifies that you have the authority in the 
totality.
	SECRETARY MINETA.  That is correct, sir.
	CHAIRMAN BARTON.  Very supportive of that?
	SECRETARY MINETA.  That is correct.
	CHAIRMAN BARTON.  Now, it is my understanding that the President and 
yourself and others in the Administration are contemplating putting forward a 
major CAFE reform legislative proposal.  Is that true?
	SECRETARY MINETA.  That is correct.
	CHAIRMAN BARTON.  Do you have any timetable when it might be presented 
to the committee?
	SECRETARY MINETA.  Well, there are statutory timetables, in terms of, 
for 
instance, in order for us to give lead time to the manufacturers; we have to 
give them 18 months.  So that means that by April of a given year, we have to 
come out with the rule that would impact them in October, 18 months later.  
And 
so we can't just say do it now, because the manufacturers have to have that 
time period.  So we are basically facing an 18-month period.
	Now, in order for us, by April, let us say, of '07, to come up with 
the 
rule, we have to get from the manufacturers their projected product production 
run, we have to have a great deal of data that goes into this, and so whether 
or 
not, let us say, on the third of May, 2006, we can get a rule out by the first 
of April, 2007, frankly, would be very problematical.  And in fact, let me 
introduce our General Counsel at the Department of Transportation, Mr. Jeff 
Rosen, and Jackie Glassman, our Deputy Administration of NHTSA.  Possibly 
Jackie or Jeff would be in a better position to lay out that time.
	But I do know that we have the 18 month statutory period for the model 
year impact, and then we have to have the time period to study this issue. 
Now, whether we can do it from May 5 and have a final rule in place by 1 April 
2007--
	CHAIRMAN BARTON.  Now, when do you think, Mr. Secretary, you will have 
your legislative proposal to the Congress?
	SECRETARY MINETA.  We are doing that right now.  We are in the process 
of having the Department put together our legislative package.
	Mr. Rosen, maybe you could give me a better timetable as to when that 
would be ready.
	CHAIRMAN BARTON.  Within a week?
	MR. ROSEN.  In very short order, yes, sir.
	CHAIRMAN BARTON.  Okay.
	SECRETARY MINETA.  And then we would have to submit it to OMB, of 
course, and then they go through their interagency--
	CHAIRMAN BARTON.  I am going to see the President this afternoon at 
1:30, and I may encourage him to encourage the OMB to expedite the review.
	SECRETARY MINETA.  And I will be at that meeting with you, sir, and--
	CHAIRMAN BARTON.  The sooner we get your proposal, the sooner we can 
dissect it, and in all probability, perfect it, so that we can have it--
	SECRETARY MINETA.  We are open to all suggestions.
	CHAIRMAN BARTON.  --we can have it on the floor.
	My time has expired.  I just want to comment on one thing you said.  
You 
talked about the need to give the industry time to react, and to change their 
engineering and their modeling, and I don't want us to lose sight of that, 
because I have a GM assembly plant in Arlington, Texas, with 2,000 direct 
employees.  The majority of those are UAW union workers.  The last thing we 
want to do is take another hit on a U.S. manufacturing capability.
	Now, we want to increase CAFE, if at all possible, and if we can do it 
in 
a way that saves gasoline, I am all for that, but in doing that, we don't want 
to drive the U.S. manufacturing for automobile industry out of business, and 
that is one of the components in the current CAFE standard that you have to 
look at that.  Is that not correct?
	SECRETARY MINETA.  It is correct.  There are four factors that we look 
at, and maximum feasibility of the fuel efficiency standard, the technical 
feasibility, safety, economic practicability, and--
	CHAIRMAN BARTON.  I think that is it.  Very good.  Thank you, Mr. 
Chairman, and thank you, Mr. Secretary, for coming before this committee.
	SECRETARY MINETA.  Thank you very much.
	CHAIRMAN BARTON.  It is good to have the Secretary of Transportation 
back 
before the Energy and Commerce Committee, and we will see if we can't get some 
jurisdiction back to get you back more frequently.
	SECRETARY MINETA.  Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  Thank you.  
	MR. ROGERS.  Thank you, Mr. Chairman, Mr. Secretary.  Mr. Dingell, the 
distinguished Member from the great State of Michigan.
	MR. DINGELL.  Thank you, Mr. Chairman.  Mr. Secretary, welcome.  It is 
a 
privilege to have you before the committee.  You are an old friend, and have 
served here with distinction, and also, in two administrations.  We are proud 
to have you here.
	Mr. Secretary, I note your testimony focuses on reforming CAFE, and 
not 
your authority to increase passenger car standards.  It is my recollection, 
and 
I think that the law says, that you have authority to increase passenger car 
standards above 27.5 miles a gallon.
	Do you agree with that statement?
	SECRETARY MINETA.  Mr. Dingell, let me have our General Counsel--
	MR. DINGELL.  Okay.
	SECRETARY MINETA.  --Mr. Rosen, address that, please.
	MR. DINGELL.  If you would, sir, please, briefly.  Yes or no?
	MR. ROSEN.  Yes.  Yes, Congressman.  The statute had provided that--
	MR. DINGELL.  Turn the microphone on, so we can hear you.
	MR. ROSEN.  Sorry.  Is that on now?  The statute had provided that the 
Department could do that, subject to a legislative veto, and the Supreme 
Court--
	MR. DINGELL.  Of course, that legislative veto was thrown out, but the 
authority--
	MR. ROSEN.  That is right.
	MR. DINGELL.  --to do this was not thrown out.
	MR. ROSEN.  And that is why we think it would be desirable, though, to 
clarify in the statute that Congress is explicitly saying--
	MR. DINGELL.  Right.
	MR. ROSEN.  --it is not subject to any limitation--
	MR. DINGELL.  Well--
	MR. ROSEN.  --that the authority would exist.
	MR. DINGELL.  I think there are two questions here, Mr. Secretary.  
Increasing CAFE will not reduce gas prices.  Do you agree or disagree with 
that statement?
	SECRETARY MINETA.  This will not have a direct impact on it.
	MR. DINGELL.  Right.  And indeed, until the time it goes into effect, 
it will not significantly change oil or petroleum or gasoline use inside the 
United States.  Is that correct?
	SECRETARY MINETA.  That is correct, and when we look--
	MR. DINGELL.  All right.
	SECRETARY MINETA.  And when we look at the President's program, it is 
really a four-part program, with short-term, mid-term, and long-term 
implications, and this CAFE issue is not a short-term solution to the price of 
gas at the pump.
	MR. DINGELL.  Thank you.  Now, Mr. Secretary, you appear to be having 
some 
early success with your new structure for light trucks.  It may not, however, 
be 
as simple as transferring the structure of that rule onto passenger cars.  Has 
NHTSA studied how a similar system might be applied to cars?
	SECRETARY MINETA.  No, we haven't gotten that far, in terms of saying 
that the bin or, let us say, continuous sort of system--
	MR. DINGELL.  So this leaves us, then Mr. Secretary, in the awkward 
position of not knowing exactly how you would do it, or the impact of that.  
Now, has NHTSA--
	SECRETARY MINETA.  It would still be subject to review.
	MR. DINGELL.  --examined how a new structure would work with existing 
requirements that manufacturers satisfy car CAFE for both foreign and domestic 
fleets?
	SECRETARY MINETA.  The two-fleet rule would still be in place, in 
terms of 
domestic and the import cars.  Maybe I will have Ms. Glassman expand on that, 
but we would not change that at all.
	MR. DINGELL.  It would be your intention to not change it, but can we 
be sure that it will not be affected by the change?
	SECRETARY MINETA.  Without really--and that is why we are asking for 
this 
authority, so that we would be able to study all of the effects, but I don't 
believe--
	MR. DINGELL.  Mr. Secretary, I have no objection to a study, but I 
want to 
be sure that what you do isn't going to have an adverse impact upon the 
industry or production or jobs in this country.  Now--
	SECRETARY MINETA.  We were very sensitive on that, as it related to 
the 
light truck rule, and in terms of the impact on job loss and safety, and the 
other considerations under the law.
	MR. DINGELL.  Now, Mr. Secretary, have you considered how this 
rulemaking 
might preserve domestic production of small automobiles?  Has that been the 
subject of any discussion or inquiry inside the Department?
	SECRETARY MINETA.  Let me turn to Ms. Glassman on that.  We have had 
some 
discussion, but I can't be really definitive on what those conclusions might 
be.
	MR. DINGELL.  Would you please submit that then for the record, if you 
please?
	SECRETARY MINETA.  We will submit--
	MR. DINGELL.  Now, Congress should proceed cautiously and deliberately 
with legislation to reform CAFE.  You have testified, Mr. Secretary, that 
increasing fuel economy standards is best suited to the regulatory process.  
There is, however, an important role for the Congress to play, to define 
parameters within which the numbers are established, is there not?
	SECRETARY MINETA.  There is--
	MR. DINGELL.  Now, Mr. Secretary--
	SECRETARY MINETA.  --suggests, subject to review.
	MR. DINGELL.  Now, Mr. Secretary, I am going to submit to you a 
letter, 
because we are running out of time here, asking how the Department will do 
this, 
and try to get some appreciation of what it is you have in your mind, with 
regard to how this new system of reformed CAFE will be accomplished, and I ask 
unanimous consent, Mr. Chairman, that that letter be, and the response, to the 
Secretary be placed in the record.
	MR. ROGERS.  Without objection.
MR. DINGELL.  Now, Mr. Secretary, I would note that at least one witness will 
testify that the draft given out on Friday will leave us with the CAFE 
standards--or without a CAFE standard on cars for a period of several years.
	Is that true, and if it is true, is that the intention of the 
Department, 
or is this just a typographical error, or what is the problem here?
	SECRETARY MINETA.  No.  There would still be the regulation that is in 
place from the, I believe 1990, 1990 regulation would still be in place, and 
that would still preserve that at 27.5 miles per gallon.
	MR. DINGELL.  Thank you, Mr. Secretary.
	MR. ROGERS.  Thank you.
	MR. DINGELL.  Mr. Chairman, thank you.
	MR. ROGERS.  Thank you, Mr. Dingell.  Mr. Bilirakis, from Florida.
	MR. BILIRAKIS.  Thank you, Mr. Chairman.  Mr. Secretary, I, too, welcome 
you.  It is always nice to see you.  You were a very efficient and popular and 
fine Member of Congress.
	Mr. Secretary, if we were to pass this bill today, does the technology 
exist to increase the fuel economy to a level greater than it is now?  That 
technology does exist, do we know that it exists?
	SECRETARY MINETA.  Well, the statutory amount is 27.5 miles per 
gallon.
	MR. BILIRAKIS.  Yeah.  Okay.
	SECRETARY MINETA.  What exists right now in the industry is 30 miles 
per gallon, so already, where the industry is is already ahead of where the 
statutory provision sets the mile per gallon--
	MR. BILIRAKIS.  But they haven't used that being ahead.
	SECRETARY MINETA.  And I think there are other technologies that can 
still 
be utilized, in order to increase the miles per gallon, but again, that is 
something that we have got to study, and be able to take a look at.  That is 
the last--
	MR. BILIRAKIS.  Okay.  But the only thing that we know about, though, 
is the increase to the 30 miles per gallon.
	SECRETARY MINETA.  That is correct.
	MR. BILIRAKIS.  Okay, now, you indicated, at least I understood you to 
say, that basically this can be done without necessarily reducing the size of 
the passenger cars to possibly an unsafe standard.  Is that right?
	SECRETARY MINETA.  That is correct.
	MR. BILIRAKIS.  Okay.  And so it is the use of this technology that 
you need the statutory authority for.
	SECRETARY MINETA.  That is right.  We would be going to a size-based, 
rather than a weight-based system, based on the footprint, and experiment with 
that, to see whether or not that would give us the ability to improve the 
miles 
per gallon without impacting on safety, loss of jobs, other factors, that we 
are required to look at.
	MR. BILIRAKIS.  All right.  Yeah.  But this has not taken place up to 
now.  
I mean, you haven't been able to sit around the table with the automobile 
industry, and the manufacturers, and to discuss--
	SECRETARY MINETA.  Not as it relates to private passenger cars.
	MR. BILIRAKIS.  All right.  You didn't have the authority to do it, 
but were you prevented from doing it, would you say?
	SECRETARY MINETA.  That had always been reserved for private passenger 
cars, had been reserved by Congress as their bailiwick, and so we didn't touch 
it at all.
	MR. BILIRAKIS.  Well, I realize that you would have had the rulemaking 
authority and the opportunities for the industry, for their inputs during that 
period of time, et cetera, et cetera, but even before you get to that point, 
would you, if you were given the authority, which apparently, you must need, 
be able to sit down with these people, and to discuss with them that you are 
concerned, of course, with the economy, with potential job losses, and further 
financial stress, and all that?
	SECRETARY MINETA.  Absolutely.
	MR. BILIRAKIS.  But at the same time, the need to do something 
regarding CAFE.
	SECRETARY MINETA.  That is correct.
	MR. BILIRAKIS.  You would do that.  And you can't do that until we 
pass this legislation.
	SECRETARY MINETA.  Well, it is that we wouldn't be able to go into any 
kind of a regulatory process.
	MR. BILIRAKIS.  No, I appreciate that.  That is your feeling, but you 
could still lead up to it.
	SECRETARY MINETA.  Yes, sir.
	MR. BILIRAKIS.  Whatever you come up with, you would contemplate that 
would be based on, it would be a size-based system, using basically, going 
back 
to your testimony, so the auto manufacturer would be required to apply a 
certain standard that would tie into a certain model size.
	SECRETARY MINETA.  It would be based on what we consider the 
footprint, as the size of--
	MR. BILIRAKIS.  So they wouldn't be one size fits all, I guess, is 
what I am saying, right?
	SECRETARY MINETA.  It would not be a one size fits all.
	MR. BILIRAKIS.  It would not be a one size fits all.
	SECRETARY MINETA.  That is correct.
	MR. BILIRAKIS.  Well, Mr. Secretary, you have been up here for many, 
many 
years, and I mean, you realize, of course, the pressure that we are under, and 
unfortunately, these pressures, when there are gas shortages or oil shortages 
and whatnot, or problems are there in the world that result in all that, that 
is 
when we sort of want to put out the fire.  I guess my time is up, but you 
would 
consider that this be necessary at this point time, even if we didn't have the 
$3 per gallon problems that we have today, but that we would still have the 
dependence upon this foreign oil?
	SECRETARY MINETA.  Yes, sir.  We would still be seeking this statutory 
authority, because this is really not a short-term solution to the immediacy 
of 
the problem facing consumers, because of the gasoline prices at the pump.
	MR. BILIRAKIS.  Thank you very much, Mr. Secretary.  Thank you, Mr. 
Chairman.
	MR. ROGERS.  Thank you, Mr. Bilirakis.  Mr. Markey from Massachusetts.
	MR. MARKEY.  Thank you.  Mr. Secretary, welcome back.
	SECRETARY MINETA.  Thank you.
	MR. MARKEY.  You and Phil Sharp in one day.
	Mr. Secretary, in your opening statement, you noted that on February 
1, 
2002, you asked Congress for legislation to reform the CAFE program.  When did 
the Administration submit its bill to make the changes you called for in 2002?
	SECRETARY MINETA.  What I asked for at that point was a legislative 
response by the Congress to provide the statutory--
	MR. MARKEY.  But when did the Administration send the language up for 
Congress to act on?  When did you send your bill up to Congress?
	SECRETARY MINETA.  Well, I am not sure that we had--I don't think we 
did it by legislation.
	MR. MARKEY.  No, the Administration never sent a bill to Congress--
	SECRETARY MINETA.  No, I didn't.
	MR. MARKEY.  --to deal with the issue.
	SECRETARY MINETA.  But I did send a letter to the Congress--
	MR. MARKEY.  No, what I am saying is the Congress never received a 
bill from the Bush Administration to deal with these issue.
	SECRETARY MINETA.  No, we never sent a bill.  I just requested that 
Congress pass the legislation--
	MR. MARKEY.  But my point is that it was a low priority for the Bush 
Administration, if they never sent a bill to Congress on these issues.  So--
	SECRETARY MINETA.  Well, many times, when we do make a request, that 
is the initiation of the give and take in coming up with legislation.
	MR. MARKEY.  My point is that it was never a high priority for 
President 
Bush to obtain this authority, even though his Secretary of Energy today is 
calling it, this whole energy situation, a crisis, the President never sent up 
legislation that deals with the fact that 70 percent of all oil goes into 
gasoline tanks, which is the transportation sector.
	So if you had the authority, Mr. Secretary, what specific CAFE 
standard would be the goal for the Bush Administration?
	SECRETARY MINETA.  Well, I wouldn't be able to pick--if you are 
looking 
for a number, I wouldn't be able to pick that out of the air, in terms of what 
that--
	MR. MARKEY.  Was it wrong for the Congress in 1975 to pick 27.5 miles 
as the goal for a 10-year period?  Was it wrong for Congress to do that?
	SECRETARY MINETA.  Well, I was here at the time, and as I recall--
	MR. MARKEY.  Was that a mistake?
	SECRETARY MINETA.  Pardon?
	MR. MARKEY.  Was that a mistake on Congress' part?
	SECRETARY MINETA.  No, but I--
	MR. MARKEY.  On President Ford's part?
	SECRETARY MINETA.  Again, that was a product of this committee, and I 
assume that this committee gave it the careful consideration, to come to that 
27.5 mile per gallon statutory requirement.
	MR. MARKEY.  Okay.  Now, the Cheney Energy Task Force told you back in 
May 
of 2001 to base a new CAFE standard on the National Academy recommendations, 
which said 33 miles per gallon was feasible for the combined fleet of cars and 
SUVs, based on existing technologies, and without reducing vehicle safety.
	Can you recommend 33 miles per gallon as a baseline standard?  That 
was what the Cheney Energy Task Force told you to look at in 2001.
	SECRETARY MINETA.  Well, first of all, I am not sure that the NAS 
study makes the contention that 33 miles per gallon is the--
	MR. MARKEY.  Yes, it does.  That is what the 2001 National Academy of 
Sciences study says, that using 2001 technologies, that the fuel economy 
average 
can be increased to 33 miles per gallon without compromising safety.  That was 
the specific conclusion.
	SECRETARY MINETA.  Well, then I would have to have you submit to me, 
then the 2001 study, because--
	MR. MARKEY.  So what is the number that you would use--
	SECRETARY MINETA.  Mr. Markey, the one that we would base our work on 
is 
``The Effectiveness and Impact of Corporate Average Economy Standards,'' and I 
believe that is a 2002 study, not 2001, and so we are basing our work on the 
NAS study of--
	MR. MARKEY.  That is the same study we are using, and it says 33 miles per 
gallon, using existing technology, without compromising safety.
	SECRETARY MINETA.  Well, then I would like to have you or your staff cite 
to me where it says 33 miles per gallon economy.
	MR. MARKEY.  What is the number that you would use, Mr. Secretary?
	SECRETARY MINETA.  I don't know what the number would be.
	MR. MARKEY.  It is 6 years after that report came out in 2001, and the 
Bush Administration has yet to decide what the number should be, using that 
NAS report--
	SECRETARY MINETA.  That is correct.
	MR. MARKEY.  --from 2001.
	SECRETARY MINETA.  There is a study in here that shows the 
distribution of 
automobiles on page 45, by weight class, and it shows average fuel economy 
miles 
per gallon for path one, path two, path three, or subcompact, compact, 
midsized, 
large, small SUV, mid SUV, large SUV, minivan, pickup, small, pickup, large.  
This table outlines all of the miles per gallon for the various 
classifications 
of cars.  There is nothing in this study that says 33 miles per gallon ought 
to be the attainable goal of the automobile manufacturers.
	MR. MARKEY.  Let me rephrase the question, then.  Mr. Boehlert and I 
have 
an amendment in a bill that we intend on having a vote on the House floor, if 
the leadership allows it to happen, which would give you all the flexibility 
you 
want, and selects 33 miles per gallon, which is the equivalent of all of the 
oil 
that we import from the Persian Gulf, over a 10-year period.  That is what 33 
miles per gallon does; it backs out all the Persian Gulf oil.
	Would you, Mr. Secretary, recommend to the President that he pick a 
goal, 
as the Congress and Gerald Ford in 1975, that the public can understand, that 
the oil futures marketplace speculators can understand, so that it will 
depress 
the speculation on the barrel of oil, so that it will all of this hype out of 
the marketplace, so the price of oil can go down, because OPEC and the oil 
industry will know that President Bush is serious about picking a target and 
having America meet it?  Will you recommend that the President announce the 
number he will meet, and the timeframe to back out all of the Persian Gulf 
oil?
	SECRETARY MINETA.  It seems to me that that approach is a ready, fire, 
aim.
	MR. MARKEY.  No, the goal is Persian Gulf oil.  The National Academy 
of 
Sciences says you can meet the goal.  What is lacking is President Bush's 
leadership on the issue.
	SECRETARY MINETA.  No, but if you say we are going to give you all the 
flexibility and authority, but we also want you to use 33 miles per gallon.  
To 
me, that has already established something that we are seeking right now, and 
that is, the broad authority to reform CAFE for passenger cars.
	MR. MARKEY.  It is almost unbelievable to believe that no study in 6 
years--
	MR. ROGERS.  Your time is up, sir.
	MR. MARKEY.  I am done.
	MR. ROGERS.  I appreciate your questioning.  Thank you, Mr. Secretary. 
Mrs. Cubin.
	MRS. CUBIN.  Thank you, Mr. Chairman.  Welcome, Secretary Mineta.  It 
is good to see you again.
	If Congress does, indeed, give the authority to your Department to 
promulgate new CAFE standards for passenger cars, what assurances do we have 
in 
Congress that adequate attention will be given to the safety of our 
constituents, and what I am speaking about, in particular, is that you stated 
in 
your testimony that ``experts at the National Highway Traffic Safety 
Administration can objectively measure how much fuel-saving technology we can 
require before the costs outweigh the benefits,'' and then that is a quote.  And 
what I am specifically interested in is what weight regional safety concerns, 
like the rugged terrain that we have in Wyoming, and the inclement weather 
that 
we have, you know, bad storms, which require heavier vehicles for safety for 
the constituents in my state.
	So how much will that be taken into account?
	SECRETARY MINETA.  Well, that would be taken into account, in terms of 
our 
establishing the corporate average fuel economy.  Again, you know, maximum 
feasible average fuel economy, the technical capabilities, feasibility, 
economic 
practicability, safety.  All of these are taken into account, and so safety, 
whether it be in terms of the size of the vehicle, the technology that is in 
the 
vehicle, under what driving conditions these are subjected to, that is all 
taken 
into consideration, as we do the underpinning for determining what the CAFE 
standard ought to be.
	MRS. CUBIN.  Good.  And then what about the use of the vehicle, for 
example?  You know, some pickup trucks are like the small pickup trucks, and 
then some pickup trucks, that we use in ranching, for example, really do have 
heavy duty work, and a lot of--not just ranching, but construction and mining 
and all those things that we have in Wyoming that require more sturdy 
vehicles, 
will the use be taken into consideration as well?  Because these are passenger 
vehicles, as well as work vehicles.
	SECRETARY MINETA.  Well, if they go over 10,000 pounds, then we would 
not 
be considering those vehicles for the application of the CAFE standard.  So to 
the extent that they are over 10,000 pounds, and they are used on the ranch, 
they are used for construction, used for mining, whatever it might be, we 
would not be including those size vehicles as part of the determination--
	MRS. CUBIN.  Right.
	SECRETARY MINETA.  --for CAFE standards.
	MRS. CUBIN.  I don't have any idea what size, or how much, like a 
Suburban 
would weigh, or a pickup truck with six wheels with a dualie, the two wheels 
in 
the back.  Do you have any idea what those weigh, if those would be included?
	SECRETARY MINETA.  Those, I think, are in the 8,500 to 10,000 pounds.
	MRS. CUBIN.  Okay, so those are the ones that I am specifically 
concerned about.
	SECRETARY MINETA.  Let me have Ms. Glassman, our Deputy Administrator 
and NHTSA, address that issue.
	MS. GLASSMAN.  Yes, thank you, Congresswoman.
	In our last light truck rule, which we issued in late March, we 
included 
within the CAFE regulation certain vehicles within the 8,500 to 10,000 weight 
class, but certain other ones, we did not.  The vehicles that were included 
are 
passenger SUVs, the larger SUVs that are used to carry people around.  We did 
not include those vehicles that are used principally for agricultural or 
commercial use.  Those vehicles are not subject to CAFE, because they are, in 
fact, needed for utilitarian purposes.
	MRS. CUBIN.  Well, I am someone who is concerned about the weight of 
vehicles, should there be an accident.  You know, with the slick roads we 
have, 
and the vast distances that we have, and the truck traffic that delivers the 
goods across the country, we have interstates that folks here would be 
absolutely amazed if they were to drive across I-80, and see the number of 
trucks, and so I just want to know that if there is a slide if you are going 
to 
be in an accident, and you are sliding on the ice, that you have the best 
chance 
possible to survive that accident, and I really don't want any standards to 
compromise the safety of the people that are in the vehicles. 
	Thank you, Mr. Secretary.
	MR. ROGERS.  Thank you.  Ms. Eshoo, from California.
	MS. ESHOO.  Thank you, Mr. Chairman.  It is always good to see you, 
Mr. Secretary.  I attempted to say Norm, but we are--
	SECRETARY MINETA.  Of course.
	MS. ESHOO.  --in the very formal setting, so it is 
Mr. Secretary, and to those of you that are here from the Department, thank 
you for your testimony.
	We have always been very up front with one another, and I am going to 
be 
really forthright today.  I think the Department and the Administration are on 
the wrong side of history here.  Today's hearing is about what we can do long 
term.  I think that was raised earlier.  Maybe Mr. Dingell asked that, or made 
that point.
	I think that Mr. Boehlert's statement to the committee was an eloquent 
one.  We are not going to be able to drill our way to independence of Middle 
East oil.  We know that.  We know that we have to do something about the 
demand.  That is not punishing Americans.  That is being very smart, in terms 
of policy.
	I think that what is being presented today is summarized pretty well 
in 
today's New York Times editorial, ``Foolishness on Fuel.''  It really takes 
the 
Administration's ``policy,'' and takes it apart.  I think, Mr. Secretary, with 
all 
due respect, when we get into these quibbles about what is going to be saved, 
in 
terms of fuel and CAFE standards, relative to a study, and what you are 
putting 
forth on a size-based approach versus of a fleet average, I think on the one 
hand, what you are approaching can--because it is so complex it can be 
manipulated--and I think a fleet-wide approach is a much better way to go.  
Obviously, the Administration doesn't think so.
	But you know, we need to take this debate into context.  Look where we 
are 
in this country.  Look where we are.  I paid $3.65 for regular in Menlo Park on 
Sunday, so if this doesn't spell urgency, while you are all saying study, I 
don't think that is the right side of history.  Now, you wouldn't go on record 
as saying the 33 miles, in terms of the CAFE standard.  What I would like to 
know is in terms of your proposal, when are you actually going to produce?  
What 
will this policy initiative of the Administration produce?  How much oil will 
it 
save, and over what period of time?  Because on your SUVs, that the 
Administration just put into place, the mileage rules covering SUVs, minivans, 
and pickup trucks, I think you heard my opening statement, I mean it is really 
miniscule.  It is miniscule.  It is almost laughable, were it not so serious, 
in terms of where this country is.
	This great country, our great economy, everything that we are, is 
really 
at a tipping point now.  So the old debate about study and whatever, so tell 
us 
what the size-based approach that you described today, and what the 
Administration would like to put in place, what are the fuel savings there, 
and 
over what period of time?  I think that that is an important way to measure 
it.
	I also want to bring to your attention that Ford has produced a hybrid 
SUV 
that gets about 40 miles per gallon.  Now, is this vehicle not safe?  Oh, you 
are doing weight.  You have to tell me, when we encourage people to buy 
these--what are they called?  They look like Army--the Humvees.
	SECRETARY MINETA.  Hummer.
	MS. ESHOO.  When I see a Humvee at a gas station, when I am filling up 
my 
small car, and they are filling that up, and I see the pain on their face, I 
think what the heck are we doing in terms of policy to encourage that?  In 
fact, 
in the tax code, we reward business to buy them.  I mean, our policies are 
standing on their heads.  My grandmother used to say always remember, when you 
are sticking your head in the ground, what is left sticking up in the air.
	We are not paying attention.  Our policies are not what they should be 
today for America's future.  In fact, we have squandered.
	MR. ROGERS.  That would be--for the record.
	MS. ESHOO.  Tell me what the fuel savings will be for the policy that 
you are proposing, and over what period of time?
	SECRETARY MINETA.  Well, again, it seems to me that that is, again, 
what I 
would say is the ready, fire, aim.  I don't know--
	MS. ESHOO.  Norm, what does that mean?  We better be ready to fire and 
aim.
	SECRETARY MINETA.  I don't know how--
	MS. ESHOO.  Because this--
	SECRETARY MINETA.  --you can--
	MS. ESHOO.  --country is held hostage today.
	SECRETARY MINETA.  No, but how do you--
	MS. ESHOO.  Everywhere in the country--
	MR. ROGERS.  The gentlelady is over her time, and I would let the 
Secretary answer the question.
	MS. ESHOO.  No, I want to hear the answer, but--
	MR. ROGERS.  Well, I would like you to let him--
	MS. ESHOO.  --a bit infuriating, to say ready, fire, aim.
	SECRETARY MINETA.  How--
	MS. ESHOO.  We should be ready to fire and aim.
	SECRETARY MINETA.  But how do I know--
	MS. ESHOO.  It is your policy.
	MR. ROGERS.  Ma'am, if you would let him answer the question.  We have 
run over your time.
	SECRETARY MINETA.  We can't establish the rule of fuel standards, 
because 
you don't know what the product plan of the manufacturers are.  You don't know 
what the mix of their vehicles that they will be building in model year, let 
us say, '08, and that is the basis for determining the CAFE standards.
	MS. ESHOO.  So we just don't know.
	SECRETARY MINETA.  I cannot give you a definitive answer, as to 
whether it 
is going to be 38 miles to the gallon, 33 miles to the gallon, or whether it 
is 
going to be 10 billion gallons saved, or 40 billion gallons saved.  That is 
not something that at this point, we can give you.
	MS. ESHOO.  And when will you know that?
	MR. ROGERS.  The gentlelady's time has expired.
	MS. ESHOO.  Mr. Chairman, others have gone over at least a minute.  
Can we just know this?  If we are going to shape a policy--
	MR. ROGERS.  I understand.
	MS. ESHOO.  --for something that is as serious as what America is 
facing 
today, how long will it be until we know what the Administration's--what the 
outcomes are going to be to the policy that is being proposed?  I think it is 
a legitimate question.
	MR. ROGERS.  Last question.  You can answer the question, and then we 
will move on from there.
	SECRETARY MINETA.  First of all, again, in terms of how long it will 
take, we are saddled with 18 months to begin with, just in terms of what model 
year it 
affects, and it requires 18 months notification, and we are always doing that 
in April of a given calendar year for the model year 18 months later.
	MS. ESHOO.  Well.
	SECRETARY MINETA.  By statute, it is already in statute.  October of 
the 
model year is, for the notification period, but that has to start 18 months 
before that, so that would be the April before.  So we are saddled with 18 
months to begin with.  And then to make this study, I think to even do it in 
one 
year, I think, is a very, very tight schedule.  You tell us to do it in that 
one-year period, you know, we are going to be responding, but it will be a 
very difficult time.
	As I said earlier to Mr. Dingell's question, our response on the CAFE 
standard is not a short-term response, in terms of what is happening with fuel 
prices.  What we deal with in CAFE is always, whether it was in 1975 or in 
2006, always has been--
	MS. ESHOO.  It is long term.  I understand.
	SECRETARY MINETA.  --a long-term response.
	MS. ESHOO.  So it is a long-term--
	MR. ROGERS.  Thank you, Mr. Secretary.  The gentlelady's time has 
expired.  Thank you.
	MS. ESHOO.  Thank you.
	MR. ROGERS.  Mr. Secretary, since the debate today is a little bit 
interesting for me, you know, the wrong side of history, did they send a bill, 
did they send a letter.  You know, going for a fleet approach.  When CAFE was 
introduced, cars still had carburetors.  General Motors controlled 50 percent 
of 
the domestic market.  I mean, it was a different time.  And now, there is much 
more competition in America from all over the world with automakers.  The 
automobile industry in America is actually doing well.  The Big Three are 
struggling to find their right place, and their niche in the market.
	A fleet approach would actually mean, in some cases, given the 
calculation, that some car companies would have to stop production of a 
certain 
vehicle.  And we went through this before.  That is really a lousy way to make 
policy, other than us saying well, we are going to mandate that everybody 
drive 
a Mini Cooper.  I think your approach here is novel, and I have been very 
vocal 
in the past about why CAFE is broken: it is old.  It is antiquated.  It 
doesn't 
work.  It is a formula.  Just because you say 33 miles a gallon doesn't mean 
everybody just gets up to 33 miles a gallon with no penalty.  People, real 
people, working and struggling to take care of their families may, in fact, 
lose their jobs.
	So there is a balance here, and you going from a weight and size issue 
to 
a footprint is pretty innovative, and it takes time to apply that science.  I 
am 
really curious.  You talked about fuel-saving technology, and how you apply 
that 
to the vehicle.  If we are going to get down from foreign dependence on oil, 
you 
may only go up a half a mile per gallon, but you may reduce the percentage of 
oil used in that vehicle.  Wouldn't that be a great outcome for America?
	SECRETARY MINETA.  Absolutely, and they are just--it is not only in 
terms 
of how to establish the corporate average fuel economy, but it is also a 
reflection of what is the state of the economy.  As you said, at this point, 
we 
had carburetors.  Today, we have fuel injection.  We use, as an example, the 
engine, to power steering.  If we went to a battery-powered steering, we would 
be saving on the fuel economy, because we would take away from the use of the 
engine to power the steering, and there are a number of these things.  The 
continuous variable transmission.  But there are a number of things that the 
automobile industry would be able to do, and it would also vary on the size of 
the car and the price of the car.  Because if you had, I don't know, a 2,800 
pound car, but it is going to cost $40,000, I am not sure there would be much 
of 
a market for that car, but on the other hand, if you have a $35,000 car, you 
can 
put technology that might cost $1,800, $2,000 per car, to improve the fuel 
efficiency of that heavier car.
	MR. ROGERS.  You know, there were some mandates in California about 
the 
zero emission cars.  General Motors invested billions in something called the 
EV1, of which nobody in California wanted to buy.  I mean, government mandates 
are not a good idea when it comes to that solution.  I think you agree.
	And that is why I think it is so important that you do have the 
ability to 
look at a savings-based, take the CAFE formula, rip it up, start over, and say 
we are going to do it on an individual car basis, and apply the technology 
that 
we have.  There is technology to buy the E-85 vehicles, is there not, on the 
market today?  I think the Big Three are probably somewhere around a million 
vehicles, E-85 capable.  Will that not, in fact, help our dependence on 
foreign oil?  Simple answer.
	SECRETARY MINETA.  Right.
	MR. ROGERS.  Yes, it will.  Displacement, cylinder displacement, all done 
by the automobile industry, trying to reduce fuel usage at certain times, the 
demand on the engine.  Will that, in fact, provide some fuel savings, and 
reduce our dependence on foreign oil?  It will?
	SECRETARY MINETA.  It will.
	MR. ROGERS.  Hybrid vehicles?  We have SUVs, I know the gentleman from 
the 
24th District in New York said I can't go out and buy an SUV that is fuel 
efficient, but are there, in fact, not SUVs on the market that have hybrid 
technology in them today, that you can buy?  I know there are.  You know, they 
don't happen to be from the car companies that I represent, but there are some 
folks other than Ford, Ford has got a great Ford Escape SUV.  So that 
technology is there, is it not?
	SECRETARY MINETA.  Right.
	MR. ROGERS.  So doesn't this allow you to take all the research and 
development that has been done, and they spend billions of dollars doing this, 
and come up with a system that works for our independence, keeps cars safe, is 
sensitive to the fact that there is a UAW family right now hoping that we do 
this thing right?  I mean, if we give you this flexibility, isn't that what 
that 
means, really, for America, versus the wrong side of history, or how you 
submitted your bill?
	SECRETARY MINETA.  Yes, that is correct.  And what we are looking for 
in this authority that we would hope we would get at the Department of 
Transportation is that it would be a standards approach, rather than a 
specifications approach, because when you end up with specifications, you 
usually end up with a much more costly response mechanism, and so again, in 
this 
instance, I think we are looking, really, more at that broad authority to be 
able to reform CAFE, and be able to do this kind of what is the best 
technology 
that is available, to be able to produce these increased CAFE requirements.
	MR. ROGERS.  If we tell them to do it in a short period of time, Mr. 
Secretary, they are just going to try to take weight out of the vehicle.  
Isn't 
that the engineering standard?  I mean, we have just got to remove weight from 
a vehicle.
	SECRETARY MINETA.  That is correct.
	MR. ROGERS.  That is the quickest way.
	SECRETARY MINETA.  That would be the quickest and the cheapest way to 
do it.
	MR. ROGERS.  But not necessarily the safest way to do it.
	SECRETARY MINETA.  And it would not be the safest.
	MR. ROGERS.  And so your approach also protects safety, as it applies 
this new technology to future vehicles.
	SECRETARY MINETA.  That is correct.
	MR. ROGERS.  I am excited about where you are going with that.  Mr. 
Wynn.
	MR. WYNN.  Thank you, Mr. Chairman.  Mr. Secretary, always good to 
you.  Thank you for coming.
	A couple of just quick questions that I would like to ask.  Just on 
the subject of weight, you don't have any authority to regulate vehicle 
weight, do you?
	SECRETARY MINETA.  I am sorry, to regulate--
	MR. WYNN.  Vehicle weight.  To mandate specific weights.  So if the 
market 
were to move toward lighter vehicle cars, I mean lighter weight cars, as an 
effort to be more competitive, there really wouldn't be anything you could do. 
Is that correct?
	SECRETARY MINETA.  Let me have Ms. Glassman respond on that.
	MS. GLASSMAN.  Now, we don't have the authority to mandate that 
vehicles 
are of a particular weight.  What we do have authority to do is to set a fuel 
economy standard.
	MR. WYNN.  Right.  Okay.
	MS. GLASSMAN.  And weight is one aspect of achieving that.
	MR. WYNN.  Okay.  Just quickly.  So if the market goes toward lighter 
cars, there is really nothing you can do about it, right?
	MS. GLASSMAN.  If there is a trend in the market towards lighter 
cars--
	MR. WYNN.  There is nothing you can do about it.
	MS. GLASSMAN.  --the market will drive that.
	MR. WYNN.  Okay.  Thank you.  With regard to the conservation, the 
savings, that would be accrued through this CAFE standard, that--does--how 
does 
the world market affect that, the world oil market?  Because if we use less, 
but the Chinese use more, is that going to bring down price?
	SECRETARY MINETA.  Well, it wouldn't--no, what happens on the world 
market would not impact on what we are doing on the CAFE standards.
	MR. WYNN.  Well, ultimately, we are here talking about gas prices.  
If the 
world market is what is really controlling gas prices, isn't it somewhat 
illusory to think that CAFE standards are going to reduce gas prices at the 
pump?
	SECRETARY MINETA.  Well, no, I don't think we are making that as a 
contention at all.
	MR. WYNN.  Okay, so I just want to be clear.  So this isn't about, in 
any 
form or fashion, reducing the $3.65 that somebody is paying, or $3.25 that I 
paid this morning.  Okay.  All right.
	Having said that, if it is not going to reduce the price at the pump, 
you 
also, I believe, said that the 27 miles per gallon is behind the 30 that the 
industry is accomplishing right now.
	SECRETARY MINETA.  That is correct.
	MR. WYNN.  Why can't the industry just do this?  I mean, last night, 
I saw 
a commercial for a Toyota car that is going to be 40 miles a gallon.  It seems 
to me we don't need Federal regulations to do this.  The market is going to do 
it.  Either the market is going to do it, or we are not going to have an 
automotive industry.
	Why are we doing this?
	SECRETARY MINETA.  Part of it, I believe, is to have a floor, so that 
you 
don't have a regression below which the standard or threshold is being set.
	MR. WYNN.  If I could just jump in, isn't that somewhat contradictory 
from 
the standpoint, anybody who is going backwards and increasing or decreasing 
their fuel economy would seem to be working their way out of business.  All 
the 
people were concerned about the employees.  So there really isn't any market 
force that would take us backward.  All the market forces seem to be taking us 
forward.  Isn't that true?
	SECRETARY MINETA.  Yeah.  I believe that is the case.  Jackie?
	MS. GLASSMAN.  Yes.  Market forces currently are working in that 
direction, and the price that people are paying at the pump often drives their 
decisions on whether to buy more or less fuel-efficient vehicles.  But 
certainly, the market today is being driven towards more fuel-efficient 
vehicles, and not less fuel-efficient vehicles.
	MR. WYNN.  Right.  That being the case, and the fact that you said what we 
are doing with CAFE is not going to affect the price at the pump, isn't it 
likely that the market is the appropriate force to resolve this issue, rather 
than engaging in government regulations, and the expense associated with it, 
to do something 18 months behind the cycle anyway?
	MS. GLASSMAN.  The market is an important piece of this, and in 
defining 
the regulations, we are careful not to disrupt market forces, so that consumer 
choice can continue to play a significant role.
	What we are looking for is the authority to have a program that can 
get the most fuel savings possible, without affecting safety, without losing 
jobs--
	MR. WYNN.  But the market could probably get more.
	MS. GLASSMAN.  --and in allowing people to continue to have consumer 
choice.
	MR. WYNN.  Okay, but the market could probably get more.
	MS. GLASSMAN.  The market will continue to move the direction.
	MR. WYNN.  Okay.  If the market moves toward lighter cars, in a 
drastic 
attempt to offset the high price of gas, and compete with foreign cars, would 
you anticipate any type of attempt to impose safety regulations relating to 
weight?
	SECRETARY MINETA.  Well, I think we always look at safety of the 
vehicle 
regardless of weight, so that if it is a very heavy car, vehicle, let us say 
it 
has a roll tendency, we would look at that as a safety issue, even if it--
	MR. WYNN.  But not weight per se.
	SECRETARY MINETA.  And we would be looking at a lightweight car, if it 
is disproportionately causing a large number of deaths, and--
	MR. WYNN.  Okay.  My last question.  The European countries all have 
much 
lighter, much smaller cars.  Has there been any analysis of their accident, 
death rates, in relation to what we are experiencing over here?
	SECRETARY MINETA.  Let me have Ms. Glassman--
	MS. GLASSMAN.  We have different fatality rates.  We have very 
different 
driving conditions in the U.S. and in Europe.  Many of the small mini-cars in 
Europe would not meet the full plethora of our safety standards.  So every 
vehicle sold in the United States would have to, whether it is a small or a 
larger vehicle, would have to meet every one of our safety standards.
	MR. WYNN.  Okay.  All right.  Thank you.
	MR. ROGERS.  Thank you.  Mr. Gonzalez.
	MR. GONZALEZ.  Thank you very much, Mr. Chairman.  Welcome, Secretary 
Mineta, our Democrat in the White House.  That is not exactly what we had in 
mind in November of 2004, but we will settle at this point.  But thank you so 
much.
	I didn't want to lose something that Representative Boehlert had 
pointed 
out in your discussion, in the question and answer with my good friend 
Congressman Wynn.  We really aren't talking about the price at the pump 
presently, but we definitely are looking prospectively.  We can't do anything 
about supply, to be real honest with you.  We can drill all over the United 
States, ANWR, East Coast, Florida, West Coast, and we are not going to have 
enough oil.  Can't do anything about India.  Can't do anything about China, 
right?  And we can't do anything about the oil speculators, or at least we are 
not going to do anything regarding that particular market, as far as 
regulation.
	What Congressman Boehlert is talking about is we can do something 
about 
demand.  And so that in the years to come, if you think $3 or $3.40 is a lot, 
you haven't seen anything yet.  So my first question will go to what you are 
already doing, and then we will get into what you are seeking in the way of 
reforming the law, and I am going to refer to a March 30 Washington Post 
article, because it was of some concern that what you are doing with the non-
passenger side, which you have the authority to do, and I commend you, I do 
commend you, but this is what it basically said.  ``Mineta's announcement 
comes 
as gasoline prices are nearing their six month high, with a gallon of regular 
averaging $2.50 per gallon.''  This was on March 30.  Little did I know those 
were the good old days.  ``Or $0.35 more than it cost a year ago, according to 
the U.S. Department of Energy.  At the same time, General Motors is staking 
its 
turnaround in profits this year on a new batch of large SUVs.  Mineta said the 
new rule is being phased in over the next 5 years to lessen the impact on the 
fragile U.S. auto industry, hit by declining market share and huge financial 
losses.''  And just since that time, we know, cutting back 60,000 jobs at GM 
and 
Ford, reorganizing, restructuring, getting rid of certain parts of their 
enterprise, and you are saying that what you are doing regarding the non-
passenger, the trucks and such side of the equation, over 5 years, will not 
adversely impact what is going on with the domestic automakers to the extent 
that could, it really could hurry or even cause their demise.
	Is that what you are saying, the 5 year plan?
	SECRETARY MINETA.  Well, what we are trying to do is to minimize what 
the 
impact of our regulations would be on job loss, and so to that extent, as we 
are 
doing our rulemaking, we do look at the various factors under the law that 
prescribe how we come to the CAFE standard.  And again, impact on 
manufacturers is a factor.
	MR. GONZALEZ.  Which is going to lead me to what you seek in the way 
of 
reform, but if what you are doing on that side of the equation, non-passenger 
vehicles, in setting the miles per gallon that you just went through in this 
past month, is any indication of what you might do if given the authority to 
move forward on passenger, then that is what my question is really about.  And 
it is not an easy one, and I understand the position that you are in, that you 
have to take into account economic feasibility of our domestic automakers, 
because we all have a stake in their wellbeing.  There is no doubt about that.
	But to what extent do you defer to their future plans?  Because you 
were 
just saying well, we are doing that with the trucks, what we just did, we are 
going to phase things in over 5 years to accommodate them.  Now, if you give 
us 
the authority to move forward on the passenger side, we are going to take 
their 
long-term plan, confidential and all that as it may be, they share it with us, 
how far do you defer to those plans?  Because if I am the manufacturer, and I 
am 
having a really hard time making these changes, and I am surviving, I may not 
be 
as accommodating as you wish me to be, so where does that balance come in?  I 
am just curious.
	SECRETARY MINETA.  Well, let me have, again, Jackie get into the--on 
how that is done within our bureaucracy.
	MS. GLASSMAN.  The manufacturers' confidential plans are our baseline. 
They are the starting point.  We receive these plans from each manufacturer. 
We 
look at them.  We look at the technology they are using.  We look at the 
technology they are using within the company, and see if there are other 
places 
that technology that is being used in one model might be able to be used in 
another model.
	We also look at what other companies are using, and we see if that 
technology can be applied in places where it is not currently being applied.  
And when we put out a rulemaking, we lay this all out.  We don't lay out the 
confidential parts in public documents, but we do lay out how we go through 
the 
analysis, and what technologies we are using to apply.  So we start with our 
product plans, we look at the baseline.  Then we see how much more technology 
we 
can add, and this is not something they have to do, but it is our assessment 
of what they can do.
	And then we arrive at a corporate average fuel economy standard that 
pushes that technology application as far as it can go, to get as much fuel 
savings as possible, subject to not either causing safety problems, or job 
losses, and substantial economic hardship.
	MR. GONZALEZ.  Okay.  Thank you.  And Mr. Chairman, if you will 
indulge me 
one second.  I just have one last question, because this has been a burning 
question.
	How do you really arrive at whether these vehicles are accomplishing 
and 
attaining these standards?  My understanding, I have heard this, I don't know 
if it is true, that the way the test is conducted, for instance, miles per 
gallon, 
highway miles, you get a vehicle, you run it at 48 miles an hour for I don't 
know how many miles, and that is it.  Now, that is totally unrealistic.  I 
don't 
know how you arrive at the in city miles, but can you shed some light on how 
that actually is conducted?
	MS. GLASSMAN.  That is actually done by EPA, and it is done pursuant 
to a 
test procedure that is in the statute, and they conduct the test, they give 
the 
results to NHTSA, and we calculate the company's corporate average fuel 
economy, 
compare it to the standard, and see if they are above it or below it, and if 
they are below it, we impose a fine.
	MR. GONZALEZ.  So if we have a flawed method of ascertaining what--it 
wouldn't matter what we set it at, 33, 27, it doesn't matter, because they are 
probably not getting that anyway.  Have you all ever looked at the EPA's 
method 
of--and I don't know if they have changed it, but that is what I was told some 
time ago.  But I know that the test is conducted, it is totally unrelated to 
the 
real world driving conditions, and maybe all of you would maybe get back to 
me, and see if, in fact, your understanding is the same as I just outlined.
	And thanks again, and it is good seeing you, Mr. Secretary.
	SECRETARY MINETA.  Well, EPA has a different standard, and they are 
going through, I believe, a reevaluation of their own test mechanism, and we 
did have a discussion about that recently.  Maybe, Jackie, you could--
	MS. GLASSMAN.  There are two different tests.  There is a test for 
compliance with CAFE standards, and then EPA takes that test, applies 
adjustment 
factors to arrive at the numbers that should be on each vehicle's label.  That 
is on the Monroney label when the vehicle is first sold.  EPA is currently in 
rulemaking to reconsider the adjustment factors that go on the label, so that 
when people go to buy a car, they will know exactly how much fuel economy that 
car can attain.
	MR. GONZALEZ.  Thank you very much.  Thank you, Mr. Chairman.
	MR. ROGERS.  Thank you, Mr. Gonzalez.  Mr. Burgess, the doctor from 
Texas.
	MR. BURGESS.  Thank you, Mr. Chairman.  Mr. Secretary, I wonder if 
Hell 
has frozen over.  We have the gentleman from Michigan presiding over a hearing 
on CAFE standards.  It seems so bizarre to me, but--
	MR. ROGERS.  It is just the way we like it, by the way.
	MR. BURGESS.  Well, the light truck rulemaking that will result in 
fuel 
savings of 11 billion gallons over the life of those vehicles manufactured 
between '08 and '11, what kind of fuel savings do you think would result from 
an increase in passenger car fuel economy standards?
	SECRETARY MINETA.  Again, that would be very hard for me to estimate 
right 
now, in terms of the number of gallons that would be saved over the life of 
the 
vehicles that would be impacted by the, let us say, in model year '08--or are we 
talking about '09-'08.  And it goes back to the question that Congresswoman 
Eshoo was asking me, and I would not be able to estimate how much the savings 
would be right now, or even to try the other goal of say establishing, I don't 
know, let us say 25 million gallons of gas saved during the life of these 
vehicle, from model year '08 through--let us see if we go-'08, that would be 
2012, and those 5 year periods.  It would be very difficult, at least for me 
right now, to be able to predict what the gallons saved would be.
	MR. BURGESS.  How significant is working on the demand side of the 
equation?  How does it affect, or what is your opinion about how it affects 
price, if consumers are to reduce their consumption of refined gasoline 
product?  Would that make a difference in bringing the price down?
	SECRETARY MINETA.  Yeah, I am not enough of an expert on the energy 
field 
to be able to say how much is really attributable to the demand side, and how 
much to the supply side.  But it seems to me, just from just off the top of 
the 
head reaction, I would think the bigger impact on the price would be from the 
supply side, rather than what we could do to be leveraging on the demand side.
	MR. BURGESS.  Well, that is totally, just not even a SWAG for me, this 
is 
just a WAG.  And I would agree with you.  I would concentrate on the supply 
side 
as well.  Of course, being from Texas, that is easy to be on the supply side.  
There was an article in one of my local papers just this past week, where a 
professor, an economist at Southern Methodist University, said that if 
consumers 
would save as little as one gallon a week, there could be a $0.50 or $0.60 
savings, or gasoline price reduction.  That seemed like an enormous amount of 
price drop for a little bit of savings, and I just wondered if anyone has any 
data on that, that would support that hypothesis?
	SECRETARY MINETA.  I am not familiar with that study or--I don't know 
if Jackie or Jeff, anyone else?
	MR. BURGESS.  Well, certainly, there are some that believe that 
setting a 
specific mile per gallon number in statute is the best way to force fuel 
economy upwards.  Is it your opinion that that is a wise course?
	SECRETARY MINETA.  Absolutely, because again, this is the kind of a 
puzzle 
where every little bit is going to be contributing to the overall picture of 
savings of fuel.  Pardon?  I am sorry.  Oh, I am sorry.  No, no.  I am sorry.  
No, I would have to go back to my original point, that I would not be able to 
pick a figure.  Either again, whether it is mpg or total fuel saved.
	MR. BURGESS.  And would that also be gallon of fossil, or would that 
include fuel that has been extended, say, with ethanol, the E-85 fuels, when 
you 
talk about those fuel standards.  It seems to me, if you can get a hybrid car 
with a bigger battery, and flex fuel option, out of one gallon of fossil 
fuels, 
you could drive that little car maybe 100 miles with an improved, and with 
supplementing with ethanol.  So is that fuel economy going to be based on that 
one gallon of fossil fuel, or the number of gallons of E-85 that are burned, 
the 
battery life?  I mean, how else are you going to be able to figure that?
	SECRETARY MINETA.  I am going to have to turn to Jackie on that one.
	MS. GLASSMAN.  That is not based on the kind of fuel that is put into 
the 
vehicle.  It is based on how the vehicle can go on a gallon of fuel.  There 
are 
incentives within the statute to encourage the development of alternative 
fuels, 
such as E-85, and as E-85 use increases, we should see fuel economy as a whole 
increase as well.
	MR. BURGESS.  But from a corporation standpoint, that is producing a 
fleet 
of cars, if you have got one hybrid with a big, big battery, and burning E-85, 
that one gallon of fossil fuel, I mean, if you could apply that to your 
average 
fleet fuel burning, it might negate the whole premise, because you would get 
such a savings out of that one vehicle that the larger vehicles and the larger 
engines would then be able to still be sold, because that is my understanding 
of 
CAFE standards, it is applied across the entire fleet.  Is that correct?
	MS. GLASSMAN.  That is right, and our new program, however, for the 
light 
trucks, will take more fuel-saving technologies into account, so that what we 
do 
we look at the fuel savings for a particular size of vehicles, and then put 
the 
product mixes into that, so it reduces the effect of the average, so that we 
can encourage more technology.
	CHAIRMAN BARTON.  The gentleman's time has expired.
	MR. BURGESS.  Thank you, Mr. Chairman.
	CHAIRMAN BARTON.  Our last questioner for the Secretary is 
Congresswoman Schakowsky of Chicago.
	MS. SCHAKOWSKY.  Thank you, Mr. Chairman.  I know that you were a good 
friend of my predecessor, Sidney Yates, and I am glad to see you here today.
	I just have a few comments, really.  I want to, first of all, fully 
associate myself with the comments of Ms. Eshoo from California.  And when she 
used the phrase being on the wrong side of history, it sounds kind of like 
maybe 
a hyperbole of sorts, but I have to think that for so many reasons, that when 
my 
grandchildren, the oldest of which is now 8 years old, looks back, perhaps, on 
this debate today, and her contemporaries as an adult, her contemporaries, I 
think, will be stunned by a lack of urgency about dealing with this issue.  
And 
I think that, for so many reasons, that we have to get so much more serious 
about addressing the problem, and perhaps, in some ways, the least of these is 
what Secretary Bodman called the crisis, referring to the cost of energy.  And 
hopefully, in the long term, we are dealing with that issue, as we reduce our 
consumption.
	But if we just take the issue of national security, and consider that 
if 
we were under Representative Boehlert's bill, their calculation is that 
raising 
the fleet-wide average to 33 miles per gallon would reduce our consumption by 
2.6 million barrels of oil a day by 2025, which would eliminate the need, at 
least the current need, for Persian Gulf oil.  So there are energy security 
issues.
	But most of all, we are dealing with an issue of the future of human 
life 
and other life, polar bears, et cetera, but human life on this planet right 
now.  
And how anyone at this date could be diddling over small numbers of, to reduce 
our consumption of fossil fuels, which of course, we are also running out of, 
and we have got to deal with that, but the global warming, I think everyone 
now, 
including the Administration, has acknowledged it as a fact, and time is 
really running out on that front.
	And so I am alarmed somewhat that we are so casually, perhaps 
intellectually, in talking about all these numbers, discussing yet again this 
issue of fuel efficiency, of reducing the amount of gas that each one of our 
cars uses.  And the notion was posited that well, consumers are buying them, 
and 
yes, while some may be buying Humvees, I would say that most consumers are 
looking for an opportunity to buy, at their neighborhood dealer, a car that is 
more fuel efficient.  And I am not an expert on the auto industry, and I know 
we 
will have some on the next panel, but I can't imagine that we have done the 
auto 
industry itself and the United States any favors by not encouraging that cars 
be 
made more fuel efficient.  That would increase their competitiveness.
	So what it says in today's ``Foolishness on Fuel,'' the New York Times 
editorial, it talks about the Boehlert bill, and then it says:  ``If that 
sounds 
radically ambitious, consider this bit of history.  In 1990, two 
Senators--Slade 
Gorton, a conservative Republican, and Richard Bryan, a liberal Democrat--
proposed raising fuel economy standards to 40 miles a gallon over 10 years.'' 
Of 
course, we would have long passed those 10 years.  ``They actually got 57 
votes 
for their proposal, which lost to a filibuster.  Had it passed, we would 
probably be consuming half the gasoline we now use, and be in better shape to 
deal with today's price squeeze.''  And today's environmental concerns, too, I 
might add.  ``There is still time to prepare for the next one,'' this 
editorial says.
	So all I would say is that let us get real.  Let us get serious.  Let 
us 
have a sense of urgency about dealing with this.  Yes, car auto safety is 
important, but everything pales in terms of are human beings going to be able 
to 
survive on this planet?  And I thank you for listening to me, and being so 
patient all morning.  And in dealing with it.
	SECRETARY MINETA.  Chairman, if I might.
	It is not that we are lacking in urgency.  We are urgently asking for 
Congress for this authority to proceed, so that we can restructure the 
program, and yet, in restructuring the program, it will take time.
	It would be like President Kennedy's call, as Mr. Markey indicated, 
for us 
to get to the Moon.  The urgency was to start today, but it still took 10 
years 
to get to the Moon.  Well, we are in the same position.  It is still going to 
take us 18 months, minimum, plus a year, to reform CAFE.  So the urgency is 
for 
us to be given the authority to start, even though it will take time to get 
there.  And at the same time, the urgency is on doing the right thing, whether 
it be on safety, or whether it be on the impact on the industry itself, and 
the impact on the environment.
	So all of these things, we take into consideration, and it is not that 
we 
are shying away from urgency.  Urgency still is a very big part of what we 
want 
you to grant to us, in terms of this authority, so that we can get started on 
this as soon as possible.
	Thank you very much, Mr. Chairman.
	MR. BILIRAKIS.  Just one question.
	CHAIRMAN BARTON.  Thank you, Mr. Secretary.  That is all the members who 
have got questions for you.
	MR. BILIRAKIS.  Mr. Chairman, I wondered, could I ask one question?
	CHAIRMAN BARTON.  All right.
	MR. BILIRAKIS.  Very quickly, a quick question, quick answer?
	CHAIRMAN BARTON.  Mr. Bilirakis is recognized for one question.
	MR. BILIRAKIS.  I am stuck to take over the Chair when you leave, so I 
have the prerogative.
	The 18 months that you refer to, plus one year, et cetera, and we are 
all 
concerned, Mr. Secretary, that haste not make waste, and we are, you know, we 
always worry about unintended consequences of our acts, and things of that 
nature, but is that 18 months then 1 year necessary?  I mean, is there any way 
to speed up this process, even if it might take legislation on our part?  We 
realize that we are talking about years, now, before--this certainly is not a 
quick fix.  But it is a fix that you have already indicated, and we have said 
for many years needs to be made.  I mean, we can't continue to be dependent on 
this foreign oil the way that we are, and the only time we address it, 
obviously, when we have an emergency like this.
	But what do you have to say about that, very quickly?
	SECRETARY MINETA.  In terms of shortening that time period, I would 
assume 
that it would require statutory change on that 18-month piece of it.  There is 
no statutory provision on how long it takes us to study it.  That is just a 
question of how many people do we have, the time it takes to get the 
information, and--
	MR. BILIRAKIS.  You have still got to give Detroit time to do the 
engineering.
	SECRETARY MINETA.  But that is the part of it that is statutory.
	MR. BILIRAKIS.  Yeah.  
	CHAIRMAN BARTON.  What we could do is just have a ban on any car that 
gets 
less than 40 miles to the gallon being sold.  Now, let us just have a show of 
hands right now, of the people that are in this room, how many of you drive 
something that gets more than 40 miles to the gallon?  Raise your hand.  The 
Chair counts four people out of approximately 100.
	All right.  Let us see a show of hands of how many people would like a 
ban 
on any vehicle that gets less than 40 miles to the gallon, including work 
vehicles, being sold to the American public beginning next week?  How many are 
for that?  Raise your hand.  An absolute ban.  Let the record show nobody 
raised their hand.  Nobody raised their hand.
	Thank you, Mr. Secretary.  I will see you at the White House in about 
35 minutes.
	We would like to call our next panel.  We would like to welcome our 
second, our third panel actually.  We have Mr. Fred Webber, who is the 
President 
of the Alliance of Automobile Manufacturers.  We have the Honorable Phil 
Sharp, 
who is President of Resources for the Future, and a past member of this 
committee, and a past Chairman of the Subcommittee on Energy and Power, which I 
served under him when he was in the Congress.  We have Dr. William Pizer.  Is 
it Pizer?
	DR. PIZER.  Pizer.
	CHAIRMAN BARTON.  Pizer.  Senior Fellow for Resources for the Future, 
and 
Mr. Alan Reuther, who is the Legislative Director for the International Union, 
United Automobile, Aerospace, and Agricultural Implement Workers of America.  
Mr. Reuther, are you kin to Walter Reuther?
	MR. REUTHER.  He was my uncle.
	CHAIRMAN BARTON.  Your uncle?
	MR. REUTHER.  Yes.
	CHAIRMAN BARTON.  Famous, very famous man in American history.  So we are 
glad to have all four of you gentlemen.  We are going to start with you, Mr. 
Webber.  We will give you 5 minutes to summarize your testimony, and then we 
will have some questions.
	Welcome to the committee.

STATEMENTS OF FREDERICK L. WEBBER, PRESIDENT, ALLIANCE OF AUTOMOBILE 
MANUFACTURERS; HON. PHILIP R. SHARP, PRESIDENT, RESOURCES FOR THE FUTURE; 
WILLIAM A. PIZER, SENIOR FELLOW, RESOURCES FOR THE FUTURE; AND ALAN REUTHER, 
LEGISLATIVE DIRECTOR, INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE, AND 
AGRICULTURAL IMPLEMENT WORKERS OF AMERICA

	MR. WEBBER.  Thank you, Mr. Chairman, and thank you for this 
invitation.  
The Alliance represents nine automakers, including BMW, Daimler-Chrysler, 
Ford, GM, Mazda, Mitsubishi, Porsche, Toyota, and Volkswagen.
	The Alliance members share the concerns of our customers and of this 
committee about gasoline prices, energy security, and the steps we need to 
take 
together to ensure diverse fuel supplies for the advanced technology vehicles 
on 
sale today.  There is a lot going on in the automobile industry.  Automobile 
makers are selling more than one hundred models that achieve more than 30 
miles per gallon on the highway.
	Every model is available with some fuel-efficient technology, like 
cylinder deactivation, where you can have the fuel economy you want on the 
highway, and still have the power you need when merging on a busy road.  In 
every State, automakers are selling advanced technology vehicles like hybrids, 
clean diesel, and ethanol-capable autos.  In just 5 years, we have made a lot 
of 
progress.  There are now more than 40 models of advanced technology vehicles 
on 
sale in dealer showrooms, and there are another 35 models in development.
	These advanced technology vehicles can help America achieve greater 
energy 
security.  Flexible fuel vehicles can run on up to 85 percent ethanol.  There 
are now six million flex fuel vehicles on our roads, and if they all used E-85 
fuel, the U.S. would reduce gas consumption by nearly three billion gallons a 
year.  Hybrid electric vehicles can improve fuel economy by up to 50 percent, 
while also reducing emissions.  By 2010, we expect more than 50 hybrid models 
to 
be on sale in North America, with sales approaching one million hybrids a 
year.
	Clean diesel autos provide fuel economy gains of up to 30 percent, 
which 
is why Europe is supporting environmental standards and economic incentives to 
enhance diesel sales.  Many diesels are also capable of running on biodiesel 
blends.  Hydrogen-powered autos offer great promise.  Hydrogen can power 
internal combustion engines or fuel cells, producing zero or near zero 
emissions and greater fuel economy.
	Today, eight million advanced technology and alternative fuel autos 
are on 
the road, and automakers will continue to increase volumes and new product 
offerings for years to come.  This year alone, automakers are working to sell 
one million of these vehicles, and we support incentives that can help put 
more of these highly fuel-efficient autos on the road.
	The 2005 energy bill helped by providing consumer tax incentives for 
advanced technology vehicles.  The energy bill also helped by raising the 
requirements for use of ethanol and other renewable fuels to 7.5 billion 
gallons 
a year by 2012, and by providing tax incentives that help make more pumps 
available to the driving public.  Today, the focus is on proposed legislation 
that clarifies NHTSA has authority to set new passenger car standards, and 
calls upon NHTSA to begin a rulemaking within the year.
	The Alliance believes that NHTSA should weigh very carefully the 
timing of 
any increase in passenger car standards for the following reasons.  First, the 
passenger car fleet average today already exceeds the current 27.5 miles per 
gallon standards, thanks to consumer purchasing the many fuel-efficient cars 
on sale today.
	Second, automakers are already adjusting to challenges.  Automakers 
are in 
the second year of 7 years of increasingly stringent light truck standards.  
Meeting these high standards is even more challenging, given the current 
economic state of the industry.
	Finally, we believe the most effective approach to reducing U.S. 
gasoline 
consumption is to expand the availability of alternative fuels, such as 
ethanol, 
and to help promote the sale of advanced technology vehicles that are now 
gaining traction in the market.
	However, if NHTSA does initiate a passenger car rulemaking, the 
Alliance 
will work closely with the agency in its consideration and promulgation of a 
final rule.
	Also under consideration is new authority to permit reform of a car 
CAFE 
program similar to the light truck reform finalized in March.  We recommend 
that 
Congress and NHTSA carefully consider any CAFE passenger car reform.  A lot of 
ideas have been discussed here today, and they are continuing to be discussed. 
It is a complex issue.
	With the ink barely dry on the light truck reform rule, no one has 
actual 
experience with a new system yet.  It may indeed be premature to lock in this 
new system for passenger cars at this time.
	In conclusion, Alliance members are working to sell one million 
advanced 
technology alternative fuel autos this year, and more will be offered in the 
future.  We are pleased that Congress passed consumer tax incentives for the 
purchase of some of these vehicles last year, and we urge Congress to focus on 
expanding the production, infrastructure, and distribution network for 
alternative fuels.
	Getting more American-based renewable fuels and biofuels to consumers 
will displace much more gasoline than a new passenger car CAFE requirement.
	Thank you, Mr. Chairman.
	[The prepared statement of Frederick L. Webber follows:]

PREPARED STATEMENT OF FREDERICK L. WEBBER, PRESIDENT, ALLIANCE OF AUTOMOBILE 
MANUFACTURERS

        The Alliance of Automobile Manufacturers (Alliance) is a trade 
association of 
nine car and light truck manufacturers including BMW Group, DaimlerChrysler, 
Ford Motor Company, General Motors, Mazda, Mitsubishi Motors, Porsche, Toyota 
and Volkswagen.  One out of every ten jobs in the U.S. is dependent on the 
automotive industry.
        Alliance members share the concerns of our customers and the American 
public 
about high gasoline prices and support the President's policy of reducing our 
consumption of petroleum.  Member companies have consistently improved the 
fuel 
efficiency of their products and continue to offer ever-increasing numbers of 
advanced technology vehicles-such as hybrids, clean diesels, alternative fuel 
vehicles, and others-that reduce the automotive sector's consumption of 
petroleum. 
        For example, since the 1970s, new vehicles have continued to become 
more fuel-
efficient.  EPA data demonstrate that fuel efficiency has increased steadily 
at 
nearly one to two percent per year on average from 1975 for both cars and 
light 
trucks.  Passenger car fuel economy has more than doubled from 14.2 mpg in 
1974 
to 29.1 mpg in 2004 and light truck fuel economy has increased by 60 percent 
since 1974.  But as we have noted on many previous occasions, the ultimate 
decisions about what vehicles are purchased and how they are driven belong to 
American consumers.
        And while consumers value fuel economy, they also want many other 
attributes in 
today's vehicles, such as safety, passenger and cargo room, performance, 
towing 
and hauling capacity and more.  Our challenge is to develop advanced 
technology 
vehicles that combine these attributes with improved fuel efficiency. Of 
particular focus is maintaining safety while improving fuel efficiency. 
        The auto industry leads the way when it comes to research and 
development 
investments.  Automakers are committed to being first to market with 
breakthrough technologies that can produce new generations of autos with 
advanced powertrains and fuels.  Automakers are competing to bring these 
vehicles to market, as soon as the technology is feasible, affordable and 
meets 
consumer expectations.  Each year many new advanced technology models are 
offered on dealer lots.  In just five years, the Alliance has seen the number 
of 
these vehicles grow to more than 40 models on sale in dealer showrooms with an 
additional 35 models, including hybrids, clean diesels and alternative fuel 
vehicles.  In addition, vehicles using liquid hydrogen in internal combustion 
engines (ICE), fuel cells and electric vehicles are in development.  Today, 
eight million advanced technology and alternative-fuel autos are on the road 
and 
automakers will continue to increase volumes and new product offerings for 
years 
to come.  This year more than one million advance technology and flexible fuel 
vehicles will be sold.  Automakers support incentives that can help put more 
of these highly fuel-efficient autos on the road.
        The result of all of this work is that today's drivers are learning a 
new 
vocabulary.  The following is a brief description of some of the exciting 
advanced technologies and alternative fuel vehicles being sold or currently in 
development.

Flexible Fuel Vehicles 
        An important provision of the new energy law is the increased 
promotion of 
renewable fuels in the transportation sector.  Since 1996, auto manufacturers 
have been producing vehicles capable of using high concentration blends of 
ethanol.  There will be more than six million of these E-85 capable vehicles 
on 
the road by the end of the year and nearly one million more are being added 
each 
year.  If fuel were available for all of these E-85 capable vehicles to refuel 
using only E-85, the U.S. would be able to reduce its gasoline consumption by 
nearly three billion gallons per year.  
	The recently passed energy bill will help in E-85 infrastructure 
development by raising the requirement for the use of ethanol and other 
renewable fuels to 7.5 billion gallons per year by 2012 and providing tax 
incentives aimed at making more E-85 pumps available to the driving public and 
helping to reduce reliance on oil imports. 

Hybrid-electric vehicles
	Hybrid-electric vehicles are being offered today and are saving fuel 
today 
and will increase substantially in number over the next several years.  They 
offer significant improvements in fuel economy - up to 50 percent and reduced 
emissions.  These products use electric motors to propel the vehicle or reduce 
some of the burdens on the traditional internal combustion engine and they 
capture usable energy through regenerative braking.  It is estimated that by 
2010, more than 50 hybrid nameplates will be available in North America with 
volumes approaching one million vehicles.  Hybrid technology can also be 
applied to diesels, alternative fuel and fuel cell vehicles.

Advanced lean-burn engines
	Vehicles that are powered by clean advanced lean-burn technology such 
as 
lean burn gasoline engines and direct injection diesels offer greater fuel 
economy and better performance than conventional gasoline-powered engines.  
Diesel-powered vehicles are very popular in Europe - where environmental 
standards and economic incentives have been provided to enhance their appeal.  
These types of vehicles could provide fuel economy gains of up to 30 percent 
compared to conventional vehicles.  In addition, most diesels are capable of 
running on good quality biodiesel blends of up to five percent (B5): many are 
designed to use up to twenty percent or one hundred percent biodiesel fuel 
(B20 or B100).

Fuel Cells 
	From a vehicle perspective, hydrogen-powered fuel cells offer the 
greatest 
potential improvement in fuel efficiency and emissions reductions.  It also 
creates a great opportunity for eliminating dependency on petroleum.  However, 
widespread commercialization of this technology is farther into the future.  
Hydrogen Internal Combustion Engines
	Another promising and enabling technology is hydrogen-powered ICEs.  
The 
concept of using hydrogen in internal combustion engines offers several 
advantages:  near-zero emissions, maintaining the utility, flexibility, and 
driving dynamic of today's automobile, assisting in the development of 
hydrogen 
storage technology, and developing hydrogen distribution channels and helping 
to 
promote hydrogen refueling infrastructure.
        All of these advanced technologies and alternative fuel vehicles will 
help the 
U.S. address concerns about over-reliance on imported oil.  But they will take 
time to be effective.  Tomorrow's transportation needs will be met by a 
diverse 
collection of technologies each offering drivers a unique set of attributes to 
help move their families down the road. 
        For its part, the auto industry is committed to advancing the state of 
technology and bringing new vehicles using these technologies to the market as 
quickly as possible.  Competition among the automakers will drive this process 
far better and with fewer disruptions to the marketplace than any regulations 
that can be adopted.  Furthermore, stimulating consumer demand can help 
accelerate this process.  Tax credit provisions enacted as part of the Energy 
Policy Act of 2005 have helped to spur the purchase of these highly fuel-
efficient vehicles.
        Today, automakers are offering broader vehicle offerings to provide 
consumers 
with a wide range of fuel-efficient choices, but when gasoline prices rise, 
not 
all consumers are in a position to purchase the highly fuel-efficient models 
on 
sale today.  There are over 200 million vehicles on U.S. roads, and the 
quickest 
way to reduce gasoline usage is through conservation. There are many simple, 
easy gas-saving tips for consumers.  American drivers can save gasoline 
immediately by keeping their engines tuned and their tires properly inflated.  
Smooth accelerations save gas, along with closing windows at higher speeds.  
The 
U.S. Department of Energy provides excellent gas-saving tips to drivers, and 
we 
urge the government to highlight this information as the summer driving season 
begins.  In addition, there are opportunities for infrastructure improvement 
such as improved traffic light timing that can help reduce fuel consumption.

Corporate Average Fuel Economy (CAFE)
        For over 30 years the CAFE program has been in place to provide 
requirements as 
to what each automaker's fleet of passenger cars and light trucks must 
achieve.  
While vehicle fuel-efficiency has improved, vehicles miles traveled has 
increased an average of about 1.7 percent per year for the past 30 years with 
a 
net result of little impact on energy conservation.  Currently, CAFE requires 
each automaker to meet an average fuel economy level of 27.5 mpg for all new 
passenger cars that it sells each year.  For light trucks, NHTSA recently 
announced an increase in the CAFE standards for the 2008 -2011 model years, 
marking seven straight years of fuel economy increases (from MY 2005-2011) and 
an increase of nearly 20 percent over that period.  Meeting these higher fuel 
economy standards will be a challenge, even with all the new fuel-efficient 
technologies that manufacturers are placing in vehicles today.
        When setting new standards, NHTSA must consider many elements 
including 
technological feasibility, economic practicability, the need of the U.S. to 
conserve energy and the effect of other motor vehicle standards, such as 
safety 
and emissions on fuel economy.  It is in the best interest of the public that 
we 
maintain a balance between improved fuel economy, highway safety and 
employment.  
        While the law holds manufacturers responsible for meeting CAFE standards, it is 
important to recognize that in reality, consumer purchases actually determine 
whether a manufacturer meets, exceeds, or falls short of the standards in any 
given year.  Because of this, CAFE compliance depends not only on what 
products are offered but also on what products consumers purchase.  

Proposed Legislation
	The proposed legislation would clarify that NHTSA has the authority to 
set 
new passenger car standards and calls upon NHTSA to begin a rulemaking for 
passenger cars within a year.  Also under consideration is new authority to 
permit reform of the car CAFE program.  With the ink barely dry on the recent 
light truck rule and no actual experience with the truck reform proposal, it 
may 
be a bit premature to think of locking in this new system for passenger cars 
at 
this time.  Inclusion of some broad guidance that CAFE reform, based on use of 
vehicle attributes and classes, can be considered, may be of some value to the 
agency when it does consider increasing car CAFE requirements.
	The Alliance also believes that NHTSA should very carefully weigh, the 
timing of any increases in passenger car standards in view of the current 
economic health of the industry.  No one likes high gas prices, but increasing 
passenger car standards - which takes time to effect and then years to fully 
become phased into the overall fleet of vehicles on the road - should not be 
viewed as a panacea to combat rising fuel costs.  Alliance members are only in 
the second year of seven years of increasingly stringent light truck 
standards.  
In addition, the passenger car fleet average already exceeds the current 27.5-
mpg standard - driven by consumer choices of the many very fuel-efficient cars 
offered for sale.
        The proposed legislation raises several issues concerning the 
authority NHTSA 
will have to establish new passenger automobile standards.  For instance, the 
bill repeals the current 27.5 maximum standard immediately, requiring NHTSA to 
commence rulemaking to set new standards within a year of enactment.  This 
would 
create a gap of at least several years in which there would be no standard for 
passenger automobiles.  We would recommend that the legislation maintain the 
current 27.5 mpg standard (subject to NHTSA's current authority to amend the 
standard in certain circumstances) for any time up until a new standard is set 
and for any period in which there is no standard in place.  
If NHTSA is granted authority to reform the structure of the passenger car 
standards, the agency should administer the new authority in a 
nondiscriminatory manner among manufacturers.
        The rulemaking for CAFE standards is a labor-intensive and 
resource-intensive 
process both for NHTSA and for the manufacturers.  Therefore, NHTSA should 
have 
the authority to establish a standard that could remain in effect for more 
than 
one year, as long as the agency determined by rulemaking that the standard is 
"maximum feasible'' for that multiyear period covered by the standard. 
        The discussion of car CAFE policy has also raised two additional 
issues--credit 
trading and the so-called, two fleet rule.  Credit trading is intended to 
provide flexibility options for manufacturers as they pursue compliance with 
the 
CAFE program.  Credit trading has been examined numerous times in the past 
without agreement as to its actual value.  Department of Transportation 
recently 
considered adding credit trading to the light truck rule and decided not to do 
it.  
        As regards to the two fleet provision, the CAFE statute requires 
separation of 
the domestically-manufactured and non-domestically manufactured vehicles in 
the 
passenger car fleet, with separate compliance required by each sub-fleet.  The 
original policy justification for the two fleet rule was to discourage 
manufacturers from shifting their production of smaller, more fuel efficient 
cars to foreign factories.  Recognizing that a fleet-wide average structure 
for 
the fuel economy standards would effectively require manufacturers to include 
smaller, more fuel-efficient cars in their fleets, Congress wanted to avoid 
any 
inducement to increase the importation of foreign-produced cars.  If there are 
any proposed changes to the two fleet requirement they should be carefully 
reviewed. 

Conclusion
        We believe the most effective approach to pursuing reductions in U.S. 
gasoline 
consumption is to expand the availability of alternative fuels such as ethanol 
and to help promote the sale of advanced technology and alternative fuel 
vehicles that are currently gaining traction in the market.
        As previously stated, Alliance members are currently offering for sale 
more than 
one million of these advanced technology and alternative fuel autos, and more 
will be offered in the future.  We are pleased that Congress passed consumer 
tax 
incentives for the purchase of some of these vehicles last year, and we urge 
Congress to focus on expanding the production, infrastructure and distribution 
network for alternative fuels.  Getting more of the American based renewable 
and 
biofuels into the market and available to consumers will displace much more 
gasoline than a new passenger car CAFE requirement.
However, if NHTSA does initiate a passenger car rulemaking, the Alliance and 
its 
members will work closely with the agency in its consideration and 
promulgation 
of a final rule.  Setting CAFE standards is a complicated, rigorous and 
arduous 
process.  NHTSA considered over 45,000 comments and spent countless man-years 
in the consideration of its light truck rule.  
	The automakers remain committed to populating America's roadways with 
the 
latest innovative vehicle technologies.  Competition among the companies will 
drive much of this innovation.  And the changing needs and wants of American 
consumers also play a huge role in driving automaker decisions.   

	CHAIRMAN BARTON.  Thank you, Mr. Webber.  We now want to recognize the 
former Chairman of the Energy and Power Subcommittee, the Honorable Phil 
Sharp.  It is good to have you with us.
        MR. SHARP.  Thank you very much, Mr. Chairman, and thank you so much 
for inviting me to testify, I think.  These hearings require great patience on 
your part, I understand, and you do it with considerable skill.
	But let me quickly, I have to indicate for the record that I am 
President 
of Resources for the Future, a nonpartisan think tank which does not take 
positions on public policy, so the remarks here are those of my own.
	But obviously, I speak from some experience, having been involved in 
CAFE 
since its creation in 1975, when I was a member of the committee here, and 
from 
recently being a part of the National Academy of Sciences study that has been 
referred to multiple times this year, that reported in 2002 that we ought to 
reform CAFE, and we ought to increase the standards.
	Additionally, I have been a part of the National Commission on Energy 
Policy, a bipartisan, private effort, funded by the Hewlett Foundation, that 
likewise recommended increasing significantly CAFE, and also, reforming the 
system.  In the case of both the Academy study and the Commission, the 
fundamental reasons given for urging these kinds of policies, is to try to 
help 
the country deal over the long term with oil security issues, and also deal 
with 
the troubling issue of carbon dioxide emissions, which are on the rise, from 
the 
auto sector, as well as throughout our economy, and this obviously affects 
climate change.
	But also, the concern has been as to why not leave it to the 
marketplace, 
that we have 30 years of experience with the oil market, and the prices 
simply, 
as one would expect, rise and they fall, and indeed, we are at a painful 
moment 
when they have risen in this country, with intense interest on alternative 
fuels, as we heard this morning, an intense interest on fuel economy.  Not 
mentioned, but great concern ought to be on public transit as well, and other 
kinds of issues.
	And yet, what we have is a long history of experience with this on 
again, 
off again interest, as these prices rise and fall.  The consumer has on again, 
off again interest in whether to buy a fuel-efficient car, investors whether 
to 
invest in alternative fuels, and the Government whether to pursue policies 
that help encourage these kinds of developments.
	So this history of price uncertainty is one of the reasons for trying 
to 
have a more consistent government policy.  Let me quickly turn to some of the 
key findings from the National Academy's report, which answers some of the 
questions that were raised, including yours, Mr. Bilirakis, and my long-term 
friend and colleague, through many fights and wonderful collaborations in this 
committee.  First and foremost, the committee identified, it had, you will be 
glad to know, many nonpolitical people on it that were engineers, and it 
identified technologies that are available in the marketplace, many of them in 
some vehicle or other at this point, which are eligible and could be, if they 
are used more broadly within the fleet, lead to fuel economy improvements.
	That was the fundamental thrust, that technologies clearly are 
available.  
Some additional ones are on the drawing board, and are close.  Therefore, 
there 
is clear prospect of being able to do a number of things technologically to 
upgrade the fleet over a time period of something like 10 to 15 years.
	Secondly, in trying to assess the costs, and this is a very difficult 
thing to do, on which there are many differences of opinion about the costs of 
how you put these pieces of technology together, the committee outlined ways 
in 
which they thought the consumer could come out at least even, that is, there 
was 
an additional cost to the vehicle that the consumer could save over the life 
of 
the vehicle, in terms of the gasoline savings, and so they identified a range 
of how far you might be able to go.
	Third, and I think very important to remember, is that in order to 
avoid 
the harmful effects that some members of the committee raised, in terms of the 
waste of capital, the unemployment in the industry, the dislocation of the 
American domestic auto manufacturers in particular, it was recommended that 
you 
allow sufficient lead times for technology, and not try to cram the system, 
because frankly, you will get very little improvement anyway, social benefit, 
and you get it at an unnecessarily high cost.  That is not to say that one 
should not move forward, it is simply to say pace it.
	And finally, it should be recognized the committee strongly endorsed a 
strong Federal research and development program, in conjunction with the 
industry as we have had under the past several Administrations, to try to look 
toward long-term technologies.
	Let me turn very quickly to a couple of the issues that are before 
you.  
One is whether or not the Congress ought to set the numbers, and the other is 
what kind of delegation of authority.  I am not going to comment much on 
these, 
except to say that in the case of the National Academy and of the commission, 
in 
neither case were the collective groups able to come to an agreement on what 
the 
numbers actually ought to be, because they all agree this is a complex 
decision, 
and it is a political tradeoff on a variety of social concerns, whether it is 
safety, employment, and particularly, fuel economy.
	Secondly, the commission itself did actually say delegate this to 
NHTSA, 
and urged the Congress to do so.  My own view, from 20 years of experience 
here 
is that the Congress should give legislative guidance to the agency.  That can 
include deadlines, and the Congress can give throughout that process very 
strong 
Congressional oversight.  It seems to me that may be a wise way to go.  Others 
may have other opinions.
	Let me just conclude by saying that I think both these, the committee 
and 
the commission, and many other people have looked at this, and believe that 
CAFE 
is a very imperfect policy, has a number of flaws to it, but it has had a 
major 
impact on the marketplace, and the Academy of Sciences has said that we would 
probably be using about 2.8 million barrels of oil a day more today had we not 
had this policy in place.  Others may dispute those figures, but at least, I 
think it is fair to say it has clearly had an impact.
	But I do think it is important for us to recognize as Americans, as 
some 
of the members of the committee pointed out, that the task before us is huge, 
and that the fact is that many experts believe that the most effective 
approach 
to reducing fuel consumption, if that is what our goal is, and it seems to me 
it 
ought to be one of our goals, would be a stronger gasoline tax, or a 
broad-based 
oil tax.  I realize the popularity of this, because this would not only 
encourage how we would purchase vehicles, which is a major decision that 
impacts 
through fuel economy, but how and whether we drive, and whether we use 
alternative means of transportation.
	CAFE has no positive impact on how much driving occurs in this 
country.  
Indeed, it can be argued that by reducing the cost of driving, assuming there 
is 
a high cost of gasoline, it probably encourages some additional driving, and 
this is one of our problems, how to get control over the continual growth of 
vehicle miles traveled in this country, which is a major driver to how much 
gasoline we consume, and how much carbon emissions we put into the air.
	I realize that many of these experts, of course, are not subject to 
popular election.
	[The prepared statement of Hon. Philip R. Sharp follows:]

PREPARED STATEMENT OF THE HON. PHILIP R. SHARP, PRESIDENT, RESOURCES FOR THE 
FUTURE

        Mr. Chairman, thank you for inviting me to testify. My name is Philip 
Sharp and 
I am president of Resources for the Future (RFF), a nonpartisan, social 
science 
think tank, which has dealt with energy and resource issues for more than 50 
years. As an institution, however, RFF does not take positions nor engage in 
advocacy, so the opinions expressed here are my own.
        For the record, I have been involved with fuel economy issues in 
several ways.
        During my service in Congress and on this committee (1975-1995), I 
participated 
in the creation of the Corporate Average Fuel Economy (CAFE) policy and in the 
few legislative changes made since then. 
        In 1975, the full House was presented with a choice between two 
dramatically 
different alternatives for dealing with fuel economy: CAFE from the Commerce 
Committee and a gas-guzzler tax from the Ways and Means Committee. As Chairman 
of the Energy and Power Subcommittee at that time, Mr. Dingell was a major 
force in the outcome.
        More recently, I was a member of the CAFE review panel sponsored by the National 
Research Council, an arm of the National Academy of Sciences. Its 2002 report 
recommended that the government take further action to improve passenger 
vehicle 
fuel economy and suggested possible reforms in the CAFE policy. (See: 
Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards at 
www.nap.edu)
        Currently, I am also a member of the National Commission on Energy 
Policy, a 
private bipartisan panel funded by the Hewlett Foundation, which in 2004 
recommended a significant increase in CAFE standards along with reforms to the 
current policy.
(See: Ending the Energy Stalemate: A Bipartisan Strategy to Meet America's 
Energy Challenges at www.energycommission.org.) 
        Both the Academy committee and the Commission recommended federal 
action to 
improve fuel economy for the purpose of mitigating two major concerns: oil 
security and growing carbon dioxide (CO2) emissions. 
        Our growing consumption of oil, concentrated in the transportation 
sector, 
entails major risks associated with our dependence on the global oil market. 
And 
this consumption is a major contributor of CO2 to the atmosphere and hence to 
global climate change.
        Among oil-market concerns is the possibility of a serious supply 
disruption 
caused by political turmoil or terrorism with severe economic consequences; 
the 
pressure to compromise important U.S. foreign policy goals for the sake of oil 
supply; the possibility that oil production will peak and dramatically 
intensify global competition for supplies; and others. 
        Among the uncertainties we face is where oil prices will go in the 
years ahead. 
Just as the dramatic rise in oil and natural gas prices over the last two 
years 
was not predicted, it is now unclear whether oil prices will rise further, or 
drop back in the $40-per-barrel range as some have predicted, or take a real 
nose dive as they did in 1986 and 1999.
        The history of price uncertainty has meant a history of on-again, 
off-again 
interest by consumers, investors, and government in fuel efficiency and in 
alternative fuels. 
        In the face of such uncertainty, many have concluded, including the 
Bipartisan 
Commission, that it is prudent for the United States to maintain policies that 
push markets to improve fuel efficiency, to advance alternative fuels, and to 
expand public transit options, in order to mitigate against global market 
risks and to reduce CO2 emissions growth. 
        Action now by Congress on fuel economy standards obviously will have 
no 
immediate impact on gasoline prices. Indeed, it will take some years for 
changes in the policy to have an impact at all. 
        But action now on fuel economy standards can help the United States 
address important concerns over the longer term.
        I trust we all recognize that there is no fast or cheap way to escape 
the risks 
of oil dependence. Undoubtedly, one of the expedient ways to reduce dependence 
would be to welcome higher oil and gasoline prices rather than decry them-an 
unlikely prospect for today's consumers or leaders.  

The Academy Report

        Let me call your attention to a few of the findings and 
recommendations of the 
Academy committee, which may be useful in your consideration today. Attached, 
as Appendix A, is a portion of that report. 
        The study notes, in Finding 5, ``technologies exist that if applied to 
passenger 
cars and light duty trucks, would significantly reduce fuel consumption within 
15 years.'' 
        It notes in Finding 6 that much of this could be accomplished with the 
consumer 
breaking even - meaning that the savings in gasoline costs would offset the 
added cost to a new vehicle. And that calculation was made assuming gasoline 
only costs $1.50 per gallon. Furthermore, the hybrid car possibility has greatly 
advanced since the report; given its costs in 2001, the committee did not 
consider it a realistic near-term option. 
        The committee recommended several possible reforms (Recommendation 2) 
such as 
trading fuel economy credits, which has also been a recommendation of RFF 
researchers (see Fischer, Carolyn and Paul R. Portney, 2004, ``Rewarding 
Automakers for Fuel Economy Improvements,'' chapter 6 in New Approaches on Energy 
and the Environment: Policy Advice for the President, RFF Press).  
        The committee cautioned that a major redesign (Recommendation 3) 
required more study than the committee had been able to devote to it.
        To avoid harmful effects on companies, on employment, and on 
consumers, the 
committee suggested allowing plenty of time for industry to meet stiffer 
requirements.
 	And finally, the government should continue to fund research on 
breakthrough technologies.

Delegation to NHTSA

        Neither the National Academy committee nor the Commission was willing 
or able to 
agree on recommended numerical CAFE targets - in part, because the task is a 
complex one and, in part, because the targets represent tradeoffs among 
various 
societal values and therefore is a political decision, as the Academy 
committee report states.
        The Commission, in fact, recommended delegation of that 
responsibility: `` 
Congress should instruct NHTSA to significantly strengthen federal fuel 
economy 
standards...to take full advantage of the efficiency opportunities provided by 
currently available technologies and emerging hybrid and advanced diesel 
technologies.'' (Appendix B is attached)
        Given the considerable burden of legislating in this area, it seems 
appropriate 
that setting the targets and redesigning the policy could be delegated to the 
National Highway Safety Transportation Authority with legislative guidance and 
strong congressional oversight.

Conclusion

        CAFE has been a very imperfect, but important, policy in dealing with 
fuel 
consumption. The Academy concluded, in 2002, that our oil imports would have 
been 2.8 million barrels a day higher had the policy not existed. (See Finding 
l in Appendix A).
        Many experts believe that a more effective approach to reducing fuel 
consumption 
- and a more cost-effective approach for the U.S. economy - would be stronger 
gasoline tax or oil tax that would not only encourage consumers to purchase 
more 
efficient vehicles but also encourage them to be more economical in their 
driving, a critical component that CAFE does nothing to address. Indeed, such 
a tax would have a more rapid impact on consumption than is possible through 
CAFE. These experts, of course, are not subject to popular election.


APPENDIX A

Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards

         Committee on the Effectiveness and Impact of Corporate
                  Average Fuel Economy Standards (CAFE)

                Board on Energy and Environmental Systems
             Division on Engineering and Physical Sciences

                    Transportation Research Board

                      National Research Council

                                 2002



                       National Academy Press
                    2101 Constitution Avenue, NW
                                Box 285
                        Washington, DC 20055
                             202-334-3313
                              www.nap.edu


                         Excerpted from the
                          EXECUTIVE SUMMARY

FINDINGS
Finding 1. The CAFE program has clearly contributed to increased fuel economy 
of 
the nation's light-duty vehicle fleet during the past 22 years. During the 
1970s, high fuel prices and a desire on the part of automakers to reduce costs 
by reducing the weight of vehicles contributed to improved fuel economy. CAFE 
standards reinforced that effect. Moreover, the CAFE program has been 
particularly effective in keeping fuel economy above the levels to which it 
might have fallen when real gasoline prices began their long decline in the 
early 1980s. Improved fuel economy has reduced dependence on imported oil, 
improved the nation's terms of trade, and reduced emissions of carbon dioxide, 
a 
principal greenhouse gas, relative to what they otherwise would have been. If 
fuel economy had not improved, gasoline consumption (and crude oil imports) 
would be about 2.8 million barrels per day greater than it is, or about 14 
percent of today's consumption. 

Finding 2. Past improvements in the overall fuel economy of the nation's 
light-duty vehicle fleet have entailed very real, albeit indirect, costs. In 
particular, all but two members of the committee concluded that the 
downweighting and downsizing that occurred in the late 1970s and early 1980s, 
some of which was due to CAFE standards, probably resulted in an additional 
1,300 to 2,600 traffic fatalities in 1993. 2 In addition, the diversion of 
carmakers' efforts to improve fuel economy deprived new-car buyers of some 
amenities they clearly value, such as faster acceleration, greater carrying or 
towing capacity, and reliability. 

Finding 3. Certain aspects of the CAFE program have not functioned as 
intended: 
        * The distinction between a car for personal use and a truck for work 
use/cargo 
transport has broken down, initially with minivans and more recently with 
sport 
utility vehicles (SUVs) and cross-over vehicles. The car/truck distinction has 
been stretched well beyond the original purpose. 
        * The committee could find no evidence that the two-fleet rule 
distinguishing 
between domestic and foreign content has had any perceptible effect on total 
employment in the U.S. automotive industry. 
        * The provision creating extra credits for multifuel vehicles has had, 
if any, a 
negative effect on fuel economy, petroleum consumption, greenhouse gas 
emissions, and cost. These vehicles seldom use any fuel other than gasoline 
yet enable automakers to increase their production of less fuel efficient 
vehicles. 

Finding 4. In the period since 1975, manufacturers have made considerable 
improvements in the basic efficiency of engines, drive trains, and vehicle 
aerodynamics. These improvements could have been used to improve fuel economy 
and/or performance. Looking at the entire light-duty fleet, both cars and 
trucks, between 1975 and 1984, the technology improvements were concentrated 
on 
fuel economy: It improved by 62 percent without any loss of performance as 
measured by 0-60 mph acceleration times. By 1985, lightduty vehicles had 
improved enough to meet CAFE standards. Thereafter, technology improvements 
were 
concentrated principally on performance and other vehicle attributes 
(including 
improved occupant protection). Fuel economy remained essentially unchanged 
while 
vehicles became 20 percent heavier and 0-60 mph acceleration times became, on 
average, 25 percent faster. 

Finding 5. Technologies exist that, if applied to passenger cars and 
light-duty 
trucks, would significantly reduce fuel consumption within 15 years. Auto 
manufacturers are already offering or introducing many of these technologies 
in 
other markets (Europe and Japan, for example), where much higher fuel prices 
($4 
to $5/gal) have justified their development. However, economic, regulatory, 
safety, and consumer-preference-related issues will influence the extent to 
which these technologies are applied in the United States. 
        Several new technologies such as advanced lean exhaust gas 
aftertreatment 
systems for high-speed diesels and direct-injection gasoline engines, which 
are 
currently under development, are expected to offer even greater potential for 
reductions in fuel consumption. However, their development cycles as well as 
future regulatory requirements will influence if and when these technologies 
penetrate deeply into the U.S. market. 
        The committee conducted a detailed assessment of the technological 
potential for 
improving the fuel efficiency of 10 different classes of vehicles, ranging 
from 
subcompact and compact cars to SUVs, pickups, and minivans. In addition, it 
estimated the range in incremental costs to the consumer that would be 
attributable to the application of these engine, transmission, and vehicle-
related technologies. 
        Chapter 3 presents the results of these analyses as curves that 
represent the 
incremental benefit in fuel consumption versus the incremental cost increase 
over a defined baseline vehicle technology. Projections of both incremental 
costs and fuel consumption benefits are very uncertain, and the actual results 
obtained in practice may be significantly higher or lower than shown here. 
Three 
potential development paths are chosen as examples of possible product 
improvement approaches, which illustrate the trade-offs auto manufacturers may 
consider in future efforts to improve fuel efficiency. 
Assessment of currently offered product technologies suggests that light-duty 
trucks, including SUVs, pickups, and minivans, offer the greatest potential to 
reduce fuel consumption on a total-gallons-saved basis. 

Finding 6. In an attempt to evaluate the economic trade-offs associated with 
the 
introduction of existing and emerging technologies to improve fuel economy, 
the 
committee conducted what it called cost-efficient analysis. That is, the 
committee identified packages of existing and emerging technologies that could 
be introduced over the next 10 to 15 years that would improve fuel economy up 
to 
the point where further increases in fuel economy would not be reimbursed by 
fuel savings. The size, weight, and performance characteristics of the 
vehicles 
were held constant. The technologies, fuel consumption estimates, and cost 
projections described in Chapter 3 were used as inputs to this cost-efficient 
analysis. 
        These cost-efficient calculations depend critically on the assumptions 
one makes 
about a variety of parameters. For the purpose of calculation, the committee 
assumed as follows: (1) gasoline is priced at $1.50/gal, (2) a car is driven 
15,600 miles in its first year, after which miles driven declines at 4.5 
percent 
annually, (3) on-the-road fuel economy is 15 percent less than the 
Environmental 
Protection Agency's test rating, and (4) the added weight of equipment 
required 
for future safety and emission regulations will exact a 3.5 percent fuel 
economy penalty. 
        One other assumption is required to ascertain cost-efficient 
technology 
packages-the horizon over which fuel economy gains ought to be counted. Under 
one view, car purchasers consider fuel economy over the entire life of a new 
vehicle; even if they intend to sell it after 5 years, say, they care about 
fuel 
economy because it will affect the price they will receive for their used car. 
Alternatively, consumers may take a shorter-term perspective, not looking 
beyond, say, 3 years. This latter view, of course, will affect the 
identification of cost-efficient packages because there will be many fewer 
years 
of fuel economy savings to offset the initial purchase price. 
        The full results of this analysis are presented in Chapter 4. To 
provide one 
illustration, however, consider a midsize SUV. The current sales-weighted 
fleet 
fuel economy average for this class of vehicle is 21 mpg. If consumers 
consider 
only a 3-year payback period, fuel economy of 22.7 mpg would represent the 
cost-
efficient level. If, on the other hand, consumers take the full 14-year 
average 
life of a vehicle as their horizon, the cost-efficient level increases to 28 
mpg 
(with fuel savings discounted at 12 percent). The longer the consumer's 
planning 
horizon, in other words, the greater are the fuel economy savings against 
which 
to balance the higher initial costs of fuel-saving technologies. 
        The committee cannot emphasize strongly enough that the cost-efficient 
fuel 
economy levels identified in Tables 4-2 and 4-3 in Chapter 4 are not 
recommended 
fuel economy goals. Rather, they are reflections of technological 
possibilities, 
economic realities, and assumptions about parameter values and consumer 
behavior. Given the choice, consumers might well spend their money on other 
vehicle amenities, such as greater acceleration or towing capacity, rather 
than 
on the fuel economy cost-efficient technology packages. 

Finding 7. There is a marked inconsistency between pressing automotive 
manufacturers for improved fuel economy from new vehicles on the one hand and 
insisting on low real gasoline prices on the other. Higher real prices for 
gasoline-for instance, through increased gasoline taxes-would create both a 
demand for fuel-efficient new vehicles and an incentive for owners of existing 
vehicles to drive them less. 

Finding 8. The committee identified externalities of about $0.30/gal of 
gasoline 
associated with the combined impacts of fuel consumption on greenhouse gas 
emissions and on world oil market conditions. These externalities are not 
necessarily taken into account when consumers purchase new vehicles. Other 
analysts might produce lower or higher estimates of externalities. 

Finding 9. There are significant uncertainties surrounding the societal costs 
and benefits of raising fuel economy standards for the light-duty fleet. These 
uncertainties include the cost of implementing existing technologies or 
developing new ones; the future price of gasoline; the nature of consumer 
preferences for vehicle type, performance, and other features; and the 
potential 
safety consequences of altered standards. The higher the target for average 
fuel 
economy, the greater the uncertainty about the cost of reaching that target. 

Finding 10. Raising CAFE standards would reduce future fuel consumption below 
what it otherwise would be; however, other policies could accomplish the same 
end at lower cost, provide more flexibility to manufacturers, or address 
inequities arising from the present system. Possible alternatives that appear 
to 
the committee to be superior to the current CAFE structure include tradable 
credits for fuel economy improvements, feebates, 3 higher fuel taxes, 
standards 
based on vehicle attributes (for example, vehicle weight, size, or payload), 
or some combination of these. 

Finding 11. Changing the current CAFE system to one featuring tradable fuel 
economy credits and a cap on the price of these credits appears to be 
particularly attractive. It would provide incentives for all manufacturers, 
including those that exceed the fuel economy targets, to continually increase 
fuel economy, while allowing manufacturers flexibility to meet consumer 
preferences. Such a system would also limit costs imposed on manufacturers and 
consumers if standards turn out to be more difficult to meet than expected. It 
would also reveal information about the costs of fuel economy improvements and 
thus promote better-informed policy decisions. 

Finding 12. The CAFE program might be improved significantly by converting it 
to 
a system in which fuel economy targets depend on vehicle attributes. One such 
system would make the fuel economy target dependent on vehicle weight, with 
lower fuel consumption targets set for lighter vehicles and higher targets for 
heavier vehicles, up to some maximum weight, above which the target would be 
weight-independent. Such a system would create incentives to reduce the 
variance 
in vehicle weights between large and small vehicles, thus providing for 
overall 
vehicle safety. It has the potential to increase fuel economy with fewer 
negative effects on both safety and consumer choice. Above the maximum weight, 
vehicles would need additional advanced fuel economy technology to meet the 
targets. The committee believes that although such a change is promising, it 
requires more investigation than was possible in this study. 

Finding 13. If an increase in fuel economy is effected by a system that 
encourages either downweighting or the production and sale of more small cars, 
some additional traffic fatalities would be expected. However, the actual 
effects would be uncertain, and any adverse safety impact could be minimized, 
or 
even reversed, if weight and size reductions were limited to heavier vehicles 
(particularly those over 4,000 lb). Larger vehicles would then be less 
damaging 
(aggressive) in crashes with all other vehicles and thus pose less risk to 
other drivers on the road. 

Finding 14. Advanced technologies-including direct-injection, lean-burn 
gasoline 
engines; direct-injection compression-ignition (diesel) engines; and hybrid 
electric vehicles-have the potential to improve vehicle fuel economy by 20 to 
40 
percent or more, although at a significantly higher cost. However, lean-burn 
gasoline engines and diesel engines, the latter of which are already producing 
large fuel economy gains in Europe, face significant technical challenges to 
meet the Tier 2 emission standards established by the Environmental Protection 
Agency under the 1990 amendments to the Clean Air Act and California's low-
emission-vehicle (LEV II) standards. The major problems are the Tier 2 
emissions standards for nitrogen oxides and particulates and the requirement 
that emission 
control systems be certified for a 120,000-mile lifetime. If direct-injection 
gasoline and diesel engines are to be used extensively to improve light-duty 
vehicle fuel economy, significant technical developments concerning emissions 
control will have to occur or some adjustments to the Tier 2 emissions 
standards 
will have to be made. Hybrid electric vehicles face significant cost hurdles, 
and fuel-cell vehicles face significant technological, economic, and fueling 
infrastructure barriers. 

Finding 15. Technology changes require very long lead times to be introduced 
into the manufacturers' product lines. Any policy that is implemented too 
aggressively (that is, in too short a period of time) has the potential to 
adversely affect manufacturers, their suppliers, their employees, and consumers. 
Little can be done to improve the fuel economy of the new vehicle fleet for 
several years because production plans already are in place. The widespread 
penetration of even existing technologies will probably require 4 to 8 years. 
For emerging technologies that require additional research and development, 
this 
time lag can be considerably longer. In addition, considerably more time is 
required to replace the existing vehicle fleet (on the order of 200 million 
vehicles) with new, more efficient vehicles. Thus, while there would be 
incremental gains each year as improved vehicles enter the fleet, major 
changes in the transportation sector's fuel consumption will require decades. 

RECOMMENDATIONS
Recommendation 1. Because of concerns about greenhouse gas emissions and the 
level of oil imports, it is appropriate for the federal government to ensure 
fuel economy levels beyond those expected to result from market forces alone. 
Selection of fuel economy targets will require uncertain and difficult trade-
offs among environmental benefits, vehicle safety, cost, oil import 
dependence, 
and consumer preferences. The committee believes that these trade-offs 
rightfully reside with elected officials. 

Recommendation 2. The CAFE system, or any alternative regulatory system, 
should 
include broad trading of fuel economy credits. The committee believes a 
trading 
system would be less costly than the current CAFE system; provide more 
flexibility and options to the automotive companies; give better information 
on 
the cost of fuel economy changes to the private sector, public interest 
groups, 
and regulators; and provide incentives to all manufacturers to improve fuel 
economy. Importantly, trading of fuel economy credits would allow for more 
ambitious fuel economy goals than exist under the current CAFE system, while 
simultaneously reducing the economic cost of the program. 

Recommendation 3. Consideration should be given to designing and evaluating an 
approach with fuel economy targets that are dependent on vehicle attributes, 
such as vehicle weight, that inherently influence fuel use. Any such system 
should be designed to have minimal adverse safety consequences. 

Recommendation 4. Under any system of fuel economy targets, the two-fleet rule 
for domestic and foreign content should be eliminated. 

Recommendation 5. CAFE credits for dual-fuel vehicles should be eliminated, 
with 
a long enough lead time to limit adverse financial impacts on the automotive 
industry. 

Recommendation 6. To promote the development of longer-range, breakthrough 
technologies, the government should continue to fund, in cooperation with the 
automotive industry, precompetitive research aimed at technologies to improve 
vehicle fuel economy, safety, and emissions. It is only through such 
breakthrough technologies that dramatic increases in fuel economy will become 
possible. 

Recommendation 7. Because of its importance to the fuel economy debate, the 
relationship between fuel economy and safety should be clarified. The 
committee 
urges the National Highway Traffic Safety Administration to undertake 
additional 
research on this subject, including (but not limited to) a replication, using 
current field data, of its 1997 analysis of the relationship between vehicle 
size and fatality risk. 

NOTES
1	Conference Report on H.R. 4475, Department of Transportation and 
Related 
Agencies Appropriations Act, 2001. Report 106-940, as published in the 
Congressional Record, October 5, 2000, pp. H8892-H9004. 
2	A dissent by committee members David Greene and Maryann Keller on the 
impact of downweighting and downsizing is contained in Appendix A. They 
believe 
that the level of uncertainty is much higher than stated and that the change 
in 
the fatality rate due to efforts to improve fuel economy may have been zero. 
Their dissent is limited to the safety issue alone. 
3	Feebates are taxes on vehicles achieving less than the average fuel 
economy coupled with rebates to vehicles achieving better than average fuel 
economy. 


APPENDIX B

Ending the Energy Stalemate
A Bipartisan Strategy to meet America's Energy Challenges

The National Commission on Energy Policy

2004


National Commission on Energy Policy
1616 H Street, NW
Sixth floor
Washington, DC 20006
202-637-0400
www.energycommission.org


POLICY RECOMMENDATIONS
2. Reduce U.S. Oil Consumption through Increased Vehicle Efficiency and 
Production of Alternative Fuels

        Reducing U.S. oil consumption is a critical complement to the measures 
described 
in previous sections for expanding and diversifying global supplies of oil. A 
key to slowing continued growth in U.S. oil consumption - which is otherwise 
projected to increase by more than 40 percent over the next two decades - is 
breaking the current political stalemate on changing Corporate Average Fuel 
Economy (CAFE) standards for new motor vehicles. Although recommendations in 
later chapters of this report - notably those aimed at promoting the 
development 
of alternative transportation fuels - will also help to reduce oil demand, 
improving passenger vehicle fuel economy is by far the most significant oil 
demand reduction measure proposed by the Commission.
        The Commission's approach to vehicle efficiency builds on three 
decades of 
experience with fuel economy regulation and a record of impressive 
technological 
advances by the automobile manufacturing industry. As a result of CAFE 
standards 
introduced in the 1970s and high gasoline prices in the late 1970s and early 
1980s, the average fuel economy of new lightduty vehicles improved from 15 
miles 
per gallon (mpg) in 1975 to a peak of 26 mpg in 1987, a 73 percent increase 
over 
a time period that also saw substantial progress in improved vehicle 
performance 
and safety. The trend toward greater fuel economy, however, did not continue. 
Passenger car CAFE standards peaked in 1985 at 27.5 mpg and have not changed 
since. Light-duty truck standards were recently raised by 1.5 mpg to a new 
standard of 22.2 mpg which will go into effect in 2005 - prior to this 
increase 
they had remained essentially unchanged since 1987. Thus, for most of the last 
two decades overall fleet fuel economy has stagnated and continued technology 
gains - such as port fuel injection, front-wheel drive, valve technology, and 
transmission improvements - have been applied to increase vehicle size and 
power, rather than fuel economy. In fact, at 24 mpg on average, new vehicle 
fuel 
economy is now no higher than it was in 1981, but vehicle weight has increased 
by 24 percent and horsepower has increased by 93 percent.
        The Commission believes that three factors are largely responsible for 
the 
current CAFE stalemate: (1) uncertainty over the future costs of fuel-saving 
technologies; (2) fear that more stringent standards will lead to smaller, 
lighter vehicles and increased traffic fatalities; and (3) concerns that 
higher 
fuel-economy standards will put the U.S. auto industry and auto workers at a 
competitive disadvantage.
        With respect to the first of these factors - cost and technology 
potential - 
numerous recent analyses by the National Academy of Sciences and others have 
concluded that significant improvements in the fuel economy of conventional 
gasoline vehicles are achievable and cost-effective, in the sense that fuel 
savings over the life of the vehicle would more than offset incremental 
technology costs. Estimates of cost-effectiveness do not, however, account for 
- and thus cannot by themselves resolve - potential trade-offs in terms of 
vehicle 
performance, safety, and impacts on jobs and competitiveness.
        Given these complexities, the Commission was unable to agree on a 
numerical fuel-economy standard.
        The recommendations that follow nevertheless reflect the Commission's 
conclusion 
that a combination of improved conventional gasoline technologies and advanced 
hybrid-electric and diesel technologies presents an opportunity to 
significantly 
increase fuel economy without sacrificing size, power, safety, and other 
attributes that consumers value. Note that the Commission defines ``advanced 
diesel'' in this context as a diesel passenger vehicle that meets stringent 
new 
federal air polution control requirements - or so-called ``Tier 2'' standards 
- 
that are being phased in from 2004 to 2008 (no currently available passenger 
diesel vehicles meet these standards). Ultimately, the Commission believes 
that 
a combination of higher standards, CAFE reforms, and complementary incentive 
programs will allow the nation to capitalize on potentially ``gamechanging'' 
technologies such as hybrids and advanced diesels in a manner that greatly 
enhances its ability to achieve oil security and environmental goals, as well 
as its ability to sustain the future competitiveness of the U.S. automobile 
industry.
        Specifically, the Commission recommends:
                 Raising Passenger Vehicle Fuel Economy Standards26- 
Congress should instruct 
the National Highway Traffic Safety Administration (NHTSA) to significantly 
strengthen federal fuel economy standards for passenger vehicles to take full 
advantage of the efficiency opportunities provided by currently available 
technologies and emerging hybrid and advanced diesel technologies. Consistent 
with existing statutory requirements, NHTSA should - in developing new 
standards - give due consideration to vehicle performance, safety, job 
impacts, and 
competitiveness concerns. To allow manufacturers sufficient time to adjust, 
new standards should be phased-in over a five-year period beginning no later 
than 2010.
                 Reforming CAFE - To facilitate compliance with higher 
standards, Congress should modify CAFE to increase program flexibility by 
allowing manufacturers to 
trade fuel economy credits with each other and across the light truck and 
passenger vehicle fleets. In addition, Congress should authorize NHTSA to 
consider additional mechanisms that could further simplify the program, 
increase 
flexibility, and reduce compliance costs. One such mechanism is a compliance 
``safety valve'' that would permit manufacturers to purchase CAFE credits from 
the 
government at a pre-determined price. Such a mechanism would effectively cap 
costs to consumers and manufacturers should fuel-saving technologies not 
mature as expected or prove more expensive than anticipated.
         Providing Economic Incentives for Hybrids and Advanced 
Diesels - Congress 
should establish a five- to ten-year, $3 billion tax incentive program for 
manufacturers and consumers to encourage the domestic production and purchase 
of hybrid-electric and advanced diesel vehicles that achieve superior fuel 
economy.

	CHAIRMAN BARTON.  Dr. Pizer is the Senior Fellow for Resources for the 
Future.  You are recognized for 5 minutes, sir.
DR. PIZER.  Thank you very much, Mr. Chairman, for the opportunity to talk to 
the committee about the possibility of reforming CAFE.
	As you said, I am the Senior Fellow of Resources for the Future, which 
is 
where Phil Sharp is now, our esteemed President.  We are happy to have him 
there, but as he mentioned, the organization does not take positions on 
matters 
of public policy.  So again, my comments are really just my own opinions.
	Five weeks ago, as many people have noted, NHTSA released a final rule 
for 
light trucks, and that rule met with a lot of criticism and concern, mainly 
over 
the level of the standards.  People felt like it wasn't enough, given our 
concern over prices and over oil security.  I am not really going to talk 
about 
that.
	What I really want to focus on is the structural changes that were in 
that 
reform package that Secretary Mineta talked a little bit about, and I also 
want 
to talk about some reforms that were not in the package that this committee 
could consider, or at least giving the authority to NHTSA to consider.
	First of all, in the package, a very important change is that 
manufacturers would now face differentiated standards, based on the size of 
the 
vehicles they produce.  So historically, if you were GM or if you were Suzuki, 
you faced exactly the same standard.  Now, if you think about that for a 
second, 
it doesn't make a lot of sense, given Suzuki produces much smaller trucks that 
are naturally more fuel-efficient.  So historically, Suzuki didn't have to do 
anything, and GM had to do a lot.
	So right off the bat, by reforming CAFE, so that Suzuki would have a 
higher standard, based on the size of its trucks than GM, you solve some of 
the 
inequalities that exist in the old program.  For example, in 2011, according 
to 
the NHTSA forecast, GM would face a standard of around 23.2 mpg, and Suzuki 
would face a 27 mpg standard.  So you have already improved on the old 
program, by creating a slightly more equitable program.
	A second thing that happens when you differentiate the standards is 
you 
actually get reductions in oil usage at lower costs.  Why is that?  Well, by 
not 
requiring Suzuki to do anything, you weren't taking advantage of some low cost 
opportunities that existed at that manufacturer.  So not only do you spread 
the 
distribution of the costs out, you achieve lower costs in terms of achieving 
greater fuel economy.
	The third thing that happens when you differentiate the standards 
across 
manufacturers based on size is you reduce the incentives to downsize, and a 
lot 
of people have already talked this morning about how downsizing creates safety 
concerns, so in the old version, if you wanted to comply with CAFE, you could 
either install technologies or make smaller cars.  Now, if you make smaller 
cars, you face a tighter standard, and that doesn't really help you as much.
	The second thing that was in the reform package, that Secretary Mineta 
didn't focus on quite as much, is the fact that now, the standard is going to 
be 
set based on an explicit balancing of costs and benefits.  Historically, had 
the 
concerns laid out that it had to weigh when it set the standard, but it wasn't 
very explicit about how it was going to weigh those.  Now, basically what they 
have to do is they set out the costs, they set out the benefits.  They include 
all kinds of benefits, from environment and externalities in oil markets, and 
things like that.  They add them up, and they set the standard to maximize the 
benefits to society.  And to me, that is what we ought to be trying to do, and 
I think that is a vast improvement in the way the agency sets the standard.
	So those were in the reform package.  What else can we think about 
doing?  
Several things have already been alluded to, and I think ought to be part of 
the 
debate on reforming CAFE.  Four things.  First of all, averaging across 
fleets.  
Right now, there are separate standards that have to be met based on domestic 
and imported vehicles, as well as light trucks and cars.  Presumably, there 
may 
be cheaper opportunities in some of these fleets than others, and we ought to 
investigate how much the savings would be if we allowed trading.  So I am not 
saying automatically allow trading, but at least, we ought to know how much we 
are paying for having those fleets separately set, the standards separately 
set.
	The second thing is we could allow trading across firms.  Right now, 
each 
manufacturer has to meet the standards separately, even though some 
manufacturers may be able to meet it more cheaply than others.  We have 
already 
seen highly successful trading programs in the lead phase down program for 
gasoline, as well as the acid rain program, that regulates electric utilities. 
We should investigate how much gain could be had from allowing trading among 
manufacturers.
	Third, we could allow unrestricted banking of credits.  Basically, 
what 
banking says is if I over-comply this year, I can save the credits for over-
complying, and use them in some future year, when I under-comply.  The 
advantage 
of this is that it doesn't change the total amount of oil savings, but it 
brings 
it forward in time.  Now, I think all of us would like to see whatever oil 
savings we can achieve earlier, rather than later.
	The last possible change is a little more controversial, and that 
would be 
allowing manufacturers to pay a fee if they want to exceed the standard.  If 
they find it too expensive to meet the standard as it is set.  I would just 
note 
that all of the problems we have had in setting a standard with CAFE have been 
disagreements over the costs and the impacts.  Manufacturers say it is going 
to 
be very expensive.  Advocates say it is going to be very cheap.  Well, we 
could 
get around a lot of that debate if we just said okay, we are going to set a 
strong standard, but if it turns out to be really expensive, allow 
manufacturers 
to pay a fee.  Currently, there is such a fee, and Europeans use it all the 
time, but it has certain criminal, not criminal, but penalty aspects 
associated 
with it, that if it were decriminalized, would be appealing to other 
manufacturers.
	So just to summarize very quickly, six possible things that could be 
considered in reforming CAFE.  Differentiating standards across manufacturers, 
based on the size of the vehicles they produce, explicitly and carefully using 
cost-benefit analysis to set the standard; allowing averaging across fleets; 
allowing trading among manufacturers; allowing unrestricted banking of credits 
that manufacturers earn; and finally, considering a way the standard could be 
set, but if it turned out to be too expensive, allow firms to pay a price, 
instead of having to meet an arbitrarily expensive standard.
	Thank you, and I am looking forward to questions.
	[The prepared statement of William A. Pizer follows:]

PREPARED STATEMENT OF WILLIAM A PIZER, SENIOR FELLOW, RESOURCES FOR THE FUTURE

        Thank you, Mr. Chairman, for the opportunity to offer testimony before 
the 
committee about the possibility of reforming the Corporate Average Fuel 
Economy 
(CAFE) program, with particular reference to the recently introduced reforms 
for 
light trucks. Over the past decade, I have had the privilege of working on 
energy and environment issues for organizations as diverse as the President's 
Council of Economic Advisers and the National Commission on Energy Policy. 
Currently, I am a senior fellow at Resources for the Future (RFF), a 
54-year-old 
research institution, headquartered here in Washington, DC, which focuses on 
energy, environmental, and natural resource issues.
        RFF is both independent and nonpartisan, and shares the results of its 
economic 
and policy analyses with members of both parties, environmental and business 
advocates, academics, members of the press, and interested citizens. RFF 
neither 
lobbies nor takes positions on specific legislative or regulatory proposals, 
although individual researchers are encouraged to express their individual 
opinions, which may differ from those of other RFF scholars, officers, and 
directors. I emphasize that the views I present today are mine alone.
        Just a few weeks ago, the National Highway Traffic and Safety 
Administration 
(NHTSA) released a final CAFE rule for the years 2008-2011 that raises the 
standard from its 2007 level of 22.2 miles per gallon (mpg), to 22.5 mpg in 
2008, 23.1 mpg in 2009, and 23.5 mpg in 2010. But what should be of more 
interest to this committee are two major changes to the structure of the 
program 
included in the final rule. First, the rule differentiated standards across 
manufacturers based on the size of the vehicles they produce, and second, 
starting in 2011, the rule set these standards based on an explicit 
cost-benefit 
analysis. Previously, there was a single standard for all light-truck 
manufacturers and that standard was set, based on the ability of the least 
capable manufacturer. In addition to these major structural changes, the rule 
will also for the first time include medium-duty passenger vehicles in the 
CAFE 
program starting in 2011. With the inclusion of these heavier and naturally 
less 
fuel-efficient vehicles, the estimated average fuel economy will be 24.0 mpg 
in 2011.
        At the time the light-truck rule was proposed last fall, I offered my 
opinion - 
which I have appended to this statement - that the reforms were a clear move 
toward a more efficient system, and perhaps even an optimal one, given 
statutory 
constraints. I also indicated that, based on an analysis of the underlying 
data 
from the recent National Research Council (NRC) study, the 2011 fuel economy 
standard should be increased based on the recent, dramatic increase in 
forecasted oil price and, in turn, the dramatic increase in benefits from 
improved fuel economy. What I would like to do today is first review my 
previous 
comments on the design of the rule for light trucks and explain why they are 
equally relevant for cars. I will then discuss additional reforms possible in 
statute - the ability to trade CAFE credits across fleets, firms, and time, as 
well as a cost-limiting safety valve that were not possible in the light-truck 
rulemaking. I will briefly remark on the fact that dramatically higher oil 
prices did not lead to an noticeable increase in the 2011 fuel economy 
standard 
and finally offer a few reflections on the overall desirability of CAFE from 
an economist's perspective.

Light-truck CAFE before the recent reforms
        To understand the recent reforms to the light-truck CAFE program, as 
well as the 
potential for further statutory reforms, it is useful to consider how ``un-
reformed'' or traditional CAFE works. There is a single, one-size-fits-all 
fuel 
economy standard for light trucks that must be met, on average, by each 
manufacturer. That is, each manufacturer takes the fuel economy of each light-
truck model they produce, and then averages those numbers weighted by 
production 
volume. That number must be at or above the mandated standard. If the 
manufacturer beats the standard, the manufacturer collects CAFE credits that 
can 
be used to make up any shortfall in the next three years. If the manufacturer 
misses the standard and does not have any credits, there is a penalty equal to 
$5.50 per 0.1 mpg per vehicle. The penalty is routinely paid by European 
manufacturers, but has never been adopted by domestic or Asian manufacturers, 
who have voiced concern about the penalization notion surrounding the fee. 
        For light trucks, the level of the traditional standard is set with an 
eye 
toward achieving the maximum possible fuel economy, but with considerable 
deference given to the ability of each manufacturer to meet that standard. The 
National Highway Traffic Safety Administration (NHTSA) has typically tailored 
the standard to be economically practicable for the least-capable vehicle 
manufacturer while also considering the nation's need to conserve energy, 
technological feasibility, and the impact of other motor vehicle standards on 
fuel economy. The actual analysis is based on confidential manufacturer 
product plans, data, and modeling.
        One consequence of the traditional approach is that the single 
standard for 
light trucks is tougher-that is, more expensive-for manufacturers with a full 
line that includes large trucks with lower fuel economy, and easier for 
manufacturers focused on small trucks with higher fuel economy. For example, 
Honda has consistently beaten the existing light-truck CAFE standard by 4-5 
mpg, 
suggesting that it has had no effect on their production decisions, while the 
major domestic manufacturers that produce a broader range of trucks have 
hovered 
right at the standard, suggesting a real impact.

The reformed CAFE rule
        The recently finalized rule for light trucks makes two major changes 
to the 
traditional approach. The first is a shift from a single light-truck standard 
for all manufacturers to differentiated standards for each manufacturer based 
on 
the size of the vehicles they produce. The second is a shift to setting the 
standard based on an explicit and careful cost-benefit analysis, involving the 
costs to manufacturers, the value of fuel savings, and other consequences of 
gasoline and vehicle usage.
        Unlike the traditional CAFE rule for light trucks, the recently 
finalized rule 
differentiates standards for each manufacturer based on a continuous schedule 
of 
targets for different-sized vehicles. The size of the vehicle, or footprint, is 
defined by multiplying the track width (the distance between tires on the same 
axel) by the wheelbase (the distance between centerlines on each axel). In 
2011, 
the fuel economy schedule ranges from 30.42 mpg for the smallest vehicle to 
21.79 mpg for the largest vehicle (Table 4 in the Final Rule). Among 
manufacturers, this is forecast to result in a fleet standard ranging from 
23.2 
mpg for General Motors (GM) to 27.1 mpg for Suzuki (Table 13).
        Differentiating manufacturers' standards based on the mix of large and 
small 
light trucks that they produce - so that Suzuki faces a higher standard than 
GM 
- has important distributional consequences. Unlike the traditional light-truck 
CAFE rule, in which the single standard was much harder for GM and other 
manufacturers of large trucks to meet, the reformed rule allocates the overall 
burden more evenly by shifting some of it away from manufacturers of large 
trucks and toward manufacturers of small trucks.
        This distributional change will also lower the cost of a given 
improvement in 
fuel economy across all fleets (or increase the overall improvement in fuel 
economy for a given total cost). By seeking larger fuel savings from small 
truck 
manufacturers, who previously faced little or no CAFE incentive to improve 
fuel 
economy, opportunities exist to improve fuel economy that previously were not 
being captured. Some of these efficiency improvements are cheaper than the 
ones 
previously achieved through almost exclusive reliance on improvements among 
manufacturers of large trucks. That is, the program achieves lower cost and/or 
more fuel savings (estimated at 15-20% in the Regulatory Impact Analysis, 
Table VII-1).
        There is a third, important effect associated with differentiating 
standards 
based on the size of vehicles: It substantially alters the incentives to 
downsize. Downsizing is one way a manufacturer could comply with the 
traditional 
light-truck CAFE rule. As noted, smaller trucks naturally have higher fuel 
economy. Instead of using technology to improve fuel economy, manufacturers 
could simply choose to make smaller trucks. While some might applaud a shift 
to smaller vehicles, this frequently raises concerns about safety.
        By making the standard higher for smaller trucks, the incentive to 
downsize to 
comply with the reformed CAFE rule is reduced if not eliminated, thereby 
addressing these concerns about safety. Making smaller trucks does not help a 
manufacturer meet their standard - the natural improvement in fuel economy 
associated with the smaller vehicle is offset by the reformed CAFE's 
requirement that smaller vehicles achieve higher fuel economy.
        The second major change in the reformed CAFE rule comes in 2011, when 
fuel 
economy will be set, based on maximizing net benefits from reduced petroleum 
consumption, including the reduced consequences of oil-supply disruptions, the 
reduced market power of oil-exporting countries, and environmental concerns, 
as 
well as effects of fuel economy on congestion, accidents, and greater vehicle 
range. These benefits are weighed against the costs of installing new 
technologies to improve fuel economy. This is sharply contrasts the previous 
approach, which focused on the ability of the least-capable manufacturer - 
that 
is, the one making the largest trucks. In fact, with the shift to 
differentiated 
standards, the notion of a least-capable manufacturer disappears; instead, 
each 
company faces a standard that is tailored to be as difficult as any other. 
This 
latter change represents an unambiguous move toward greater efficiency in the 
light-truck CAFE program. While the traditional approach highlighted factors 
that should be considered when setting the standard, it did not suggest how 
they 
ought to be balanced, somewhat ironically using cost-benefit analysis as part 
of 
the regulatory impact analysis after the standard was set. The proposed 
reforms 
put the cost-benefit analysis front and center, stipulating that those factors 
should be balanced based on the best available valuations. By definition, such 
an approach is the most efficient possible approach to setting CAFE standards 
once the structure of the program is determined.

Applying the light-truck reforms to passenger cars
        Both of the reforms adopted in the recent light-truck rule - 
differentiating 
manufacturer's standards based on their mix of large and small vehicles, as 
well 
as setting the standards based on careful cost-benefit analysis - provide 
similar opportunities to improve the passenger car CAFE program. Unlike the 
light-truck program, however, these changes must be made in statute. While 
NHTSA 
had the authority to differentiate manufacturer's standards and to shift to a 
cost-benefit approach for light trucks, the existing statute is much more 
specific for passenger cars.
        As was the case for light trucks, differentiating the passenger car 
standard 
among manufacturers based on their mix of large and small cars provides three 
advantages. First, it creates a more equitable burden. Because large cars 
naturally have lower fuel economy than smaller cars, a single standard for all 
manufacturers would put a disproportionate burden on those who produce larger 
cars. In contrast, a differentiated standard would shift that burden toward 
small car manufacturers. Second, this shift in burden will also mean a shift 
from higher-cost improvements in large cars to lower-cost improvements in 
small 
cars. This will lower the cost of achieving a given overall level of fuel 
economy, or allow a greater improvement in overall fuel economy at a given 
total 
cost. Finally, by making the standard progressively higher for smaller cars, 
the 
incentive to downsize passenger cars is reduced if not eliminated. The natural 
fuel economy improvement associated with downsizing is now penalized by a 
higher 
standard. This addresses past concerns that CAFE produces smaller, less safe 
vehicles.
        The use of a cost-benefit approach to set the passenger car standard 
would, by 
definition, create a program that maximized efficiency - that is, the net 
benefits to society - of the program, given the design (for example, 
differentiated standards and fleet averaging).

Going beyond the light-truck reforms
        There are at least four areas where light-truck reform was limited by 
statute 
but where greater efficiency could be realized by changing the structure of 
the 
program. Three relate to simply giving manufacturers more flexibility to meet 
a 
given standard without affecting the outcome in terms of overall oil savings. 
The fourth addresses uncertainty about compliance costs, reducing the risk of 
high costs at the expense of possibly achieving lower oil savings. 
        The first of these further reforms would allow manufacturers to 
average fuel 
economy jointly over both cars and light-truck fleets. Currently, 
manufacturers 
must meet each standard separately, even though cheaper opportunities may 
exist 
in one fleet versus the other. From a national perspective, Congress should 
not 
care whether fuel savings are achieved in one fleet or the other. Allowing 
manufacturers to trade off cheaper improvements in one fleet against more 
expensive improvements in the other would lower overall costs without 
affecting oil savings.
        Second, Congress could also allow credit trading among manufacturers. 
That is, 
when one manufacturer exceeds their standard, they earn credits that could 
then 
be sold to other manufacturers struggling to meet theirs. This reform reduces 
costs by shifting improvements to manufacturers with lower costs and away from 
manufacturers with higher costs. And like the first reform, this action has no 
effect on overall oil savings. 
        It is useful to note that historically there has been opposition to 
trading 
because it likely further exacerbates the disparity between manufacturers of 
large and small vehicles. That is, even though trading would generally benefit 
both buyers and sellers of CAFE credits, under traditional CAFE, it would tend 
to provide larger benefits to sellers - manufacturers of small cars who can 
easily if not effortlessly exceed the standard. However, with size-based CAFE, 
the initial compliance burden is more evenly distributed among manufacturers 
of 
both large and small vehicles, erasing the likely larger benefit to 
manufacturers of small vehicles.
        Third, Congress could allow companies who exceed the standard in one 
year to 
bank credits for the indefinite future. Banking not only leaves the total 
volume 
of reduced oil consumption unchanged, it moves the savings forward in time - 
that is, we see the effects of energy conservation sooner. Banking has easily 
been the most successful element of the acid rain trading program used by 
electric utilities to reduce sulfur dioxide emissions. In that case, firms 
reduced emissions by twice as much as the law required to create flexibility 
for 
future compliance. Currently, banking is allowed in the CAFE program - but for 
only up to three years, after which time the banked credits expire, thereby 
reducing the incentive to over-comply and to reduce oil consumption earlier. 
New legislation could remove this restriction.
        Finally, Congress could create a safety valve, whereby manufacturers 
could opt 
to pay a specified fee if compliance costs end up being unexpectedly high. 
This 
would allow manufacturers to avoid the risk of high costs in exchange for the 
possibility that fuel economy - and oil savings - might be lower if that turns 
out to be the case. As noted earlier, the current program already has such a 
fee, defined as a penalty, which is often used by European manufacturers but 
has 
been avoided by domestic and Asian manufacturers. By ``decriminalizing'' the 
fee, 
Congress could help allay manufacturer concerns and reduce the central debate 
about how much technology really costs - perhaps allowing higher standards to 
be introduced more quickly.

Transparency about costs
        The recent light-truck rule highlighted the fact that the cost 
estimates used to 
set fuel economy standards remain something of a mystery. Despite the fact 
that 
the benefits of improving fuel economy increased by 50 percent between when 
the 
proposed and final rules were published, due to dramatic increases in forecast 
oil prices, the estimated aggregate fuel economy standard for 2011 increased 
by 
only 0.2 mpg, from 23.9 to 24.1 mpg (excluding medium-duty vehicles, which 
were 
not included in the proposed rule). Yet, the standard is supposed to represent 
a balancing of costs and benefits.
        The final rule indicates that there were countervailing changes in 
estimated 
costs - related to the costs of technologies and especially the time required 
to 
phase in those technologies - but those changes are difficult to judge because 
the underlying details of the cost model are not spelled out clearly. Without 
any countervailing effects, my comments last fall suggested that a 50-percent 
increase in benefits might lead to a 4-5 mpg increase in the standard. Having 
reviewed other cost analyses, I might adjust that downward, closer to 2 mpg. 
In 
any case, a 0.2-mpg increase is surprisingly small despite the indicated 
countervailing modeling changes.
        It might be desirable, therefore, for the Department of Transportation 
to be 
required to make public the cost modeling used in any rulemaking to set fuel 
economy standards. In the past, such disclosure would have been nearly 
impossible, as it entirely centered on the capabilities of one manufacturer. 
Now, there is presumably safety in numbers: Cost modeling for particular 
vehicle 
sizes can be disclosed, on average, without necessarily revealing proprietary 
information. Such a requirement would facilitate a more informed debate in the 
rulemaking process.

Do fuel economy standards make sense?
        So far the discussion has centered on how to improve CAFE through 
statutory 
reform - that is, how to get more fuel savings at lower cost, while addressing 
concerns about equity and safety. This is an extremely important question, 
given 
the likelihood that the CAFE program will not go away and will remain the main 
policy tool for addressing concerns about petroleum use in the transportation 
sector. Nonetheless, it is useful to ask whether CAFE makes sense compared to 
other choices, or whether Congress should instead focus on an entirely 
different policy.
        The underlying motivation for CAFE is the desire to reduce oil demand 
because of 
concerns about costs, security, and the environment. Given this underlying 
motivation, many people, especially economists, often criticize CAFE policy 
for 
two related reasons: First, it does not encourage consumers, once they buy a 
vehicle, to drive less; and second, it implies that the government can do a 
better job of weighing the costs and benefits of fuel-saving vehicle 
technologies than the auto manufacturers and auto consumers who make and use 
those vehicles. These critics typically conclude that the better policy is to 
tax gasoline, where the tax rate reflects some or all of the additional cost 
to 
society associated with oil use - for example, the negative influence of oil 
supply disruptions on the economy, domestic and international environmental 
impacts, and highway congestion.
        One response is to agree with the CAFE critics on principle, but note 
that 
political opposition to gasoline tax increases make them impractical. However, 
we can also take issue with the second criticism and argue that auto 
manufacturers and consumers are not really making good decisions about fuel 
economy. Several explanations for this failure stand out. The first is that 
consumers may not know, understand, or believe differences exist in fuel 
economy 
among vehicles. The recent controversy over the inaccuracy of EPA fuel economy 
ratings on information labels underscores this point. 
        Second, even understanding that those differences exist and are real, 
consumers 
may not rank fuel economy high enough to worry about when shopping for a car. 
Cargo capacity, power, and styling may be more important to consumers. 
Finally, 
even if consumers consider fuel economy, they may find it does not make a big 
enough difference to sway their choice of vehicle. Typical fuel economy 
decisions might represent an annual net gain per vehicle of about $50-500, 
depending on the payback period a consumer requires. On a $20,000 new car, 
this 
is analogous to an option for a fancy radio or improved styling. 
        Finally, consumers may not properly account for the full value of 
future fuel 
savings from a more fuel-efficient car, considering, for example, only the 
first 
few years of savings rather than the entire vehicle lifetime. 
        If consumers are systematically undervaluing fuel economy, it makes 
sense that 
vehicle manufacturers are not going to build more fuel-efficient cars. Based 
on 
that observation - an observation with which I tend to agree - fuel economy 
standards are a sensible policy and Congress should focus on reforming CAFE to 
make it more efficient.
        It is worth noting that one argument that cannot be used to support 
CAFE is that 
stricter fuel economy standards will substantially lower gasoline prices. 
Recent 
estimates by the Energy Information Administration, for example, suggest that 
a 
36-percent improvement in CAFE (6-7 mpg) would lower gasoline prices by at 
most 
$0.08 by 2025. More modest CAFE improvements, such as the recent 1.8-mpg 
increase in light-truck standards, would lower gasoline prices even less 
(although the impact is larger with reforms than without). However, CAFE will 
lower expenditures on gasoline, as the quantity consumed will decline even if 
the price remains relatively insensitive. More importantly, it will reduce the 
vulnerability of the economy to future oil price shocks by reducing the share 
of gasoline expenditures in overall economic activity.

Overall conclusions
        Following on the heels of recent regulatory reforms to the light-truck 
CAFE 
program, Congressional action to similarly reform the CAFE program for 
passenger 
cars - as well as to enact further reforms that were not possible in the 
light-
truck rulemaking - has a large potential to improve program efficiency, to 
make 
the program more equitable, and to do all of this without sacrificing safety. 
The light-truck rule provides a model for two improvements: differentiating 
manufacturers' standards based on their mix of large and small vehicles, and 
setting the overall level of the standards based on an explicit and careful 
cost-benefit analysis. Further reforms include trading between the passenger 
car 
and light-truck fleets, trading among manufacturers, unrestricted banking of 
CAFE credits earned by exceeding the standard, and a cost-limiting safety 
valve.
        It is surprising that the recent final rule for light-truck fuel 
economy in 
2011, based on balancing costs and benefits, demonstrated remarkably little 
sensitivity to a 50-percent increase in the value of fuel saving benefits. 
This 
surprise, along with other concerns about how NHTSA would set the standards, 
has 
led to calls for Congress to directly set the standard in statute. 
Nonetheless, 
I find the complexity of the standard-setting process, as well as the need to 
regularly revisit the level of the standard, to be more suitable for agency 
rulemaking than Congressional action. Congress can instead reform the 
structure 
of CAFE to increase efficiency, continue to give NHTSA clear guidance on the 
key costs and benefits it should consider, and perhaps require greater 
transparency with regard to the cost modeling.
        Lastly, critics often argue that CAFE is not the right policy to 
address 
petroleum use in the transportation sector, because it improperly focuses on 
creating more fuel-efficient vehicles rather than alternatively or 
additionally 
encouraging consumers to drive those vehicles less. Such a criticism is based 
on 
an assumption that consumers and manufacturers will make good decisions about 
fuel economy based on technology and fuel costs. Yet, there are a variety of 
reasons why this assumption might be false; based on my belief that these 
reasons have credibility, a CAFE program continues to make sense.
        In summary, Congress has a great opportunity to improve the efficiency 
of an 
extremely significant program to reduce oil consumption in the United States, 
namely by reforming the fuel economy program for cars and light trucks. Such 
reforms will reduce the costs of achieving a given standard and allow us to 
pursue greater fuel economy without sacrificing safety. In contrast to other 
policies being promoted to address concerns about higher fuel prices and oil 
dependency, such improvements attack the problem directly by reducing both our 
expenditures on oil and our vulnerability to future price increases.
        I thank you again for the opportunity to appear before this committee, 
and I would be pleased to answer any questions.


Appendix I. Understanding Proposed CAFE Reforms for Light Trucks
FR Doc. 05-17005

By William A. Pizer and Madeleine Baker,* Resources for the Future

Summary
        On August 23, 2005, the National Highway Traffic Safety Administration 
(NHTSA) released a Notice of Proposed Rulemaking (NPR) on corporate average 
fuel economy 
(CAFE) standards for light trucks along with a Preliminary Regulatory Impact 
Analysis (PRIA) (NPRM: Federal Register 05-17005, vol. 70, no. 167, August 
30).  
Relative to the existing 2007 standard of 22.2 miles per gallon (mpg), the 
proposed changes include fuel economy standards of 22.5-23.5 mpg over 
2008-2010 using the current program design.  
        More notable, however, are proposed changes to this design.  Under the 
proposed 
changes, each manufacturer would still need to meet a single overall standard 
for their light truck fleet, but that standard would differ across 
manufacturers 
based on their production of different sized vehicles.  Vehicles with 
different 
footprints (wheelbase times track width) would have different fuel economy 
targets and a manufacturer's overall standard would be based on these size-
differentiated targets averaged over their specific fleet.  During 2008-2010, 
manufacturers would have a choice of complying with either the old 
(unreformed) or new (reformed) CAFE standards.
        Importantly, the fuel economy standards starting in 2011 would be set 
explicitly 
to maximize net benefits to society-including fuel savings, safety, security, 
and environmental concerns.  Among other things, this shift implies that those 
standards will rise along with the price of oil.  While the proposed 2011 
targets assume $25-30 per barrel crude oil prices (based on available 
government 
forecasts) and are estimated to achieve a 24-mpg fuel economy, we estimate 
that 
an additional $20 per barrel (in line with recent long run private-sector 
forecasts) would raise the proposed targets by perhaps 4-5 mpg.
        The proposed reforms also erase the current disparity between 
passenger 
automobile and light truck standards, as the smallest light truck category 
would 
have a target exceeding the current 27.5 mpg for passenger automobiles.  This 
would remove the incentive for automakers to effectively design passenger cars 
that can be categorized as a light truck (by raising the height, making the 
seats removable, etc.) in order to face an easier fuel economy standard.  
        From an economic perspective, these reforms represent a remarkable 
shift toward 
a more efficient regulatory system.  Still, potentially valuable, further 
improvements remain-trading of CAFE credits across manufacturers and between 
passenger cars and light trucks, for example.  The proposed reforms also fail 
to 
address the larger economic questions of whether taxes or tradable permits 
(for 
gasoline usage) would be a better policy than a CAFE performance standard, and 
whether consumers and manufacturers are really making bad fuel economy 
decisions 
absent government intervention.  The latter question could also have 
significant 
implications for whether technology costs and fuel economy benefits are 
correctly valued in the CAFE analysis.
        The remainder of this memorandum walks through essential elements of 
the reform 
package, provides a quick economic analysis, and summarizes the economist's 
perspective.

Unreformed CAFE
        Existing CAFE regulations establish a single mileage standard that 
must be met, 
on average, for every manufacturer's light truck fleet.  That is, each 
manufacturer takes the fuel economy of each light truck model they produce, 
and 
then averages those numbers weighted by production volume.  That number must 
be 
at or above the mandated standard.  If the manufacturer beats the standard, 
the 
manufacturer collects CAFE credits that can be used to make up any shortfall 
in 
the next three years.  If the manufacturer misses the standard and does not 
have 
any credits, there is a penalty equal to $5.50 per 0.1 mpg per vehicle.  The 
penalty is routinely paid by European manufacturers but has never been 
utilized 
by domestic or Asian manufacturers.
        The level of the standard is set with an eye toward achieving the 
maximum 
possible fuel economy, but with considerable deference given to the ability of 
each manufacturer to meet that standard.  In particular, NHTSA has 
traditionally 
focused on the least capable vehicle manufacturer and tailored the standard to 
be ``economically practicable'' for that firm.  The actual analysis is based 
on 
confidential manufacturer data and modeling.  This approach was used in 2003 
to 
set the 2005-2007 standards.  Prior to that, Congressional riders prevented 
any 
changes to the CAFE levels for light trucks since 1996.  The standard for 
passenger cars has remained unchanged since 1990.
        One consequence of this approach is that the single standard for light 
trucks is 
tougher-more expensive-for manufacturers with a full line, including large 
trucks that have lower fuel economy, and easier for manufacturers focused on 
small trucks that typically have higher fuel economy.  For example, Honda has 
consistently beaten the existing light-truck CAFE standard by 4-5 mpg, 
suggesting it has had no effect on their production decisions, while the major 
domestic manufacturers that produce a broader range of trucks have hovered 
right 
at the standard, suggesting a real impact.   
        The current NPR uses this approach to determine unreformed 22.5-23.5 
mpg standards for 2008-2010.

Reformed CAFE
        The proposed CAFE reforms involve two major changes.  The first is a 
shift from 
a single standard for all manufacturers to differentiated standards for each 
manufacturer based on the composition of their fleet.  This shift arguably 
eliminates the notion of a least capable manufacturer because standards are 
tailored to each manufacturer's vehicle mix.  The second is a shift to an 
explicit cost-benefit analysis based on fuel savings and other consequences of 
gasoline and vehicle usage.  While previous standards have utilized 
cost-benefit 
analysis as part of the regulatory impact analysis after the standard was set, 
the proposed reforms put the cost-benefit analysis front and center.

Differentiated Standards
        The NPR proposes differentiating fuel economy standards for light 
trucks using 
six discrete size categories, but requests comments on the use of both 
alternative attributes and/or more size categories (or even a continuous 
function).  The size of a vehicle, or ``footprint,'' is defined by multiplying 
the 
track width (distance between tires on the same axel) multiplied by the 
wheelbase (distance between centerlines on each axel).  The proposed ranges 
for 
each footprint category, according to NHTSA, were based on an effort to keep 
the 
majority of models in the low end of each range; that is, to avoid creating 
significant opportunities for firms to slightly increase the size of a vehicle 
and have it move into the next higher range with a correspondingly lower 
standard.
        NHTSA then establishes the relative position of targets for each 
category.  That 
is, category 2 is 0.8 mpg lower than category 1; category 3 is 3.4 mpg lower 
than category 2; etc.  These relative positions are determined based on the 
difficulty / cost of achieving fuel economy levels in each category.  The 
result 
is a schedule of fuel economy targets for different size categories, but only 
defined relative to each other.

Setting the Standards
        The actual standards are determined by moving the absolute level of 
this 
schedule up or down in order to meet one of two criteria.  From 2008-2010, the 
criterion is that the total cost to industry under the reformed regulation 
should equal the total cost to industry under the unreformed regulation, 
described earlier.  From 2011 onward, the criterion is that benefits to 
society, 
minus costs, are maximized.  Table 1 summarizes the resulting standards in the 
NPR.
        With the target for each category in hand, the standard for each 
manufacturer is 
based on how many trucks the manufacturer produces in each category.  Based on 
current projections by NHTSA, that results in the manufacturer-specific 
standards given in Table 2.  Note that manufacturers do not have to meet the 
target in any one category, but underachievement in one category has to be 
offset by overachievement in another.

Analysis
        Several questions naturally arise when evaluating the proposed reform 
package.  
Does it cost more or less than the unreformed policy?  Even if the cost is 
roughly the same, is the distribution of costs different across manufacturers?  
Does it achieve more overall fuel economy for a given cost?  Are these cost-
benefit estimates consistent with other cost-benefit estimates?  We briefly 
examine each question in turn based on available data.

Does Reformed CAFE Cost More?
        There are no direct comparisons of costs under the proposed, 
cost-benefit 
approach to setting the standard versus costs based on the existing, least-
capable manufacturer approach.  A footnote in Table 3 highlights this 
fact-costs 
are similar in each year where both reformed and unreformed CAFE costs are 
reported by design.
        However, looking at those same cost estimates in Table 3 across years, 
we do not 
see a dramatic difference moving from 2010 to 2011, when the new metric of 
maximizing net benefits is applied for the first time, versus moving from 2007 
to 2008, 2008 to 2009, or 2009 to 2010, when the overall cost to industry is 
set 
based on unreformed CAFE.  Costs per vehicle rise by $89 from 2010 to 2011, 
but 
they rise by $88 from 2008 to 2009.  That suggests, at the very least, that 
any 
increase in costs from the reformed approach is in line with the spending 
trend 
for fuel economy improvements over time under the unreformed program.

Is the distribution of costs different across manufacturers?
        Unreformed CAFE sets a common standard for all manufacturers, whereas 
reformed 
CAFE will set differentiated standards based on each manufacturer's product 
line-higher standards for manufacturers specializing in smaller trucks.  Other 
things equal, this suggests a shift in costs away from manufacturers of larger 
trucks and toward those which only manufacture smaller light trucks.  Table 4 
quantifies this shift using historical data on CAFE credits:  Under both 
reformed and unreformed CAFE, manufacturers can earn credits equal to the 
amount 
by which their fleet exceeds the standard, expressed in tenths of a mile-per-
gallon, per vehicle.  These credits can then be used in future years to make 
up 
a deficit if they fail to meet the standard.  
        Based on historic manufacturing data for 2002-2004, Table 4 shows the 
change in 
manufacturers' net CAFE credits position under the reformed versus unreformed 
program; positive numbers reflect a better outcome under reformed CAFE.  What 
we 
see is that three manufacturers, Hyundai, Isuzu, and Suzuki, do noticeably 
worse, facing a deficit of perhaps 30 credits per vehicle absent changes.  
Meanwhile, GM, to a lesser extent Ford, and eventually Nissan, all see an 
improvement of 2-6 credits per vehicle.  If we look at the underlying 
production 
data available in Tables III-3 through III-5 of the PRIA, the three 
manufacturers who face the greatest deficit are the ones whose trucks fall 
entirely in the smallest two of the six reformed CAFE categories.  Meanwhile, 
GM, Ford, and Nissan have the largest share-more than one-third-in the largest 
two categories by 2004 (only 20 percent of DaimlerChrysler vehicles fell in 
those two categories in that year).

Does reformed CAFE achieve more fuel economy for a given cost?
        Given that the costs of reformed CAFE are similar to the costs of 
unreformed 
CAFE, the delivered value of the proposed reforms turns on whether benefits 
are 
higher.  Table 5 compares estimates of the fuel economy, gallons saved, and 
dollar benefits under the two programs.  For all three metrics, we see 
reformed 
CAFE improvements that are 12-15 percent higher in 2008, 19-20 percent higher 
in 
2009, and 6-7 percent higher in 2010.  No comparison is possible in 2011, 
because only reformed CAFE estimates were provided.  

Are the cost estimates consistent with other studies?
        In an effort to benchmark the cost analysis in the NPR and PRIA, we 
used the 
data contained in the 2001 National Academy of Science (NAS) CAFE study to 
estimate cost curves for fuel economy improvements for different classes of 
light trucks (SUVs, trucks, and minivans).  We compare these costs to the 
benefits from fuel savings in the NPR, ignoring all of the additions and 
subtractions for various externalities the PRIA considers that have a net 
effect 
of lowering benefits 2-4% (see PRIA Tables VIII-4 through VIII-10).  We then 
estimate the net benefit maximizing level of fuel economy.
        Despite the fact that our data is now five years old and that we could 
not 
replicate the size-based categories in the NPR, our results suggest a benefit-
maximizing fuel economy squarely in the range of the 22.6-24.0 mpg levels 
forecast under the proposed rule.  However, it is important to highlight that 
this estimate uses the NPR and PRIA oil price forecast of $25-30 from the 
Annual 
Energy Outlook 2005.  More recent private-sector forecasts suggest an increase 
of perhaps $20 per barrel, adding an additional $0.50 per gallon to the fuel 
economy savings and raising our estimate of the benefit-maximizing fuel 
economy by 4-5 mpg.  

Perspective
        From an economist's perspective, the proposed reforms represent a 
clear move 
toward greater efficiency, perhaps even an optimum given current statutory 
constraints.  Moving beyond this constraint, however, the efficiency of the 
CAFE 
program could still be improved by allowing trades among manufacturers and 
between cars and trucks.  Because the benefit per gallon is now the metric for 
setting the standard, one could also ask whether this value ought to be used 
to 
cap the cost of any compliance efforts by allowing manufacturers to pay that 
value (or some multiple) if they miss the standard.  One might even want to 
back 
up and ask whether CAFE itself-that is a performance standard for vehicles 
rather than fuel taxes or emissions trading-is what we really want.  Many 
economists argue that consumers and manufacturers already make the desired 
fuel 
economy decisions without regulation, excluding concerns over the environment, 
security, and safety.  If so, the fuel economy savings and technology cost 
ought 
to balance at the margin, suggesting they have been incorrectly valued in this 
analysis.
        Importantly, by raising the target for small trucks above the standard 
for 
passenger vehicles the proposed reforms eliminate the incentive to redesign 
what 
is essentially a passenger vehicle in order to be classified as a light truck 
and to face a lighter CAFE standard.  Under the current program, such 
redesigns 
are often cited as a significant, adverse, and unintended consequence of the 
wide gap in standards between cars and trucks.
        Finally, our calculations, showing that recent increases in long-run 
oil prices 
raise the desired fuel economy by 4-5 mpg, highlight the importance of 
assumptions about these prices.  While it is unclear what role oil prices 
played 
in setting standards under the unreformed program, they drive the standards 
set by benefit maximization under the reformed program.

Tables and Figures

Table 1. Proposed Targets (in mpg)

Source:  NPR Table 6



Table 2. Estimates of Required Fuel Economy Levels (in mpg)

Source:  NPR Table 7


Table 3. Incremental Cost per Vehicle


Source:  PRIA Table 1






Table 4. Effect of Reformed CAFE, Relative to Unreformed CAFE, on 
Manufacturer's CAFE Credit Position using Historic Data
(change in credits per vehicle)
Manufacturer
Market share (2004)
2002
2003
2004
BMW
0.01
-4.29
-0.92
-16.23
DaimlerChrysler
0.19
-3.03
-6.00
-7.25
Ford
0.23
2.80
-1.00
3.01
GM
0.29
7.87
6.00
5.63
Honda
0.06
-3.51
-11.00
-9.91
Hyundai
0.02
-13.64
-30.05
-27.15
Isuzu
0.00
-14.32
-29.76
-27.21
Nissan
0.06
-9.89
-16.02
2.18
Suzuki
0.00
-16.71
-29.90
-29.40
Toyota
0.13
-4.50
-5.01
-7.99
Volkswagen
0.01
-8.53
-15.12
-8.14
Source:  PRIA Tables III-3 through III-5


Table 5. Benefit Estimates, Reformed and Unreformed CAFE

2008
2009
2010
2011
Fuel economy improvement versus baseline (mpg)
unreformed
0.26
0.59
0.87

reformed
0.29
0.71
0.88
1.34





Gallons saved over vehicle lifetime versus baseline (millions, undiscounted)
unreformed
826
1860
2715

reformed
942
2218
2892
4110





Benefits versus baseline 
($millions, net present value at 7% over vehicle life for each model year)
unreformed
605
1366
2007

reformed
694
1633
2144
3069

Source:  PRIA Tables VI-1b, VI-2, VI-3 (Fuel Economy), PRIA Table 5 (Gallons), 
PRIA Table 3 (benefits)


	MR. BILIRAKIS.  Thank you, Dr. Pizer.  Mr. Reuther.
MR. REUTHER.  Thank you, Mr. Chairman.  My name is Alan Reuther.  I am the 
Legislative Director for the UAW.  We appreciate the opportunity to testify 
before this committee on the draft legislation authorizing NHTSA to set new 
passenger car fuel economy standards.
	The UAW has repeatedly emphasized two important points about the CAFE 
program.  First, we have urged that the structure of the program be modified 
to 
eliminate discrimination against full line producers, based on their product 
mix.  In our view, all companies should be required to make similar efforts to 
improve fuel economy across their entire line of vehicles.
	Second, we have consistently emphasized the importance of retaining 
both 
the fleet-wide averaging and the two fleet, domestic and foreign components of 
the passenger car CAFE structure.  These two requirements ensure that full 
line 
auto manufacturers must maintain small car production in North America.  This 
is 
because the production of smaller, more fuel-efficient vehicles is needed to 
offset the production of larger, less fuel-efficient vehicles.
	As a matter of national energy policy, we believe it is important for 
the 
U.S. to retain domestic production of smaller, more fuel-efficient passenger 
cars.  Furthermore, currently, over 17,000 American workers are employed in 
seven U.S. assembly plants that produce small passenger cars.  This includes 
GM, 
Ford, Daimler-Chrysler, Mitsubishi, and NUMMI plants in Lordstown, Ohio; 
Wilmington, Delaware; Spring Hill, Tennessee; Wayne, Michigan; Belvidere and 
Bloomington, Illinois; and Fremont, California.  In addition, almost 50,000 
American workers produce parts for these vehicles.  The jobs of these workers 
would be directly threatened by any CAFE proposals that undermine fleet-wide 
averaging and/or the two-fleet rule for passenger cars.
	NHTSA recently released final rules establishing a size-based CAFE 
system 
for light trucks.  UAW supported these rules for several reasons.  We were 
pleased that the size-based system eliminated the discriminatory impact on 
full 
line producers.  At the same time, because the new rules only dealt with light 
trucks, not passenger cars, there was no threat to small car production and 
jobs 
in this country.
	The UAW believes that NHTSA already has the authority to raise the 
flat 
mpg requirement in the current CAFE standards for passenger cars, but NHTSA 
does 
not have the authority to change the structure of the passenger car CAFE 
system 
to an attribute-based system.  We recognize that establishing an 
attribute-based 
CAFE system for passenger cars, similar to the new light truck system, would 
have the benefit of eliminating the current discrimination against full line 
producers, but it would also have the major downside of undermining fleet-wide 
averaging and the two-fleet rule, and thus would enable auto manufacturers to 
offshore all of their small car production and jobs.
	And I would like to note, Secretary Mineta, in his comments, suggested 
that they might retain the two-fleet rule.  Only doing that would not protect 
the small car production and jobs.  You also have to protect the fleet-wide 
averaging.
	Some commentators have tried to dismiss these concerns about small car 
production by arguing that companies will simply substitute large car 
production 
at these facilities.  This ignores the harsh reality that there is currently 
significant overcapacity in the auto industry.  The UAW submits that the real 
world impact is that certain companies would take advantage of the change in 
the 
CAFE rules to further downsize their operations.  The net result is that small 
car facilities would be closed, and tens of thousands of automotive jobs would 
be lost.
	Fortunately, the UAW believes there is an easy way to obtain the 
benefits 
of moving to an attribute-based CAFE system for passenger cars, while avoiding 
the downside of losing our small car production and jobs.  Specifically, we 
urge 
Congress to impose an anti-backsliding requirement on any new CAFE rules that 
NHTSA would be authorized to promulgate for passenger cars.  This requirement 
should specify that both the domestic and foreign passenger car fleets for 
each 
auto manufacturer would still have to meet or exceed the CAFE standard under 
the 
current system, the 27.5 mpg fleet-wide standard.  This anti-backsliding 
benchmark should be increased, in line with the overall fuel economy 
improvements required under any attribute-based system.
	The adoption of this type of anti-backsliding requirement would 
prevent 
companies from offshoring their small car production and jobs.  It would also 
ensure that the auto manufacturers cannot subvert the objective of any new 
CAFE 
system by up-weighting or upsizing many of their vehicles, resulting in worse 
overall fuel economy.
	The UAW would support legislation authorizing NHTSA to establish an 
attribute CAFE system for passenger cars similar to the truck system, provided 
this is coupled with an anti-backsliding requirement that protects the small 
car 
production and jobs.  If this type of anti-backsliding requirement is not 
included, we would have to oppose the legislation.
	The UAW firmly believes that our Nation can make substantial progress 
in 
improving fuel economy and reducing our Nation's dependence on foreign oil, 
and 
at the same time, make sure that we keep and expand automotive jobs in this 
country.  In addition to changes in the CAFE system, we urge Congress to 
provide 
incentives to encourage the domestic production of advanced technology and 
flexible fuel vehicles, and their key components.
	We look forward to working with the committee as you consider these 
proposals.  Thank you.
	[The prepared statement of Alan Reuther follows:]


PREPARED STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL UNION, 
UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA

SUMMARY STATEMENT OF
ALAN REUTHER, UAW LEGISLATIVE DIRECTOR

        The UAW has repeatedly emphasized two points about the CAFE program.  
First, we 
have urged that the structure of the CAFE program be modified to eliminate 
discrimination against full line producers based on their product mix.  
Second, 
we have emphasized the importance of retaining both the fleet wide averaging 
and 
the two-fleet (domestic and foreign) components of the passenger care CAFE 
structure.  The combination of these two provisions ensures that full-line 
auto 
manufacturers must maintain small car production in North American.  This 
protects the jobs of over 17,000 American workers who are currently employed 
in 
U.S. assembly plants that produce small passenger cars, and almost 50,000 
workers who produce parts for these vehicles.
        The UAW supported the rules that NHTSA recently promulgated 
establishing a new 
attribute based CAFE system for light trucks.  Because these rules only dealt 
with light trucks, not passenger cars, there was no threat to small car 
production and jobs in this country.
        The UAW believes that NHTSA already has the authority to raise the 
flat MPG 
requirement in the current CAFE standards for passenger cars.  But it does not 
have the authority to change the structure of the passenger car CAFE system to 
an attribute-based system.
        The UAW recognizes that establishing an attribute-based CAFE system 
for 
passenger cars similar to the new light truck system would have the benefit of 
eliminating the current discrimination against full line producers.  But it 
would also have the major down side of enabling auto manufacturers to offshore 
all of their small car production and jobs.
        The UAW strongly urges Congress to impose an ``anti-backsliding'' 
requirement on 
any new CAFE rules that NHTSA would be authorized to promulgate for passenger 
cars.  This would allow us to obtain the benefits of moving to an attribute-
based CAFE system for passenger cars, while avoiding the down side of losing 
our 
small car production and jobs.  It would also prevent the companies from up-
sizing or up-weighting their passenger cars, resulting in worse overall fuel 
economy.  The UAW would strongly oppose any legislation authorizing NHTSA to 
establish an attribute-based CAFE system for passenger cars, unless it 
contains this type of ``anti-backsliding'' provision.
        The UAW also urges Congress to specify that new passenger CAFE rules 
should only 
take effect in 2012 or later, after the new light truck CAFE rules have been 
implemented.  We oppose the adoption of any credit trading system in the CAFE 
program, since this could also jeopardize the continuation of small car 
production and jobs in the United States.


        Mr. Chairman, my name is Alan Reuther.  I am the Legislative Director 
for the 
International Union, United Automobile, Aerospace & Agricultural Implement 
Workers of America (UAW).  The UAW appreciates the opportunity to testify 
before 
this Committee on the draft legislation authorizing the National Highway 
Traffic 
Safety Administration (NHTSA) to set new passenger car fuel economy standards.
        The UAW represents 1.1 million active and retired workers across the 
country, 
many of whom work or receive retirement benefits from auto manufacturers or 
auto 
parts companies.  We were deeply involved in the original enactment of the 
Corporate Average Fuel Economy (CAFE) program, and continue to have a very 
strong interest in this program because of its major impact on automotive 
production and employment in this country and the jobs and benefits of our 
members.
        The UAW strongly supported the establishment of the CAFE program, and 
we support 
continuation of this program as an essential mechanism for improving fuel 
economy and reducing our dependence on foreign oil.  We have previously 
stated, 
and continue to believe, that modest increases in the CAFE standards over time 
are technologically and economical feasible. 
        However, the UAW has repeatedly emphasized two critically important 
points about 
the CAFE program.  First, we have urged that the structure of the CAFE program 
be modified to eliminate discrimination against full line producers based on 
their product mix.  In our view, all companies should be required to make 
similar efforts to improve fuel economy across their entire line of vehicles.  
Because of this, we have strongly opposed legislative proposals that would 
have 
a discriminatory impact on full line producers, and therefore jeopardize the 
jobs and benefits of tens of thousands of active and retired workers.
        Second, we have consistently emphasized the importance of retaining 
both the 
fleet wide averaging and the two-fleet (domestic and foreign) components of 
the 
passenger car CAFE structure.  The fleet wide averaging requirement provides 
important flexibility to automotive manufacturers, while ensuring that the 
CAFE 
standards produce an overall improvement in fuel economy.  Furthermore, the 
combination of fleet wide averaging and the two-fleet requirement ensures that 
full-line auto manufacturers must maintain small car production in North 
America.  This is because the production of smaller, more fuel efficient 
vehicles is needed to offset the production of larger, less fuel efficient 
vehicles.    
        As a matter of national energy policy, we believe it is vital that the 
U.S. 
retain domestic production of smaller, more fuel efficient passenger cars.  As 
we have all witnessed, sharp increases in gas prices can lead to shifts in 
consumer demand towards smaller, more fuel efficient vehicles.  Unless we 
retain 
domestic production of such vehicles, consumers interested in this segment of 
the market could be forced to purchase foreign-made vehicles.
        Over 17,000 American workers are currently employed in seven U.S. 
assembly 
plants that produce small passenger cars.  This includes GM, Ford, DCX, 
Mitsubishi and NUMMI plants in Lordstown (Ohio), Wilmington (Delaware), Spring 
Hill (Tennessee), Wayne (Michigan), Belvidere (Illinois), Bloomington 
(Indiana) 
and Fremont (California).  Almost 50,000 American workers produce parts for 
these vehicles.  The jobs of these workers would be directly threatened by any 
CAFE proposals that undermine fleet wide averaging and/or the two-fleet rule 
for 
passenger cars.  In addition, the loss of these jobs would inevitably have a 
negative ripple effect on the rest of the economy.
        NHTSA recently released final rules establishing new CAFE standards 
for light 
trucks.  These rules require modest improvements in light truck fuel economy, 
and also establish a sized-based CAFE system for light trucks.  The UAW 
supported these rules for several reasons.  We believed the magnitude and 
timing 
of the proposed increases in light truck fuel economy were feasible.  We were 
also very pleased that the size-based CAFE system eliminated the 
discriminatory 
impact on full line producers.  At the same time, because the old light truck 
CAFE standards did not contain any two-fleet rule, there was no threat to the 
continuation of small truck production and jobs in the United States.  
Furthermore, because the new rules only dealt with light trucks, not passenger 
cars, and did not change the definitions of what is a ``passenger car'' and 
what 
is a 'light truck", there was no threat to small car production and jobs in 
this country.
        The draft legislation that is the subject of this hearing would 
authorize NHTSA 
to set new CAFE standards for passenger cars.  The UAW believes that NHTSA 
already has the authority to raise the flat MPG requirement in the current 
standards, and that legislation is not needed to enable it to go forward in 
this manner.
        However, in his recent letters to Congress, Secretary Mineta made it 
clear that 
the Department of Transportation also wants Congress to give NHTSA the 
authority 
to change the structure of the passenger car CAFE system to an attribute-based 
system similar to the new structure that has been implemented for light 
trucks.  
There is general agreement among the various stakeholders in the fuel economy 
issue that NHTSA does not currently have this authority, and that authorizing 
legislation would be required before such structural changes in the passenger 
car CAFE program could be adopted.    
        The UAW recognizes that establishing an attribute-based CAFE system 
for 
passenger cars similar to the new light truck system would have the benefit of 
eliminating the current discrimination against full line producers.  We would 
strongly applaud this development.
        However, it would also have the major down side of enabling auto 
manufacturers 
to offshore all of their small car production and jobs.  This would happen due 
to the elimination of the two-fleet rule.  But even if this rule was retained, 
the companies would still be able to offshore their small car production and 
jobs due to the shift from a uniform, flat MPG fleet wide requirement for all 
companies to a pure attribute-based system.
        Some commentators have tried to dismiss concerns about the loss of 
small car 
production by arguing that the companies will simply substitute large car 
production at these facilities, leaving the overall production and employment 
levels unchanged.  This ignores the harsh reality that there currently is 
significant over capacity in the auto industry.  The UAW submits that the real 
world impact is that certain companies would take advantage of the change in 
the 
CAFE rules to further downsize their operations.  The net result is that small 
car facilities would be closed, and tens of thousands of automotive jobs would 
be lost, without any compensating replacements with large vehicle production 
and jobs.
        Fortunately, the UAW believes there is an easy way to obtain the 
benefits of 
moving to an attribute-based CAFE system for passenger cars, while avoiding 
the 
down side of losing our small car production and jobs.  Specifically, the UAW 
urges Congress to impose an ``anti-backsliding'' requirement on any new CAFE 
rules 
that NHTSA would be authorized to promulgate for passenger cars.  This 
requirement should specify that both the domestic and foreign passenger car 
fleets for each auto manufacturer would still have to meet or exceed the CAFE 
standard under the current system (i.e. the 27.5 flat MPG fleet wide 
standard).  
This ``anti-backsliding'' benchmark should be increased in line with the 
overall 
fuel economy improvements required under any attribute-based passenger car 
CAFE system.  
        The adoption of this type of ``anti-backsliding'' requirement would 
prevent 
companies from offshoring all of their small car production and jobs.  This 
would help protect the jobs of tens of thousands of American workers.  It 
would 
also guarantee that we continue to maintain domestic production capacity for 
smaller, more fuel efficient vehicles.
        This type of ``anti-backsliding'' requirement also would ensure that 
the auto 
manufacturers cannot subvert the objective of any new CAFE system by ``up-
weighting'' or ``up-sizing'' many of their vehicles, resulting in worse 
overall 
fuel economy.  It would guarantee that the companies will actually improve 
fuel 
economy across the entire range of their passenger cars, and that consumers 
and 
our nation will indeed receive the benefits of more fuel efficient vehicles.
        The imposition of this type of an ``anti-backsliding'' requirement 
would not be 
burdensome for the auto manufacturers.  If the companies are genuinely taking 
steps to improve fuel economy across their entire range of passenger vehicles, 
and if they do not shift small car production overseas, they should easily be 
able to meet this requirement.
        Thus, the UAW would support legislation that authorizes NHTSA to 
establish an 
attribute-based CAFE system for passenger cars similar to the recently 
promulgated rule for light trucks, provided this is coupled with an ``anti-
backsliding'' requirement that protects small car production and jobs in this 
country and prevents up-weighting or up-sizing of cars.  If this type of 
``anti-
backsliding'' requirement is not included, then we would vigorously oppose 
such legislation.
        In addition to imposing an ``anti-backsliding'' requirement on any new 
passenger 
car CAFE rules, the UAW urges Congress to specify that such rules should only 
take effect in 2012 or later, after the new light truck CAFE rules have been 
implemented.  In light of the serious economic difficulties currently facing 
certain auto manufacturers, we believe it is important to avoid placing undue 
regulatory burdens on the industry.  The auto companies will have to make 
significant investments to meet the challenges posed by the new light truck 
CAFE 
rules.  In our judgment, these burdens should not be compounded by 
simultaneously requiring changes in passenger car CAFE rules.  By delaying the 
effective date of any new CAFE rules for passenger cars, NHTSA can gain the 
benefit of valuable experience in the implementation of the size-based CAFE 
system for light trucks.  This will also ease the financial burdens on the 
auto manufacturers.
        The UAW recognizes that there are other important issues associated 
with any 
shift to an attribute-based system of CAFE rules for passenger cars.  This 
includes whether this type of a system should be based on weight, size or some 
combination of factors.  We believe that resolution of these complex issues 
can best be resolved through the administrative rulemaking process.
        We understand that some persons have also called for the adoption of a 
``credit 
trading'' system that would allow auto manufacturers to buy and sell CAFE 
credits 
for passenger cars and/or trucks.  The UAW strongly opposes such proposals, 
and 
urges Congress not to give NHTSA any authority to establish this type of a 
credit trading system.  A system for trading CAFE credits would inevitably  
have 
the effect of undermining the two fleet rule and/or fleet wide averaging, and 
would therefore jeopardize the continuation of small car production and jobs 
in 
the United States.  It could also aggravate the uneven playing field that 
currently exists between foreign and domestic auto manufacturers.    
        The UAW believes it is important for Congress to recognize that 
changing the 
CAFE standards for passenger cars, by itself, will not solve either the 
immediate problem of high gas prices or the larger problems of energy security 
and environmental protection.  Because of the long lead time needed to 
implement 
any changes in CAFE, there clearly will not be any impact whatsoever on 
current 
gas prices.  Furthermore, light duty vehicles (passenger cars and light 
trucks) 
only account for 40 percent of oil demand in 2006.  Passenger cars account for 
less than half of light-duty vehicle sales, and new passenger cars sold each 
year represent a very small percentage of the total vehicle stock on the road. 
Thus, changing the CAFE standard for passenger cars would, over five years, 
only 
moderate demand from a source comprising less than 10 percent of our nation's 
oil use. In order to significantly reduce our oil usage and our dependence on 
foreign oil, clearly there is a need for broader national energy policies.
        The UAW submits that these critically important energy security 
objectives do 
not have to be at odds with the goal of protecting and creating jobs for 
American workers.  Indeed, we firmly believe our nation can make substantial 
progress in improving fuel economy and reducing our nation's dependence on 
foreign oil, and at the same time help make sure that we keep and expand 
automotive jobs in this country.    
        The UAW urges this Committee, the entire Congress and the Bush 
administration to 
support energy initiatives that further both of these important objectives.  
Specifically, we urge Congress and the Bush administration to move forward 
with 
proposals to encourage the domestic production of advanced technology vehicles 
and their key components.  We believe great strides can be made in improving 
fuel economy and reducing our dependence on foreign oil by accelerating the 
introduction of such vehicles.  But, as was demonstrated by a November, 2004 
study conducted by the Office for the Study of Automotive Transportation 
(OSAT) 
of the University of Michigan Transportation Research Institute, and 
commissioned by the bipartisan National Commission on Energy Policy, the 
United 
States will lose tens of thousands of automotive jobs unless steps are taken 
to 
encourage the domestic production of these vehicles and their components.  
Currently, most of the advanced technology vehicles are assembled overseas, 
and 
almost all of the key components for the hybrid and diesel vehicles are built 
overseas.  As these vehicles gain a larger share of the market, we will 
inevitably lose automotive jobs unless we make sure that these vehicles are 
assembled in the U.S. and the main components are also built here.
        We are very pleased that proposals along these lines have already been 
introduced by Members on both sides of the aisle, including the Kingston-Engel 
(H.R. 4409), Inslee (H.R. 4370) and other bills.  The UAW submits that the 
types 
of manufacturer's incentives in these bills can help to create thousands of 
automotive jobs for American workers, while at the same time improving fuel 
economy, reducing global warming and our dependence on foreign oil.    
        The UAW also urges Congress and the Bush administration to move 
forward with 
proposals to aggressively promote the production, sale and use of alternative 
fuel vehicles.  Several automakers are already producing vehicles that can run 
on a blend of 85 percent ethanol, 15 percent gas.  This technology is 
relatively 
inexpensive - about $150 per vehicle.  But production and sales of flex fuel 
vehicles represent only a small fraction of the market.  And the actual use of 
alternative fuels has been hampered by bottlenecks in processing and, more 
importantly, the lack of a distribution network.  The UAW believes these 
problems can be overcome by mandating that a certain percentage of all 
vehicles 
sold in the U.S. by each automaker must be flex-fuel capable by a specified 
date.  Indeed, there's no reason why automakers can't make 100 percent of 
their 
vehicles fuel capable within a reasonable time frame.  We also believe that 
there should be additional incentives to encourage the creation of more 
processing plants to increase the supply of alternative fuels, and to 
encourage 
the conversion of existing filling stations so they have the capability to 
distribute alternative fuels. In our judgment, this combination of flex fuel 
policies offers the best opportunity to make progress in the near term on 
reducing oil consumption and our dependence on foreign oil.
        In conclusion, the UAW looks forward to working with this Committee as 
you 
consider proposals to improve fuel economy.  Thank you for considering our 
views on these important issues.

	MR. BILIRAKIS.  [Presiding]  Thank you very much, sir.  I am sorry if 
I caused you to speed it up there at the end.
	First of all, I want to welcome Mr. Sharp, who is a good friend.  He 
was a 
very effective Congressman, a very effective member of this committee, and we 
are sorry to have lost you, Phil, even though you have gone on to bigger and 
better things.
	Second of all, I want to apologize to all four of you, you sat there 
through so many opening statements, if you will, and the other two panels, and 
then when you come up, there are only three or four of us here to listen to 
you.  But the record is being kept, and of course, the television is on, and 
hopefully, your words are going to be seriously taken, and be helpful.
	Mr. Webber, I was asked by Mr. Joe Barton to ask you this question. 
Would 
you support an increase, a new increase in the fines for those manufacturers 
who do not meet the standard, the CAFE standard?
	MR. WEBBER.  You put me in a very difficult position, Mr. Chairman.
	MR. BILIRAKIS.  Yeah, that is probably why he wanted me to ask you.
	MR. WEBBER.  You know who I represent.  I would say that this has not 
been 
discussed, and I would like to defer my answer, but I think there are better 
ways to skin the car.
	MR. BILIRAKIS.  Well, that is really what concerns me here, is we 
forget 
too easily, we Americans, we have already forgotten, almost, 9/11 and whatnot.  
And when we have our problems at the pump, our gas problems at the pump, with 
the long lines, that has taken place over the years and whatnot, we get all 
shook up, and we think we can maybe come up with something.  And then when the 
problem sort of goes away, we relax again, and I honestly feel that is what is 
going to happen this time around, if we don't soon do something.  That is why 
it 
is critical, I think, that now that we have the door sort of open a little 
bit, 
that we address ways to try to solve the problem.  The problem is not $3 a 
gallon of gasoline.  The problem is our dependency on foreign oil.
	So, with that in mind, I asked Mr. Mineta if they have gotten around, 
sat 
around a table, with the auto manufacturers, and I didn't bring up the unions, 
but certainly, the unions would be very, very significant in that regard, and 
sit down and say, hey, there is a problem here, and we may not have the legal 
authority to change the CAFE standard, particularly, as Mr. Reuther has 
already 
indicated, and the other side kept insisting the authority was there, and this 
is, what we are doing here today is not necessary.  But you know, why can't 
people sit around a table and discuss these problems, and try, maybe have a 
give 
and a take and whatnot, and not basically require almost Congress to do it, in 
this ivory tower of ours.  We ordinarily, sometimes, will cause more problems 
and more harm than good.
	Let me ask you, and I will ask all four of you that.
	MR. WEBBER.  Well, I will lead off.  We do from time to time sit 
down--
	MR. BILIRAKIS.  Yeah, I would like to have you answer, and then Mr. 
Reuther after that, because I do want to hear that viewpoint.  Go ahead, sir.
	MR. WEBBER.  We do, from time to time, sit down and talk through these 
problems, and participate in panels, and come up with ideas, but I would just 
repeat what I said in my summary statement a few minutes ago.  We acknowledge 
the challenge.  The good news is advanced technology has become a competitive 
issue.  My industry, the manufacturers I represent, are moving on several 
fronts to gain the marketplace share, because of advanced technology.
	You know, when safety became a competitive issue, all kinds of good 
things 
happened.  And today, you and I drive vehicles that have never been safer.  
The 
same is true today with advanced technology.  It indeed is a competitive 
issue.  And I think that bodes well for our future.
	MR. BILIRAKIS.  Well, and you pointed those out in a very good manner 
in your statement.  Mr. Reuther.
	MR. REUTHER.  The UAW does not believe that we can solve our energy 
security issues just by CAFE alone.  That is why--
	MR. BILIRAKIS.  I would agree.
	MR. REUTHER.  --we have called for policies to aggressively promote 
both the hybrid and advanced diesel, and the flex fuel vehicles.
	MR. BILIRAKIS.  How would you do that?
	MR. REUTHER.  We would like to see incentives to the manufacturers to 
encourage domestic production of these vehicles, in terms of the hybrids and 
diesels.  Those cost benefits would flow through to the consumers, but in 
addition, it would ensure that we retain domestic production.  That would also 
be good for jobs.  We don't think there has to be this tension between jobs 
and promoting energy security.  We think we can move forward on both.
	On flex fuel, we have the technology already.  It is very inexpensive.  
We 
would even support a mandate that by a certain date, there has to be a much 
higher percentage of flex fuel vehicles produced in this country.  The 
challenge 
there is providing the incentives so that we have the distribution and 
processing of the flex fuels, and we would support policies along those lines.
	MR. BILIRAKIS.  Thank you, sir.  Phil, very quickly, if you have maybe 
a real quick response.
	MR. SHARP.  Well, I just would go back to the proposition that right 
now, 
we have this intense interest, understandably, from everybody, consumers 
alike, 
in fuel economy.  But what happens to us is if these oil prices decline again, 
as they might, they might not.  But if they do, as the past patterns have 
been, then we lose that as consumers.  Naturally, the industry has to adjust 
to consumer issues.
	So the difficulty is how to sustain a proposition, and that is why I 
think 
the Government, in one way or another, unfortunately needs to be in the act.
	MR. BILIRAKIS.  Yeah.  Okay, thank you, gentlemen.
	Ms. Schakowsky has walked out.  Mr. Inslee.
	MR. INSLEE.  Thank you.  I am just following up Mr. Sharp's comment 
that 
price is not the only reason, there are a variety of reasons, this is a 
trifecta.  It is good for price, it is good for our national security, so that 
we stop funding our enemies.  We are sending billions and billions of dollars 
to 
the Mideast, funding our enemies.  It is a security issue, and climate change 
is 
something we have got to come to grips with, and today, another agency of the 
Federal Government issued another report categorically saying that essentially 
the debate is over, that the science is in, and we have got to deal with this 
issue.  I just pointed out this solves a lot of our problems, some economic, 
some security, some environmental.
	I want to thank Mr. Sharp for your work on the commission that came up 
with really broad-based suggestions, not just on CAFE, but on a whole host of 
issues, and I want to point out that a lot of the commission's reports are 
found 
in a bill I have introduced, called the New Apollo Energy Act, which really 
takes a holistic approach to dealing with this, and this is just one part of 
it, and I just want to thank your efforts on that.
	Mr. Reuther, I wanted to ask you about the flex fuel issue.  I really 
appreciate the UAW's leadership, saying that you are even willing to consider 
Congress demanding, essentially, some percentage of our vehicles to be using 
this existing technology, but we also are sensitive to the financial condition 
of our auto industry, and it is something we have got to be aware of, too, and 
some of us have suggested a variety of ways to assist in that regard.  Senator 
Obama has introduced a bill.  I have introduced one here, to help with the 
legacy healthcare costs of the industry, as they go through this transition 
period.
	I just wondered what your observations are.  What should we be 
thinking 
about in that regard?  What is the most effective thing to do, as far as 
incentives, from your observation, that actually works?
	MR. REUTHER.  We believe the important thing is to make sure that all 
companies in the industry are able to utilize the incentives, and because of 
the different tax situations, financial situations of the companies, simply 
providing, for example, an investment tax credit might not be equally 
beneficial to all companies.
	So in order to have a level playing field, we want all companies to be 
making investments here in these advanced technology vehicles, flex fuel 
vehicles.  We think mechanisms have to be found, so that all companies get the 
same incentives.  One way to do that would be, as you have suggested in your 
bill, to give companies the ability to get relief on legacy healthcare costs, 
perhaps giving companies the alternative, either the tax benefit, or the 
healthcare benefit.  There may be other mechanisms, but the notion should be a 
level playing field, all companies given the same incentives.
	MR. INSLEE.  Appreciate that.  You know, the flex fuel, one of the 
reasons 
I am excited about this prospect, it is an existing technology.  In your 
testimony, I think, you said it costs maybe $150 a vehicle, which is peanuts 
relative to what you are going to save, if we can keep these prices down by 
introducing a competitor to oil and gas.  If we can get bio-fuels to be a 
competitive element, to help reduce, to essentially get another alternative 
source, we think that can have a very beneficial impact on costs.  So there 
are savings actually over the long run.
	Do all the industry have the capacity, do all the companies have the 
capacity to provide us these flex fuel vehicles today?  Is there any 
particular 
advantage in one or the other?  Is there any sort of domestic, non-domestic 
concern here, or is everybody on the same wavelength?
	MR. REUTHER.  My understanding is that the Big Three companies may be 
slightly ahead in producing the flex fuel vehicles, but the technology is very 
simple and inexpensive. If there is direction from the Government to move 
forward in that direction, we think all auto companies can easily do it.  We 
believe this holds the best prospect for near-term significant oil savings, 
and that is why we call on the Government to aggressively promote flex fuel 
vehicles, and the domestic production.
	MR. INSLEE.  Some of us would rather send our money to Midwestern 
farmers 
and Middle Eastern sheikhs, and I don't think that is too parochial to say 
that.  
I will ask you kind of a rhetorical question.  There are suggestions that we 
continue our research into advanced fuels, hydrogen vehicles.  I support that, 
but I hate to think of that as a cover for inaction, to use the technologies 
today.  Today, we can drive hybrid vehicles.  I drive one.  It gets over 50 
miles a gallon.  I am 6'2", 205 pounds, and I am very comfortable and safe in 
it.  Today, we can drive flex fuel vehicles that can grow this demand for bio-
fuels.  Hopefully, we will have cellulosic ethanol at some point.
	Would you counsel us against using research as a cover for inaction?  
I guest that is a rhetorical question, but I will ask it anyway.
	MR. REUTHER.  I don't think it is an either/or situation.  Obviously, 
additional research is needed, and would be helpful on, you know, plug-in 
batteries, hybrids, fuel cells, et cetera, but we think we can move forward, 
in 
terms of encouraging domestic production of the advanced technology vehicles, 
and in encouraging flex fuel vehicles, and move forward on CAFE, as we have 
said in our testimony.
	MR. INSLEE.  Thank you.
	MR. BILIRAKIS.  Thank you.  The gentleman's time has expired.  Dr. 
Burgess 
to inquire.
	MR. BURGESS.  Thank you, Mr. Chairman.  Mr. Webber, there is a 
question 
that I have just got to ask you.  It is really a little bit off the subject of 
CAFE standards, but I have heard this for years, that ethanol was harmful to 
some of the parts in the engines of automobiles.  Is that just an urban myth, 
or is that true?  I hear that mostly from my Corvette guys.
	MR. WEBBER.  I don't think the companies that have committed to 
ethanol 
would have done so had they not solved that problem, or had they not believed 
that they could solve that problem.  Whereas that might have been a problem in 
the past, it is my understanding that the ethanol-capable, the E-85-capable 
vehicles that are in the marketplace today, and I think we have got about five 
million on the American road today, and we are going to have another million 
before the year is out, you are not going to see any harm to the engines.  
That is my clear understanding.
	But I do want to raise one issue, and I go back to the Congressman 
from 
Washington's comments on ethanol.  To me, the real challenge with ethanol has 
to 
do with infrastructure.  We have 180,000 plus gas stations in the United 
States.  
Only 500 will give you ethanol, or what I would call E-85.
	MR. BURGESS.  Yeah.  Let me reclaim my time, so the gentleman from 
Washington doesn't use it.  Being from Texas, I am not sure I am liking the 
direction that is going.
	We have heard, of course, today, about innovation and taxation and 
regulation, so we have got the whole gamut ahead of us.  Mr. Webber, let me 
stay with you on that line of questioning.  Do you think an increase in the 
corporate 
average fuel economy standards would substantially increase the number of 
hybrids offered by American manufacturers?
	MR. WEBBER.  Your questions are very easy, Dr. Burgess, or not easy, I 
should say.
	I don't know the answer to that question.  I do know that by 
increasing 
CAFE, and it will take time.  It is a complex issue, especially if you go the 
reform route that they did with light trucks.  It is going to take time, and 
so 
it is not an immediate fix.  It is not a silver bullet.  If you are looking 
for 
immediate answers, they are probably not there.  We will have, as my testimony 
explained, a million hybrids on the road by the year 2010.  I think that is 
fairly impressive.  I drive one.  The mileage is very, very impressive, even 
though I drive an SUV hybrid.  I am very impressed.  It is double what I would 
probably normally get in a standard SUV.
	MR. BURGESS.  Yeah.
	MR. WEBBER.  So I think hybrid technology is here to stay.  I think 
you 
are going to see more and more companies getting involved in it, and I think 
it 
is one of the answers.  But there are several answers.  That, indeed, clearly 
is one of them.
	MR. BURGESS.  Let me ask Mr. Reuther, are we going to see those 
hybrids from American manufacturers?
	MR. REUTHER.  Well, there already are hybrids from the manufacturers.  
The Ford Escape--
	MR. BURGESS.  Mr. Reuther, with all due respect, I waited 5 years for 
a Ford Escape before I broke down and bought a Toyota.  I desperately wanted 
an American-made hybrid.  Now, I like the hybrid, and I like the fuel economy.  
I like the feeling of moral superiority, but I would really like to be able to 
know that I wasn't outsourcing a job in driving that hybrid vehicle.  So what 
can we do to encourage American manufacturers along those lines?
	MR. REUTHER.  Well, that is why we specifically urge that there be 
incentives for the domestic production of the hybrids, and especially, the 
components.  A lot of people often think of just the final assembly, but it is 
actually the components, the hybrid electric motors, the diesel engines, where 
there are thousands and thousands of jobs, and you know, unfortunately, right 
now, none of those key components are built in this country.  We think with 
the 
proper incentives, we could get those built here, create jobs, and at the same 
time, accelerate the introduction of these fuel-saving vehicles.
	MR. BURGESS.  Isn't the success story of the Toyota, though, isn't 
that 
enough incentive for the industry?  I mean, I had to wait 6 months to get one.
	MR. REUTHER.  But there is a difference between--
	MR. BURGESS.  That is paying full price.
	MR. REUTHER.  --producing it and producing it in this country, and we 
want 
to make sure the jobs are created for American workers, not over in China or 
Japan.
	MR. BURGESS.  And I agree with that.  Mr. Sharp, let me just ask 
you--of 
course, you made a statement that I probably don't agree with fundamentally, 
but 
about the vehicle miles driven, and that leading to the tax increase.  I asked 
the question of Mr. Mineta, but I asked it so clumsily, I don't know if he 
really understood it.  If you have one of Mr. Reuther's American-produced 
hybrid 
vehicles, now, that is getting 50 miles to the gallon, and it has got a 
plug-in 
battery that you run off a solar cell, so that you are really only using one 
gallon of fossil fuel for every hundred miles driven, would you just tax the 
fossil fuel, or would you tax the ethanol that goes into the E-85 at the same 
rate that you are--do you really care if those vehicle miles driven are that 
great, unless you are burning fossil fuel?  Is it the question of fossil fuel, 
or the vehicle miles?
	MR. SHARP.  I actually never thought of that question, and I don't 
have an 
answer for you.  Although I would quickly say when we get to that point, that 
they have so many on the road, then the Ways and Means Committee can consider 
relieving us of the gasoline tax.  I think the risk of our getting to that 
point is nowhere on the horizon.
	MR. BURGESS.  Mr. Sharp, nothing has changed since you were here.  
Once we 
get a tax, we never undo it.  At least, that has been my experience.
	MR. BILIRAKIS.  The gentleman's time--
	MR. SHARP.  Or an ethanol subsidy, I might think.
	MR. BILIRAKIS.  The gentleman's time has expired.  Ms. Baldwin.
	MS. BALDWIN.  Thank you, Mr. Chairman.  In November of last year, I 
and 12 
colleagues sent a letter to Secretary Mineta voicing concerns about the 
Department's proposed rule with regard to light trucks and specifically, I was 
asking the Administration to consider increasing the fleet-wide fuel economies 
by more than 1.8 miles per gallon, and including standards for vehicles 
between 
8,500 and 10,000 pounds gross vehicle weight.  I was pleased that the 
Department 
was moving forward, but I felt that this was something that could be a little 
bit more ambitious.
	Now, I know, Dr. Pizer, in your remarks, you--thank you, by the way, 
for 
providing us with some new, creative ideas to be thinking about, but you 
avoided 
addressing the substance of the light truck rule.  I am hoping I can coax you 
to 
do that.  I know your caveat, that your views being expressed are your own, 
but 
as a Senior Fellow, who has looked very closely at this, I just--your 
comments, 
and do you agree that it would not have caused manufacturers undue hardship to 
include pickup trucks, or to have created a standard higher, even just 
slightly higher, than a 1.8 miles per gallon over four years?
	DR. PIZER.  The main comment I had about the level of the standard was 
when NHTSA put out the proposed rule.  It was based on a forecast of oil 
prices 
that was outdated by the time the proposed rule was even printed.  By the time 
the rule went final, the forecasts were about $20 per barrel higher, over the 
long run, or about $0.50 per gallon higher.  By my reckoning, that would have 
raised the benefits from the fuel economy standard by about 50 percent.  And I 
was very surprised when they had that 50 percent increase in benefits, and 
they 
are doing a cost/benefit analysis, that it didn't alter the standard very 
much.  
The difference between the proposed rule and the final rule was 0.2 mpg, and 
there were some countervailing reasons mentioned in the rule, more lead time, 
and changes on the cost side, but it was still surprising to me that there 
wasn't a larger increase.  If we have these much higher oil prices that are 
forecast to continue, we would expect, I think, to see a stronger response on 
the CAFE standard, and that was very surprising to me.
	MS. BALDWIN.  Thank you, Dr. Pizer.  Congressman, I thank you for your 
testimony here today.  In your testimony, you were urging strong Congressional 
oversight and involvement, if the Department is going to be creating CAFE 
standards for passenger cars.  One thing I am curious to know is, 
specifically, 
do you believe that the committee print that we are looking at today, that we 
are considering, needs to be strengthened in that regard, or are you talking 
specifically about just the general oversight of this committee, and our 
relevant Senate committees, with regard to the Department taking over this 
responsibility?
	MR. SHARP.  Well, two things--
	MS. BALDWIN.  Exercising it, I should say.
	MR. SHARP.  I used the word, not an artful word, but legislative 
guidance, 
which is what I consider what you put in the legislation.  It does seem to me 
that you could put more guidance in the legislation, as to what you expect, or 
the factors to be considered.  Although, as I understand it, the legislation 
is 
reverting back to the four provisions that were discussed earlier today.
	But secondly, I think you can follow up as the process is going on, 
since 
it will and it should take some time for them to redesign this, through 
hearings, through other ways that Congress has traditionally exercised 
oversight.  And historically, from time to time, Congress has done a very good 
job of that, and sometimes not, and there is an opportunity here to do some 
serious work, because these are not casual questions, as many of you have 
indicated.  What is at stake here are large in terms of employment, are large 
in 
terms of our economy, are large in terms of the environment, and on the energy 
front as well.
	MS. BALDWIN.  Thank you.
	MR. BURGESS.  Mrs. Blackburn.
	MRS. BLACKBURN.  Thank you, Mr. Chairman, and I thank all of you for 
being with us, and for your patience today.
	Dr. Pizer, I think I want to come to you first, and I enjoyed reading 
your 
testimony, and appreciate what you had to say.  When you were looking in your 
testimony, talking about fuel efficiency and considering how to best develop 
new 
technologies to meet the environmental needs, and the demands that consumers 
have, that drivers have--and I would just like a concise answer from you, as 
we 
go through this process of deciding what the right balance is going to be--and 
looking at CAFE standards, and looking at what the impact of government ought 
to 
be, and looking at the consequences of more governmental action, and then 
looking at the free market and consumers, and what they want, and what we hear 
from our consumers.  
	Do you think that we should just have the Highway Traffic Safety 
Administration, the Administration develop the standards, and then allow the 
manufacturers just to compete with what the best technologies are going to be?   
As Dr. Burgess has pointed out, some of the concerns his constituents had, and 
then we hear from different constituents.  They like this, they don't like 
that, 
they can get this at just the normal competition, the market.  And this, in 
conjunction with that, do you think, what is your advice to us in being 
careful 
that policies we make aren't inadvertently promoting one technology over the 
other, instead of just preparing a playing field, a level playing field, and 
letting people, letting companies go to it, and so I would love your response.
	DR. PIZER.  I agree with you completely.  You want to have a policy 
that 
sets a goal very clearly, and then allows the private sector to achieve that 
policy goal as cheaply and as efficiently as possible, also recognizing 
whatever 
competing concerns there might be, like about safety, about jobs, and things 
like that.  I think a CAFE program suitably reformed, can achieve that.  I am 
not sure, I would be happy to hear other people comment.  I think a CAFE 
program 
does not favor one particular technology, in terms of how you are going to 
achieve the fuel economy savings.
	Now, there are some other things that were mentioned that would be 
complementary policies, for example, alternative fuels, that would be very 
important.  But in terms of the technology for achieving fuel economy, I think 
a 
fuel economy standard is probably the most appropriate policy, if it is well 
designed.
	MRS. BLACKBURN.  So set it and move it.  That is what you are saying.
	DR. PIZER.  Well, reform it, so it is as efficient as possible, and it 
gives manufacturers as much flexibility as possible.
	MRS. BLACKBURN.  Yeah.  Mr. Webber, do you want to add something to 
that?  I saw you look up.
	MR. WEBBER.  No.
	MRS. BLACKBURN.  Okay.
	MR. WEBBER.  I am fine.
	MRS. BLACKBURN.  All right.  Great.  Mr. Reuther, in your testimony, 
you 
mentioned the importance of the two-fleet rule, and this is something that I 
found interesting, and I had hoped to be back while Secretary Mineta was still 
here, because I wanted to talk with him about that, and Academy of Sciences 
study, that basically said that the two-fleet rule did not seem to protect or 
grow domestic jobs.  And I would like for you to talk for just a second as to 
why you disagree with that, and then what I would like to know whatever type 
evidence you have to substantiate whatever type quantifiable data you have to 
substantiate your position, and if you would like to submit that to me.
	MR. REUTHER.  The NAS study's conclusion was based on the assumption 
that 
the companies would simply substitute other production for the small car 
production, and we think that is not a real world assumption.  We think it 
ignores the fact that there is significant overcapacity in the industry, and 
that if given the opportunity, the companies would like to close additional 
facilities.  Our evidence is that the companies talk about that they are not 
making the profits in the small vehicles--discussions with the companies, 
and--
	MRS. BLACKBURN.  So it is anecdotal, basically.
	MR. REUTHER.  Well, we believe--
	MRS. BLACKBURN.  Let me--
	MR. REUTHER.  --based on what would actually happen--
	MRS. BLACKBURN.  Okay, and let me ask you something else.  You 
mentioned 
in your testimony the 17,000 American workers who are currently employed at 
U.S. 
assembly plants, and I appreciate that you did mention the Saturn Spring Hill 
plant, which is at the edge of my district, right outside my district.  You 
didn't mention the Smyrna, Tennessee plant that has 6,000 workers.  That is on 
the other side of my district, and they build the Nissan Altima that is there. 
And was there a specific reason that you left the Smyrna location off your 
list?
	MR. REUTHER.  We were focused on plants that have UAW members.
	MRS. BLACKBURN.  Just UAW members.  Okay.  All right.  Thank you so 
much.
	MR. BURGESS.  The gentleman from Massachusetts is recognized for 5 
minutes.
	MR. MARKEY.  Thank you so much, and I am going to go in the Wayback 
Machine and explain to people why fuel economy standards set by Congress were 
the single most important thing that has ever happened in the history of our 
energy dependence.
	As you can see, in the '60s and the '70s, there was a continued rise 
in 
the amount of dependence upon imported oil, just continued to rise.  Then 
Congress, in 1975, passed a law, which mandated that over a 10 year period, 
the 
fuel economy average for the United States had to be 27.5 miles per gallon.  
After a couple of years, what you saw is a ramping up of the efficiency, in 
this 
green line, and a plummeting of the amount of imported oil from OPEC, just a 
plummeting over that 10 year period, until we reach the point where imported 
oil 
had dropped from--down to only 27 percent of the oil we consumed, from 35 
percent, just as we reached the peak of where the fuel economy standards had 
reached.
	But then as we know, President Bush took over, the first President 
Bush.  
No additional changes were made.  The number actually stagnated and declined 
after that point, and so we saw a reemergence of the historic trend, higher 
and 
higher.  And each time Sherry Boehlert and I asked for the imposition of the 
NAS, the National Academy of Sciences standards, the Republican Congress voted 
no, no, no, and we never saw, actually, a request from the Administration, in 
the form of legislation, to act in this area.
	So this is a devastating historical reality.  Okay.  Congress acting, 
fuel 
economy standards going into place, plummeting of imported oil, and then once 
the pressure was relieved, it once again started to escalate.  So the NAS, in 
2001, they actually assumed in their analysis three technology paths, and they 
assumed $1.50 a gallon of gasoline, that the cost of the technologies at the 
time, they took that as the assumption, and they all assumed that 5 percent 
weight increase, as a result of the addition of new CAFE or safety technology. 
And so clearly, the assumptions are outdated, since there is now a much higher 
cost of gasoline, which would imply that the technologies are now more 
affordable than they were in 2001.
	So there were three assumptions.  We selected the middle assumption, 
Sherry Boehlert and I, the mid path, and what they did in their report, on 
pages 
35 to 39, the National Academy of Sciences in 2001, was they took 13 
technologies, and they used the existing state of those technologies, if they 
were incorporated into the automotive fleet.  So nothing new, you don't have 
to 
invent a single thing.  Hybrid technology is not included.  And what they do 
is 
they take engine friction and other mechanical, hydrodynamic loss reduction 
that 
would be a one to five percent fuel economy improvement.  Application of 
advanced low friction lubricants, multi-valve, overhead camshaft valve trains, 
variable valve timing, variable valve lifting and timing.  So they just went 
through, using these you know, Ph.D.s and summa cum laudes from Harvard and 
Cal 
Tech and MIT, to figure out what it would be if they included it, if the 
automotive industry used over the counter, available technologies, and they 
assumed that there would be a 65 percent increase, a 34 to 65 percent increase 
in fuel economy standards.
	But what Mr. Boehlert and I do, for the purposes of our amendment, is 
we 
picked the low number.  We picked the 34 percent number, the one-third 
improvement that the NAS determined was possible, using off the shelf 
technologies, not the 65 percent.
	So here we are now, 6 years later.  The Secretary of Transportation is 
saying they have yet to really evaluate this report.  They have been waiting 
for 
authority, apparently, to study something that the Secretary of Energy says is 
a crisis, because 70 percent of the oil goes into gasoline tanks.
	So I guess my question to the panel, maybe you--my good friend and 
mentor, 
Phil Sharp, on energy issues--maybe you could give us some historical 
commentary 
on this NAS report, the findings that they made on page 35 to 39, and whether 
or not, you know, they were and still are implementable?
	MR. SHARP.  Well, if anything, you are correct that they are more 
implementable today than they were in 2000.  There is the issue over here, 
2001 
and 2002, as it was reported in 2001, but not printed until 2002, so you and 
the 
Secretary got into an issue over that, but there is no question that the price 
of gasoline used was $1.50 in these calculations, and so there should be more 
benefit.
	The one thing that I don't know in your proposal is the timetable that 
you allow for.  That is critical to this issue of how costly it becomes.
	MR. MARKEY.  We used 10 years, which is the same that NAS used, so it 
was 10 years.
	MR. SHARP.  Well, I believe the NAS said 10 to 15 years, but I am not 
sure 
at what point we are talking about in the report.  But the point is, is that 
is a key factor on the cost thing.
	But also, to add to your argument in part--
	MR. MARKEY.  Even if it is 15, since 5 years has elapsed, if we gave 
them 10 more years that would have given them 15 years.
	MR. SHARP.  Well, they might not see it that way.
	MR. MARKEY.  Well, I know they are not going to see it that way, 
because they don't want to do it, but--
	MR. SHARP.  But let me say more significantly, the NAS study simply 
did 
not consider the possibility of significant increase in hybrids, which we are 
seeing.
	MR. MARKEY.  Exactly.
	MR. SHARP.  Because at the time, they could not foresee what the 
actual 
costs would be, and what the consumer response would be, so it left that out, 
so in fact, that has made it somewhat easier to do.
	Now, I must say, on behalf of the National Academy report--which I was 
a 
part of--that they refused vehemently, over and over, to actually say what 
number they recommend.  They simply said these are possibilities at certain 
cost levels, and gave options.
	MR. MARKEY.  No, what they did in the report was they said two plus 
two, 
we are not going to tell you what the number is.  You pick the number that two 
plus two equals.  So they took very simple analysis, and they said this will 
improve it by two percent, that will improve it by 2.5 percent.  That will 
improve it by four percent.  And then they left the math to you, to take home 
and add up, which is what we did.  And no one in six years at the NAS has ever 
contested that that isn't the result, 34 to 65 percent increase.
	MR. SHARP.  The NAS committee does not exist any more.  It does not 
respond, except as individuals, to questions, so there would be no response 
from the National Academy.
	MR. MARKEY.  Well, let me ask just one final question, if I may, Mr. 
Chairman.
	Do you agree that 33 miles per gallon CAFE improvement is consistent 
with 
the lower end of the range of what the NAS concluded was achievable using 
existing technology?
	MR. SHARP.  Mr. Markey, you may be right.  I don't know.  I have not 
tried 
to calculate and add that up.  You were combining both, obviously the two 
fleets together.

	MR. MARKEY.  Right.
	MR. SHARP.  The light duty truck and the other.
	MR. MARKEY.  Exactly.  Exactly.
	MR. SHARP.  You may well be correct.  I simply can't authoritatively 
say absolutely you are.
	MR. MARKEY.  Does anyone down there dispute it?
	MR. REUTHER.  Well, I would like to add that besides the magnitude of 
any increase, there is the question of the structure.  Simply mandating a 
significant flat mpg increase has a very disparate impact on different 
companies, depending on their product mix.
	MR. MARKEY.  No, I agree with that, but look at the impact on America. 
Okay, look at how much less dependent we were upon Middle Eastern Persian Gulf 
oil, so that is also something that should be factored in.  Yes.
	MR. WEBBER.  Congressman Markey, if I may respond to that chart.  For 
the 
record, fuel economy since 1978, of cars and trucks, has gone up one to two 
percent a year, but what you have seen is a change in purchasing.  Now, we are 
selling more light trucks, for example, than automobiles.  That is one factor. 
The real challenge for this country, though, is the proverbial VMT, vehicle 
miles traveled.  If you look at the EIA charts--and I have studied them until 
I am blue in the face--that is a straight up line, a diagonal line.  Vehicle 
miles traveled.  
	MR. MARKEY.  You are going to have to explain this away, Mr. Webber, 
and I 
don't think you can do it, with all your VMTs.  You can't explain away '75 to 
'86.
	MR. WEBBER.  You have a VMT challenge, you have more people driving 
more, you have more vehicles on the road.
	MR. MARKEY.  Is this aberrational, Mr. Webber?  What happened there?
	MR. WEBBER.  Well, I think it is aberrational.
	MR. MARKEY.  I don't think so Mr. Webber.
	MR. WEBBER.  And I know that we can have a friendly disagreement on 
that.  
The other thing I would like to point out is that production from U.S. oil 
sources has gone down appreciably, and that is one of the reasons why oil 
imports have risen.
	MR. BURGESS.  The gentleman's time has expired.
	MR. MARKEY.  We are only down one million barrels of production, but 
we are up to 13 million that we import, so we are up 6.5 million that we 
import--
	MR. BURGESS.  The gentleman's time has expired.
	MR. WEBBER.  But U.S. production is down.
	MR. BURGESS.  Now, we do have another hearing coming into this room, 
but I 
was going to give Mr. Inslee one last question.  He wasn't here, so Mr. Markey 
took it.  Taking the Chairman's prerogative, I want to have the last word.
	Dr. Pizer, I had asked the question about that gallon of fossil into 
the 
hypothetical hybrid vehicle, but also burning ethanol.  Would that be eligible 
for those, to bank those credits that you talked about?  Would you be able 
to--
are those credits only applicable to fossil fuel burned, or would the fact 
that 
it was burning gallons of E-85 ethanol make it ineligible for those credits?  
Could the credit just apply to the fossil fuel burned?
	DR. PIZER.  Well, I am not sure quite how it works under the current 
system.  I mean, presumably, you don't know what kind of fuel a vehicle is 
going 
to burn when you sell it.  It can burn either.  So that is something that 
would 
really have to be addressed in the rules you are making.  But as a general 
rule, 
I think all of the problems that we have identified, well, I shouldn't say 
that.  
A lot of the problems we identified really have to do with the oil usage, and 
I 
think that you would probably want to think about oil a little bit differently 
than you would want to think about ethanol.
	But as Mr. Sharp suggested, it would really require a little bit of 
study, 
to think about exactly what all the differences are, and how many are common 
across ethanol and oil, and how many different.  Obviously, the security ones 
are very different, but maybe some of the other ones are similar.  I don't 
know.
	MR. BURGESS.  Very well.
	Our time is up, and our hearing is adjourned.  Thank everyone on the 
panel very much for their perseverance.
	[Whereupon, at 2:02 p.m., the committee was adjourned.]


RESPONSE FOR THE RECORD BY ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL 
UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF 
AMERICA




UAW RESPONSE TO QUESTIONS POSED BY
REPRESENTATIVE STEARNS


1. QUESTION: ``Wouldn't you agree that the two fleet rule has created the 
incentive of forcing vehicle manufacturers to de-content their domestically-
produced vehicles to make them apply to their import fleets, or vice versa 
thereby reducing their procurement of American-made supplier components?

UAW ANSWER: No, we do not agree with this assertion.  The primary impact 
of the 
two-fleet and fleet wide averaging rules has been to require full line 
automakers to keep small car production in the United States.  This has helped 
to keep tens of thousands of assembly and parts jobs in this country.  As is 
apparent from the self-contradictory nature of the question, any ``incentive'' 
that auto companies might have to lower the domestic content of higher-mileage 
vehicles to keep them in their foreign fleets is counterbalanced by an 
``incentive'' to raise the domestic content of other vehicles to meet the CAFE 
standard for their domestic fleets.  Thus, these ``incentives'' cancel each 
other 
out.  Overall, the two-fleet rule has a positive impact on automotive jobs in 
the United States because it keeps small car production in this country.


2. QUESTION: ``Hasn't the ability to produce in the NAFTA region eliminated 
any benefit from the two fleet in forcing small car production to stay in the 
United States because manufacturers can produce small cars in non-UAW plants 
in Mexico that can be included in their domestic fleet?''

UAW ANSWER: Again, we do not agree with this assertion.  One of the main 
impacts 
of NAFTA was the elimination of the 25% U.S. tariff on imported pickup trucks 
from Mexico.  As a result, auto companies have established pickup truck 
production in Mexico, along with the production of cars.  It is not likely 
that 
the companies would disrupt their production of pickup trucks in Mexico by 
shifting more small car production from the U.S. to Mexico.  Furthermore, it 
is 
worth noting that vehicles produced in Mexico have significantly higher 
percentages of U.S. content than vehicles produced outside of North America.

However, if the two-fleet rule and/or fleet wide averaging were eliminated, 
there is a very real danger that full line auto producers would decide to 
shift 
small car production from the U.S. to places where small cars make up a much 
larger share of the market.  This could include shifting small car production 
to 
Southeast Asia, Europe, and/or Brazil.  This would translate into a 
significant 
loss of both assembly and parts jobs, since vehicles produced in these 
locations have much lower levels of U.S. content.


RESPONSE FOR THE RECORD BY THE HON. PHILIP R. SHARP, PRESIDENT, RESOURCES FOR 
THE FUTURE

RESPONSE TO: Questions from The Honorable Cliff Stearns
FROM: Phil Sharp, President, Resources for the Future
June 7, 2006

QUESTION: How far are we from significant fuel cell penetration in the 
passenger vehicle market - say 10%? What will be required of our 
infrastructure to sustain 
that penetration? And aren't there problems in the ``wells to wheels'' energy 
analysis depending on the feed stocks used for hydrogen production - like 
natural gas versus water and hydrolysis?

ANSWER: This is beyond my technical expertise, and therefore I have no basis 
upon which to predict this.


QUESTION: How have crossover vehicles, particularly in the SUV niche, affected 
the current CAFE system? Why can't we simply eliminate the passenger car and 
light truck classification distinction and deal with vehicles purely with an 
attribute based approach?

ANSWER: The attribute-based approach certainly provides, over time, the 
opportunity to eliminate the distinction between light-duty trucks and 
passenger cars.


QUESTION: Isn't it a bit ridiculous that while the production of flexible fuel 
vehicles generates CAFï¿½ credits for manufacturers the vast majority of these 
vehicles are never run on flexible fuels like ethanol? Can we ever get away 
from the ``chicken or the egg'' argument about enabling infrastructure and 
technology as we get more involved with ethanol and biodiesel?

ANSWER: When CAFï¿½ credits for flexible fuel vehicles were adopted, it was 
presumed that other government incentives were needed and would be adopted to 
make sure an infrastructure was built. However, given the fact that gas prices 
have remained for many years quite low, neither market incentives nor 
incentives by government to sustain policies for infrastructure ever happened.


RESPONSE FOR THE RECORD BY WILLIAM A PIZER, SENIOR FELLOW, RESOURCES FOR THE 
FUTURE

RESPONSE TO:  Questions from the Honorable Cliff Stearns
FROM:  William Pizer, Senior Fellow, Resources for the Future
June 19, 2006

1. How far are we from significant fuel cell penetration in the passenger 
vehicle market - say 10%?  What will be required of our infrastructure to 
sustain that penetration?  And aren't there problems in the ``well-to-wheels'' 
energy analysis depending on the feed stocks used for hydrogen production - 
like natural gas versus water and hydrolysis?

It is hard to imagine significant fuel cell penetration for several decades.  
The production, distribution, storage, and use of hydrogen all face 
significant cost disadvantages that are several times that of competitive 
alternatives.  For 
example, production of hydrogen through electrolysis is about seven times more 
expensive per unit of energy than gasoline; production via natural gas is 
about 
two to four times more expensive.  Meanwhile, the current cost of power from a 
fuel-cell engine is about 100 times the cost from an internal combustion 
engine; 
estimates of the cost of a fuel cell vehicle are on the order of $1 million.  
Given it took 20 years for wind and solar power to see tenfold decreases in 
costs, it will take some time for these costs to come down.1

Even after a fuel cell vehicle becomes competitive in price with ordinary 
vehicles, the penetration of such vehicles will take time.  Current estimates 
suggest that hybrid electric vehicles will reach 10% of the passenger vehicle 
market by the end of the decade - ten years after such cars were first 
available.2

A key element of fuel cell vehicle penetration will be the widespread 
availability of hydrogen fuel, requiring significant changes in the existing 
infrastructure delivering gasoline, diesel and ethanol.  Distributed 
generation 
of hydrogen, where filling stations would produce hydrogen by reforming 
natural 
gas, would require considerably less infrastructure, but would not provide as 
signficant climate benefits or take advantage of economies of scale in 
production.  In the long term, a recent National Research Council report 
predicts large-scale centralized generation with pipeline distribution.3

As the preceding comment suggests, the source of the hydrogen matters greatly 
for the net climate consequences of fuel cell vehicles.  A recent presentation 
of work at Argonne National Labs highlighted that while a fuel cell vehicle 
using hydrogen made by reforming natural gas would have about half the 
emissions 
(well-to-wheel) of a conventional vehicle, that same vehicle using hydrogen 
made 
from electrolysis powered off the current U.S. electricity grid would have 
higher emissions than a conventional vehicle.  Meanwhile, electrolysis powered 
by non-emitting electricity - nuclear or renewables --  would have zero 
emissions.4

2. How have crossover vehicles, particularly in the SUV niche, affected the 
current CAFï¿½ system?  Why can't we simply eliminate the passenger car and 
light truck classification distinction and deal with vehicles purely with an 
attribute based approach?

Light trucks now make up more than half of the light-duty fleet.  This is due, 
in large part, to the introduction of crossover vehicles, which went from 2% 
of 
light-duty vehicles in 1980 to more than 25% in the last few years, as shown 
in the table below.5


Sales of Light Trucks (SUV + vans + pickups)
Sales of SUVs
Sales of Passenger Cars
1975

187,000
7,274,000
1980
2,217,000
244,000
9,095,000
1985
4,235,000
707,000
10,969,000
1990
4,515,000
930,000
9,224,000
1995
5,934,000
1,736,000
8,725,000
2000
8,307,000
3,625,000
8,978,000
2002
8,673,000
4,187,000
8,336,000
2004
9,360,000
4,648,000
7,505,000
2005

4,442,000
7,870,000

Until the recent reforms to light-truck CAFE, there was a significant 
incentive 
to build cars that could be classified as light trucks (SUV).  The same 
vehicle, 
if it were classified as a light truck rather than a passenger car, would face 
an almost 7 mpg easier standard (declining to 4.5 mpg in 2007).  Under the new 
program, small light trucks will actually face a standard that is more 
stringent 
than the current passenger car standard in 2011.  In this way, using a size-
based system and setting car and light-truck standards consistently, many of 
the existing problems with the two classification system are reduced.

Nonetheless, the original distinction between the fleets - for work/cargo 
versus 
personal use - has clearly broken down and the argument for supporting a two-
class system is unclear.  The recent NRC CAFE report suggests a fully tradable 
system, with consideration for an attribute-based system.6  

At this point, the main concern about removing the distinction (or allowing 
companies to trade across fleets) is how it would affect the distribution of 
burden across manufacturers.  Some companies might see a benefit if they are 
currently constrained by CAFE in one fleet, but not in the other - for 
example, 
if company ``A'' finds it difficult to meet its truck CAFE but easy to meet 
the 
car CAFï¿½, they may benefit from merging the standards as they are able to 
trade 
off less effort on trucks for more effort on cars (something they currently 
cannot do).  Meanwhile company ``B", who has equal difficulty meeting both the 
car and truck CAFï¿½, would not see any benefit from this added flexibility.  In 
this case, company ``B'' might oppose the standard based on the benefit (or 
even perceived benefit) to ``A".  

Importantly, moving to an attribute-based approach tends to equalize the 
burden 
across manufacturers in each fleet even when the standards are separate for 
cars 
and trucks.  This diminishes the noted distributional effects and should make 
it easier to merge the standards. 

3. Isn't it a bit ridiculous that while the production of flexible fuel 
vehicles 
generates CAFï¿½ credits for manufacturers, the vast majority of these vehicles 
are never run on flexible fuels like ethanol?  Can we ever get away from the 
``chicken or the egg'' argument about enabling infrastructure and technology 
as we get more involved with ethanol and bio-diesel?

Currently, about 2% of vehicles on the road are flexible fuel vehicles.  They 
use alternate fuels about 1% of the time but receive CAFE credit as if they 
use alternate fuel 50% of the time.7

From the vantage point of reducing oil use, this does not make sense.  As the 
NRC report notes, this has lead to less oil savings from CAFE than would occur 
without the flexible fuel provision.  They recommend removing the CAFï¿½ credits 
for flexible fuel vehicles.  However, from the perspective of creating 
flexibility in the vehicle fleet, it might make some sense - that is, if we 
value the flexibility as well as the fuel savings.  For example, the ability 
to switch to ethanol could reduce oil price volatility by providing the 
flexibility 
to switch to an alternate fuel when oil prices are high.  Reduced volatility, 
in turn, has economic benefits.

Unfortunately, the flexibility in the fleet has little value if ethanol is 
unavailable when you need it.  Currently, there are only 637 E-85 stations out 
of about 180,000 nationwide.  Of course, with only 2% of vehicles on the road 
able to use E-85 (and 1% using it), perhaps it is not surprising that only 
0.3% 
of stations provide it.  Hence what might appear to be a chicken and egg 
problem.

However, until recently, the underlying cost of ethanol did not allow it to be 
cost competitive with gasoline.  And even now, because of current supply 
constraints, E-85 has not been priced in a way that made it an attractive 
alternative to gasoline at the pump. Before considering fuel distribution and 
vehicle use to be a chicken and egg problem, therefore, it may be useful to 
see how markets adjust over time to higher gasoline prices.


RESPONSE FO THE RECORD BY  FREDERICK L. WEBBER, PRESIDENT, ALLIANCE OF 
AUTOMOBILE MANUFACTURERS

Responses to written questions from the May3, 2006 legislative hearing on H.R. 
___, a bill to authorize the National Highway Traffic Safety Administration 
(NHTSA) to set passenger car fuel economy standards

The Honorable Cliff Stearns

Has the Alliance seen the manufacturer fleet fuel economy figures rise with 
gasoline prices?  If so, isn't that the most efficient, market-based way to 
improve CAFE averages, or more specifically, conservation?

As gasoline prices have risen in recent months, consumers have started looking 
more toward cars and trucks that use less fuel.  And, over the past few years, 
consumer surveys show that fuel economy has become a much higher priority for 
those purchasing a new vehicle.  In fact, in 2000, fuel economy ranked 25th on 
a list of consumer priorities when purchasing a new vehicle.  In 2005, fuel 
economy moved up to 7th place in the list of vehicle purchase priorities.
        Automakers are manufacturing cars and trucks that meet this consumer 
demand.  Currently, over 100 models are available that have EPA-estimated 
highway ratings 
of 30-miles per gallon or more.  Forty-six models are available with advanced 
technologies like hybrids, flex-fuel vehicles, and clean-diesel.  These models 
will add to the existing 8 million advanced technology vehicles on the road 
today.  These technologies are improving fuel economy and helping our nation 
move toward energy independence.  Furthermore, as shown in the Model Year 2006 
Fuel Economy Guide published by EPA and DOE, nearly every model has a 
combination of engines and transmissions that typically affect fuel economy by 
2-3 mpg but as much as 5 mpg, providing consumers with fuel economy choices 
with today's gasoline engine technologies.
        Dramatic increases in gasoline prices and incentives for consumers to 
purchase 
advanced technology vehicles are shifting the marketplace.  According to R.L. 
Polk & Co., there were more than 280,000 hybrids, 3.6 million diesel, and 3.8 
million ethanol-capable vehicles on U.S. roads at the end of 2005.  
        The continued growth of advanced technology automobiles powered by a 
diverse mix 
of fuels is a proven market-based solution that will continue to reduce the 
amount of gasoline we use.  Furthermore, this is the best path forward as CAFE 
compliance is based on what consumers actually purchase - not what automakers 
manufacture.  Market-based incentives coupled with new fuel saving 
technologies are more reasonable than dramatic increases in CAFE standards.

Do other mature economies use a command and control CAFE-like approach to 
achieve conservation in the auto sector?  Europe?  Japan?  How do their 
domestic 
fleet averages compare with the U.S.?  If they are different, why?

        The U.S. CAFE system is unique in terms of the level of command and 
control.  
Other systems in mature economies take different forms than the U.S.' mandated 
fleet average approach and are typically voluntary.  For example, the Canadian 
system and E.U. systems are voluntary.  Moreover, the EU is primarily focused 
on reductions in carbon dioxide emissions.  
        Other mature economies are working with stakeholders through 
government-industry 
agreements to achieve specific targets on certain emissions.  North of our 
border, automakers entered into an agreement with the Canadian government to 
reduce the growth of greenhouse gas emissions from cars and light trucks by 
5.3 
megatonnes by 2010.  Across the Atlantic, the EU has a government-industry 
agreement focused on reductions in carbon dioxide emissions.

European Union
        A closer comparison of the United States and the next largest mature 
economy 
(The European Union) shows some dramatic differences.  High taxes on gasoline 
are the primary method of spurring conservation across Europe.  These taxes 
have 
historically made gasoline in Europe two to three times more expensive than 
prices here in the U.S.  In addition, taxes are different between gasoline and 
diesel, encouraging the use of diesel fuel.  Pickup trucks and sport utility 
vehicles are not a significant part of the European fleet, while they account 
for roughly half of all automobile sales here in the United States.  As for 
fuel 
mix, the proliferation of diesel is about 50% in Europe compared to only about 
2% in the U.S.  As diesel generally offers as much as 30% better fuel economy 
over gasoline, European diesel models often get better mileage over similar 
U.S. 
gasoline-powered models.  Additionally, vehicle miles traveled are much lower 
in 
Europe compared to the U.S. and transit usage is much higher in the older, 
European cities than in typical U.S. cities.
        These key differences help us understand why domestic fleet averages 
in Europe are higher than the United States. 

Japan
        Japan is another modern, mature economy with significant 
transportation 
challenges.  It is an island nation slightly smaller than California and has a 
population of 127 million people.  However, given the rugged, mountainous 
terrain less than 40 percent of the land is habitable.  To understand this 
impact on their transportation system, imagine about 44 percent of the U.S. 
population and economic activity concentrated in the state of Michigan.  Thus, 
Japan's highly concentrated population relies heavily on mass transportation.  
More than 80 percent of Japan's car market consists of small cars powered by 
engines smaller than 2000cc.  In 2004, Japan had approximately 72 million cars 
and trucks in use.
        The Japanese government uses a simple weight-based standard to reduce 
fuel 
consumption in its transportation sector. There are eight weight classes in 
the 
Japanese system, covering both cars and light trucks. Average fuel economy 
targets are set within each weight class, and the targets are more stringent 
for 
the lighter weight classes and less stringent for the heavier weight classes. 
The targets for gasoline-powered passenger vehicles were set for 2010 and 
represent about a 23% improvement in fuel economy compared to the 1995 
baseline. 
Fuel economy targets are selected by a ``top runner'' method, whereby the 
targets 
for each weight class are established in part based on the best performing 
vehicle in that weight class. The original system was established without any 
opportunity for a multi-class manufacturer to average compliance across 
classes.  
However, the Japanese system was more recently modified to allow ``offsets'' 
on a 
two-for-one basis: credits earned by a better-than-required fuel economy 
performance in one weight class are discounted by 50% when applied to 
compensate 
for worse-than-required performance in another weight class.  Originally, 
Japan's system was somewhat troubling for companies importing automobiles into 
their market but recent refinements have helped address this issue. 


RESPONSE FOR THE RECORD OF THE HON. NORMAN Y. MINETA, SECRETARY, U.S. DEPARTMENT 
OF TRANSPORTATION




OUESTIONS FOR THE RECORD FROM THE HONORABLE CLIFF STEARNS

1. How does the reformed CAFE program for light trucks prevent size creep in 
models to lower fuel economy requirements?

Answer

The National Highway Traffic Safety Administration (NHTSA) has structured the 
reformed CAFE program to minimize the regulatory incentives to make vehicles 
larger.
        First, under the reformed program, NHTSA has based the fuel economy 
target for vehicles on their ``footprints.'' To change the vehicle footprint, 
manufacturers 
would have to change the vehicle platform. Changes to the vehicle platform 
typically require redesign and retooling for the various models that share the 
platform, and making such changes requires substantial time and money. Given 
the 
costs associated with platform changes, vehicle manufacturers are unlikely to 
change a vehicle footprint solely, or even primarily, in response to the 
reformed CAFE program.
        Second, the reformed CAFE program sets fuel economy targets at a level 
for each 
footprint that requires substantial use of fuel-saving technology for every 
size 
vehicle footprint. Even if a manufacturer makes its vehicles larger, it still 
must make substantial use of available fuel-saving technologies to enhance the 
fuel economy of the larger vehicles. Under the reformed CAFE program, it is 
not 
technically easier or less expensive to achieve the fuel economy targets in 
the next-larger vehicle category.
        Third, the new rule will set challenging targets for all models. This 
will 
encourage manufacturers to improve fuel economy without downsizing in a way 
that can impair safety.
        Lastly, the incentive to upsize is virtually nonexistent for vehicles 
larger 
than 65 sq. ft. The continuous function is essentially flat once size exceeds 
65 
sq. ft., which means there is a minimal, if any, effect of upsizing on a 
vehicle's fuel economy target 

2. Even though I believe the light truck reformed CAFE program is a step in 
the right direction, won't the next level of gaming be to design your 
over-8500-
pound light trucks to qualify as pick-ups because over-8500-pound pick-ups are 
not covered by the new CAFE rules? Didn't we see much of this with cross-over 
vehicles like the PT Cruiser that qualify for CAFE as light trucks but meet 
car emissions standards?

Answer
        Vehicle manufacturers have had the ability to make vehicles heavier 
and escape 
the truck CAFE standards since the beginning of the program. However, for the 
first time in the history of the CAFE program, the reformed CAFE program 
extends 
the fuel economy standards to SUVs and other vehicles between 8,500 and 10,000 
pounds gross vehicle weight rating that are regulated as medium duty passenger 
vehicles, or MDPVs, by the EPA.
        The MDPV category established by EPA excludes only those vehicles 
between 8,500 
and 10,000 pounds that are typically designed for work-oriented functions, 
such 
as high-capacity vans and pick-up trucks with a separate cargo area 6-feet or 
more long. Redesigning a pick-up to increase its gross vehicle weight rating 
and 
extending the length of its cargo bed would be expensive and change how the 
vehicle could be marketed. Furthermore, MDPVs are used to carry 7 or more 
passengers. We believe that redesigning them to qualify as pick-up trucks 
would greatly diminish this attribute and is therefore unlikely.
        Cross-over vehicles such as the PT Cruiser qualify as light trucks by 
having 
removable seats so as to provide a cargo area. Designing seats so that they 
are 
removable is inexpensive and simple compared to the changes needed to a 
pick-up 
to make it a work-oriented vehicle. Also, the reformed CAFE program has 
eliminated the provision that permits PT Cruisers to be classified as a light 
truck.
        Unlike MDPVs that have come into production only in the last decade, 
large 
pickups have been produced before the enactment of the CAFE program and always 
have been produced in small numbers. Currently, large pick-ups make up less 
than 
3 percent of annual light duty vehicle sales. These large pick-ups are used 
for 
specialized work-related purposes such as towing, hauling cargo, farming or 
other work-related uses and often are equipped with diesel engines.


SUBMISSION FOR THE  RECORD BY EDWARD B. COHEN, VICE PRESIDENT, GOVERNMENT AND 
INDUSTRY AFFAIRS, HONDA NORTH AMERICA, INC.




SUBMISSION FOR THE  RECORD OF THE ASSOCIATION OF INTERNATIONAL AUTOMOBILE 
MANUFACTURERS, INC.




* William A. Pizer, an RFF fellow and a senior economist with the National 
Commission on Energy Policy, has published widely on the cost of environmental 
regulation (email: [email protected]). Madeleine Baker is an intern at RFF (email: 
[email protected]).

1 See R. Newell (2005), ``The Hydrogen Economy,'' Resources 156.
2 See http://www.hybridcars.com/blogs/brain/how-fast.
3 See NRC (2004), The Hydrogen Economy: Opportunities, Costs, Barriers, and 
R&D Needs, National Academy Press.
4 See M. Wang (2003), www.transportation.anl.gov/pdfs/TA/281.pdf.
51980-2004: Bureau of Transportation Statistics, 
http://www.bts.gov/publications/national_transportation_statistics/pdf/entire.
pdf  (Tables I-17, I-19, I-20); 1975 and 2005: EPA, 
http://www.epa.gov/otaq/cert/mpg/fetrends/420r05001e.pdf (Tables E-1 and E-5)
6 NRC (2004), Effectiveness and Impact of Corporate Average Fuel Economy 
(CAFE) Standards, National Academy Press.
7 See http://www.E-85fuel.com/index.php.

