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


 
                    VEHICLE AND FUELS TECHNOLOGY: NEXT 
                                GENERATION


                                 HEARING

                                BEFORE THE

                  SUBCOMMITTEE ON ENERGY AND AIR QUALITY

                                 OF THE 

                         COMMITTEE ON ENERGY AND 
                                COMMERCE

                         HOUSE OF REPRESENTATIVES


                        ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION


                              MAY 24, 2006

                           Serial No. 109-103

      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


               SUBCOMMITTEE ON ENERGY AND AIR QUALITY
                   RALPH M. HALL, Texas, Chairman
MICHAEL BILIRAKIS, Florida                RICK BOUCHER, Virginia                    
ED WHITFIELD, Kentucky                      Ranking Member
CHARLIE NORWOOD, Georgia                  MIKE ROSS, Arkansas
BARBARA CUBIN, Wyoming                    HENRY A. WAXMAN, California
JOHN SHIMKUS, Illinois                    EDWARD J. MARKEY, Massachusetts
HEATHER WILSON, New Mexico                ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona                  ALBERT R. WYNN, Maryland
CHARLES W. "CHIP" PICKERING,  Mississippi GENE GREEN, Texas
VITO FOSSELLA, New York                   TED STRICKLAND, Ohio
GEORGE RADANOVICH, California             LOIS CAPPS, California
MARY BONO, California                     MIKE DOYLE, Pennsylvania
GREG WALDEN, Oregon                       TOM ALLEN, Maine
MIKE ROGERS, Michigan                     JIM DAVIS, Florida
C.L. "BUTCH" OTTER, Idaho                 HILDA L. SOLIS, California
JOHN SULLIVAN, Oklahoma                   CHARLES A. GONZALEZ, Texas
TIM MURPHY, Pennsylvania                  JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas                   (EX OFFICIO)                            
JOE BARTON, Texas
  (EX OFFICIO)

                              CONTENTS


                                                                     Page
Testimony of:

     Karsner, Hon. Alexander A., Assistant Secretary, Office 
          of Energy Efficiency and Renewable Energy, U.S. 
          Department of Energy	                                      14
     Cischke, Susan M., Vice President, Environment and 
          Safety Engineering, Ford Motor Company                      22
     Morrissett, Deborah, Vice President, Regulatory Affairs, 
          DaimlerChrysler Corporation	                              29
     Reinert, William, National Manager, Advanced 
          Technology Group, Toyota Motor Sales, USA, Inc.	      35
     Lowery, Elizabeth, Vice President, Public Policy Center, 
          General Motors	                                      50
     Pacheco, Dr. Michael A., Director, National Bioenergy 
          Center, National Renewable Energy Laboratory	              67
     Warzel, Jon A., Vice President, Business Development 
          and Government Programs, Syntoleum Corporation	      75
     Hughes, Scott, Director of Government Affairs, National 
          Biodiesel Board	                                      82
     Pratt, Mitchell, Senior Vice President, Clean Energy	      88
Additional material submitted for the record:
     Cischke, Susan M., Vice President, Environment and 
          Safety Engineering, Ford Motor Company, response 
          for the record	                                     106
     Reinert, William, National Manager, Advanced 
          Technology Group, Toyota Motor Sales, USA, Inc., 
          response for the record	                             115
     Lowery, Elizabeth, Vice President, Public Policy Center, 
          General Motors, response for the record	             120
     Morrissett, Deborah, Vice President, Regulatory Affairs, 
          DaimlerChrysler Corporation, response for the record	     126
     Ramsbottom, Hunt, CEO and President, Rentech, Inc., 
          submission for the record	                             136


                       VEHICLE AND FUELS TECHNOLOGY: 
                              NEXT GENERATION


                         WEDNESDAY, MAY 24, 2006

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


        The subcommittee met, pursuant to notice, at 1:00 p.m., in 
Room 2123 of the Rayburn House Office Building, Hon. Ralph M. 
Hall [Chairman] presiding.
        Present:  Representatives Hall, Whitfield, Norwood, Shimkus, 
Radanovich, Bono, Sullivan, Burgess, Ross, Green, and Dingell 
(ex officio).  
        Staff Present:  Kelly Cole, Counsel; Elizabeth Stack, Policy 
Coordinator; Margaret Caravelli, Counsel; Anh Nguyen, 
Legislative Clerk; Peter Kielty, Legislative Clerk; Bruce Harris, 
Minority Professional Staff Member; Sue Sheridan, Minority 
Senior Counsel; and Lorie Schmidt, Minority Counsel.  
        MR. HALL.  I would like first to welcome everyone to today's 
hearing entitled "Vehicle and Fuels Technology:  Next 
Generation," and to thank the two panels that are witnesses for 
being here today to testify and educate us on this topic.  You really 
do us a great favor by, first, being as qualified as you are and as 
recognized as you are; and, then, giving us your time today.  And 
that is the way we write laws here.  We get people that know more 
about it than we do, and we listen to them.  And we thank you for 
being here.  
        The U.S. dependence on foreign oil is a pending national 
security and economic crisis.  While we are working to improve oil 
production, we must also work toward becoming more fuel-
efficient.  The U.S. Congress can facilitate that with the production 
of new technologies that will improve fuel efficiency.  
Technologies that could have an impact within the next 2 to 
4 years is what is really needed.  
        Historically, we have been focusing on long-term technologies 
at our national laboratories and universities.  And while that is 
good, we have to consider now, due to the staggering increase in 
the cost of fuel, technology that can be used in the near term.  
Major automotive companies have both the financial and 
manufacturing resources to do what is needed, but I think Congress 
has to make the greatest difference by helping smaller companies 
that don't have those vast resources at their disposal.  
        I am aware of several technologies being developed with just 
such potential.  For example, there is a new concept for a 
continuously variable transmission that would reduce both the 
weight and cost of present-day continuously variable transmissions 
and improve the fuel efficiency of the vehicle.  This same 
technology also has applications in hybrid electric vehicles, 
improving their already good fuel efficiency.  This technology is 
available now, but because of limited resources, it will not be in 
full-scale production for five more years.  We have an opportunity 
with technologies such as this to work together with developing 
technologies for exploration of oil and gas and to help ease our 
dependence on foreign oil.  And I think we should certainly nurture 
them.  
        In regards to hydrogen, regardless of the number of hydrogen 
fuel vehicles produced, without a reliable and adequate 
infrastructure, the vehicles are going to be useless.  To progress to 
a hydrogen economy requires large-scale hydrogen production, and 
I am aware of an effort in Texas where the automobile 
manufacturers, fossil fuel industry, and the renewable energy 
industry are coming together as a coalition with this goal in mind.  
The effort in Texas is boosted by the abundance of domestic 
resources in the State suitable for the large-scale production of 
hydrogen, and these new efforts must be encouraged and expanded 
across the country so that a network of infrastructure is in place to 
support the vehicles of the future.  
        I believe we have a lot to look forward to.  It is a very exciting 
time in our history as we look for new ways to build and power our 
vehicles.  There are many promising developments, several of 
which we will hear about today, not only with new next-generation 
vehicle technology, but also the fuels that make them run:  
cellulosic ethanol, the production of which has the potential to turn 
what we call waste material into a valuable resource; biodiesel, the 
replacement fuel made from renewable food stocks, including 
vegetable oils and animal fats; coal to liquid, the conversion of 
solid coal into liquid fuels; and chemicals and natural gas as a 
transportation fuel.  
        Again, I thank you for being with us today, and I look forward 
to your testimony.  
        [The prepared statement of Hon. Ralph Hall follows:] 



PREPARED STATEMENT OF THE HON. RALPH HALL, CHAIRMAN, 
SUBCOMMITTEE ON ENERGY AND AIR QUALITY

        I'd like to welcome everyone to today's hearing entitled 
"Vehicle and Fuels Technology: Next Generation", and to thank 
our two panels of witnesses for being here today to testify and 
educate us on this topic.  
        The US dependence on foreign oil is a pending national 
security and economic crisis.  While we are working to improve oil 
production, we must also work towards becoming more fuel 
efficient.  The US Congress can facilitate the path to production of 
new technologies that will improve fuel efficiency.  Technologies 
that could have an impact within the next 2 to 4 years are what is 
needed.  Historically, we have been focusing on long-term 
technologies at our National Laboratories and Universities.  While 
that is good, we must consider now - due to the staggering 
increases in the cost of fuel - technology that can be used in the 
near term. The major automotive companies have both the 
financial and manufacturing resources to do what is needed, but I 
believe that Congress can make the greatest difference by helping 
smaller companies that don't have those vast resources at their 
disposal.  I am aware of several technologies being developed with 
just such potential.  For example, there's a new concept for a 
continuously variable transmission that would reduce both the 
weight and cost of present day continuously variable 
transmissions, and improve the fuel efficiency of the vehicle.  This 
same technology also has applications in hybrid electric vehicles--
improving their already good fuel efficiency.  This technology is 
available now, but because of limited resources it will not be in full 
scale production for five more years.  We have an opportunity with 
technologies such as this to work together with developing 
technologies for exploration of oil and for gas, to help ease our 
dependence on foreign oil, and I think we should nurture them.
        In regards to hydrogen, regardless of the number of hydrogen 
fueled vehicles produced, without a reliable and adequate 
infrastructure the vehicles will be useless. To progress to a 
hydrogen economy requires large scale hydrogen production.  I am 
aware of an effort in Texas where the automobile manufacturers, 
fossil fuel industry and the renewable energy industry are coming 
together as a coalition with this goal in mind. The effort in Texas is 
boosted by the abundance of domestic resources in the state 
suitable for the large-scale production of hydrogen.  These new 
efforts must be encouraged and expanded across the country so 
that a network of infrastructure is in place to support the vehicles 
of the future.
        I believe we have a lot to look forward to - it's a very exciting 
time in our history as we look for new ways to build and power our 
vehicles.  There are many promising developments, several of 
which we will hear about today.  Not only with new next 
generation vehicle technology, but also the fuels that make them 
run .  Cellulosic ethanol - the production of which has the potential 
to turn "waste material" into a valuable resource.  Biodiesel - a 
replacement fuel made from renewable feedstocks including 
vegetable oils and animal fats.  Coal-to-liquids - the conversion of 
solid coal into liquid fuels and chemicals, and natural gas as a 
transportation fuel.
        Again, thank you to our witnesses for coming today.  I look 
forward to your testimony.
        Without objection, the Chair will proceed pursuant to 
Committee Rule 4(e) and recognize Members for 3 minutes for 
opening statements.  If they defer, this time will be added to their 
opening round of questions.

        MR. HALL.  Without objection, the Chair will proceed pursuant 
to Committee Rule 4(e) and recognize Members for 3 minutes for 
opening statements.  If they defer this time it will be added to their 
opening rounds of question.  
        The Chair now recognizes Ranking Member Mr. Ross, from 
the great city of Texarkana, Arkansas, my neighbor.  We both 
represent Texarkana.  He represents Texarkana, Arkansas and I 
just represent Texarkana, Texas.  I recognize you at this time.  
        MR. ROSS.  Actually, Mr. Chairman, it is an interesting town.  
You can drive south down State Line Avenue and on the right side 
of the road you can vote for Ralph Hall and buy lottery tickets.  On 
the left side of the road you can vote for me and buy liquor.  And 
you can't do either one on the other side of the street.  It is a 
unique situation.  
        But, thank you.  And I am glad we are holding today's hearing 
to discuss vehicle and fuel technologies and what the future holds 
for American consumers.  As we continue to experience record 
fuel prices, the demand for alternative fuels, hybrid and flex fuel 
vehicles, and other energy-efficient technologies will continue to 
increase.  I strongly believe the substance of our discussions in this 
hearing today will be a significant piece in the puzzle of meeting 
our future energy needs.  We all recognize that our Nation's 
transportation sector is the primary contributor to the United 
States' consumption of roughly 20 million barrels of oil a day.  
Reducing the transportation sector's use of this commodity will 
require future implementation and advancement of the many 
technologies that will be discussed today.  
        High fuel prices have certainly increased the awareness and 
interest in alternative fuels and vehicles.  Even in the State of 
Arkansas, where pickup trucks far exceed cars, my constituents are 
talking more and more about hybrid and flex fuel vehicles.  My 
district spans 21,000 square miles, 29 counties, and 150 towns.  It 
is not uncommon for my constituents to drive 50 miles or more 
each way to and from work; and in most cases, they commute 
these distances for a job that pays well below the national average.  
These long commutes and frequent costly stops at the gas station 
are forcing not only Arkansans but all Americans to think about 
alternatives.  As this trend continues, it is increasingly important 
for industry, government, and the consumers to engage in these 
issues and work together to advance energy-efficient technologies.  
        As a member of this committee, we have received testimony 
from the Department of Energy's Energy Information 
Administration regarding their forecast indicating both fuel prices 
and demand are going to remain high.  With these record cost 
projections, it will be cost-effective for us to make the necessary 
investment and aggressively advance alternatives.  
        I have been pleased with the automobile industry and their 
efforts toward the development of hybrid and flex fuel vehicles.  
They have embraced the consumers' demand for increased energy 
efficiency and are working to expand the production of their hybrid 
and flex fuel models.  
        I am also supportive of the provisions in the Energy Policy Act 
regarding hybrid vehicles.  This legislation, which was passed last 
August, provides tax credits to consumers who purchase hybrid 
vehicles.  This has been a successful incentive program and has 
stimulated hybrid vehicle sales.  However, I believe we can and 
should do more.  I hope to hear from our witnesses today on ways 
and ideas to improve this tax credit, allowing more consumers to 
access these technologies.  I am not 100 percent convinced 
eliminating the 60,000-unit cap is the answer, but I think it is an 
option that should be investigated, and I look forward to receiving 
input from the industry representatives here today.  And the more 
consumers who can access the tax credit, the more hybrid vehicles 
there will be on our highways, therefore, reducing our dependence 
on foreign oil.  
        I also look forward to hearing from our two panels about the 
development of hydrogen fuel-cell vehicles.  Ironically, this 
morning, I test drove a hydrogen fuel-cell car and I was very 
impressed.  It had a lot of pick-up, or get-up, as we would say in 
south Arkansas.  I understand the challenges facing hydrogen 
fuel-cell vehicles, especially the needed infrastructure to support 
them and similar problems facing expanded use of E-85.  I do 
believe hydrogen fuel-cell technology will be a significant part of 
our future, and I look forward to working with the industry on its 
continued development.  
        Being from Arkansas, I am extremely excited about the 
growing potential for biodiesel ethanol and biomass ethanol in this 
country.  The increased use of ethanol and biodiesel provides new 
markets for our farm families, reduces our dependence on imported 
oil, and lowers greenhouse gas emissions.  Efforts are underway in 
my congressional district and across the Nation on the 
development of ethanol, which is derived from biomass feedstocks 
such as wood chips, switchgrass, and other plant fibers.  We must 
make the investments to continue the development and expansion 
of ethanol, including the E-85 infrastructure needed to support 
flex-fuel vehicles.  
        And Mr. Chairman, I will conclude by simply asking that I can 
submit the rest of the statement to you for the record.
        [The prepared statement of Hon. Mike Ross follows:]

PREPARED STATEMENT OF THE HON. MIKE ROSS, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARKANSAS

        Thank you Mr. Chairman.  I am glad we are holding today's 
hearing to discuss vehicle and fuel technologies and what the 
future holds for American consumers.  As we continue to 
experience record fuel prices, the demand for alternative fuels, 
hybrid and flex fuel vehicles, and other energy efficient 
technologies will continue to increase.  
        I strongly believe the substance of our discussions in this 
hearing today - will be a significant piece in the puzzle of meeting 
our future energy needs.  We all recognize that our nation's 
transportation sector is the primary contributor to the U.S. 
consumption of roughly 20 million barrels of oil a day. Reducing 
the transportation sector's use of this commodity will require 
further implementation and advancement of the many technologies 
that will be discussed today.  
        High fuel prices have certainly increased the awareness and 
interest in alternative fuels and vehicles.  Even in the state of 
Arkansas, where pickup trucks far exceed cars and sedans, my 
constituents are talking more and more about hybrid and flex fuel 
vehicles.  My district spans 21,000 square miles, 29 counties, and 
150 towns. It is not uncommon for my constituents to drive 50 
miles or more - each way to and from work.  And in most cases 
they commute these distances for a job that pays well below the 
national average.  These long commutes and frequent, costly stops 
at the gas station, are encouraging, not only Arkansans, but all 
Americans to think about alternatives.  As this trend continues, it is 
increasingly important for industry, government, and the 
consumers to engage in these issues and work together to advance 
energy efficient technologies.  
        As members of this Committee, we have received testimony 
from the Department of Energy's Energy Information Agency 
regarding their forecast indicating both fuel prices and demand are 
going to remain high.  With these record cost projections, it will be 
cost effective for us to make the necessary investments and 
aggressively advance alternatives.   
        I have been pleased with the automobile industry and their 
efforts toward the development of hybrid and flex fuel vehicles.  
They have embraced the consumer's demand for increased energy 
efficiency and are working to expand the production of their hybrid 
and flex fuel models.   
        I am also supportive of the provisions in the Energy Policy Act 
regarding hybrid vehicles.  This legislation, which was passed last 
August, provides tax credits to consumers who purchase hybrid 
vehicles.  This has been a successful incentive program and has 
stimulated hybrid vehicle sales.  However, I believe we can and 
should do more.  I hope to hear from our witnesses today on ways 
and ideas to improve this tax credit - allowing more consumers to 
access these technologies.  I am not 100 percent convinced 
eliminating the 60,000 unit cap is the answer, but I think it is an 
option that should be investigated and I look forward to receiving 
input from the industry representatives here today.  The more 
consumers who can access the tax credit - the more hybrid vehicles 
there will be on our highways.  
        I also look forward to hearing from our two panels about the 
development of hydrogen fuel cell vehicles.  Coincidently, I test 
drove a hydrogen fuel cell car this morning and was impressed.  I 
understand the challenges facing hydrogen fuel cell vehicles, 
especially the needed infrastructure to support them- a similar 
problem facing expanded use of E-85.  I do believe hydrogen fuel 
cell technology will be a significant part of our future hybrid 
vehicle fleet and look forward to working with industry on its 
continued development. 
        Being from Arkansas, I am extremely excited about the 
growing potential for biodiesel, ethanol and cellulosic biomass 
ethanol in this country.  The increased use of ethanol and biodiesel 
provides new markets for our farm families, reduces our 
dependence on imported oil, and lowers greenhouse gas emissions.  
Efforts are under way in my Congressional District and across the 
nation on the development of cellulosic ethanol, which is derived 
from biomass feedstocks such as wood chips, switch grass, and 
other plant fibers.  We must make the investments to continue the 
development and expansion of ethanol, including the E-85 
infrastructure needed to support flex fuel vehicles.  The reality is 
this:  the energy bill, which I voted for, authorizes $632 million for 
the next fiscal year for renewable energy research, development, 
demonstration, and commercial application activities by the 
Department of Energy- $213 million of which is for bio-energy 
purposes--including $100 million for bio-refinery demonstration 
projects.  This funding is authorized, but not yet appropriated.  And 
yet we send $1.9 billion to Iraq every week.  I want to make sure 
the American people understand that while there is a lot of talk 
these days about alternative and renewable fuels, over the next 
fiscal year we are going to spend less than half as much money 
toward research and development of alternative and renewable 
energy as we will spend this week alone in Iraq.  It is about 
priorities, and we as a nation need to re-evaluate our priorities and 
make the desperately needed investments in alterative and 
renewable energy. 
        Coal-to-Liquid technology and natural gas are also exciting 
alternative sources of transportation fuels being used and 
developed.  The public transportation buses here in the District of 
Columbia are using natural gas technology and have proudly 
printed on the side of each bus that "they are running on clean 
burning natural gas."  
        Our future will have a strong blend of alternative fuels and 
hybrid vehicles that will hopefully provide a choice to consumers 
when they go to purchase a car and fill up at the pump.  We must 
work together toward making these technologies affordable and 
reasonable for all Americans - and work to build our nation's 
infrastructure to support these technologies.  I thank our panel for 
being here today and look forward to receiving their testimony.  

        MR. HALL.  Without objection, so ordered.  
        The Chair recognizes the gentleman from Illinois, Mr. 
Shimkus.  
        MR. SHIMKUS.  Thank you Mr. Chairman.  A couple of things, 
real quick.  We appreciate you all coming.  We appreciate the auto 
industry's getting on board on the flexible-fuel vehicle bandwagon.  
It is a long time in coming, but now the marketing is just great.  
        I have been driving a flex-fuel vehicle, as a lot of people on the 
committee know, for a couple of years.  I am in my fourth year.  I 
have got a Ford Explorer.  And In southern Illinois where we have 
200 retail locations for E-85 pumps, in my district I have 20.  So I 
can really--and I represent a large rural district, from Springfield to 
Metropolis, which is right across from Paducah, Kentucky, from 
Collinsville, my hometown, right outside St. Louis, all the way to 
the Indiana border.  So that is progress, and we need to talk about 
that.  
        Part of that progress came from the Energy Policy Act where 
we sent a signal.  When Ralph Hall starts talking about biofuels, I 
know that the world has changed dramatically.  And we welcome 
that, because that is one way that we are going to decrease our 
reliance on imported crude oil.  And now everybody is on board 
with that.  And everybody is on board with biodiesel.  
        I am focusing now on over the horizon, the next obtainable 
assistance.  And I dropped a bill with Rick Boucher just yesterday.  
I will encourage all my colleagues to get on board.  It is H.R. 5453, 
and it basically will extend the excise tax credit on refineries to 
2020.  And here is the premise.  It is very simple.  I am holding in 
my hand a vial of diesel fuel, Fischer-Tropsch diesel fuel, diesel 
fuel produced from coal.  And some of the folks came up and 
checked it out before the hearing.  And you can--I will encourage 
my friends in the media to come and take a whiff of it.  And it is 
cleaner-burning diesel fuel.  But if you look here, this is the 
premise:  U.S. coal, on top of the coal field in southern Illinois, a 
refinery; a coal to liquid refinery.  You pipe that on U.S. pipes to--
the DOD has great interest in this type of fuel for diesel 
applications and for aviation applications.  This is an issue whose 
time is right.  We are all tired of the reliance on imported crude oil.  
We are going to have a chance to expand our ability to get our own 
resources with a vote tomorrow, Mr. Chairman, or on Friday, on 
ANWR.  
        But this battle is a wide battle on multiple fuels.  So that is why 
the biofuels debate is great.  We are glad to have you here.  Coal to 
liquid is an application already in South Africa, and we want to 
continue that and do our other petroleum research that we have.  
        So this is a timely hearing, Mr. Chairman.  Thank you for the 
time.  
        MR. HALL.  I thank the gentleman.  It is well said, and you are 
right about tomorrow.  You could also say that we have a shot at 
voting for ultra-deep today, that people are trying to back away 
from what might keep our kids from having to fight a war or 
something. 
        MR. SHIMKUS.  I am with you, Mr. Chairman.
        MR. HALL.  At this time I recognize the Honorable Gene Green 
from the great State of Texas.  Mr. Green. 
        MR. GREEN.  Thank you Mr. Chairman.  Just a note; I signed 
that letter you asked me about a while ago, so your staff should 
have it.
        MR. HALL.  I thank you and the generations that follow.  Thank 
you for that.
        MR. GREEN.  Mr. Chairman, I have a statement I will put in the 
record.  But I really want to thank you for calling the hearing 
because coming from a State that is basically hydrocarbons, but we 
are producing less than we are used to, I will literally leave no 
stone unturned to see how any other way we can move our 
vehicles, power our factories and our homes.  But I appreciate your 
calling this hearing.  Thank you.  
        [The prepared statement of Hon. Gene Green follows:]

PREPARED STATEMENT OF THE HON. GENE GREEN, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

        Mr. Chairman and Ranking Member thank you for convening 
this hearing today on vehicle and fuel technology.
        This hearing is another in a long string of recent hearings 
focusing on the rapid rise in fuel costs. 
        Many working American families have budgets that are border 
right on the line between financial health and serious financial 
problems.
        Rapid increases in the price of gasoline are causing the drive to 
work, to school, or to visit family and friends to become a serious 
drain on the family budget.
        I am interested to hear today from the US automakers about 
how their fleets are evolving to reduce gasoline consumption in the 
future.
        I am especially interested to know whether fuel efficiency and 
fuel alternatives will bring relief to working class and middle class 
Americans, or whether these new technologies will be too 
expensive to afford.
        Biodiesel is also an important part of our future fuel mix, and I 
am pleased that at least one chemical manufacturer along the 
Houston Ship Channel, which is the heart of our nation's gasoline 
refining supply, is also in the biodiesel business.
        I have a lot of professional truck drivers in my district and they 
are hit coming and going by gas prices, as a cost of doing business 
and a consumer cost just like the rest of us.
        Biodiesel needs to increase rapidly if we are going to help out 
on diesel prices and keep a lot of trucking operations is business.

        MR. HALL.  The Chair is honored to recognize the gentleman 
from Georgia, Dr. Norwood.  
        MR. NORWOOD.  Thank you, Mr. Chairman.  I will simply 
submit for the record, and thank you for having this hearing, and 
yield to the panel.  I am anxious to hear what they have to say. 
        MR. HALL.  I am honored to recognize Mary Bono from the 
great State of California.  
        MS. BONO.  Thank you, Mr. Chairman.  I also have a statement 
I will submit for the record.  And I welcome the witnesses.  I am so 
happy you are here and look forward to hearing what you have to 
say.  Thank you. 
        [The prepared statement of Hon. Mary Bono follows:] 

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 believe the subject of this hearing is not only about how we 
can promote fuels and vehicles that are more environmentally 
friendly but more importantly, how we can use good old fashioned 
American ingenuity to wean ourselves off foreign oil.
        Of course, oil, and for that matter foreign oil, will always play 
some role in our economy.  But as of today, the United States is 
too dependent on stability in the Middle East and on various 
dictators in South America.  It troubles me to have foreign oil 
serve as the keystone to our economic and even national security.  
We must become more self sufficient.
        Self sufficiency involves supporting our domestic suppliers of 
oil but it also means looking beyond oil as the sole means for 
fueling our economy.  There are a variety of experimental fuels out 
there. I believe that between  private industry, our colleges and 
universities as well as government, we can identify the most 
promising of those alternative fuels and then focus on how to bring 
them to market in an efficient manner so it they are widely 
available as well as affordable.
        Our country must make a concerted decision to forge ahead on 
this front.  We must be bold because it is, in sorts, a race. We don't 
know when international incidents will slow or stop the flow of oil 
to the U.S.  We don't know when and if our own source of 
domestic oil will be unable to keep up with demand. But we do 
know that at some point, our economy could come to an abrupt 
halt if we do not have an adequate supply of oil. So, we must set 
out upon this course of finding and developing alternative forms of 
energy right here and right now
        It is my hope to work with those involved in the process to see 
how government can best help.  Too often, the federal government 
gets in the way of good ideas.  It is my hope that when it comes to 
this, government can serve to facilitate a process that in the end, 
makes sense for the consumer and gives greater security to our 
country.
        Again, thank you Mr. Chairman. I yield back the balance of my 
time.

[Additional statements submitted for the record follows:] 

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, 
COMMITTEE ON ENERGY AND COMMERCE
        
	Thank you, Chairman Hall, for holding this hearing today on 
the future of vehicles and fuels technology in the United States.  I 
would also like to thank our witnesses for appearing before us 
today to tell us about their work putting the U.S. on a path towards 
transportation security through innovation and diversity.  
        Vehicles and fuels constitute approximately 25 percent of the 
energy demand in this country and they are vital to the continued 
growth of the national economy.
	Advanced technologies will balance supply and demand.  On 
the supply side, a diverse spectrum of fuels can and will reduce our 
dependence on foreign oil, benefiting our economy, our 
environment, and our national security.  
        On the demand side, innovation in vehicle design allow us to 
use those fuels more efficiently, cutting both emissions and the 
strain on fuel distribution networks. 
        A new fuel, even if it's the perfect fuel, is useless without the 
vehicle that can run on it.   And even of millions of cars can run on 
it, the perfect fuel won't do much good if it can't reach your tank.  
        The Energy Policy Act of 2005, or EPACT  took bold steps on 
supply-side and demand-side energy issues.   For example, EPACT 
law directs DOE to partner with industry to enable and promote 
hydrogen and fuel cell technology  This law provides a virtual 
roadmap to energy independence and is being used today to make 
hydrogen transportation a reality.
        EPACT also gives consumers tax incentives to buy fuel-saving 
advanced vehicles.  These incentives are technology-neutral - the 
law does not favor hybrids over diesel, or fuel cells over flex fuel 
vehicles.  By creating vehicle and fuel diversity in our 
transportation sector, we can decrease our dependency on imported 
oil.
        I am eager to learn today about all of the advances in vehicle 
technologies.  There are literally billions of dollars being invested 
in research and development efforts both by government and by 
industry.  The goal, as we will hear today, is to move from the 
petroleum-fueled vehicles we rely on today to running our 
transportation infrastructure on the cleanest of fuels, hydrogen.  
Moving to hydrogen is seen as the most promising long-term way 
to eliminate our dependence on foreign oil.
        However, most will agree that we are many years from the 
commercial realization of hydrogen-powered vehicles.  But we 
should be creating plans and strategies for the intervening years.  
The Department of Energy has a Transition Strategy which we will 
hear about today that will help improve our energy security until 
fuel cell hydrogen vehicles are a market reality.  
        I also look forward to hearing what advanced technologies 
automakers are developing that will improve fuel economy, 
maintain freedom of mobility, and a wide range of vehicle choices.  
Today consumers have multiple options to the gasoline-powered 
internal combustion engine, such as lean burn diesel, hybrids, and 
flex fuel vehicles. These are the technologies that will take us from 
here into the future of fuel cell hydrogen vehicles.   
        The Energy Policy Act of 2005 included a Renewable Fuel 
Standard, requiring a significant amount of renewable fuel be part 
of our national fuel supply. Beginning in 2013 we required 
250,000,000 gallons of renewable fuel derived from cellulosic 
biomass be incorporated in the Renewable Fuel Standard.  Given 
the state of the art in cellulosic, this schedule is very ambitious. 
Cellulosic ethanol will diversify ethanol supply, with many 
different feedstocks.  
        The Energy Policy Act of 2005 provided production incentives 
for cellulosic biofuels, conversion assistance for cellulosic biomass 
producers for the production of renewable fuels, and loan 
guarantees for the construction of facilities for the production of 
fuel ethanol from cellulosic biomass.
        Other next generation fuels in use today include biodiesel and 
natural gas.  Biodiesel in a blend with petroleum diesel reduces 
harmful particulate matter emissions making our air cleaner.  
Natural gas as an alternative fuel is clean burning and efficient. 
        The production and use of coal-to-liquid fuels is appealing 
given the vast  coal reserves in this country. This ripe technology 
can make coal-based liquid transportation fuel one of the cleanest 
on the market.  All these sources will move us into an era of 
greater choice, greater freedom and greater security.  
        Beyond pushing technology development in fuels and vehicles 
designs we must take other steps to win our energy security.  
Unlocking America's conventional energy resources in Alaska and 
offshore is crucial.   And applying common sense rules to 
developing energy projects especially with regard to the permitting 
process is also critical.   Taking all these steps, not just a few here 
and there will be required to get the job done.  

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

        Mr. Chairman, thank you for convening this hearing today.  
        In recent months, and indeed since Hurricane Katrina reminded 
us how perilously dependent and accustomed we have become, as 
a nation, to cheap oil and gasoline, there have been dozens of 
hearings, held in multiple committees, on both sides of the Capitol, 
on the subject of high gasoline prices.  
        I continue to believe that the most important thing that we can 
do to alleviate high gas prices in the short term is to increase 
domestic supply of crude oil.  We should allow, and in fact 
encourage, exploration and production here at home.  This includes 
traditional exploration and development in the Outer Continental 
Shelf and the Arctic National Wildlife Refuge, as well as non-
traditional sources like oil shale.  
        But in the mid to long term, we need to look at other solutions.  
Since the transportation sector consumes the lion's share of oil 
used in the United States, the future of transportation will play a 
vital role in weaning our addition to foreign oil.  
        It is no secret that I am an avid supporter of hybrid vehicles, 
but I am looking forward to hearing the panelists discuss the other 
types of vehicle technologies as well as the other possible motor 
fuels.  
        I'd like to thank our panelists again for giving up their time to 
testify before us this morning.  And with that, Mr. Chairman, I 
yield back.  

        MR. HALL.  Thank you.  Don't be discouraged by the empty 
seats up here.  This is a terrible time for Congress, and we are 
trying to right some wrongs that have been going on for 30 years 
and all telescoping it into these last few weeks.  But they all have 
other committee meetings, and you have the main ones here.  You 
have the staffers that are here that tell us what you all say after you 
leave.  And we glean from that the legislation that we are going to 
do.  But it is being taken down, and I have a good court reporter 
here.  Everybody gets a copy, and everybody will read it.  So your 
testimony is not just going to four or five people.  You are talking 
to the most important people on this committee, other than 
Chairman Barton.  And please tell him I said that, how important 
he is.  
        But we will at this time recognize the Honorable Alexander A.  
Karsner, Assistant Secretary, Energy Efficiency and Renewable 
Energy, U.S. Department of Energy.  
        The Chair recognizes you for about 5 minutes.  We don't hold 
you to 5 minutes, but try to give us just a brief statement of what 
you are going to tell us, and then we will ask you questions about it 
and let you enlarge on it.  I might even ask you something you can 
knock clear out of the park, by golly.

STATEMENTS OF HON. ALEXANDER A. KARSNER, ASSISTANT SECRETARY, OFFICE OF ENERGY 
EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY; SUSAN M. CISCHKE, 
VICE PRESIDENT, ENVIRONMENT AND SAFETY ENGINEERING, FORD MOTOR COMPANY; 
DEBORAH MORRISSETT, VICE PRESIDENT, REGULATORY AFFAIRS, DAIMLERCHRYSLER 
CORPORATION; WILLIAM REINERT, NATIONAL MANAGER, ADVANCED TECHNOLOGY GROUP, 
TOYOTA MOTOR SALES, USA, INC.; AND ELIZABETH LOWERY, VICE PRESIDENT, PUBLIC 
POLICY CENTER, GENERAL MOTORS 

        MR. KARSNER.  I want to thank you, Mr. Chairman and 
members of the subcommittee.  I appreciate the opportunity to 
testify today on the next generation of vehicles and fuel 
technology.  I have submitted a fuller statement of written 
testimony for the record so I will summarize during my time here.  
        To paraphrase President Bush in his State of the Union address 
this year, breaking out of our national addiction to oil is an 
imperative for our time.  Today no sector of energy consumption is 
more in the spotlight than vehicles, cars and trucks, and the fuels 
that propel them.  In the President's Advanced Energy Initiative, a 
broad program for developing cleaner, cheaper, and more reliable 
alternative energy sources and technologies, vehicles and fuel 
initiatives hold a central place.  
        I would like to give you an overview of the Department of 
Energy's research and development and deployment programs in 
these areas, including technologies that will make a difference for 
today's drivers and those that can usher in a generational change 
over time.  Biomass is the predominant clean renewable energy 
resource that can make a short-term impact on diversifying our 
liquid transportation fuels, thereby reducing our dependency on 
imported oil.  
        The President's Biofuels Initiative aims to make cellulosic 
ethanol cost competitive by 2012.  If successful, this research 
could lead to the production of biofuels equivalent to 30 percent of 
today's gasoline consumption by 2030.  The additional impetus 
created by the President's Biofuels Initiative will enable program 
RD&D to accelerate the development and deployment of 
cost-competitive biobased liquid transportation fuels.  The 
Department presently addresses near, middle, and long-term 
vehicle technology outcomes with two cooperative government 
industry activities:  the FreedomCAR and Fuel Partnership and the 
21st Century Truck Partnership.  The FreedomCAR and Fuel 
Partnership is a collaborative effort among the U.S. Council for 
Automotive Research, five energy companies and DOE, for 
research on advances that may possess significant potential to 
reduce oil consumption.  Activities in FreedomCAR focus on the 
technical challenges of advanced and high-efficiency vehicle 
technologies such as fuel cells, advanced combustion engines and 
enabling fuels, hybrid and plug-in hybrid vehicle systems 
including high-power and high-energy batteries, power electronics 
and motors, and lightweight materials.  Near-term activities also 
include developing and deploying biofuels to displace petroleum.  
        This year we will spend at least $3 million to provide 
assistance for fueling stations to add E-85 capabilities and each 
DOE dollar will be leveraged by cost share, from either the private 
sector or State and local governments.  Through ongoing 
discussions with auto makers, the Department is encouraging 
increased production of flex-fuel vehicles.  The Department is also 
working with the National Biodiesel Board to tighten fuel 
standards and to develop real-time fuel quality tests for biodiesel to 
enhance performance in advanced engines.  Advanced catalysis 
research at our national labs could enable more efficient diesel 
engines to replace gasoline engines in light-duty vehicles without 
sacrificing air quality.  
        Research focused on advanced batteries, power electronics, 
motors, and lightweight materials is essential for improved hybrid 
electric vehicles in the near and mid term as well as fuel-cell 
hybrid electric vehicles in the long term.  Hydrogen offers a 
strategy for long-term energy security and reduced emissions.  The 
Department is pleased to have Congress's support of the hydrogen 
program in Title VIII of the Energy Policy Act of 2005.  The 
requirements in this act are consistent with the Department's plans 
and include important provisions for coordination of efforts across 
the Federal government and for independent advice from outside 
of the Department on our hydrogen efforts.  
        Indeed, much progress has been made since 2003, when 
President Bush committed $1.2 billion over 5 years to accelerate 
hydrogen research.  Our hydrogen program is focused on research 
to overcome the technology barriers that would be a precondition 
to broad commercialization.  Over 3 years our ongoing research 
has contributed to reducing the high-volume costs of automotive 
fuel cells from $275 per kilowatt in 2002 to $110 per kilowatt in 
2005.  In addition to supporting fuel-cell cost reduction, this work 
will help us achieve the durability target of 5,000 hours which 
equates to the vehicle lifetime required.  
        Hydrogen storage on board a vehicle to meet all performance 
and cost requirements is one of the most technically challenging 
barriers we face.  The Department has a diverse portfolio through 
three centers of excellence as well as independent projects both in 
applied and basic science, with a total of about 40 universities, 15 
companies and 10 Federal laboratories.  In just 1 year, we are 
starting to see promising results with some completely new 
materials being developed in different areas, such as metal 
hydrides, chemical hydrides, and carbon-based materials.  Through 
cost-shared partnerships with the automotive and energy industries, 
four teams are installing hydrogen refueling stations and putting 
cars on the road to test the technology and real-world conditions as 
part of the Department's learning demonstration.  Data collected 
on vehicle performance, durability, and fuel economy is feeding 
back into our research program to ensure our research is focused 
on the most relevant problems.  
        We are working with our indispensable partners in the 
economic community, at the national labs, and, as importantly, in 
private industry; and we are putting our research dollars in the 
most promising areas to address critical technical barriers, and I 
believe, with confidence, that the next generation of vehicles and 
fuels is already in sight.  
        This concludes my opening remarks and I would be happy to 
answer any questions the committee may have. 
        [The prepared statement of Hon. Alexander A. Karsner 
follows:] 

PREPARED STATEMENT OF THE HON. ALEXANDER A. KARSNER, 
ASSISTANT SECRETARY, OFFICE OF ENERGY EFFICIENCY AND 
RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY

        Mr. Chairman and Members of the Subcommittee, I appreciate 
the opportunity to testify today on the next generation of vehicle 
and fuels technology.  
        To paraphrase President Bush in his State of the Union address 
this year, breaking our national addiction to oil is an imperative for 
our time.  Today, no sector of energy consumption is more in the 
spotlight than vehicles (cars and trucks), and the fuel that propels 
them.  In the President's Advanced Energy Initiative, a broad 
program for developing cleaner, cheaper, and more reliable 
alternative energy sources and technologies, vehicle and fuels 
initiatives hold a central place.  I would like to give you an 
overview of the Department of Energy's (DOE) research and 
development (R&D) programs in these areas, including 
technologies that will make a difference for today's drivers, and 
those that can usher in a generational change.  In general, the 
Department supports efforts that would reduce petroleum 
consumption both through improved efficiency of use and through 
substitution of domestic alternatives to petroleum, such as biomass 
derived ethanol.

                              Biofuels
        Biomass is the predominant clean, renewable energy source 
that can make a short-term impact on diversifying our liquid 
transportation fuels, thereby reducing our dependency on imported 
oil.  The President's Biofuels Initiative aims to make cellulosic 
ethanol cost competitive by 2012.  If successful, this research 
could lead to the production of biofuels equivalent to 30 percent of 
today's gasoline consumption by 2030. In FY 2007, the 
Department requested $149.7 million for EERE's Biomass 
program.  The additional impetus created by the President's 
Biofuels Initiative will enable program RD&D to accelerate the 
development and deployment of costcompetitive, bio-based liquid 
transportation fuels.
        The program's research focus is in three areas: Feedstock 
Infrastructure, for reducing the cost of collecting and preparing raw 
biomass, and for the sustainable production and delivery of future 
energy crops; Platforms R&D, for reducing the cost of outputs and 
byproducts from biochemical and thermochemical processes; and 
Utilization of Platform Outputs, for developing technologies and 
processes that utilize intermediates such as sugars and syngas to 
co-produce fuels, valueadded chemicals and materials, and heat 
and power.  The program's strategy is to integrate those 
technologies and processes in biorefinery configurations that 
industry will validate at an industrial scale. We ultimately envision 
the development of biorefineries that will produce transportation 
fuels along with value-added chemicals and materials, and/or 
power from nonconventional, low-cost feedstocks such as 
agricultural and forest residues and other biomass.
        For the near-term, the program supports expansion of the 
existing biofuels industry by helping current producers become the 
early adopters of our advanced cellulosic conversion technology.  
The leveraging of the technology through the use of the existing 
plant and delivery infrastructure should enable earlier deployment.  
The deployment is supported by our current cost-shared projects, 
and we plan to continue this support.
        The mid term expands the Government's focus in two 
important ways.  The first is meeting the President's objective of 
cost competitive cellulosic ethanol by 2012.  The Department is 
accelerating research and development efforts to continue to 
reduce the barriers to cost effectiveness.  Second, we will continue 
to work with industry to apply that research and reduce the capital, 
operating costs, and risks associated with these future facilities.  
Deployment may be initiated in the further expansion of the 
existing industry and through niche opportunities ultimately 
leading to sustainable biorefineries.
        EERE's Biomass Program's long-term focus is on further 
reducing the cost of producing domestic biofuels by continuing to 
develop advanced technologies to transform the Nation's domestic 
biomass resources into affordable biofuels, biopower, and high-
value bioproducts.  Working with the U.S. Department of 
Agriculture (USDA), the program leads a multi-agency initiative 
that coordinates and accelerates all Federal bioenergy R&D in 
accordance with the Biomass Research and Development Act of 
2000.  The long-term objectives require the development of the 
feedstock and the associated infrastructure discussed by the USDA 
and DOE in their jointly published "Billion Ton Study" report. It is 
anticipated that feedstock development will be the culmination of 
regional feedstock development efforts leading to costeffective 
collection and use of agricultural and forest residues as well as 
regionally indigenous energy crops, such as switchgrass in the 
South Central region and willow in the Northeast.  Research efforts 
combined with limited, targeted demonstrations to further focus 
research efforts should continue to lower conversion costs leading 
to the growth of the biofuels industry.

                       Vehicle Technologies
        The Department presently addresses near, middle and long-
term vehicle technology outcomes with two cooperative 
Government/industry activities: the FreedomCAR and Fuel 
Partnership (where CAR stands for Cooperative Automotive 
Research) and the 21st Century Truck Partnership.
        The FreedomCAR and Fuel Partnership is a collaborative effort 
among the U.S. Council for Automotive Research, five energy 
companies, and DOE for research on advanced automotive 
technologies that may possess significant potential to reduce oil 
consumption.  The National Research Council of the National 
Academies published a 2005 report on the research program of the 
partnership, describing it as "an extremely challenging program, 
whose ultimate vision involves a fundamental transformation of 
automotive technologies and the supporting fuel infrastructure."  
The report went on to say that "the committee believes that 
research in support of this vision is justified by the potentially 
enormous beneficial impact for the nation."
        Activities in FreedomCAR focus on the technical challenges of 
advanced and high-efficiency vehicle technologies, such as fuel 
cells, advanced combustion engines and enabling fuels, hybrid and 
plug-in hybrid vehicle systems (including high-power and high-
energy batteries, power electronics, and motors) and light weight 
materials.  Hybrid technologies can lead to near-term oil savings 
when used in advanced combustion hybrid electric vehicles; they 
are also the foundation for the hydrogen fuel cell hybrid vehicles 
of tomorrow.  The requested 2007 funding level of $166 million 
for EERE's FreedomCAR and Vehicle Technologies Program 
fully supports the FreedomCAR and Fuel Partnership goals.
        In support of the President's Advanced Energy Initiative, the 
Vehicles Technologies program requests $31 million, an increase 
of 27 percent, for advanced battery technology research.
        Advances in battery and other technologies can help accelerate 
development of "plug-in" hybrid electric vehicles. It is anticipated 
that plug-in hybrid electric vehicles should look and perform much 
like regular cars, but have a high energy battery that can be 
charged from an electrical outlet.  Plug-ins would run on the stored 
energy for much of a typical day's driving - depending on the size 
of the battery--up to 40 miles per charge, satisfying the daily 
commuting needs of many Americans.  In fact, some analysts say 
that a 40 mile battery range would allow substitution of electricity 
for petroleum in up to two-thirds of all miles driven by average 
Americans.
        Most of the goods we consume cover part of their journey to us 
by truck.  The 21st Century Truck Partnership involves key 
members of the commercial highway vehicle industry such as 
truck equipment and engine manufacturers, along with three other 
Federal agencies.  The R&D centers on improving the efficiency of 
large combustion engine and fuel systems, while reducing 
"parasitic" losses (such as wind resistance and rolling resistance) 
to decrease the overall fuel consumption of highway freight 
transportation.
        Other activities focus on accelerating the adoption of 
alternative fuel and advanced technology vehicles, deployment of 
alternative fuel infrastructure, and expansion of advanced vehicle 
fleet evaluations to include plug-in hybrids.  There are three 
activities--regulatory and rulemaking support for the Energy Policy 
Acts of 1992 and 2005, alternative fuel and fleet activities, and 
Clean Cities--that work to accelerate alternative fuel infrastructure 
installation.  Clean Cities promotes deployment of vehicle 
technologies and alternative fuels that can reduce petroleum 
consumption.  Advanced Vehicle Competitions provide 
educational opportunities for university students to learn and use 
real-world engineering skills while demonstrating the performance 
of advanced vehicle technologies.  We think of these competitions 
as building the next generation of automotive engineers.  A couple 
of years ago the Department found that 60 percent of graduating 
seniors that had participated in one of these competitions were 
hired by an automaker or one of the major automotive suppliers. 
Next week students from 17 university engineering departments 
will face off in the second round of the Challenge X competition at 
GM's Desert Proving Grounds, and see who has done the best job 
of improving the fuel economy and emissions of a Chevy Equinox 
while maintaining vehicle comfort and capabilities. GM is our 
headline co-sponsor this year, but they are joined by over 30 
corporate sponsors from the supplier community.
        Near-term activities also include developing and deploying 
bio-fuels to displace petroleum.  This year, we will spend at least 
$3 million to provide assistance for fueling stations to add E-85 
capabilities.  Depending on the results of a solicitation out right 
now (closing June 8), the total committed to E-85 deployment 
could reach $4.5 million.  And each DOE dollar will be leveraged 
by cost-share from the private sector or state and local 
governments.  Through ongoing discussions with automakers, the 
Department is encouraging increased production of flex fuel 
vehicles.  The Department is also working with the National 
Biodiesel Board to tighten fuel standards and to develop real-time 
fuel quality tests for biodiesel to enhance performance in advanced 
engines.  Advanced catalysis research at our National Laboratories 
could enable more efficient diesel engines to replace gasoline 
engines in light duty vehicles without sacrificing air quality.
        In the mid-term, advanced combustion research seeks to use 
electronic controls and new fuel formulations to operate 
compression ignition engines in the zone between soot formation 
and nitrogen oxide formation. Research success in homogeneous 
charge compression ignition (HCCI) and other low temperature 
combustion regimes could result in passenger vehicles greater than 
40 percent more fuel efficient than today's best gasoline cars.  
Additional gains are possible since advanced combustion engines 
will still generate waste heat. One of our most tantalizing research 
opportunities is the direct conversion of waste heat to electricity 
using solid state thermoelectric devices.  Our 2007 budget request 
commits over $3 million to solid state thermoelectric research.
        Research on hybrid electric vehicle (HEV) technologies 
(batteries, power electronics, motors), addresses reduced 
component cost, improved performance, and extended lifetimes.  
Efforts are being expanded to include technologies that would 
enable plug-in HEVs. Materials research emphasizes new 
processes to make raw carbon fiber cheaper, and allow carbon 
fiber parts to be manufactured at speeds appropriate for automotive 
mass production. Use of carbon fiber parts, along with magnesium, 
titanium and lightweight steel alloys would enable fabrication of 
lighter vehicles that use less fuel while maintaining occupant 
safety and comfort.  We are also examining new processes for 
recycling these vehicles in our pilot recycling facility at Argonne 
National Laboratory. Research focused on advanced batteries, 
power electronics, motors and lightweight materials is essential for 
improved hybrid electric vehicles in the near- and mid-term as well 
as fuel cell hybrid electric vehicles in the long-term.

                       The Hydrogen Frontier
        Now that I've discussed the near- and mid-term options for 
reducing foreign oil dependence, I'd like to move on to hydrogen, 
which offers a strategy for long-term energy security and reduced 
emissions.  Hydrogen is a transportation fuel that can be made 
from a variety of domestically available resources, while removing 
criteria pollutants and carbon from the tailpipes of vehicles.  The 
Department's research explores pathways to manufacture and 
deliver hydrogen from fossil, nuclear and renewable resources.
        The FY 2007 Budget requests $289.5 million for the 
President's Hydrogen Fuel Initiative, including $195.8 within the 
Office of Energy Efficiency and Renewable Energy.  The balance 
is requested in our basic science, fossil and nuclear offices, as well 
as the Department of Transportation.  We are closely coordinating 
our efforts with other Federal agencies through a special task force 
led by the Office of Science and Technology Policy.
        The Department is pleased to have Congress' support of the 
hydrogen program in Title VIII of the Energy Policy Act of 2005.  
The requirements in the Act are consistent with the Department's 
plans and include important provisions for coordination of efforts 
across the Federal Government and for independent advice from 
outside the Department on our hydrogen efforts.
        Indeed, much progress has been made since 2003 when 
President Bush committed $1.2 billion over five years to accelerate 
hydrogen research. Since then, the Department's program has been 
twice reviewed by the National Academies.  In the latest review 
released last summer, the chair of the review committee said the 
program "is making significant headway" and that "it could have 
an enormous beneficial impact on energy security and the U.S. 
economy."
        Our hydrogen program is focused on research to overcome the 
technology barriers that would be a precondition to broad 
commercialization.  Over three years, our ongoing research has 
contributed to reducing the high-volume cost of automotive fuel 
cells from $275 per kilowatt in 2002 to $110 per kilowatt in 2005.   
Further research and development are required to meet our 
ultimate cost target of $30 per kilowatt. In FY 2007, the 
Department will initiate new projects in several areas, including 
improved fuel cell membranes, cold-weather start-up and 
operation, and the effects of impurities on fuel cells.  In addition to 
supporting fuel cell cost reduction, this work will help us achieve 
our durability target of 5,000 hours which equates to the vehicle 
lifetime required.
        Hydrogen storage on board a vehicle to meet all performance 
and cost requirements is one of the most technically challenging 
barriers we face.  The Department has a diverse portfolio through 
three Centers of Excellence as well as independent projects both in 
applied and basic science with a total of about 40 universities, 15 
companies and 10 Federal laboratories.
        In just one year we are starting to see promising results with 
some completely new materials being developed in different areas 
such as metal hydrides, chemical hydrides, and carbon-based 
materials.  Some of these materials can store 6 to 9 percent by 
weight of hydrogen.  This is up from a maximum of 5.5 weight 
percent a year ago. Another step taken is to tailor these materials 
for storing and releasing hydrogen under practical temperature and 
pressure conditions.
        Further research breakthroughs on materials and systems 
engineering is required to meet our system target to provide 
consumers with a 300-mile driving range.  The Department's basic 
research is carefully coordinated with our applied research in 
materials development for hydrogen storage.
        We are also analyzing transition scenarios on how the Nation 
might initiate hydrogen production and delivery infrastructure 
investment during the early years of potential vehicle market 
penetration and growth.
        Working with our nuclear and basic science offices, we are 
pursuing revolutionary approaches to hydrogen production.  For 
example, heat from nuclear reactors or solar energy can be used to 
split water into hydrogen and oxygen.  This approach involves 
thermochemical cycles that are still under development.  Other 
high risk, high pay-off production approaches also involve 
harnessing the huge potential resource of solar energy.  Working 
with the DOE Office of Science, we are developing 
"photobiological" hydrogen production where micro-organisms 
produce hydrogen and "photoelectrochemical" hydrogen 
production where solid state devices use photon energy to convert 
water into hydrogen and oxygen.
        In our coal-based hydrogen program, we plan to scale up 
membrane reactors for separating hydrogen gas and carbon dioxide 
streams.  This research is closely coordinated with our FutureGen 
effort to create the world's first near zero-emission fossil fuel plant 
by using clean coal technology and sequestering of greenhouse gas 
emissions.
        In our nuclear-based hydrogen program, we plan to complete 
the assembly and preliminary testing of a laboratory system to 
demonstrate hydrogen production by using nuclear heat to drive 
chemical cycles, just discussed, that split water to produce 
hydrogen and oxygen.  In another approach, we plan to 
demonstrate hydrogen production from a higher temperature 
electrolysis system that can be more efficient than electrolyzers 
used today in standard industry practice.
        Through cost-shared partnerships with the automotive and 
energy industries, four teams are installing hydrogen refueling 
stations and putting cars on the road to test the technology in 
realworld conditions as part of the Department's Learning 
Demonstration.  Data collected on vehicle performance, durability 
and fuel economy is feeding back into our research program to 
ensure our research is focused on the most relevant problems.
        As mentioned, hydrogen is critical to our Nation's long-term 
strategy for energy and environmental security.  Developing 
hydrogen technologies that can be manufactured domestically will 
improve our economic competitiveness as well.  Our 
manufacturing research and development effort is new in FY 2007 
and will address the need for high-volume manufacturing 
processes for components like fuel cells that are currently hand-
built.  These processes are important to lowering the costs of fuel 
cells and to developing a supplier base.  Establishing an early 
supply base for fuel cell applications such as portable, stationary, 
remote and emergency backup power lays the groundwork for 
much larger supply chains needed for automotive applications.  In 
January, Secretary Bodman released a draft roadmap for public 
comment on manufacturing research for the hydrogen economy.  
This roadmap is being finalized and will be the foundation for 
executing this important research.
        Investments are not only occurring in the Federal Government 
but also at the state and local level. From Aiken, South Carolina, to 
Sacramento, California, hydrogen research facilities and 
infrastructure investments show a commitment to hydrogen and 
may provide the earliest catalysts for a hydrogen economy.  These 
diverse investments increase our probability of success in solving 
technology barriers that would enable industry to make fuel cell 
vehicles that consumers will want to buy and to invest in hydrogen 
refueling infrastructure that is profitable.  These investments can 
ultimately help displace demand for oil and reduce greenhouse gas 
emissions.

                            Conclusion
        Our national pathway to a secure energy future will be 
composed of a variety of invaluable components, from making 
today's internal combustion engines more efficient to developing 
home-grown biofuels, plugging in our cars, and harnessing the 
renewable, pollution-free potential of hydrogen.  Working with our 
indispensable partners in the academic community, at our National 
Labs, and in private industry, we are putting our research dollars in 
the most promising areas to address critical technical barriers, and 
I believe, with confidence, that the next generation of vehicles and 
fuels is already in sight.

        MR. HALL.  I thank you very much.  And we recognize at this 
time Ms. Susan Cischke, Vice President of Environmental and 
Safety engineering, Ford Motor Company.  I'm honored to 
recognize you. 
        MS. CISCHKE.  Members of the committee, my name is Susan 
Cischke, and I am the Vice President of Environmental and Safety 
Engineering at Ford Motor Company.  Energy security is a 
significant issue facing our Nation and the role of the next 
generation of vehicles and fuels is of great importance to the auto 
industry.  I appreciate the opportunity to share with you Ford 
Motor Company's view on this issue.  
        We believe that our Nation's energy challenges can only be 
properly addressed by an integrated approach; that is, a partnership 
of all stakeholders, which includes the automobile industry, the 
fuel industry, government, and consumers.  The truth is that we 
must all accept that these are long-term challenges, and we are all 
part of the solution.  
        From our perspective, no one factor can be ignored in the 
highly competitive U.S. marketplace.  As a result, we are working 
to accelerate the commercial application of all areas of advanced 
vehicle technologies, including hybrids, flexible-fuel vehicles, 
advanced clean diesel, hydrogen-powered internal combustion 
engines, and fuel-cell vehicles.  The diversity of customer needs 
within and across the market is why we are investing in a portfolio 
of solutions.  At Ford we recognize that hybrids have an important 
place within this portfolio of solutions.  They deliver excellent 
benefits in lower-speed stop/start traffic and offer many customers 
significant improvements in fuel economy, up to 80 percent in city 
driving without compromise.  
        And much of this technology is also applicable to our fuel-cell 
and our ethanol vehicle development efforts.  In 2004, we launched 
the world's first gasoline electric full-hybrid SUV, the Escape 
hybrid.  In 2005, we expanded this technology to the Mercury 
Mariner hybrid and have announced plans to offer this technology 
on the Mazda Tribute SUV, the Ford Fusion, the Mercury Milan, 
the Ford 500, and Mercury Montego sedans, plus the Ford Edge 
and Lincoln Mark X crossover vehicles.  
        Ford's U.S. HEV volume for the 2005 model year was over 
10,000 units and has almost doubled in 2006.  And we have over 
130 hybrid-related U.S. patents issued or pending.  Expansion of 
our hybrid offering is clearly an important part of our overall 
innovation strategy, which embraces our recent commitment to 
increase our production capacity to up to 250,000 hybrids per year 
by 2010 and to offer hybrids on half of our Ford, Lincoln, and 
Mercury products.  Nevertheless, a key challenge facing hybrids is 
the incremental costs both in terms of higher prices for components 
and engineering investments that must be overcome for this 
technology to transition from niche markets to high-volume 
applications.  
        In addition to hybrids, we believe that the greater use of 
renewable fuels, like ethanol, a domestically produced renewable 
fuel, will help reduce reliance on foreign oil.  We applaud 
Congress's efforts that resulted in the Energy Policy Act of 2005, 
as well as the President's recent commitment to address our 
Nation's addiction to oil.  Ford has been building flexible-fuel 
vehicles, or FFVs, for over a decade, and we are an industry leader 
in this technology.  These FFVs are capable of operating on up to 
85 percent ethanol or gasoline or any mixture in between, and all 
of our gasoline-powered vehicles are capable of operating on 
10 percent ethanol or E-10.  
        FFVs are a great alternative for our customers because they 
provide them with an option to choose between E-85 and gasoline 
as they desire.  And as ethanol production increases driven by 
growing availability and demand, competitive pricing will help to 
lower the cost of E-85, further increasing its use as well as the 
demand for FFVs.  In 2006, Ford Motor Company will produce 
250,000 FFVs and by the end of this year will have placed a total 
of nearly 2 million FFVs on the road, including America's best 
selling vehicle, the Ford F-150.  As a whole, U.S. auto makers will 
have produced a total of nearly 6 million vehicles.  And if all these 
vehicles were operated on E-85, over 3.6 billion gallons of 
gasoline a year could be displaced.  That is like saving a full year 
of gasoline consumption in a State like Missouri or Tennessee.  
        And we are not stopping there.  Earlier this year, we unveiled 
the Ford Escape hybrid E-85 research vehicle, which marries 
petroleum saving technologies, hybrid electric power and E-85 
flex-fuel capability.  Though there are many technical and cost 
challenges to address, we believe that if just 5 percent of the U.S. 
fleet were powered by E-85 HEVs, oil imports could be reduced by 
about 140 million barrels a year.  
        Unfortunately, there is a problem.  Even though the volume of 
E-85 vehicles continues to grow rapidly, there are less than 700 
E-85 fueling stations in the U.S. and that is out of over 170,000 
retail gasoline fueling stations nationwide.  For ethanol to compete 
as a motor fuel in the transport sector and play an increasingly 
significant role addressing our Nation's energy concerns, we need 
a strong, long-term focus on policies that increase U.S. ethanol 
production and accelerate E-85 infrastructure development.  
        Ford is also working on advanced light-duty diesel engines.  
Today, clean diesels offer exceptional driveability and can improve 
fuel economy by up to 20 to 25 percent.  This technology is 
already prevalent in many markets around the world.  Nearly half 
the new vehicles sold in Europe are advanced diesels and Ford 
continues to accelerate our introduction of diesel applications in 
these markets.  
        There are, however, many hurdles that inhibit wide-scale 
introduction of this technology in the U.S. We are working to 
overcome the technical challenges of meeting the extremely 
stringent Federal and California tail pipe emission standards and to 
address other issues such as fuel quality, customer acceptance, and 
retail fuel availability.  
        Looking to the future, we are working on what we think is an 
important transitional technology to sustainable transportation:  
hydrogen-powered internal combustion engines.  Ford is a leader 
in this technology, and we think it is a bridge to the development 
of a hydrogen infrastructure and ultimately fuel-cell vehicles.  And 
we are in the process of developing hydrogen power shuttle buses 
for a fleet demonstration in North America starting later this year.  
        Even further down the road, hydrogen-powered fuel cells 
appear to be another promising technology for delivering 
sustainable transportation.  Hydrogen can be derived from a wide 
range of feedstocks to increase energy diversity, and fuel cells are 
highly energy efficient and produce no emissions.  Our Ford Focus 
fuel-cell vehicle is a state-of-the-art hybridized fuel-cell system, 
sharing much of the same hybrid technology we developed for our 
Escape hybrid SUV.  We have already placed a small fleet of these 
vehicles in three U.S. cities as part of the U.S. Department of 
Energy's hydrogen demonstration program collecting valuable 
data.  
        As you can imagine, the R&D investment that goes with all 
this work is a very big number, certainly in the billions, not the 
millions, and it will only grow in the future.  We would like to see 
more R&D support for vehicle technologies and renewable fuels.  
Government incentives for advanced vehicle technologies and 
E-85 infrastructure can accelerate the introduction of these vehicles 
and fuels into the marketplace.  
        Government must play a critical role to promote U.S. 
innovation and can do so by approving a seamless extension of the 
R&D tax credits and enhancing the level of credit for a broad range 
of energy-efficient technologies and energy security initiatives.  
Consistent implementation of an integrated approach will allow us 
to achieve much more in a shorter time frame and at a significantly 
lower cost than if each stakeholder were to pursue its own agenda 
in isolation, however well-intentioned they may be.  
        The challenges are considerable, but not insurmountable, and 
there is an enormous amount we can achieve if we act together in 
an integrated manner.  Thank you again for this opportunity to 
address the committee.  
        MR. HALL.  And we thank you.  
        [The prepared statement of Susan M. Cischke follows:] 

PREPARED STATEMENT OF SUSAN M. CISCHKE, VICE PRESIDENT, 
ENVIRONMENT AND SAFETY ENGINEERING, FORD MOTOR 
COMPANY

        My name is Susan Cischke and I am the Vice President of 
Environmental and Safety Engineering at Ford Motor Company.  
Energy security is a significant issue facing our nation, and the role 
of the next generation of vehicles and fuels is of great importance 
to the auto industry.  I appreciate the opportunity to share with you 
Ford Motor Company's views on this issue.
        Energy is literally the fuel that powers the industrial and 
manufacturing growth of the United States. The energy supply 
disruptions of last summer, increases in global demand, and 
geopolitical concerns with some of the oil rich regions of the world 
led to significantly higher energy prices and consumer angst at the 
fuel pump.  It's our view that action must be taken in all sectors, if 
we are to meet these challenges as a nation.
        At Ford, we recognize that we have a responsibility to do 
something to help address America's energy security needs, and we 
are accelerating our efforts to develop innovative solutions.  As 
Bill Ford has said, "Ford Motor Company is absolutely committed 
to making innovation a central part of everything we do."  That 
innovation begins with alternative fuels and vehicles. Ford 
produced the first American hybrid on the road today - the Ford 
Escape Hybrid.  We have committed to building up to a quarter-
million hybrids a year by 2010 and to continue our leadership in 
ethanol powered flexible fuel vehicles.
        These new product initiatives are a strong commitment for 
Ford and our customers, and they recognize a changing 
marketplace.  But there is a limit to what we can achieve on our 
own.  We believe that our nation's energy challenges can only be 
properly addressed by an Integrated Approach: that is, a 
partnership of all stakeholders which includes the automotive 
industry, the fuel industry, government, and consumers.  The truth 
is that we must all accept that these are long-term challenges and 
that we are all part of the solution.
        So let me set out how we at Ford Motor Company believe each 
stakeholder can play its part.  I'll start with the automotive industry 
itself, because we clearly have a central role to play.  The industry 
has taken significant steps in improving the fuel efficiency of our 
products.  At Ford Motor Company we see this not only as being 
socially responsible but a business necessity, and we are moving 
ahead with a range of technological solutions simultaneously - 
because there is simply no single solution, no "silver bullet".  We 
know that when customers consider purchasing a vehicle, they are 
concerned with numerous attributes including price, quality, safety, 
performance, comfort and utility.
        From our perspective, no one factor can be ignored in the 
highly competitive U.S. marketplace. As a result, we are working 
to accelerate the commercial application of all areas of advanced 
vehicle technologies, including hybrids, flexible fuel vehicles, 
advanced clean diesels, hydrogen-powered internal combustion 
engines and fuel cell vehicles.
        The portfolio approach that we are taking ensures that we are 
able to offer consumers a range of products that meet their specific 
needs and circumstances.  And make no mistake; it will ultimately 
be the consumers who decide.  
        This diversity of customer needs within and across markets is 
why we are investing in a portfolio of solutions.  The result is a 
period of unprecedented technological innovation.  Innovation - in 
matters of the energy, renewable fuels, safety and design - is the 
compass by which we are setting our direction for the future. At 
Ford, we recognize that hybrids have an important place within 
this portfolio of solutions.  They deliver excellent benefits in lower 
speed stop/start traffic and offer many customers breakthrough 
improvements in fuel economy - up to 80% in city driving - 
without compromise.  And much of this technology is also 
applicable to our fuel cell and ethanol vehicle development efforts.
        In 2004, we launched the world's first gasoline-electric full 
hybrid SUV, the Escape Hybrid.  In 2005, we expanded this 
technology to the Mercury Mariner Hybrid, and have announced 
plans to offer this technology on the Mazda Tribute SUV, and the 
Ford Fusion, Mercury Milan, Ford Five Hundred and Mercury 
Montego sedans, plus the Ford Edge and Lincoln MKX crossover 
vehicles.  Ford's U.S. HEV volume for the 2005 model year was 
over 10,000 units and has almost doubled in 2006, and we have 
over 130 hybrid-related U.S. patents issued or pending.
        Expansion of our hybrid offering is clearly an important part of 
our overall innovation strategy which embraces our recent 
commitment to increase our production capacity to up to 250,000 
hybrids per year by 2010 and to offer hybrids on half of our Ford, 
Lincoln and Mercury products.  Nevertheless, a key challenge 
facing hybrids is the incremental costs - both in terms of higher 
prices for components and engineering investments - that must be 
overcome for this technology to transition from "niche markets" to 
high-volume applications.
        In addition to hybrids, we believe that greater use of renewable 
fuels like ethanol, a domestically produced renewable fuel, will 
help reduce reliance on foreign oil.  We applaud Congress' efforts 
that resulted in the Energy Policy Act of 2005, as well as the 
President's recent commitment to address our nation's addiction to 
oil.
        Ford has been building flexible fuel vehicles (FFVs) for over a 
decade, and we are an industry leader in this technology.  These 
"FFVs" are capable of operating on up to 85% ethanol, or gasoline, 
or any mixture in between.  And all of our gasoline powered 
vehicles are capable of operating on 10% ethanol or "E10".  FFVs 
are a great alternative for our customers because they provide them 
with an option to choose between E-85 and gasoline as they desire.  
As ethanol production increases, driven by growing availability 
and demand, competitive pricing will help to lower the cost of E-
85 further, increasing its use as well as demand for FFVs.
        While I'm talking about FFVs, let me clear the air about what it 
takes to make an FFV.   We've heard from many people that all it 
takes to make a FFV is "a little tweak to the chip that runs the 
engine".  I really wish it was that simple - but it's not.  Because 
ethanol is a unique fuel with unique properties, fuel tanks with low 
permeation characteristics are required.  They also require a special 
fuel pump and fuel lines to deliver the fuel to the engine.  Unique 
injectors introduce the fuel into the engine where special 
calibrations programmed into the on-board computer determine 
how much ethanol is in the fuel and how best to set spark timing 
and fuel flow. And because there is more than one fuel calibration 
within an FFV, costly development and certification testing is 
doubled. Many of the FFV parts and processes are patented by 
Ford and are the result of innovative ideas by our best engineers, 
and we're proud of them.  Nevertheless, making an FFV is a 
significant investment for auto manufacturers.
        In 2006, Ford Motor Company will produce 250,000 FFVs and 
by the end of this year, we will have placed a total of nearly 2 
million FFVs on America's roads, including America's best selling 
vehicle--the (5.4L) Ford F-150.
        As a whole, the U.S. automakers will have produced a total of 
nearly 6 million vehicles.  If all of these vehicles were operated on 
E-85, over 3.6 billion gallons of gasoline a year could be displaced. 
That's like saving a full year of gasoline consumption in a state like 
Missouri or Tennessee.
        And we are not stopping there.  Earlier this year we, unveiled 
the Ford Escape Hybrid E-85 research vehicle which marries two 
petroleum-saving technologies - hybrid electric power and E-85 
flexible-fuel capability.  Though there are many technical and cost 
challenges to address, we believe that if just 5% of the U.S. fleet 
were powered by E-85 HEVs, oil imports could be reduced by 
about 140 millions barrels a year.
        Unfortunately there is a problem.  Even though the volume of 
E-85 vehicles continues to grow rapidly, there are less than 700 E-
85 fueling stations in the U.S. - and that's out of over 170,000 
retail gasoline fueling stations nationwide.  For ethanol to compete 
as a motor fuel in the transport sector and play an increasingly 
significant role addressing our nation's energy concerns, we need 
strong, long-term focus on policies that increase U.S. ethanol 
production and accelerate E-85 infrastructure development.  At the 
same time, as the President pointed out in the State of the Union 
address, we need national research efforts to pursue producing 
ethanol from more energy-efficient cellulosic materials like rice 
straw, corn stover, switch grass, wood chips or forest residue.
        Ford is also working on advanced light duty diesel engines. 
Today's clean diesels offer exceptional driveability and can 
improve fuel economy by up to 20-25%.  This technology is 
already prevalent in many markets around the world - nearly half 
of the new vehicles sold in Europe are advanced diesels - and Ford 
continues to accelerate our introduction of diesel applications in 
these markets.  There are, however, many hurdles that inhibit wide 
scale introduction of this technology in the U.S. We are working to 
overcome the technical challenges of meeting the extremely 
stringent Federal and California tailpipe emissions standards, and 
to address other issues such as fuel quality, customer acceptance 
and retail fuel availability.
        Looking to the future, we are working on what we think is an 
important transitional technology to sustainable transportation - 
hydrogen-powered internal combustion engines.  Ford is a leader 
in this technology.  We think it's a "bridge" to the development of 
a hydrogen infrastructure and, ultimately, fuel cell vehicles, and we 
are in the process of developing hydrogen powered E450 H2ICE 
shuttle buses for fleet demonstrations in North America starting 
later this year.
        Even further down the road, hydrogen powered fuel cells 
appear to be another promising technology for delivering 
sustainable transportation.  Hydrogen can be derived from a wide 
range of feedstocks to increase energy diversity, and fuel cells are 
highly energy-efficient and produce no emissions. Our Ford Focus 
Fuel Cell vehicle is a state-of-the-art, hybridized fuel cell system - 
sharing much of the same hybrid technology we developed for our 
Escape Hybrid SUV.  We have already placed a small fleet of 
these vehicles in three U.S. cities as part of the U.S. Department of 
Energy's hydrogen demonstration program collecting valuable 
data.
        As you can imagine, the R&D investment that goes with all 
this work is a very big number--certainly in the billions, not the 
millions--and it will only grow in the future.  Many of our 
competitors and suppliers are also investing heavily.  But there is 
only so much we can achieve without the help of others outside our 
industry.  We need an integrated approach.
        It is clear that the solution to the energy issues associated with 
road transport will need to come from advances in fuels as well as 
vehicle technology.  We need the oil industry to endorse an 
Integrated Approach here in the U.S., just as they are beginning to 
do with automakers and government officials in Europe.  We at 
Ford are clearly excited about the potential role of renewable fuels.  
However, the fact is that without the wholehearted involvement of 
the fuel industry, we cannot move forward far enough or fast 
enough.  We obviously need key partners like the oil industry to 
invest in developing and marketing renewable fuels like E-85 - 
and we need it to do so now and rapidly.  We fully support 
government incentives to encourage the industry or others to 
accelerate this investment.
        There is a great deal that policy makers can do at all levels as 
well.  We would like to see more R&D support for vehicle 
technologies and renewable fuels.  Government incentives for 
advanced technology vehicles and E-85 infrastructure can 
accelerate the introduction of these vehicles and fuels into the 
marketplace.  Government must play a critical role to promote U.S. 
innovation and can do so by approving a seamless extension of the 
R&D tax credits and enhancing the level of credit for a broad range 
of energy efficient technologies and energy security initiatives.
        We would also like to see greater investment in improved road 
traffic management infrastructure in order to reduce congestion 
and save fuel.  According to the American Highway Users 
Alliance, about 5.7 billion gallons of fuel are wasted annually due 
to congestion. Effective traffic light synchronization is a good 
example of a change that could lead to big reductions.
        There is also a role for government in educating the public on 
how to drive in an energy efficient manner.  In the end, it will 
ultimately be the size of the car park, and consumers' choices of 
vehicles, how many miles they drive, and driving behaviors that 
will determine how much motor fuel we consume.  A person who 
drives in an energyconscious way - by avoiding excessive idling, 
unnecessary bursts of acceleration and anticipating braking - can 
enjoy much better fuel consumption today.  And government can 
play a key role to raise public awareness.  We believe that 
awareness is a simple and effective early step which is why we 
have introduced driver training programs in Europe and recently 
developed on-line training for all Ford Motor Company 
employees.
        Consistent implementation of an Integrated Approach will 
allow us to achieve much more in a shorter timeframe and at a 
significantly lower cost than if each stakeholder were to pursue its 
own agenda in isolation, however well-intentioned they might be.  
The challenges are considerable but not insurmountable, and there 
is an enormous amount we can achieve if we act together in an 
integrated manner.
        We have to ensure that our business is sustainable by making 
vehicles that continue to meet the changing needs of the 21st 
century.  That's a responsibility we owe to our customers, 
shareholders and our employees.  But at another level, all of us 
have the opportunity to do something about energy independence - 
and that's a responsibility we owe future generations.
        Thank you again for the opportunity to address the Committee.

One Page Summary of Major Points
         Ford believes that our nation's energy challenges can only 
be properly addressed by an Integrated Approach: that is, a 
partnership of all stakeholders which includes the automotive 
industry, the fuel industry, government, and consumers.  The 
truth is that we must all accept that these are long-term 
challenges and that we are all part of the solution.
         Ford is working to accelerate the commercial application of 
all areas of advanced vehicle technologies, including hybrids, 
flexible fuel vehicles, advanced clean diesels, hydrogen-
powered internal combustion engines and fuel cell vehicles.
         Ford is the only American auto company with full hybrid 
vehicles on the road today and we plan to increase our 
production capacity to up to 250,000 hybrids per year by the 
end of the decade.
         Ford is also leading the way in vehicles operating on 
renewable ethanol - putting up to 250,000 ethanol-capable 
vehicles on the road this year and working to develop ethanol 
infrastructure.
         Ford Escape Hybrid E-85 is the world's first ethanol-fueled 
hybrid, a research project that combines hybrid and FFV 
technology to provide an innovative solution to U.S. national 
energy concerns.
         If the nearly 6 million FFVs that will be on the roads by the 
end of this year were operated on E-85, over 3.6 billion gallons 
of gasoline could be displaced.
	 For ethanol to compete as a motor fuel in the transport 
sector and play an increasingly significant role addressing our 
nation's energy concerns, we need a strong, long-term focus on 
policies that increase U.S. ethanol production and accelerate E-
85 infrastructure development.
	 We think hydrogen internal combustion engines are a "bridge" 
to the development of a hydrogen infrastructure and, 
ultimately, fuel cell vehicles, and we are in the process of 
developing hydrogen powered E450 H2ICE shuttle buses for 
fleet demonstrations in North America starting later this year.
	 Further down the road, hydrogen powered fuel cells appear to 
be another promising technology. Ford has placed a small fleet 
of hydrogen fuel cell vehicles in three U.S. cities as part of the 
U.S. Department of Energy's hydrogen demonstration program 
collecting valuable data.
	 Government must play a critical role to promote U.S. 
innovation and can do so by approving a seamless extension of 
the R&D tax credits and enhancing the level of credit for a 
broad range of energy efficient technologies and energy 
security initiatives.

        MR. HALL.  The Chair at this time recognizes Mrs. Deborah 
Morrissett, Vice President, Regulatory Affairs, DaimlerChrysler 
Corporation. 
 	MS. MORRISSETT.  Good afternoon.  I am Deb Morrissett, Vice 
President for Regulatory Affairs for DamilerChrysler.  I want to 
thank you for providing this opportunity to appear today to discuss 
DaimlerChrysler's involvement in the development of advanced 
power trains and to tell you what we are doing to advance to the 
next generation of vehicles and fuels for America.  
        At the Chrysler Group we are committed to producing products 
that customers want to buy and for continuing to innovate in all 
aspects of our business.  Reducing fuel consumption is an 
important part of that innovation.  We are developing a broad 
range of advanced propulsion technology, including more efficient 
gasoline engines, clean diesels, hybrids, biofuel-capable systems, 
and, in the longer term, fuel cells.  
        We are focused on providing the market with the ability to 
select the propulsion technology that best fits the needs of the 
individual consumer.  
        Today, hydrogen appears to be the eventual successor to fossil 
fuels and a long-term energy solution for our Nation.  
DaimlerChrysler has been working on fuel-cell technology for over 
10 years.  We have the largest worldwide fleet of fuel-cell 
vehicles, more than a hundred, including small passenger cars, 
delivery vans, and mass transit buses in use, and demonstration 
projects in the United States, Europe, and Asia.  
        On the strength of government and industry partnerships, we 
have made good progress in advancing hydrogen fuel-cell 
technology.  These partnerships are absolutely vital to providing 
the significant investment necessary to further develop fuel-cell 
technology and a hydrogen infrastructure.  
        DaimlerChrysler Commercial Buses North America.  The 
Orion brand is the leading manufacturer of diesel electric hybrid 
buses worldwide.  Compared to standard diesel buses, the hybrid 
units provide significantly better fuel economy while greatly 
reducing emissions.  Drivers enjoy faster acceleration and 
passengers experience a quieter, smoother ride compared to 
conventional buses.  
        I would like to focus the remainder of my comments on diesel 
engines and biofuels.  Advanced diesel technology offers up to 
30 percent better fuel economy and 20 percent lower CO2 
emissions when compared to equivalent gasoline engines.  The 
modern clean diesel is a technology that is available today and can 
help reduce our Nation's consumption of petroleum.  
        Last year the Chrysler Group became the first North 
American-based manufacturer to offer a modern diesel engine in a 
light-duty vehicle market with our Jeep Liberty.  Currently, 
DaimlerChrysler offers three models with diesel engines:  Jeep 
Liberty, the Dodge Ram Pickup, and the Mercedes-Benz E-320.  
This fall we will introduce diesels in the Mercedes M and R 
classes.  And in the next few weeks we will announce another 
diesel product for the Chrysler Group.  
        Also in the 2006 calendar year, DaimlerChrysler will introduce 
the cleanest and most efficient diesel technology in the world, 
called Blue Tech.  To give you a benchmark for performance, the 
Mercedes E-320 full-size sedan, powered by a 6-cylinder engine, 
will be the cleanest diesel in the world.  It delivers the torque of an 
8 cylinder, the fuel economy of 35 miles per gallon in real-world 
driving, and has the potential to meet emission standards in all 50 
States.  To meet these fuel economy and stringent emission goals, 
it is essential that the introduction of low-sulfur diesel fuel later 
this year continue on schedule and not be delayed.  
        While diesel technology and improved gasoline engines can 
make big strides towards helping us to meet our Nation's energy, 
environment, and security objectives, biofuels represent a huge 
opportunity to further reduce our consumption of petroleum.  
Every Jeep Liberty diesel leaves the assembly plant in Toledo, 
Ohio, fueled with B-5, a 5 percent biodiesel mix derived from 
locally grown soybeans.  Beginning with our 2007 Dodge Ram, we 
endorse the use of B-20, a 20 percent biodiesel mix, for use in our 
military, government, and commercial fleet customers.  We believe 
that allowing our fleet customers to use fuel made to the current 
military specification will help accelerate the development and 
adoption of a strong national B-20 standard, a standard that OEMs 
and engine manufacturers can endorse for all of their vehicles, 
including the millions of diesel vehicles on the road today.  
        Biofuels, including ethanol, reduce life cycle greenhouse gas 
emissions.  Biodiesel reduces tail pipe emissions of particulates, 
carbon monoxide, and hydrocarbons compared with conventional 
diesel fuel.  Biofuels are proof that at least part of the solution for 
our energy, environment, and national security issues can be home 
grown.  Biofuels support the American agricultural economy.  
Incentives for the introduction of biodiesel and E-85 flex-fuel 
vehicles should continue in order to help us reach the critical mass 
of vehicles on the road required to spur fuel infrastructure 
development.  
        At DaimlerChrysler, and all of the other manufacturers 
represented here today, we are doing our part to improve existing 
technology, to accelerate the introduction of new technologies, to 
encourage the use of renewable fuels, and to invest in the research 
necessary to deliver the long-term future technologies that America 
needs.  We stand ready to do our part, but to achieve our ambitious 
goals we need action from government policymakers, the fuels 
industry, and ultimately the American consumer.  Thank you.  
        MR. HALL.  Thank you.  
        [The prepared statement of Deborah Morrissett follows:] 

PREPARED STATEMENT OF DEBORAH MORRISSETT, VICE 
PRESIDENT, REGULATORY AFFAIRS, DAIMLERCHRYSLER 
CORPORATION

        Good afternoon.  I'm Deb Morrissett, Vice President for 
Regulatory Affairs for DaimlerChrysler.  I want to thank the chairs 
and distinguished Members of the Subcommittee on Energy and 
Air Quality for this opportunity to appear today. 
        I am coming before you today to describe our involvement in 
the development of advanced technologies for vehicles to reduce 
petroleum consumption and what DaimlerChrysler is doing to 
advance the transition to the next generation of vehicles and fuels 
for America.
        Speaking for the Chrysler Group only, we have the most 
aggressive product plan in the history of our company. In 2004 we 
set a company record for new vehicle launches in one year with 
nine. This year we'll break that record by introducing 10 all-new 
vehicles, among which will be some of the most fuel-efficient 
vehicles we've ever built. Over the next five years we plan to 
invest $30 billion in our product program. Over the past four years 
we've committed $7.0 billion in total program investments to 
upgrade the flexibility and competitiveness of our manufacturing 
facilities to world-class levels. 
        These investments and our product development are essential 
to ensure that our company and our people can compete against 
global competition. We are responsible for producing products that 
customers want to buy and for continuing to innovate in all aspects 
of our business. Reducing fuel consumption is an important part of 
that innovation.
        There are several forces shaping energy policy at a national 
level including "acts of God" such as hurricanes Katrina and Rita 
last year that exposed the fragile state of domestic oil refinement 
capability. Ultimately, an effective response to all of the concerns 
about petroleum usage includes 1) use less oil; 2) more cleanly and 
efficiently burn the petroleum-based fuels we do use; and, 3) find 
alternatives. We must do all three without adversely affecting the 
economy or employment in the auto and related industries.
        Clearly, the federal government and auto manufacturers have 
leading roles to play in achieving those goals. We stand our best 
chance of success when we work hand-in-hand to achieve them.
Take the example of fuel cell technology. Today, hydrogen 
appears to be the eventual successor to fossil fuels and a long-term 
energy solution for our Nation. On the strength of government and 
industry partnerships, we've made good progress in advancing 
hydrogen fuel-cell technology.
        DaimlerChrysler has been working on fuel cell technology for 
transportation utilizing hydrogen for over ten years. We have 
invested more than $1 Billion in R&D and have developed five 
generations of vehicles (NECAR1, 2, 3, and 4, and the F-Cell). Of 
all manufacturers, we have the largest worldwide fleet of fuel cell 
vehicles-more than 100-participating in several international 
demonstration projects in the United States, Europe, and Asia with 
over 1.2 million miles of accumulated real world experience. As 
part of these projects, we are demonstrating the viability of the fuel 
cell in the entire fleet of vehicles-from small passenger cars to 
delivery vans to large mass transit buses.
        Government-industry fuel cell partnerships are working. These 
partnerships will continue to be absolutely vital to providing a 
jumpstart to the significant investment necessary to develop fuel 
cell technology and a hydrogen infrastructure. It is clear that we 
can work together toward solving our long-term energy, 
environmental and national security needs. We need to expand this 
cooperation to find solutions to the problem of petroleum 
consumption in the near term as well.
        DaimlerChrysler is engaged in a broad range of advanced 
propulsion technologies. Fuel cell vehicles are one long term focus 
of this technology portfolio, which also includes more efficient 
gasoline engines, advanced diesels, and hybrid powertrain systems. 
DaimlerChrysler is focused on providing the market with the 
ability to select the advanced propulsion technology that best fits 
the needs of the individual customer. 
        In October of 2005, DaimlerChrysler Commercial Buses North 
America received a contract for 500 Orion VII diesel hybrid-
electric buses from New York City transport services. This is the 
largest order for hybrid buses in history. Orion, DaimlerChrysler's 
North American city bus brand, will begin deliveries in the second 
quarter of 2006. This is the third hybrid order in New York City 
for Orion complementing the prior orders of 200 units and 125 
units respectively.
        Orion, along with partner BAE Systems, producer of the 
HybriDriver series hybrid propulsion system, is the leading brand 
of hybrid buses worldwide with more than 300 units in revenue 
service and 700 more units on order for the Toronto Transit 
Commission, San Francisco MUNI and now New York City 
Transit and MTA Bus. Trusted for their significant emissions 
reductions and fuel savings compared to standard diesel buses, 
Orion Hybrid buses also outperform conventionally powered 
vehicles.
        Compared to standard diesel buses, the hybrid units will 
provide significantly better fuel economy while greatly reducing 
emissions: 90 percent less particulate matter, 40 percent less NOx, 
and 30 percent fewer greenhouse gases. Drivers will enjoy faster 
acceleration and customers will experience a quieter, smoother ride 
free of the frequent transmission shifts encountered in conventional 
buses.
        Regarding hybrids for light duty vehicles, DaimlerChrysler, 
GM and BMW have recently combined efforts to develop a two-
mode hybrid drive system that surpasses the efficiency of today's 
hybrids. The partnership will cut development and system costs 
while giving customers an affordable hybrid alternative that 
improves fuel economy. Our first use of the system will be in early 
2008 with the Dodge Durango.
        DaimlerChrysler has developed and implemented technologies 
that improve the efficiency of the current gasoline propulsion 
system. We must continue to enhance the gasoline combustion 
propulsion system since it will be the dominant choice in the 
market for many years to come. We offer the Multi-Displacement 
System (MDS) available in the HEMI in seven Chrysler Group 
vehicles. MDS seamlessly alternates between smooth, high fuel 
economy four-cylinder mode when less power is needed and V-8 
mode when more power from the 5.7L HEMI engine is in demand. 
The system yields up to 20 percent improved fuel economy.  We 
also recently launched a new world engine coupled with a 
continuously variable transmission (CVT) to further improve fuel 
economy and reduce emissions of the all new Dodge Caliber. We 
will expand the application of this technology to several additional 
new products starting later this year. We are also working on 
further development of gasoline direct-injection which 
considerably enhances fuel economy by closely monitoring fuel 
atomization.
        Yet another alternative, and the one I wish to focus on in the 
remainder of my testimony, is the diesel engine. Modern diesels 
are only beginning to make inroads in the light duty fleet in the 
U.S.  Meanwhile, diesels account for nearly 50 percent of the new 
car market in Europe and about two-thirds of the Chrysler and 
Jeepr vehicles sold in Europe in 2005. Advanced diesel 
technology offers up to 30 percent better fuel economy and 20 
percent lower CO2 emissions when compared to equivalent 
gasoline engines. Modern, clean diesels are a technology that is 
available today and can help reduce our nation's consumption of 
petroleum based fuels.
        According to the EPA, if we had a light-duty vehicle 
population that was one-third diesel, we'd save up to 1.4 million 
barrels of oil per day in the U.S. That's the amount of oil the U.S. 
currently imports from Saudi Arabia. If Chrysler Group's diesel 
mix in the U.S. were the same as it is in Europe, our CAFE would 
improve by three miles per gallon!
        Last year the Chrysler Group became the first North American-
based manufacturer to offer a modern diesel engine in the light 
duty vehicle market with our Jeep Liberty. By the way, customer 
demand for the diesel Liberty exceeded our expectations. Sales are 
almost twice our initial target.
        Our sister company, Mercedes-Benz, and our competitor, 
Volkswagen, also offer diesels here. We expect to see other 
manufacturers offering diesels in the U.S. in the not too distant 
future as well. For 2006, DaimlerChrysler currently offers 5 
models with diesel engines-the Jeep Liberty, Dodge Ram 2500 
and 3500 pickups, and Mercedes-Benz E-320, ML-320, and R-320. 
In the next few weeks we will announce yet another diesel product 
for the Chrysler Group.
        Also in the 2006 calendar year, DaimlerChrysler will bring to 
this market the cleanest and most fuel-efficient diesel technology 
in the world, called BLUETEC. We introduced it in a Mercedes E-
Class at the North American International Auto Show in Detroit in 
January.
        To give you a benchmark for performance, the Mercedes E320 
full-size sedan, powered by a six-cylinder diesel engine, will be the 
cleanest diesel in the world. It delivers the torque of an eight-
cylinder, 35 miles-per-gallon in real-world driving, and has the 
potential to meet emissions standards in all 50 states. To meet 
these fuel economy and stringent emission goals, it is essential that 
the low sulfur requirements for diesel fuel set to become effective 
later this year, be maintained and not delayed.
        While diesel technology alone can make big strides toward 
helping us meet our national energy, environment, and security 
objectives, when you add biodiesel and other biofuels, it gets really 
interesting. Biofuels represent a huge opportunity to reduce our 
consumption of conventional petroleum-based fuel.
        Designing more engines to run on biodiesel is a current 
objective at DaimlerChrysler. Biodiesel fuel reduces emissions of 
diesel vehicles and lowers petroleum consumption. Every Jeep 
Liberty diesel we build leaves the assembly plant in Toledo, Ohio, 
fueled with B5 - a renewable fuel with a 5 percent biodiesel mix 
derived from locally-grown soy beans. Beginning with our 2007 
model year Dodge Ram, we will endorse the use of B20-a 20 
percent biodiesel mix-for use by our military, government and 
commercial fleet customers. We believe that allowing our fleet 
customers to use fuel made to the current military specification 
will help accelerate the development and adoption of a national 
B20 specification for general use.
        Biofuels reduce lifecycle greenhouse gas emissions, because 
the plants from which they're derived absorb carbon dioxide from 
the atmosphere during growth. Biofuels also reduce tailpipe 
emissions of particulates, carbon monoxide and hydrocarbons 
compared with conventional diesel fuel. Biofuels also support the 
American agricultural economy. 
        To support this effort, we have teamed up with the Detroit-
based nonprofit NextEnergy, the nation's largest chain of biodiesel 
refiners, industry-leading suppliers, and local universities to 
conduct much needed research and field testing. We even plan to 
study the use of biodiesel crops as possible tools to remediate old 
brownfield sites. 
        One of the key enablers to broad acceptance of biodiesel is the 
establishment of a national high quality B20 fuel specification. In 
order for manufacturers to produce, sell, and warranty diesel 
vehicles for operation on biodiesel, we feel a national B20 standard 
is critical to us and our customers. This standard is needed, and 
must be designed, to allow manufacturers to endorse B20 for all of 
their vehicles, including the millions of diesel vehicles already on 
the road as well as the ones that will be built in the future.
        Gas-ethanol flex-fuel is another option we need to revisit. 
Since 1998 the Chrysler Group has provided to customers about 
1.5 million minivans, cars, SUVs and pickup trucks that are E-85 
flex-fuel (a gas-ethanol mix) capable. Unfortunately, in the past, 
virtually all of those vehicles ran on pure gasoline, due to the lack 
of an E-85 fuel infrastructure. But flex-fuels can work, when 
government policy gets behind them and encourages infrastructure 
development. 
        Our current product plan commits us to producing, by the 2008 
model year, just under 500,000 flexible fuel vehicles annually for 
our U.S. fleet. That's roughly 25 percent of our production. If all of 
them operated on E-85 instead of gasoline, it would save 250 
million gallons of petroleum per year-roughly the amount of oil 
we import from Libya each year. In the same timeframe we will 
produce over 150 thousand diesels annually that could operate on 
biodiesel if we have a suitable national B20 specification.
        Incentives for the introduction of biofuels and E-85 FFVs 
should continue to help reach the "critical mass" of vehicles on the 
road required to help spur the necessary fuel infrastructure 
development. Biofuels are proof that at least part of the solution to 
our energy, environment and national security issues can be 
homegrown.
        We at DaimlerChrysler, and all of the other manufacturers 
represented here today, are doing our part to improve existing 
technology, to accelerate the introduction of new technologies, and 
to invest in the research necessary to deliver the long-term future 
technologies America needs. However, the solution rests not just 
with auto industry action. We need action from government policy 
makers, the fuels industry and ultimately the American consumer. 
According to our computer models, full deployment of FFVs 
operating on E-85, 10 percent ethanol in all conventional gasoline 
vehicles and full penetration of 20 percent biodiesel, in both the 
light and heavy duty diesel fleets, would lead to a reduction in U.S. 
demand for petroleum of 3.6 million barrels per day. We stand 
ready to do our part.
        Thank you for your attention; I would be pleased to answer any 
questions the Subcommittee has.

        MR. HALL.  The Chair recognizes Mr. William Reinert, 
National Manager, Advanced Technology Group, Toyota Motor 
Sales, USA.  
        MR. REINERT.  Mr. Chairman, members of the committee, my 
name is Bill Reinert, and I am National Manager, Advanced 
Technology for Toyota.  I want to thank you for inviting Toyota to 
participate in this hearing and to provide our perspective on future 
technological advancements for automobiles.  Today, I will 
emphasize hybrid electric and plug-in hybrid power trains.  
        Toyota recognizes that the competing priorities of energy 
security, environmental concerns, and emerging fuels may reshape 
the transportation and fuels market and may one day change 
customer perspectives on vehicle choice.  As you can see from the 
slide above, today, we are seeing the emerging markets for 
biodiesel and tremendous expansion of corn-based ethanol 
production.  We are also beginning to see previously overlooked 
hydrocarbon supplies such as tar sands and very heavy crude 
products making significant impacts in the market.  In the coming 
years, our tremendous natural gas and coal reserve can be brought 
to the market from the Fischer-Tropsch process providing zero 
sulfur diesel or gasoline.  
        We feel that our investments in hybrid development give us the 
opportunity to use these new fuels and maximize their benefits.  
Toyota believes there is no single fuel or technology that can solve 
all of transportation's needs.  Simply put, there is no single silver 
bullet.  That is why we are pursuing multiple technology paths in 
our continuing quest to reduce the impact of the automobile on 
society.  
        Key to our efforts is the ability to apply hybrid systems to any 
type of power train without constraint from the type of fuel or 
propulsion technology used.  In other words, hybrids are a core 
technology for Toyota.  By combining battery energy storage with 
conventional power trains, Toyota hybrid systems have the ability 
to greatly increase and in some cases double the efficiency of any 
propulsion system, while significantly reducing smog-forming 
emissions.  
        Some have characterized hybrid technology as an interim 
approach, a bridge to fuel cells.  In our view, this underestimates 
the value of the hybrid system.  The fuel cells we are now testing 
in the United States are hybrid designs and in fact use many of the 
same components that are found in today's Prius.  Since our 
introduction of the Prius in 1997, Toyota's cumulative global 
hybrid sales have exceeded 600,000 units.  Of this total, over 
300,000 have been sold in the United States.  Clearly the American 
market is a key to our plans to expand our hybrid technology.  
Currently, we offer five different hybrid models for sale in the 
United States, with one additional model scheduled for launch in 
2007.  All auto manufacturers try to find the right combination of 
features such as fuel economy, emissions, and power at the 
customer's value.  But no matter how brilliant or appealing a 
product may be, it will not succeed in the marketplace unless it is 
better in every respect than the product it seeks to replace.  That is 
why Toyota hybrid products reflect customers' preferences in each 
market segment in which they compete.  
        For instance, the Prius maximizes fuel economy while 
achieving class average performance.  The Lexus LS 600h will 
provide 12-cylinder performance and class leading V8 fuel 
economy.  And the 4-cylinder Camry hybrid offers a combined 
EPA fuel economy value of 39 MPG, while at the same time 
achieving V-6 performance.  Importantly, hybrids are saving fuel 
today using infrastructure.  The application of hybrid technology 
takes on different forms, and not all offer the same range of 
benefits.  Toyota designs are known as full or strong hybrid.  This 
means the battery and power electronic components of our design 
are the primary influences on system efficiency and provide the 
benefits of motor-assist and an all-electric EV range.  
        We believe that as future technologies are developed, the 
benefits of a strong hybrid approach will become even more 
pronounced.  Evidence of Toyota's continuous development 
philosophy is the improvement in Prius performance.  During the 
6 years since it was launched, fuel economy has increased by over 
30 percent.  Our 0-to-60 mile-per-hour acceleration time has 
dropped by 4.4 seconds, and already low emissions were reduced 
even lower.  These enhancements were primarily the result of 
weight and size reductions in electrical components and steady 
improvement in battery technology.  We can foresee a time when 
we offer a hybrid in every segment in which we compete.  Over 
time the cost and complexity of hybrid systems will be improved 
to the point that a hybrid becomes a normal check-the-box power 
train option, just like 4, 6, and 8 cylinders are today.  It is 
reasonable to expect that Toyota's global hybrid production could 
exceed 1 million units per year sometime in the next decade.  
        Particularly interesting is the continuation of the lithium ion 
battery technology.  We hope that this will lead to low-cost 
lightweight batteries with high-energy densities increasing the all 
electric range and the efficiency of hybrid products even further.  
        We are aware of the enthusiasm in some quarters for plug-in 
hybrid technology, and Toyota is investigating the idea of plug-in 
hybrid designs because this type of approach may have merit in the 
future.  We believe that plug-in hybrids' ability to successfully 
compete in the marketplace to a large extent depends on the 
development of battery technology that is lightweight, inexpensive, 
and durable.  Many current plug-in hybrid designs use deep-charge 
discharge cycles to improve their all electric range.  The data 
demonstrate that battery life is adversely impacted by large swings 
in the state of charge.  Battery management systems in the Prius 
restrict state-of-charge swings to a carefully defined level that is 
consistent with its long battery life.  Successful plug-in hybrid 
designs must carefully balance the desire for longer all-electric 
range with cost and weight targets and the need to extend the 
lifetime of the battery systems.  And ultimately, as I said earlier, 
customers must want the vehicle.  
        Mr. Chairman, I would be happy to answer any questions.  
        MR. HALL.  All right.  Thank you sir.  
        [The prepared statement of William Reinert follows:] 



PREPARED STATEMENT OF WILLIAM REINERT, NATIONAL 
MANAGER, ADVANCED TECHNOLOGY GROUP, TOYOTA MOTOR 
SALES, USA, INC.

 

        MR. HALL.  The Chair now recognizes Elizabeth Lowery, Vice 
President, Public Policy Center, General Motors.  You are 
recognized you for 5 minutes.  
        MS. LOWERY.  Thank you, Mr. Chairman.  Good afternoon, my 
name is Elizabeth Lowery and I am Vice President for 
Environment and Energy for General Motors.  I am pleased to be 
able to speak to you today regarding GM'S near and longer-term 
plans for development and implementation of advanced 
technologies into our future vehicles.  
        GM has always been a leader in the development and use of 
technologies in vehicles.  From the move away from hand-cranked 
starters, to the highly successful catalytic controls for vehicle 
emissions, to efforts to produce an innovative electric vehicle in 
the 1990s, GM has been instrumental in implementation of 
advanced technologies.  Today, we are continuing to focus on 
ways to advance vehicle fuel economy, safety, and emissions.  And 
GM is leading in all of these activities.  We have a plan to address 
both the needs of our customers and the critical public policy 
issues facing us.  This plan includes near-term steps, such as 
continuing to make improvements to today's internal combustion 
engines and transmissions and increased E-85 flex-fuel capability; 
mid-term steps, such as more affordable and flexible hybridization 
of vehicles; and long-term steps such as fuel cells powered by 
hydrogen.  
        The answer to today's energy issues is not simple.  And we 
believe that all of these technologies play an important role in 
America's energy future.  
        Today I am here to speak about our work in two particular 
areas, E-85 capable vehicles and hydrogen fuel cells.  GM is 
leading the effort on flex-fuel vehicles capable of running on 
gasoline or E-85 ethanol.  These vehicles offer a choice to 
consumers, a choice that has significant energy and economic 
benefits.  Ethanol is renewable and, in high concentration blends, 
helps reduce greenhouse gas emissions.  As E-85 it helps reduce 
U.S. dependence on petroleum, diversifies our sources of 
transportation fuel, and reduces smog-forming emissions.  
        Ethanol usage provides great opportunity for the domestic 
agriculture industry and should help spur new job growth in other 
areas.  Until last fall, there was limited interest in the development 
of ethanol as an alternative fuel, but when gasoline prices spiked in 
the aftermath of the hurricanes that devastated the Gulf Coast, 
ethanol became more visible, and GM recognized an opportunity 
to become part of the solution.  
        Earlier this year, General Motors launched a national 
advertising campaign beginning with the very visible 2006 Super 
Bowl hosted in our own home city of Detroit.  After the Super 
Bowl we continued through the 2006 Winter Olympics, including 
launching our "Live Green, Go Yellow" Web site.  Traffic to that 
Web site quickly rose to the millions as consumers wanted to know 
more about E-85, GM flex-fuel vehicles, and station location.  But 
that was just the beginning.  
        With nearly 2 million E-85 capable vehicles already on the 
road and a plan to offer 14 separate E-85 capable models in 2007, 
we wanted to make sure our customers knew when they were 
getting this flex-fuel capability.  So GM launched a labeling effort 
that included an external badge on the vehicle, noting its flex-fuel 
capability and a yellow gas cap to remind customers that their 
vehicle is capable of running on E-85 ethanol.  We have also 
embarked upon several significant partnerships to increase the 
availability of the ethanol fueling infrastructure.  
        Most recently, GM partnered with Meijer, Clean Fuel USA, the 
State of Michigan, and the State of Indiana to work toward 
approximately 40 new retail outlets.  We have previously 
announced similar partnerships in California, Illinois, Minnesota, 
and Texas, working with a variety of energy companies, State 
agencies, and distribution outlets.  For the U.S., the growth of the 
ethanol industry raises enormous potential for displacing gasoline 
consumption in the transportation sector.  If all of the 5 to 6 million 
flex-fuel vehicles on the road today were fueled using E-85, the 
U.S. could offset the need for 3.6 billion gallons of gasoline 
annually.  And for the individual consumer, regularly filling a 2007 
Chevrolet Tahoe with E-85 would displace the use of over 600 
gallons of gasoline each year.  These are impressive numbers so 
they need to find ways to increase availability of E-85 in the 
marketplace.  
        Looking to the long term, General Motors has placed very high 
priority on fuel cells and hydrogen as a power source and energy 
carrier for automobiles.  To accomplish this, GM's fuel-cell 
program has focused on lowering costs, and increasing reliability 
of the fuel-cell stacks.  Demonstrating the promise of the 
technology through validation programs and collaborating with 
other parties on the infrastructure issues that need to be addressed.  
We have made significant progress in several of these areas.  
        In the last 6 years, we have improved fuel-cell power density 
by a factor of 7, while enhancing efficiency and reducing the size 
of our fuel-cell stack.  We have significantly increased fuel-cell 
durability, reliability, and cold-start capability.  We have 
developed safe hydrogen storage systems that approach the range 
of today's vehicles.  We have made significant progress on cost 
reductions through technology improvements and system 
simplification.  With respect to collaboration, we are working with 
key partners on virtually every aspect of fuel-cell and 
infrastructure technology.  
        The FreedomCAR and Fuel Partnership, managed through the 
U.S. Department of Energy, has proven to be an important forum 
for addressing these issues and challenges.  Clearly, huge 
challenges remain.  Reliability of the fuel-cell stacks and storage of 
the hydrogen on board the vehicle must be resolved to draw 
American consumers to these vehicles.  And the fueling 
infrastructure must be available so the owners of these vehicles 
have no concerns about where to get the hydrogen.  
        In conclusion, there is no one single solution to the challenges 
we face.  We are concentrating our energies on a number of 
different fronts and believe that many of these technologies will 
coexist in the marketplace.  General Motors has a rational 
advanced technology plan that goes from near term, focused on 
alternative fuels like E-85 ethanol, to long-term hydrogen-powered 
fuel cells.  We are executing that plan.  All of these will help to 
simultaneously reduce U.S. energy dependence, remove the 
automobile from the environmental debate and stimulate economic 
and jobs growth.  
        Thank you for your attention and I am happy to answer 
questions.  
        MR. HALL.  Thank you Ms. Lowery.  
        [The prepared statement of Elizabeth Lowery follows:] 

PREPARED STATEMENT OF ELIZABETH LOWERY, VICE PRESIDENT, 
PUBLIC POLICY CENTER, GENERAL MOTORS

        Good afternoon.  My name is Elizabeth Lowery and I am Vice 
President for Environment and Energy in the GM Public Policy 
Center.  I am pleased to be able to speak to you today regarding 
GM's near and longer term plans for development and 
implementation of advanced technologies into our future vehicles.
        GM has always been a leader in the development and use of 
technologies in vehicles.  From the move away from hand-cranked 
starters--to the highly successful catalytic control technology for 
vehicle emissions--to efforts to produce an innovative electric 
vehicle in the 1990s, GM has been instrumental in the 
implementation of advanced technologies.
        Today, we are continuing to focus on ways to advance vehicle 
fuel economy, safety and emissions.  And GM is leading in all of 
these activities.  We have a plan to address both the needs of our 
customers and the critical public policy issues facing us.  This plan 
includes near term steps, such as continuing to make improvements 
to today's internal combustion engines and transmissions and 
increased E-85 flexfuel capability; mid-term steps, such as more 
affordable and flexible hybridization of vehicles; and long-term 
steps, such as fuel cells powered by hydrogen.  The answer to 
today's energy issues is not simple, and we believe that all of these 
technologies will play an important role in America's energy 
future.
        Today, I am here to speak about our work in two particular 
areas - E-85 capable vehicles and hydrogen fuel cells.
        GM is leading the effort on flexfueled vehicles capable of 
running on gasoline or E-85 ethanol.  These vehicles offer a choice 
to consumers--a choice that has significant energy and economic 
benefits.  Ethanol is renewable and, in high concentration blends, 
helps reduce greenhouse gas emissions; as E-85 it helps reduce 
U.S. dependence on petroleum, diversifies our sources of 
transportation fuel, and reduces smog-forming emissions.  Ethanol 
usage provides great opportunities for the domestic agriculture 
industry and should help spur new job growth in other areas.
        Until last fall there was limited interest in the development of 
ethanol as an alternative fuel.  But when gasoline prices spiked in 
the aftermath of the hurricanes that devastated the Gulf Coast, 
ethanol became more visible and GM recognized an opportunity to 
become part of the solution.  Earlier this year, General Motors 
launched a national advertising campaign, beginning with the very 
visible 2006 Super Bowl, hosted in our own home city of Detroit.  
After the Super Bowl, we  continued through the 2006 Winter 
Olympics, including launching our "Live Green, Go Yellow" 
website.  Traffic to that website quickly rose to the millions--as 
consumers wanted to know more about E-85, GM flexfuel vehicles 
and station locations.
        But that was just the beginning.  With nearly two million E-85 
capable vehicles already on the road and a plan to offer 14 separate 
E-85 capable models in 2007, we wanted to make sure our 
customers knew when they were getting this flexfuel capability.  
So, GM launched a labeling effort that included an external badge 
on the vehicle noting its flexfuel capability and a yellow gas cap to 
remind customers that their vehicle is capable of running on E-85.
        We have also embarked upon several significant partnerships 
to increase the availability of the ethanol fueling infrastructure.  
Most recently, GM partnered with Meijer, CleanFuelUSA, the 
State of Michigan and the State of Indiana to work toward 
approximately forty new retail outlets.  We have previously 
announced similar partnerships in California, Illinois, Minnesota 
and Texas--working with a variety of energy companies, state 
agencies, and distribution outlets. 
        For the U.S., the growth of the ethanol industry raises 
enormous potential for displacing gasoline consumption in the 
transportation sector.  If all of the 5 million flexfueled vehicles on 
the road today were fueled using E-85, the U.S. could offset the 
need for 3.6 billion gallons of gasoline annually.  And for the 
individual consumer, regularly filling a 2007 Chevrolet Tahoe with 
E-85 would displace the use of over 600 gallons of gasoline each 
year.  These are impressive numbers, so we need to find ways to 
increase availability of E-85 in the marketplace.
        Looking to the long-term, General Motors has placed very high 
priority on fuel cells and hydrogen as the power source and energy 
carrier for automobiles.  To accomplish this, GM's fuel cell 
program is focused on lowering cost and increasing reliability of 
the fuel cell stacks, demonstrating the promise of the technology 
through validation programs and collaborating with other parties 
on the infrastructure issues that need to be addressed.  We have 
made significant progress in several of these areas:
	 In the last six years, we have improved fuel cell power 
density by a factor of seven, while enhancing the efficiency 
and reducing the size of our fuel cell stack. 
	 We have significantly increased fuel cell durability, 
reliability, and cold start capability.
	 We have developed safe hydrogen storage systems that 
approach the range of today's vehicles.
	 We have made significant progress on cost reduction 
through technology improvements and system 
simplification. 
        With respect to collaboration, we are working with key partners 
on virtually every aspect of fuel cell and infrastructure technology. 
The FreedomCAR and Fuel Partnership, managed through the U.S. 
Department of Energy, has proven to be an important forum for 
addressing these issues and challenges.
        Clearly huge challenges remain.  Reliability of the fuel cell 
stacks and storage of the hydrogen on board the vehicle must be 
resolved to draw American consumers to these vehicles.  And the 
fueling infrastructure must be available so that owners of these 
vehicles have no concerns about where to get the hydrogen.
        In conclusion, there is no one single solution to the challenges 
we face.  We are concentrating our energies on a number of 
different fronts, and believe that many of these technologies will 
coexist in the marketplace.  General Motors has a rational 
advanced technology plan that goes from near term, focused on 
alternative fuels like E-85 ethanol, to the long term hydrogen-
powered fuel cells.  We are executing that plan.  All of these will 
help to simultaneously reduce U.S. energy dependence, remove the 
automobile from the environmental debate, and stimulate 
economic and jobs growth.

        MR. HALL.  The Chair recognizes the presence of a long-time 
Chairman of the Committee on Energy and Commerce, Mr. 
Dingell.  Would you care to make an opening statement, or do you 
want to put one in the record?  
        MR. DINGELL.  Mr. Chair, you are most gracious.  Thank you.  
I would just like to welcome the distinguished panel here.  Thank 
you for being here.  This is very helpful to us.  It is a privilege to 
see you.  I have a number of friends down there in the well and I 
am delighted that they are here with us.  Thank you Mr. Chairman.  
        MR. HALL.  All right.  The Chair notes that there is a vote on 
the floor, we have two votes.  What do you think?  
        MR. SHIMKUS.  We can get two people done.
        MR. HALL.  Okay.  All right.  
        With that, I will ask some questions then.  Thank you.  
        I, along with Chairman Barton, am interested in this question, 
and I am sure Gene Green, if he is here--most of us from Texas--
and the Ranking Member here, Mr. Ross, who has great interest in 
Texas as his neighbor from Arkansas.  But Texas has a unique 
confluence of automobile manufacturers, petrochemical industry 
infrastructure, oil and natural gas reserves, recoverable oil 
reserves, with the potential for carbon sequestration, nuclear power 
production, windfalls, and, importantly, 1,000 miles of existing 
hydrogen pipeline.  And I understand that there is a coalition 
working toward the goal of large-scale hydrogen production, but 
there are no DOE hydrogen products that I am aware of in the 
State of Texas.  
        So, Secretary Karsner, can you tell me why DOE has not 
chosen to take advantage of the natural resources and infrastructure 
we have got in Texas?  Doesn't it make sense to focus R&D efforts 
in the areas that can best support them?  It is kind of a pro-Texas 
question.  
        MR. KARSNER.  Mr. Chairman, as someone who has spent most 
of his life growing up in Texas, I don't have the answer to that, but 
I can assure you I will find out ambitiously.
        MR. HALL.  Thank you.  Talk to Mr. Bodman about it.  He is a 
great Secretary of Energy, and just sensible and kind and generous.  
I know he is probably going to put one in Texas, and we want one 
there.  
        MR. KARSNER.  I know that would make my folks happy.  I 
will do that.  
        MR. HALL.  All right.  Let's see.  Again, to Mr. Karsner.  I 
know that DOE is involved in pushing flex-fuel vehicles and the 
rollout of fuels that can run those vehicles, including E-85.  Are 
you getting the support you need from the automakers on the 
rollout of the flex-fuel vehicles?  
        MR. KARSNER.  Mr. Chairman, I have only been in this job for 
about 6 weeks and I can tell you that very few things occupy my 
time more than dialoguing with the automakers on that question.  
Secretary Bodman has tasked me quite deliberately on that issue, 
and, in fact, my first trip within 24 hours of joining DOE was to 
Detroit to put out that message and call for cooperation.  I am 
happy to report that for the most part, we are receiving good 
response from the automakers, particularly the members of the 
U.S. Car and FreedomCAR Coalition.  We received that 
cooperation in varying degrees at various levels at various times, 
but it is proceeding forward and we do believe on a voluntary basis 
the automakers are taking their responsibilities quite seriously and 
engaging the Administration on ways that they could accelerate the 
rate of market penetration for flex fuel.  
        MR. HALL.  And you are encouraging them.
        MR. KARSNER.  We are encouraging them.
        MR. HALL.  You are pushing them.
        MR. KARSNER.  I think that would be accurate to characterize it 
that way, sir.
        MR. HALL.  All right.  Ms. Lowery, what is the future for 
fuel-cell vehicles?  How do you see them evolving over the next 
5 years, and the next 10 years?  
        MS. LOWERY.  Well, I think there is a bright future for fuel-cell 
vehicles.  There is a lot of work that needs to be done with respect 
to the hydrogen infrastructure, as well as the work that is being 
done through FreedomCAR and Freedom Fuel.  We have an 
aggressive goal at General Motors to get the fuel-cell stack 
competitive with the internal combustion engine with respect to 
durability and reliability and all the important features of today's 
engines.  And we have that in the 2010 time frame.  And then in 
the next decade after that, we will look at production and the 
volume, with the development of the hydrogen economy.  
        MR. HALL.  I thank you.  At this time I will let the Ranking 
Member ask questions, if you like, Mr. Ross. 
        MR. ROSS.  I have got quite a few, so you may want to tell me 
when we need to go vote, Mr. Chairman.  
        MR. HALL.  When I go like that.  
        MR. ROSS.  We will be back, I take it, after votes, Mr. Karsner, 
is that right?  
        MR. KARSNER.  Yes, sir.  
        MR. ROSS.  At the beginning of your testimony today, you 
mentioned the President's biofuels initiative and its goal to make 
cellulosic ethanol cost competitive by--what?  2012?  
        MR. KARSNER.  Correct, sir.  
        MR. ROSS.  Can you elaborate on the specific details within 
this initiative and how you plan to achieve that goal?  
        MR. KARSNER.  Right now, cellulosic ethanol at today's prices, 
some could argue at the point of production, might be competitive.  
It is $2.25 and some odd cents.  The program itself is designed to 
bring that number down by more than half, and it has a targeted 
goal of $1.07.  In fact, arguably, depending on the work that is 
done with the various feed stocks, it could be brought down more 
than that.  
        What really needs to occur between now and 2012 and what 
we are seeking to do at the fastest possible rate is to put up 
commercial-scale facilities and to measure how these interactions 
will work in real time.  To that end, a solicitation for a cost share, 
as stipulated in the EPACT, has been put out by the Department; 
and the office has received in excess of 60 responses by 
private-sector participants and consortia seeking to be involved in 
putting up a commercial-scale facility based on different feed 
stocks in different geographic locations.  
        We are also seeking to work with those partners to see what 
their eligibility might be for financially structuring loan guarantee 
programs for those commercial facilities.  
So that is what needs to occur in order to bring down the cost 
by 2012.  
        MR. ROSS.  The Energy Policy Act of 2005 established an 
integrated biorefinery demonstration grant program.  
        MR. KARSNER.  Correct.  
        MR. ROSS.  I believe for the next 12 months for all of America, 
there is going to be a hundred million dollars in grant money 
available.  
        MR. KARSNER.  That is right.  
        MR. ROSS.  Roughly a third of what we spend in the next 24 
hours in Iraq.  
        MR. KARSNER.  I don't know about that.  
        MR. ROSS.  Yeah, well it is $279 million a day that goes to 
Iraq, and we are going to spend a hundred million over the next 
365 days basically for, you know, basically to fund a biorefinery 
demonstration grant program.  So, basically, what we spend in Iraq 
in 8 hours is what we are going to spend in the next 365 days, 
trying to advance biorefinery.  So we do a lot of talk in this town 
about alternative renewable fuels, but we really don't put our 
money where our mouth is.  
        My deal is this, that the program was created, as I understand 
it, to spur the development and implementation of a 
multifunctional commercial scale biorefinery.  Legislation didn't 
specifically state that it needed to be built in Arkansas, but it does.  
I understand that the Department of Energy has released a notice of 
public interest in OPI and begun receiving applications from 
interested parties, such as Potlatch.  
        Can you tell me the status of this program, what other 
programs or initiatives is DOE pursuing to develop biorefineries in 
the United States?  
        MR. KARSNER.  The status of that program is, as I referred to in 
an earlier answer, that we have received in excess of 60 responses 
that are currently being evaluated and that I believe the next 
significant milestone is August 10, which is the deadline for 
submissions.  
        I could report back with fuller details of what would happen 
procedurally after those initial submissions on August 10, but what 
I can tell you in the short time since I have been aboard is that we 
are also looking with those same partners who have made 
submissions to see whether we could save them from having to 
create the same workload twice and expand our efforts to reach 
them with the loan guarantee programs that are also available in 
the EPACT.  
        MR. ROSS.  I would be very interested in personally following 
up with you after the August-- 
        MR. KARSNER.  Happy to do that.  
        MR. ROSS. --date that you mentioned, and I appreciate you 
doing that.  
        MR. KARSNER.  Thank you so much, sir.  
        MR. ROSS.  Mr. Chairman, I have 31 seconds left.  Do we need 
to go vote or what do you want me to do here?  
        MR. HALL.  I think we might recess for 15 minutes.  You think 
we can be back in that time?  
        All right.  At ease for 15 minutes.  We will be back.  
        You know, used to be a store in my hometown that had--during 
the Depression, when he couldn't afford to miss a sale, he had a 
sign on his door when he would go for coffee, said "Going across 
to the cafe for a coffee, be back in 5 minutes.  Been gone 3."  That 
is one way of doing it.  
        [Recess.]
        MR. SHIMKUS. [Presiding.]  If I can have folks take their seats.  
And for their time and our time, we will get started.
        Really, it is in the best interest of all of us that we move 
expeditiously, because you never know votes around here, never 
know how long they will keep you waiting.  So Members can get 
their questions when everybody is around.  We appreciate your 
patience, and I will begin to recognize myself for 5 minutes or 
until someone else comes back.  Maybe I will have longer, pretty 
good deal.  
        Mr. Karsner, my understanding is that your office has 
conducted important research showing that vehicles burning 
biodiesel fuel blends generate lower levels of the other pollutant 
NOx, nitrous oxide--nitrogen oxide, excuse me--than vehicles 
burning exclusively petroleum diesel.  You mentioned this in your 
testimony.  Have you discussed the research with EPA 
policymakers?  
        MR. KARSNER.  I am sorry.  Have we discussed the--forgive 
me.  
        MR. SHIMKUS.  This research and your numbers with our 
friends at the Environmental Protection Agency.
        MR. KARSNER.  Yes, sir, we have.  In fact, we are collaborating 
with the EPA now to clarify the differences with the respective 
findings.  
        Fundamentally, we believe that the differences are related to 
differences in testing protocols; and, thus far, our conversations 
had led us and the EPA to believe that the future certification 
testing ought to be done more in the fashion that is being 
conducted in our national laboratories in real time, with the 
engines inside the trucks themselves, as opposed to outside of them 
on the bed.  
        MR. SHIMKUS.  So it is your impression the two agencies will 
come to some agreement on how we do this testing and what is 
really the base?  
        MR. KARSNER.  Yes, sir.  I believe the collaboration is moving 
that way.  
        MR. SHIMKUS.  Also, on the Office of Energy Efficiency and 
Renewable Energy, I know that is your arena, but I would be 
interested to hear your thoughts on coal-to-liquids--as I said in my 
opening statement--technology and what the Department might be 
doing for the advancement of its use.  
        MR. KARSNER.  I appreciate that, sir.  
        As you mentioned, it actually belongs to my colleague, Jeff 
Jarrett, in the Office of Fossil Energy, but personally I can tell you 
that we in the Department--across the Department encourage the 
use of coal-to-liquids use and, in fact, anything that can cleanly 
accelerate the domestic installation of alternative fuel production 
capacity.  
        Specifically in my office, Energy Efficiency and Renewable 
Energy, we conduct testing of how those fuels might burn and burn 
well into the engines and into the fleet.  So that is very promising; 
and it is a promising fuel that, in fact, enhances the cetane, is sulfur 
free, and can blend readily with conventional diesel.  So we are 
encouraging its use and its acceleration as an alternative domestic 
fuel.  
        MR. SHIMKUS.  Thank you.  
        And the great thing about the technology--and technology, as 
you all know in your business, can increase over the years, but the 
basic premise of this refinery technique was developed in the late 
1920s, and so you have workable refineries out there now.  So it is 
building on that.  It is not inventing a whole new process from the 
bench top all the way up, and that is why I am very excited about it 
with our great coal reserves in this country.
        For the car manufacturer folks, I am pleased with where we 
have progressed on the flexible fuel vehicles from--and now the 
major marketing campaigns that you all are involved with I think is 
great.  
        I do drive a Ford Explorer in my district.  We do have 20 
fueling stations in my district alone; and, of course, Illinois is a big 
ethanol State, as Iowa and those were their first showing, showing 
up.  
        Can you tell me what you are trying to do and encouraging and 
maybe investing on the facilities?  I know, Ms. Cischke, you 
mentioned fueling stations, fueling stations and inability in a lot of 
parts of the country to have it.  Is there any focus you all are doing 
to try to encourage retail locations?  
        MS. CISCHKE.  Yes.  We have partnered with VeraSun Energy, 
which is the number two ethanol producer in the country, and we 
are working on developing a corridor in the Midwest to increase 
the number of fueling stations so somebody could drive from 
Chicago to St. Louis and on without having to do anything but fuel 
with E-85.  
        So we think that there is a real focus on putting it in the 
Midwest where there is a lot of the corn and other things.  So we 
can heighten people's awareness as we are working with our 
partners, BP and other oil companies, to encourage them to also 
invest.  We do think this is going to take the oil industry's support 
as well as the ethanol producers.  
        MR. SHIMKUS.  Thank you.  
        Does anyone else want to add?  Ms. Lowery?  
        MS. LOWERY.  Sure.  We have what is called the West-East 
Coast strategy, working on different State initiatives to encourage 
more fueling stations in different locations.  So we have a project 
in California, we have a project in Illinois with Gas City and 
VeraSun, and we have decided that each of the States, if we can 
get some competition and grow the gas stations beyond just in the 
Midwest, E-85 ethanol will have a lot more success.  So we are 
doing our part to encourage that with marketing efforts and 
bringing people to the stable.  
        MR. SHIMKUS.  Thank you.  
        We have been tricked.  So they just called me back to vote.  I 
am going to ask a few more of my questions and then I will--unless 
someone jumps in back, we will recess and--I told you.  You have 
to get it when you can.  
        I want to just make this point clear, and there is a lot of debate 
about the cost of E-85 refueling stations, and I know that people 
are looking for a lot of investment credits or help from the Federal 
government.  I am telling you, the stations that we have employed 
in my district are mostly independent stations, and you know what 
the cost is?  Zero.  
        Because what they do is they take the low-selling tank that they 
have in place right now, and most of that is 10 percent ethanol, and 
they drain it.  They fill it with E-85, and they slap a sticker on the 
pump, and, voila, they are selling E-85 fuel out of a retail location.  
        So I get a little frustrated with some of the folks--especially the 
major energy refinery companies--that are moaning and groaning 
about the cost of--actually, the retail location.  I personally say it is 
a bunch of hogwash, and they need to step up to the plate because 
of all the great benefits that you are doing now and what is being 
done on the refinery end.  
        So, with that, if I hope to make this vote, I had better start 
walking over, so I recess this hearing.  
        [Recess.] 
        MR. HALL. [Presiding.]  They had a little mix-up.  They didn't 
just have one vote over there.  They had two votes.  
        I am watching the floor right now to see what they are doing 
and what they are going to do.  They start making speeches again, 
and as soon as we get someone else in here, there will be others 
that will probably want to ask you something.  I hate to hold you, 
but give them about another 10 minutes, and I think they will 
amble in here.  
        [Recess.]  
        MR. HALL.  Okay.  I know the questions that a lot of the others 
are going to ask.  When they get in here, I will yield them time, 
and then I will take it away from them.  
        Mr. Reinert, what is the breakthrough technology we have been 
waiting for when it comes to batteries?  
        MR. REINERT.  Well, I certainly hope, Mr. Chairman, that it is 
lithium ion batteries.  They have the ability to be very lightweight.  
        Obviously, we have a materials problem with nickel.  It is very 
high on the commodity markets.  So we hope lithium ion 
technology is going to be a near and a mid-term solution.  There 
are obviously some issues with lithium.  It is a substance of 
concern, and we are not quite there with our cost targets and our 
PHEV targets, but we are fairly confident this will be very rapidly 
developed.  
        MR. HALL.  I thank you.  
        Ms. Morrissett, what is the future for diesel and lean-burned 
diesel machines in vehicles?  How do you see them evolving over 
the next 5 years or maybe the next 10 years?  
        MS. MORRISSETT.  DaimlerChrysler, we see large growth in 
diesels and, in particular, biodiesels in the next 5 to 10 years.  I 
announced to you today a few of the additional vehicles that we are 
adding, with some announcements coming in the next few weeks, 
but we see the growth over years.  
        Today, almost 50 percent of the market in Europe is diesel, and 
Chrysler products are two-thirds diesels in Europe.  As you see 
fuel prices increasing, as you see customer demands for smaller 
engines, like you have in Europe, the things that you see are diesels 
that offer good performance in small packages.  They have the 
torque and the towing capabilities in a smaller engine than you 
would see in gasoline.  
        If you look at J.D. Power numbers, J.D. Power predicts that we 
are going to go from about 4 percent of the products you see today 
to 7 to 15 percent in 2015.  
        That is just, you know, somebody else's thoughts.  I really 
can't predict beyond that.  
        MR. HALL.  Okay.  I can't tell you who wants these questions 
asked, but they are questions that various members of the group 
had marked to ask, and I have got the gauge here.  
        So, Ms. Lowery, this is a very interesting question, and I don't 
know why I didn't think of it.  I used to be in the aluminum 
business that sold parts for aviation.  The goal was to have stronger 
material with less weight for the vehicle.  If you could knock off 
some weight, well, you had really a breakthrough.  So utilizing 
some materials such as carbon fiber seems to be an excellent way 
to reduce the weight of a car without compromising safety.  
Ms. Lowery, how expensive is it to create a car from carbon fiber 
materials, and how would that translate to the cost of the vehicle?  
        MS. LOWERY.  Well, your reference to aviation is a legitimate 
one, given that a lot of the lightweight materials are in the aviation 
business.  The automobile business is a little more robust with 
respect to all the different requirements and all the vehicles on the 
roads with respect to safety issues.  So GM is looking at a lot of the 
lightweight materials.  We have some of the leading experts in the 
business, and we are also working with a lot of the research 
institutes on lightweight materials.  
        I don't know the specifics with respect to the costs.  I just know 
those materials are more expensive, but we are all looking at those 
kinds of materials in order to be able to get better fuel economy 
and not do anything with respect to safety issues.  
        MR. HALL.  That is a real good subject for them to be 
upgrading, though, because it makes so much sense.  
        Mr. Karsner, do you think legislation is necessary to direct the 
Secretary of Energy to carry out a program of research 
development demonstration and commercial application for 
plug-in hybrid electric vehicles and electric drive transportation 
technology?  
        MR. KARSNER.  I am not sure about the content of any new 
legislation.  I think we have sufficient legislation on the books to 
move us that way, and it is integral to the President's Advanced 
Energy Initiative and the programming currently under way at the 
Department of Energy.  
        So plug-in hybrids are at the center of our agenda of research 
and development as was alluded to in the earlier answer, 
particularly with the focus on enhancing and bringing to market at 
a more rapid rate lithium ion technology.  
        MR. HALL.  Well, what is the soonest we will have the 
infrastructure in place to support large fleets of hydrogen-powered 
vehicles?  
        MR. KARSNER.  I am sorry.  Did your earlier question ask about 
hydrogen or plug-in--
        MR. HALL.  If it wasn't, I didn't know it.
        MR. KARSNER.  What is the soonest we will have in place a 
fleet of--forgive me.  
        MR. HALL.  Go ahead.  
        MR. KARSNER.  I don't think, from the Federal standpoint, we 
are prepared to talk in terms of when we would have a fleet of 
hydrogen vehicles in place, depending on what you would 
characterize that fleet to be.  We tend to leave the idea, dates, and 
timings of commercialization, i.e., the timing in which production 
would be economically and technically feasible, to the automotive 
companies.  
        So, under present planning, dates have been thrown around in 
the time range between 2015 and 2020 as to when initial 
production might be ready, based on technology readiness.  We 
feel that it is really the automotive companies that would have to 
talk about what manufacturing transformation might be necessary 
for them to manufacture en masse to provide fleets.  
        MR. HALL.  I notice in your testimony that the cost of fuel cells 
has diminished over the last 3 years.  How much further does the 
price of fuel cells need to drop before they can be manufactured for 
commercialization?  
        MR. KARSNER.  Well, that is, again, I think a subject for much 
debate and speculation.  I have heard really on an order of 
magnitude of 10 times as much as where the total price 
adjustments need to fall.  I would think that the auto manufacturers 
have different calculations themselves internally as to where that 
needs to be for them to put the capital costs into a manufacturing 
facility that would allow them to produce them en masse, but, 
fundamentally, all the research towards technology readiness is 
really about driving down that cost, and I think right now the price 
point we use is getting to a tenth of the current cost.  
        MR. HALL.  Mr. Ross, would you like to ask questions, or 
would you like to get under way with the next panel? 
        MR. ROSS.  I have a few questions.  
        MR. HALL.  The Chair recognizes Mr. Ross for anywhere 
between 3 to 5 minutes, somewhere in there.  Whatever you want.  
        MR. ROSS.  That is better.  
        For, I guess, any of you that are automobile manufacturers on 
the panel, as I mentioned in my opening statement, I would like to 
discuss the hybrid, the vehicle tax credit as it relates to each of the 
manufacturers here today in an effort to continue and possibly 
provide additional incentives to consumers who purchase hybrid 
vehicles.  Do you believe--and I would like to get an answer, I 
guess a short answer--from each of you.  Do you believe waiving 
the--or increasing the 60,000-unit cap is a viable option to 
consider?  
        And the reason I ask that, as we all know, the cost for a hybrid 
is somewhat more than for a nonhybrid vehicle.  But, with the tax 
credit, it pretty much gets the hybrid on a level playing field.  And 
until we are able to get the price of hybrid technology down, do 
you believe this tax credit is important to encourage people, 
consumers to buy these hybrid cars?  And should we waive or raise 
the 60,000-unit cap in order to accomplish that?  
        MS. CISCHKE.  I would like to just comment that we do know 
that incentives like that do help pull advanced technology.  There 
are certain people that buy these advanced-technology vehicles 
without a lot of encouragement, but the vast majority of people are 
influenced by cost savings there.  
        I know that there is a limit on the resources for the Government 
in terms of being able to do this type of thing, but we would 
support increasing that.  Maybe even doubling it would be 
appropriate.  
        MR. ROSS.  Again, let me just point out that you mention that 
there is a limit to what the Government can do on this.  Again, it is 
about priorities.  
        MS. CISCHKE.  Sure.  
        MR. ROSS.  It is about are we going to spend $279 million a 
day in Iraq, $57 million a day in Afghanistan, pass another $90 
billion in tax cuts primarily for those earning over $500,000 a year, 
or are we going to invest in biorefineries and alternative renewable 
energy to reduce our dependence on foreign oil?  So it is really 
about priorities.  
        I would like to get a response to the original question, before 
my little tirade there, from the rest of you that are in the car 
business.  
        MS. LOWERY.  Incentives are important for the uptakers of 
advanced technology.  There is no doubt about it.  
        I think with respect to the prioritization through the Energy 
Policy Act, there was a decision made with respect to prioritization 
and figuring out the economics of the entire bill.  So I think it has 
to be looked at as a whole, and I also think that we have spent a lot 
of time now really looking at incentives for biofuels, which is an 
immediate response to some of the issues we are facing.  So I think 
it has to be looked at in the whole package, not one piece.  
        MR. ROSS.  And Toyota.  
        MR. REINERT.  The situation is, we have had the Prius, which is 
probably the most popular hybrid on the road, for 6 years, and we 
are selling about a little over a hundred thousand cars per year in a 
17 million-car market.  Obviously, we are doing the best we can at 
preparing society for these cars.  I believe that the tax credit does 
help people become aware of the options under the hybrids and 
does help the market penetration greatly.  
        MR. ROSS.  When I was out driving this hydrogen fuel cell car 
this morning--I won't mention the brand since none of you all are 
representing that one--but the point they made was this is a million 
and a half dollar car, and in 3, 4 years from now it may be a car 
that is affordable.  So I think we are going to see a lot of changes 
in the technology and in the mass production that allows the cost of 
these things to come down, that really can reduce our dependence 
on foreign oil.  
        One of the things noted to me this morning was, with the 
hydrogen fuel cell if you do the math on it, it comes out to what we 
would know as about $2.75 a gallon for the fuel, and that would 
run you about 25 miles.  So it is not that we are going to see that 
much savings in terms of what consumers are paying today, at least 
early on in some of these technologies, but it seems to me that 
these technologies could go a long way to reducing our 
dependence on foreign oil; and, hopefully, as we mass produce and 
end up with, hopefully, millions of these things on the road 
someday then that will, in fact, lower the price we pay at the pump, 
or whatever they call it for a hydrogen fuel-cell car.  
        I am still learning some of this, but I was really impressed with 
the technology and all the components that I have read about and 
studied.  But actually to experience it this morning was quite 
fascinating.  
        Mr. Chairman, if you could indulge me, I have one other thing 
that I think is really important I would like to ask.  
        MR. HALL.  Only if you tell us what kind of car it was in.  
        MR. ROSS.  It was Honda.  It was a Honda hydrogen fuel-cell 
car.  And I don't know, some of y'all may be doing that now, too.  
Are you?  
        MS. LOWERY.  Yes.  
        MR. ROSS.  I want to give equal representation.  I would love to 
ride in y'all's, too.  Get it on up here, and I will ride in y'all's, too.  
It was pretty impressive.  I guess I was kind of expecting 
something to go like a golf car goes, but it doesn't.  It gets up and 
goes.  
        But, thank you, Mr. Chairman, for indulging me for this 
question.
        The formula--because I think this is something that we do need 
to revisit--that is found in the energy policy that passed last year, 
the formula used to calculate the amount of the tax credit for 
hybrid cars applies a city fuel economy metric.  Now it is my 
understanding that different hybrid technologies perform 
differently in city versus highway situations.  So would changing 
this formula to use a combined city and highway fuel economy 
metric to calculate the credit provide a significant increase in the 
credit that consumers receive?  And depending on which 
manufacturer you are with may depend on how you answer that 
because of the technology and what you have invested in up until 
now.  
        The other part of that is, should Congress try to stay away from 
specifying city and highway and even the word hybrid and just 
leave it open for any alternative renewable energy forms out there 
to try to encourage development rather than limiting it to what we 
actually get specific with in the law?  
        I would like to get your thought on that as, I guess, a second 
part or follow-up to that question.  I would love to get y'all's 
thoughts on that.  
        MS. CISCHKE.  I would like to just comment a bit on the hybrid 
comment regarding the metric that you use for the benefit.  
        One of the challenges we all have in the industry is that we use 
hybrid technology to describe a lot of different things.  So there are 
full hybrids, there are mid hybrids, there are hybrids that can run 
totally on electric engine, and there are others that coexist.  That is 
why in the Energy Policy Act there was a metric that tried to 
define and classify the degree of hybridization, so to speak.  So I 
think you do have to have some kind of measure.  Otherwise, if 
they are all the same, I think you are not really pushing the 
technology along as far.  
        So that would just be one comment I would like to share.  
        MR. REINERT.  I agree 100 percent with my colleague from 
Ford that there are a wide variety of approaches to hybrid 
technologies, and some of them have more and some of them have 
less benefit overall.  So I do think we need to take a look, and I 
think we are addressing that or attempting to in the Energy Policy 
Act and do take a look at the performance of the cars.  
        MR. ROSS.  Any thoughts on whether we ought to get away 
from the city and go to a combined city and highway fuel economy 
metric?  
        MS. MORRISSETT.  If we go to a combined city and highway 
metric, what we do is we become more technology neutral.  If you 
look at city, it favors certain types of technologies.  If you look at 
highway, it favors others.  So if you did a combination, it is more 
technology neutral.  
        MR. ROSS.  Would you agree that we need to stay away from 
specifying technologies in laws and allow the private sector to 
compete with those technologies to get the most fuel economy and 
to reduce our dependence the most on foreign oil or do we, in the 
future, need to be specifying things like hybrid or hydrogen or 
leave the technology to y'all and put the incentives in for whatever 
fits within a broader scope?  
        MS. MORRISSETT.  My position would be I just as soon that you 
did not dictate to us what the technology is.  There are new 
emerging technologies every day, and you really don't want to 
limit that.  Our customers are telling us what they require and what 
they need.  
        Back to your question on credits with hybrids before, my 
response would be I would prefer to have credits for any advanced 
technologies if we started talking about the biofuels, biodiesels, 
things that also accomplish some of the things that we are trying to 
do with energy security.  
        MR. ROSS.  Mr. Chairman, I appreciate your indulgence; and 
next time I am introducing you in Texarkana, I will give you a 
favorable introduction.  
        MR. HALL.  Okay.  All right.  You have been an informative 
and affable group.  Thank you very much.  We are going to release 
you at this time.  We will have the second panel.  Thank you for 
the time you have given us and the time preparing, the time of 
travel.  Have a good, safe trip back to your office, and we thank all 
of you. 
        Okay.  We are going to get under way.  We don't have a full 
group, but they are on their way. 
 
STATEMENTS OF MICHAEL A. PACHECO, DIRECTOR, NATIONAL BIOENERGY CENTER, 
NATIONAL RENEWABLE ENERGY LABORATORY; JON A. WARZEL, VICE PRESIDENT, BUSINESS 
DEVELOPMENT AND GOVERNMENT PROGRAMS, SYNTROLEUM CORPORATION; SCOTT HUGHES, 
DIRECTOR OF GOVERNMENT AFFAIRS, NATIONAL BIODIESEL BOARD; AND MITCHELL PRATT, 
SENIOR VICE PRESIDENT, CLEAN ENERGY  

        MR. HALL.  At this time, I recognize Mr. Pacheco, Director of 
the National Bioenergy Center, National Renewable Energy 
Laboratory, and ask you to kindly just give us a synopsis of your 
testimony, and then we will ask you questions about it.  Try to stay 
as close to 5 minutes as you can.  You have been so patient and 
tolerant, go over if you need to, and I recognize you at this time.  
        MR. PACHECO.  Thank you, Mr. Chairman.  
        Mr. Chairman, thank you for this opportunity to discuss how 
biofuels can provide our Nation with an abundant and renewable 
source of energy and, in particular, to help us reduce our 
dependence on imported oil.  
        I am the Director of the National Bioenergy Center at the 
National Renewable Energy Laboratory in Golden, Colorado.  
NREL is the U.S. Department of Energy's primary laboratory for 
renewable energy and energy efficiency.  I am honored to be here 
today and to be able to speak with you.  
        The committee is to be commended on your hearings on new 
technologies.  The director of NREL, Dr. Dan Arvizu, came before 
you last week to address the entire range of renewable energy 
technologies.  Given the seriousness of our energy challenges, 
there is a lengthy list of renewable and conventional energy 
options that must be pursued.  
        If we narrow our focus to just those things that can reduce our 
addiction to oil, then our choices become more limited.  
Developing an industry to produce biofuels like ethanol and 
biodiesel must be a priority, because biomass is the only renewable 
option that we have for liquid transportation fuels.  
        The biomass resource in this country is huge.  A recent study 
by USDA and DOE found that the U.S. could annually produce 1.3 
billion tons of biomass for fuels.  This amount of biomass holds as 
much energy as 3 ï¿½ billion barrels of oil.  This equals the energy 
in 60 percent of all the oil that we consume in a year.  It also 
equates to the most oil the United States has ever produced in a 
year.  We envision that every State in the Nation can benefit 
economically from an expanding biofuels industry.  
        The U.S. currently produces more than 4 billion gallons a year 
of ethanol almost exclusively from corn grain, and this industry is 
growing 30 percent annually.  To move the ethanol industry where 
we need it to be, we have to go beyond corn grain as the primary 
resource.  
        One of the most abundant potential resources we have is corn 
stover, the nonfood parts of the corn plant, includes the stalks, the 
leaves, and the husks.  Other resources include forest thinnings to 
reduce fire hazards, residues from the forestry and agricultural 
operations, and eventually even energy crops like fast-growing 
trees and hardy grasses, like switchgrass.  
        Given this full range of resources, biofuels could supply at 
least 30 percent of what we use today.  However, to use all of these 
resources and to maximize the impact ethanol can have, we need to 
perfect the technologies that convert cellulosic biomass.  We need 
to reduce the cost of the technology and we need to improve its 
conversion efficiency.  
        With the President's biofuels initiative, we are on course to do 
just that.  Our goal, as Mr. Karsner has said, is to make cellulosic 
ethanol as cheap as corn ethanol in the next 6 years.  We have 
made very good progress over the past 4 years; and with the 
President's initiative we have established detailed R&D plans to 
reach the goal of $1.07 by 2012, while still shooting for the 
longer-term cost target of about 60 cents a gallon.  
        Inviting me here today, you asked me to talk about the energy 
efficiency of ethanol.  The ethanol industry is much more efficient 
today than it was 20 years ago.  Today, the energy benefits of fuel 
ethanol are clear and considerable.  Corn ethanol delivers about 
60 percent of the total energy that we use in order to make that 
ethanol.  Most of the energy that we use is renewable energy in the 
form of the corn itself.  The energy actually delivered to the 
customer in the fuel ethanol is about 1.4 times greater than the 
fossil energy put into the process, and it is about 10 times greater 
than the petroleum energy input.  Cellulosic ethanol will yield 
45 percent of the total energy used to make it, and nearly all of the 
energy input can come in the form of biomass itself.  
        The take-away message is that ethanol can replace about 10 
times the amount of petroleum that we use to make the ethanol.  
This is true for both corn and cellulosic ethanol.  
        In conclusion, biomass is our only renewable option for liquid 
transportation fuels.  U.S. resources can supply a large portion of 
the transportation fuel that we need, and the energy balance is 
actually very good for such a young technology.  Biofuels can 
come from resources in every region in the country and can 
stimulate rural economies.  Ongoing research will reveal ways to 
expand our resource base, improve the conversion efficiency and 
create new fuels that go beyond ethanol and biodiesel.  
        As the Director of this Nation's National Bioenergy Center, I 
can assure you that a sustained high-level investment for basic 
biofuels research will provide sustainable benefits for all future 
generations.  Biofuels are an environmentally and economically 
beneficial way for us to bridge the gap between rising energy 
demand and peaking oil production, while reducing U.S. 
dependence on imported oil.  
        Thank you, Mr. Chairman.  
        MR. HALL.  Thank you. 
        [The prepared statement of Dr. Michael A. Pacheco follows:] 



PREPARED STATEMENT OF DR. MICHAEL A. PACHECO, DIRECTOR, 
NATIONAL BIOENERGY CENTER, NATIONAL RENEWABLE ENERGY 
LABORATORY

 

        MR. HALL.  The Chair recognizes Mr. Jon A. Warzel, Vice 
President, Business Development Government Programs, 
Syntroleum Corporation, for 5 minutes or whatever it takes you to 
give it.  
        MR. WARZEL.  Thank you, Mr. Chairman, committee 
members, and guests.  My name is Jon Warzel, and I am the Vice 
President of Business Development and Government Programs for 
Syntroleum Corporation.  Syntroleum is a publicly held company 
based in Tulsa, Oklahoma, focused on the application of its 
proprietary Fischer-Tropsch technology for the conversion of 
natural gas and coal to liquid hydrocarbon transportation fuels.  
        We would like to recognize the efforts of Congressmen John 
Sullivan and Don Young and Senators Jim Inhofe and Conrad 
Burns as champions for domestic alternative fuels in the use by our 
Nation's military.  
        Syntroleum has over 20 years of comprehensive technology 
development.  Currently, Syntroleum has the only fully integrated 
Fischer-Tropsch plant capable of producing a finished 
transportation fuel in North America and will be providing the 
Department of Defense with a hundred thousand gallons of product 
for their Assured Fuels Initiative later this summer.  This program 
aimed at certifying Fischer-Tropsch product for military use is a 
critical step in reducing our Nation's dependence on crude oil and 
providing alternative energy resources.  
        As part of the military's program, a flight test in a B-52 will 
take place later this year using Syntroleum's alternative fuel.  
Currently, military operations consume in excess of 350,000 
barrels a day of jet fuel, predominantly derived from crude oil.  
        My objective today is to provide you with a background and 
understanding of Fischer-Tropsch's history, technology, and the 
products produced by this process.  
        Syntroleum was founded by our current chairman, Mr. Ken 
Agee, in the mid-1980s.  By the mid-1990s, the company was in a 
position to expand from a research lab to construction of a pilot 
plant for further testing.  
        In 2002, Syntroleum, in conjunction with the participation of 
Integrated Concepts Research Corporation, ICRC, and Marathon 
Oil Company, built the demonstration plant at the Port of Catoosa 
near Tulsa, Oklahoma.  This effort was partially funded by the 
Department of Energy's Ultra Clean Fuels Program under a 
subcontract with ICRC.  Finished fuels production for the nominal 
70-barrel-per-day demonstration plant occurred in March of 2004.  
        Based on information from the Air Force, Syntroleum is the 
only company to date that has delivered sufficient quantities of 
100 percent FT product to the U.S. military to perform extensive 
tests, including jet engine emissions testing.  
        The Fischer-Tropsch's chemistry and process was developed 
by two German scientists, Franz Fischer and Hans Tropsch, in the 
1920s.  The basic reaction chemistry is the combining of carbon 
monoxide and hydrogen to form long chain hydrocarbon 
molecules.  The initial German efforts were to provide the country, 
which lacked indigenous oil resources, a means of supporting 
chemical feedstock and military operation requirements.  Due to 
the oil price collapse of the 1950s, synthetic fuel development 
essentially halted for the next 20 years or so, except for the 
development efforts in South Africa.  
        In 1950, the South African Coal, Oil Gas, and Gas Corporation, 
known as Sasol, was formed.  First FT production by Sasol in 1955 
was based on coal-driven synthesis gas at their Sasolburg facility.  
The Government-funded efforts continued, culminating in the 
start-up of additional plants in the 1980s.  Currently, Sasol 
produces 150 to 160,000 gallons a day--or barrels a day--of FT 
products from coal.
        From a chemistry standpoint, Fischer-Tropsch is the reaction of 
carbon monoxide and hydrogen in the presence of a catalyst, 
typically iron or cobalt.  The carbon monoxide and hydrogen split 
and formed together to make a hydrogen product and a water 
product.  The reaction requires a specific 
hydrogen-to-carbon-monoxide ratio and produces approximately a 
barrel of water for each barrel of FT product, essentially reducing 
water consumption requirements in the coal gasification process.  
The key concept for FT is that the synthesis gas can be produced 
from almost any carbon-bearing substance, the most abundant 
source being natural gas and coal.  
        In CTL, or coal to liquids, the application requires a number of 
steps required to convert the solid coal into carbon monoxide and 
hydrogen.  The coal is mined, prepared for gasification, gasified, 
adjusted for the hydrogen-to-carbon-monoxide ratio and, finally, 
cleaned prior to the delivery to the Fischer-Tropsch's reactor.  The 
component of the synthesis gas is to remove the carbon dioxide, 
which allows for sequestration or enhanced oil recovery 
opportunities.  Upon final cleanup, the synthesis gas enters the 
reactors for conversion of the hydrocarbon product.  Due to the 
size and complexity of these processes, there are only a few 
companies worldwide that have the experience of building these 
type of plants.  
        The Air Force results of the testing of Syntroleum's fuels have 
shown 90 percent reduction in particulate matter emissions, in 
excess of 50 percent reduction compared to low sulfur diesel fuel 
for hydrocarbon emissions and particulate matter and diesel 
running machines.  
        As far as industry status, there are a limited number of 
companies that have developed Fischer-Tropsch's technologies to 
the point of constructing commercial-scale plants.  The FT industry 
is predominantly focused on natural-gas-based plants.  In Qatar, at 
the moment, this effort is being led by the likes of Sasol, 
ExxonMobil, Shell, ConocoPhillips, and Marathon Oil, which have 
all announced in excess of hundred-thousand-barrel-per-day plants.
        In conclusion, the technology to convert the Nation's vast coal 
resources to ultra-clean fuels via the Fischer-Tropsch process 
exists today.  I believe it is accurate to say Sasol, based on the 
development under a government program, has demonstrated 
large-scale Fischer-Tropsch plants using coal as a feedstock.  
Based upon 2003 Energy Information Administration data, the 
U.S. has a demonstrated coal reserve base of 496 billion tons.  At a 
conservative conversion rate of 1.5 barrels of Fischer-Tropsch's 
product for each ton of coal, the potential for domestically 
produced CTL is approximately 750 billion barrels of product, 
greater than the estimated crude oil reserves of the Middle East.  
It is our view that funding of loan guarantees specific to the 
CTL initiative and long-term offtake agreements by the 
Department of Defense are critical to moving forward with the 
domestic initiative, specifically for those smaller companies that 
do not have the balance sheets of the super major integrated energy 
companies at this time.  
        Finally, thank you for the opportunity to address the 
subcommittee on this important issue as industry and government 
work towards making CTL a reality in the United States.  
        MR. HALL.  We thank you. 
        [The prepared statement of Jon A. Warzel follows:] 

PREPARED STATEMENT OF JON A. WARZEL, VICE PRESIDENT, 
BUSINESS DEVELOPMENT AND GOVERNMENT PROGRAMS, 
SYNTROLEUM CORPORATION

        Thank you Mr. Chairman, Distinguished Representatives, and 
guests, my name is Jon Warzel and I am the Vice President of 
Business Development and Government Programs for Syntroleum 
Corporation.  Syntroleum is a publicly held company based in 
Tulsa, Oklahoma focused on the application of its proprietary 
Fischer-Tropsch ("FT") technology for the conversion of natural 
gas and coal to liquid hydrocarbon transportation fuels and other 
specialty products, such as lubricating oils.  Syntroleum has over 
20 years of comprehensive technology development, with a 
combined 127 US and foreign patent applications pending and 
issued.  Currently, Syntroleum has the only fully integrated FT 
plant capable of producing a finished transportation fuel in North 
America.  My objective today is to provide you with a background 
and understanding of Fischer-Tropsch history, technology, and the 
products produced by this process.

Syntroleum Background
        Syntroleum was founded by our current Chairman, Mr. Ken 
Agee in the mid 1980's.  Mr. Agee focused on the application of 
the FT chemistry for conversion of natural gas.  Initial efforts were 
directed at the research and development of a suitable catalyst.  By 
the mid 1990's the company was in a position to expand from the 
research lab to construction of a pilot plant for further testing of its 
proprietary cobalt catalyst and begin developing plant design 
details.  By 2002, Syntroleum had advanced its technology to the 
next development stage, construction and operation of a 
demonstration scale plant.
        In early 2000, Syntroleum in conjunction with Atlantic 
Richfield Company (ARCO) operated a demonstration plant at 
ARCO's Cherry Point refinery.  In 2002 upon British Petroleum's 
acquisition of ARCO, Syntroleum, in conjunction the participation 
of Integrated Concepts Research Corporation (ICRC) and 
Marathon Oil Company, moved this demonstration plant from 
Cherry Point, Washington to the Port of Catoosa near Tulsa, 
Oklahoma.  This effort was partially funded by the Department of 
Energy Ultra Clean Fuels Program under a subcontract with ICRC, 
allowing for the expansion of the demonstration plant to a fully 
integrated plant capable of producing a finished transportation 
fuels.  Groundbreaking for the Catoosa Demonstration Facility 
("CDF") took place in August 2002 and first finished fuels 
production for the nominal 70 barrel per day plant occurred in 
March of 2004.  
        Syntroleum continues to own and operate its facilities for the 
development of a commercial scale FT plant.  Syntroleum's fully 
integrated plant has over 18,000 hours of runtime and has 
produced over 300,000 gallons of FT product.  These fuels have 
been extensively tested by transit fleets, engine testing labs, 
product testing labs, universities, and specifically the Air Force 
and Army.  
        Based on information from the Air Force, Syntroleum is the 
only company to date that has delivered sufficient quantities of 
100% FT product to the U.S. military to perform extensive tests, 
including turbine emissions testing.  Recently, our plant was 
chosen to produce the initial fuels for the Department of Defense 
Assured Fuels Initiative.  As part of the Assured Fuels Initiative, 
the Air Force is scheduled to test Syntroleum's product in a B-52 
flight test this fall.

The History of Fischer-Tropsch
        The Fischer-Tropsch chemistry and process was developed by 
two German scientists, Franz Fischer and Hans Tropsch in the 
1920's, with the first German patent being issued in 1925.  The 
basic reaction chemistry is known as a hydro-polymerization of 
carbon monoxide.  Essentially, this is the combining of carbon 
monoxide ("CO") and hydrogen ("H2") to form a long chain 
hydrocarbon molecule.  The initial German efforts were to provide 
the country, which lacked indigenous oil resources, a means of 
supporting chemical feedstock requirements and military 
operations.    Germany's first two FT plants, approximately 1,500 
barrels per day of capacity, utilized cobalt based FT catalyst and 
generated the required feedstock (synthesis gas), a mixture of CO 
and H2, from coal and coke.  History reflect that the initial startup 
of these plants occurred in the 1935 - 1936 timeframe.  
        During the World War II years, a total of 13 FT plants were 
constructed, nine of which were located in Germany.  All plants 
utilized cobalt catalyst in a fixed bed reactor system with coal or 
coke derived synthesis gas.  Germany reached a maximum 
production of approximately 16,000 barrels per day in 1944; all 
based on their cobalt catalyst FT process.  Significant research and 
development efforts were initiated on iron based FT catalyst due to 
the scarcity of cobalt in Germany and the desire to produce a high 
octane gasoline.  The efforts on iron based FT catalyst research 
were not commercialized by the Germans.  Additionally, 
development of large scale slurry reactors capable of producing 
more FT product were initiated, but never completed due to war 
related problems.  Copies of the original German documents and 
their translation are available at the www.fischer-tropsch.org 
website.
        Post World War II, extensive FT catalyst and process patents 
were issue primarily to US companies.  Under the US Synthetic 
Fuels Act (1944 - 1955) the US Bureau of Mines constructed a 
nominal 50 barrel per day iron based FT plant located in Louisiana, 
Missouri.  This plant produced approximately 1.5 million gallons 
of gasoline which was fleet tested by the Armed Services.  A 
second US plant was constructed and operated in the 1947 to 1957 
timeframe in Brownsville, Texas.  This approximately 8,000 barrel 
per day plant employed iron based catalyst and utilized natural gas 
as the feedstock, making it the first "gas-to-liquids" plant in the 
world.  Technical difficulties and the oil price collapse in the mid 
1950's rendered the plant uneconomic.
        Due to the oil price collapse of the 1950's, synthetic fuel 
development essentially halted for the next 20 years or so except 
for development efforts in South Africa and German plants which 
were moved into Russia or areas controlled by Russia.  Three 
plants were located within the Russian security zone (2 in East 
Germany and 1 in current day Poland).  At least 1 and maybe 2nd 
German FT plants were relocated to the USSR and in operation 
during the 1952 - 1954 timeframe.  Little is known about these 
plants, but Russian technical teams were active post WWII.
        In 1950, the South African Coal, Oil Gas and Gas Corporation 
(Sasol) was formed.  First FT production by Sasol in 1955 was 
based on coal derived synthesis gas ("CTL") utilizing iron based 
catalyst at their Sasolburg facility.  The plant was built to operate 
both low and high temperature reactors initially producing gasoline 
and later switching to chemicals production.  Capacity for the 
initial plant was approximately 8,000 barrels per day.  The 
government funded efforts continued, culminating in startup of 
Sasol Two and Three at their Secunda facility in the 1980's.  
Currently, Sasol produces 150,000 to 160,000 barrels per day of 
FT product from coal derived synthesis gas with an iron based 
catalyst.  Additional facilities are operated to provide required 
research and development activities for their natural gas and cobalt 
catalyst based FT applications.
        Since 1990, three large scale FT plants have been constructed 
all utilizing natural gas as a feedstock.  Mossgas, now PetroSA, 
built as part of a government project, operates a 30,000  barrel per 
day facility built in 1992 to produce bulk fuel by licensing the 
Sasol technology.  In 1993, Shell completed a nominal 12,000 
barrel per day facility utilizing Shell's fixed bed process (Shell 
"Middle Distillate Synthesis" - MDS).  Currently in start-up is the 
Sasol Oryx plant located in Qatar.  This nominal 34,000 barrel per 
day plant utilizes a cobalt based FT catalyst for the primary 
purpose of producing diesel fuel and possibly synthetic lubricants 
with the primary market being Europe.

Industry Status
        Sasol clearly has the most experience in FT technology and 
operations, in part to the early efforts of the South African 
government program.  Public information indicates Sasol is 
currently working to expand the Oryx (Qatar) project by 66,000 
barrels per day and develop an additional fully integrated GTL 
project in Qatar with their partner, Chevron, of 130,000 barrels per 
day.  Additional work is proceeding on their 34,000 barrel per day 
GTL plant in Nigeria and a significant expansion (30-40%) of their 
South African facilities.  Additional business development efforts 
include feasibility studies for two nominal 80,000 barrel per day 
coal to liquids plants in China and reported interest in Indian 
projects with India Oil Company.  Sasol has recently discussed 
their potential interest in US based CTL projects in addition to the 
announced WMPI project in Pennsylvania.  
        Syntroleum continues to operate their nominal 70 barrel per 
day facility located near Tulsa, Oklahoma in support of technology 
enhancement and to provide FT product to the US Department of 
Defense.  Business development efforts are focused on deploying 
Syntroleum's marine and land based FT technology and the 
potential development of several domestic CTL projects.
        Shell continues operation of their GTL plant in Malaysia 
providing FT diesel to the Far East and European markets focused 
on reduction of air emissions.  Shell has announced a 70,000 - 
140,000 barrel per day GTL plant in Qatar, but the current project 
status is unknown.  To date, Shell has not announced any 
additional projects.
        Statoil-PetroSA continues to operate the 1,000 barrel per day 
GTL demonstration plant located at Mossel Bay, South Africa.  To 
date, no definitive commercial projects have been announced.
ExxonMobil has announced a 150,000 barrel per day GTL 
plant to be located in Qatar. The current status of the project is 
unknown, but it appears this project will not be delayed by the 
Qatar government upon completion of commercial arrangements.  
        ExxonMobil technology is based on cobalt catalyst and associated 
operating experience from their 200 barrel per day demonstration 
plant in Baton Rouge, Louisiana which was operated in the 1990 - 
1993 timeframe.  ExxonMobil would appear to be the leader in FT 
patents with over 3,500 patents assigned to it.  In 2004, Syntroleum 
signed a worldwide license with ExxonMobil for access to their 
Gas to Liquids (GTL) patents to produce and sell fuels from 
natural gas or other carbonaceous substances such as coal.
        ConocoPhillips also utilizes a cobalt based FT process and 
operated a 400 barrel per day demonstration plant at their Ponca 
City, Oklahoma facility from 2003 to 2005.  Their announced 
80,000 to 160,000 barrel per day GTL plant in Qatar has been put 
on hold by the Qatar government.  BP and Institut Francais du 
Petrole (IFP) / Agip continue the development of their respective 
technologies with no known announcements of commercial 
projects.  BP continues to operate their FT demonstration plant in 
Nikiski, Alaska which is not currently capable of producing a 
finished product.  Rentech continues development of their 
proposed conversion of a natural gas based fertilizer plant in 
Illinois to a nominal 5,800 barrel per day CTL plant.  Additional 
proposed projects that have been announced are a 10,000 barrel per 
day CTL plant in Natchez, Mississippi and a license for DKRW's 
proposed 40,000 barrel per day plant in Wyoming and construction 
of a 10 barrel per day demonstration plant in Colorado. 

Fischer-Tropsch Technology and Products 
        From a chemistry standpoint, the Fischer-Tropsch reaction is 
the hydro-polymerization of carbon monoxide.  In essence, a 
synthesis gas stream consisting predominantly of carbon monoxide 
(CO) and Hydrogen (H2) is reacted in the presence of a FT 
catalyst.  The CO molecule splits into carbon and oxygen and a 
hydrogen molecule attaches to each resulting in production of a 
stream containing hydrocarbon compounds and water.  The 
reaction requires a H2/CO ratio of in the range of 2.1 - 2.15 for 
production of transportation fuels and produces approximately 1.1 
barrels of water for each barrel of FT product.  The hydrocarbons 
produced by the FT reaction prior to product upgrading, range in 
carbon number from C1 (methane) to C100+ .  The typical carbon 
number range for a diesel fuel is C8 thru C20.  
        The key concept for FT is that the synthesis gas can be 
produced from almost any carbon containing substance, the most 
abundant sources being natural gas and coal.  Additional carbon 
sources such as petroleum coke or biomass (wood, farming waste, 
grasses, sewage) could also be utilized as a feedstock with the 
appropriate technology for conversion to a synthesis gas.  In a CTL 
application a number of steps are required to convert the solid coal 
into a CO and H2 synthesis gas stream.  The coal is mined, 
prepared for gasification, gasified, water-gas shifted to adjust the 
H2/CO ratio, and finally cleaned prior to delivery to a FT reactor 
for conversion to a hydrocarbon product.  A component of the 
synthesis gas clean-up process is to remove the carbon dioxide 
prior to the FT reactor.  Removal and capture of the CO2 allows for 
sequestration or enhanced oil recovery opportunities.
        Individual companies have developed specific FT catalysts, but 
iron and cobalt based catalyst are the predominate formulations 
utilized currently.  Each catalyst type has specific attributes, but 
the current commercial project developments in Qatar all utilize a 
cobalt based catalyst.  Cobalt based FT catalysts have been shown 
to be more selective towards the production of mid-distillate range 
hydrocarbon product, which is the range for diesel and aviation 
finished fuels.  Additionally, cobalt catalysts are more active, and 
as a result produce more barrels of FT product per lb of FT 
catalyst, which equates to smaller FT reactors for equivalent FT 
production.  Iron based FT catalyst is more suited to the production 
of chemical feedstock due to their inherent selectivity towards 
producing olefins and aromatics at high temperature operation.  
        The primary issue with using a cobalt based FT catalyst in a 
CTL plant is the ability to clean the synthesis gas to acceptable 
impurity levels.  It is believed that through the use of Lurgi's 
Rectisol process and subsequent synthesis gas clean-up processes, 
such as charcoal beds, levels required for economic use of a cobalt 
catalyst can be achieved.  For example, Eastman Chemical 
Company has been producing methanol from a coal derived 
synthesis gas for approximately 20 years.  Although the catalyst is 
different, the methanol stream Eastman produces is utilized for a 
variety of end products and healthcare feedstock where high 
quality synthesis gas is a requirement.  
        Upon final clean-up, the synthesis gas enters the FT reactor for 
conversion to a raw hydrocarbon product.  For a commercial scale 
GTL facility, 17,000 to 20,000 barrel per day, a single FT reactor 
is approximately 34 feet in diameter and 180 feet tall.  These 
vessels can weigh in the range of 2,000 tons each.  As a reference 
point, the new MIA2 tank weighs about 68 tons, so a single GTL 
FT reactor can approximate the weight of 30 MIA2 tanks.  The FT 
reaction is a vigorous reaction which produces significant heat 
which must be removed.  In addition to the basic reactor shell, the 
FT reactor internals are essentially a piping system to evenly 
distribute the synthesis gas within the reactor and a set of heat 
transfer tubes to remove excess heat.  Due to the size and 
complexity of these reactors, only a limited number of companies 
can construct FT reactors.  For CTL projects, due to the potential 
transportation, logistical, and safety issues associated with moving 
a vessel of this size, on-site construction may be required.  
        The raw hydrocarbon product is further processed / upgraded 
to enhance the properties of the finished fuels, chemical feedstock, 
or waxes.  For the transportation market, typical FT finished diesel 
contains non-detectable levels of sulfur, aromatics and has a cetane 
index of 74+.  Syntroleum has been working with and supplied the 
Air Force, Army, and Navy FT product.  Based on our 
understanding from discussions with the Air Force, Syntroleum's 
FT product is the only fuel that has been extensively tested to date 
with respect to emissions reduction.  The Air Force results, 
dependent upon equipment and operating conditions, have shown 
in excess of 90% reduction in particulate matter emissions.  
Testing performed by the Army - National Automotive Center, has 
shown particulate matter and hydrocarbon emission reductions of 
50+% and 60+% respectively compared with low sulfur diesel 
fuel.
        The testing performed on Syntroleum's FT fuels by the Air 
Force, Army, and Navy has shown that FT fuels also provide a 
number of other performance benefits, such as increased thermal 
stability and cold performance properties.  Currently, FT fuels are 
not fully certified for use in aircraft.  Our understanding based on 
meetings with the Department of Defense, is that a component of 
the Assured Fuels Initiative is to certify the use of FT fuels for 
turbine applications which would eventually crossover to the 
commercial sector.  
        In conclusion, the technology to convert the nation's vast coal 
resources to ultra-clean fuels via the Fischer-Tropsch process 
exists today.  The capital cost associated with a CTL plant have 
been estimated in the $80,000 to $100,000 per barrel range with 
70% to 75% associated with the gasification and clean-up process 
required to produce a synthesis gas.  As an example, a 20,000 
barrel per day plant is estimated to cost between $1.6 and $2.0 
billion.  Based upon 2003 Energy Information Agency data, the US 
has a demonstrated coal reserve base of 496 billion tons.  At a 
conservative conversion rate of 1.5 barrels of FT product for each 
ton of coal the potential for domestically produced CTL is 744 
Billion barrels of product, essentially equal to the crude oil 
reserves of the Middle East.
        Finally, thank you for the opportunity to address the 
Subcommittee on this important issue as industry and government 
work towards making CTL a reality in the United States.
        MR. HALL.  The Chair recognizes the Director of Government 
Affairs, National Biodiesel Board, Mr. Scott Hughes, for 5 
minutes. 
 	MR. HUGHES.  Good afternoon.  Thank you, Mr. Chairman.  
        Thank you, Mr. Chairman, committee members.  We 
appreciate the opportunity to be here and come before you today 
on this important issue.  
        I would like to focus my comments today on providing you 
with some background about biodiesel, our industry, as well as an 
overview of the collaborative work between the biodiesel industry, 
engine and automakers, and the role that we see biodiesel having in 
the national energy pool.  
        Biodiesel is the name of a cleaner burning, alternative fuel 
produced from renewable resources such as animal fats and 
cooking oils.  Biodiesel contains no petroleum, but it can be 
blended at any level with petroleum diesel to create a biodiesel 
blend.  Biodiesel blends can be used in any compression, ignition 
engine or i.e., a diesel engine with no major modifications.  
Biodiesel in its pure form is simple to use, readily biodegradable, 
nontoxic, and essentially free of sulfur and aromatics.  
        In chemical terms, biodiesel has a composition similar to that 
of conventional diesel fuel.  It is what is called an alkyl ester, 
where conventional diesel fuel is a hydrocarbon, the difference 
being that biodiesel alkyl ester contains oxygen in addition to 
carbon and hydrogen, about 11 percent by weight, where 
conventional diesel fuel contains no oxygen.  
        Biodiesel is produced using a chemical reaction.  A fat or an oil 
is reacted with an alcohol such as methanol and the presence of a 
catalyst to produce two products, glycerin or methyl esters or 
biodiesel.  The glycerin is removed in the production process, and 
it is then further refined and marketed as a value-added product.  
Everything that goes into the production process of biodiesel 
comes out.  
        Soybeans are the largest oilseed crop grown in the U.S., and, as 
a result, soybean oil makes up about half the raw material available 
to make biodiesel.  The other half consists of all other vegetable 
oils, recycled cooking oils, and animal fats.  But approximately 
90 percent of the biodiesel that is produced today in the U.S. is 
made from soybean oil.  
        As the industry has developed, we have made it a priority to 
work with automakers, engine makers, and the petroleum industry 
to develop a fuel specification for biodiesel, just as they have for 
diesel and gasoline.  This collaborative effort has resulted in the 
adoption of an ASTM standard for biodiesel.  
        Additionally, we recognize the importance of fuel quality to the 
consumer and our stakeholders.  As a result, industry has 
developed a comprehensive QAQC program called BQ9000.  This 
program is aimed at assuring that biodiesel fuel is produced and 
maintained at the industry standard, which is ASTM D6751.  
        The biodiesel industry has shown slow but steady growth since 
the early 1990s.  However, in the past 2 years, its growth has gone 
up exponentially.  A critical contributing element to the strong 
growth has been the implementation of the volumetric biodiesel 
fuels tax credit that you passed in 2004.  
        Back in 2004, there were approximately 25 million gallons of 
biodiesel sales.  That increased to 75 million gallons in 2005, and 
we are currently on track to exceed 150 million gallons this year.  
        Likewise, capacity has also increased significantly.  The 
industry went from 22 biodiesel plants in 2004 to more than 60 
biodiesel plants in operation today, and there are over 40 more 
plants currently under construction.  Production facilities are 
located and being located in just about every region of the country 
from coast to coast.  
        Biodiesel is primarily marketed as a blended product with 
conventional diesel fuel typically in concentrations up to 
20 percent.  It is distributed utilizing the existing fuel distribution 
infrastructure with blending most commonly occurring with what 
we call "below the rack" by fuel jobbers.  Biodiesel is beginning to 
be distributed through the petroleum terminal system.  To date, 
biodiesel has positions in approximately 25 terminals around the 
country, and we anticipate this trend to increase.
        Historically, biodiesel's primary markets have been regulated 
fleets for EPAct or various other Executive Order requirements for 
petroleum reduction, as well as the agricultural industry.  However, 
biodiesel is increasingly being introduced into private-sector fleets, 
home heating oil, light duty diesel vehicles, marine applications, 
and even some electrical generation.  All of these markets 
represent significant volume opportunities for our industry.  
        The American Trucking Associations has endorsed the use of 
B5--it is the 5 percent blend--as a way to supplement our Nation's 
energy supply.  Likewise, Sysco Corporation, the largest private 
truck fleet in the Nation, has begun using B5 in its trucks.  So, 
today, the biodiesel industry has worked diligently through the 
development of a national fuel standard, interaction with 
stakeholders, and a focus on fuel quality to establish a solid 
foundation to support our industry's future growth.  
Looking ahead, recent regulatory changes aimed at improving 
the emission profile of diesel engines and improving air quality 
require significant advancement in engine and emission control 
technologies.  Auto and engine makers are stepping up to meet the 
challenges presented by these standards which will take effect in 
model years 2007 to 2010.  
        A critical element in meeting these standards will be the fuel 
that is used.  Biodiesel will be used in these engines, and 
consumers are ever increasing their demand for biodiesel both in 
fleet applications and light duty markets.  
        The biodiesel and OAM industries are working collaboratively 
in this area.  The biodiesel industry has spent about $1.4 million to 
date, with an additional $700,000 committed for fiscal year 2007.  
Automakers and engine makers are also committing significant 
time and resources towards this effort.  
        We foresee strong growth for biodiesel and it becoming further 
integrated into the national fuel distribution system and energy 
pool.  
        The President has laid out a vision of significantly reducing our 
Nation's dependence on foreign sources of oil.  Biodiesel can be 
one of the first tools used to begin reaching that goal, because it is 
a liquid renewable fuel that is available right now, ready for 
blending into our existing fuel supply and use in existing vehicles.  
        So, in short, biodiesel has many benefits for the consumer 
Nation as a whole.  It is a viable tool in our toolbox of available 
options to enhance our Nation's energy security as it, one, adds to 
the distillate fuel pool; two, adds to U.S. refining capacity; three, 
directly replaces imported finished diesel fuel; and, finally, utilizes 
domestic agricultural products.  
        With that, Mr. Chairman, I will conclude welcome my 
remarks.  
        MR. HALL.  Mr. Hughes, thank you very much. 
        [The prepared statement of Scott Hughes follows:] 

PREPARED STATEMENT OF SCOTT HUGHES, DIRECTOR OF 
GOVERNMENT AFFAIRS, NATIONAL BIODIESEL BOARD

        Good afternoon Mr. Chairman, Ranking Member Boucher, and 
committee members.  It is a pleasure to be here today.  We 
appreciate the committee holding this hearing and providing the 
opportunity to examine this important issue.
        My name is Scott Hughes, Director-Governmental Affairs, 
with the National Biodiesel Board (NBB).  The NBB is the 
national not-for-profit trade association representing the 
commercial biodiesel industry as the coordinating body for 
research and development in the US.  State soybean commodity 
groups who were funding biodiesel research and development 
programs, founded NBB in 1992.  Since that time, the NBB has 
developed into a comprehensive industry association, which 
coordinates and interacts with a broad range of stakeholders 
including industry, government, and academia.  NBB's 
membership is comprised of state, national, and international 
feedstock and feedstock processor organizations, biodiesel 
suppliers, fuel marketers and distributors, and technology 
providers.
        In examining vehicle and fuels technology with a focus on the 
future, I would like to focus my comments on providing 
background about biodiesel, the industry, as well as an overview of 
the collaborative work between the biodiesel and 
engine/automakers, and the role we see biodiesel having in the 
national energy pool.  



Biodiesel
        Biodiesel is a cleaner burning, renewable diesel fuel 
replacement made from agricultural fats and oils meeting a specific 
commercial fuel definition and specification.  Soybeans are the 
primary oilseed crop grown in the United States, and soybean oil 
makes up about half of the raw material available to make 
biodiesel.  The other half consists of all other vegetable oils and 
animal fats.  Biodiesel is made utilizing a chemical reaction 
process where the oil/fat is reacted with an alcohol to remove the 
glycerin in order to meet specifications set forth by the American 
Society for Testing and Materials (ASTM).  Biodiesel is one of the 
best-tested alternative fuels in the country and the only alternative 
fuel to meet all of the testing requirements of the 1990 
amendments to the Clean Air act.

Industry Background & Overview
        In the early 1990's, soybean farmers struggled to maintain 
profitability because of high energy prices and low commodity 
prices.  Investment in the development of a biodiesel industry was 
a priority to farmers eager to contribute to our energy supply, while 
finding ways to add value to their crops.  Farmers have invested 
more than $50 million of their check-off dollars to date to conduct 
research and development on biodiesel.  Much of that effort has 
focused on the testing of biodiesel to ensure performance, establish 
quality standards, and gain acceptance by engine and equipment 
manufacturers.
        The biodiesel industry has shown slow but steady growth since 
the early 90's, however, in the past two years, it has grown 
exponentially.  In 2004 there was approximately 25 million gallons 
of biodiesel sales.  That increased to 75 million gallons in 2005.  
We are currently on track to exceed 150 million gallons in 2006.  
Likewise, we went from 22 biodiesel plants in 2004 to more than 
60 biodiesel plants currently (395 million gallons of production 
capacity).  There are over 40 more plants currently under 
construction (estimated additional 713 million gallons of 
production capacity), with another 30 projects in pre-construction.
        Biodiesel is primarily marketed as a blended product with 
conventional diesel fuel typically in concentrations up to 20%.  It 
is distributed utilizing the existing fuel distribution infrastructure 
with blending most commonly occurring "below the rack" by fuel 
jobbers.  Biodiesel is beginning to be distributed through the 
petroleum terminal system.  To date, biodiesel has positions in 
approximately 25 terminals.  We anticipate this trend to increase.
        Three major factors are contributing to the industry's current 
strong growth:  relatively stable feedstock prices, crude oil prices, 
and public policy (federal and state).  The combination of these 
drivers has made biodiesel priced more competitive in the market.  
As a result, we are starting to see biodiesel entering several new 
price sensitive markets.
        Historically biodiesel's primary markets have been regulated 
fleets (alternative fuel use/petroleum reduction-EPAct, Executive 
Order 13149) and the agricultural industry.  However, biodiesel is 
increasingly being introduced into private sector fleets, home 
heating oil, light duty diesel vehicles, marine applications, and 
even some electrical generation.  These markets all represent 
significant volume opportunities for industry.  
        The industry's early investment in technical research; pursuit 
of an ASTM standard; public education efforts; outreach to 
automakers, engine and component makers, and the petroleum 
industry are allowing us to maximize our growth potential under 
current market dynamics.

Regulatory and Policy Impacts 
        The need for increased use of biofuels has never been more 
pressing with diesel fuel prices at an all-time high.  As crude oil 
prices continue to rise, America's trade deficit continues to 
balloon.  America relies on imports for 60 percent of its petroleum 
needs.  Imported petroleum makes up the single largest component 
of our national trade deficit amounting to approximately one third 
of the total.  Every gallon of domestic, renewable biodiesel that is 
used to replace diesel fuel refined from imported crude reduces the 
need for imported crude and finished fuel, extends the diesel 
supply, and expands domestic refining capacity.  Even a small 
reduction in demand has a positive effect on straining price 
pressures.
        The majority of diesel fuel in this country is used in over-the-
road trucks.  The trucking industry serves as a critical part of our 
economy, and impacts every industry, business, and consumer in 
America.  Virtually every product that we use everyday is brought 
to us by a diesel-powered truck.  Fuel is the single largest 
operational cost in the trucking industry.  Average diesel fuel 
prices have nearly doubled over the past four years.  This dramatic 
increase in operational cost offers enormous challenges to the 
trucking industry, and will be felt throughout our entire economy.
        The American Trucking Association (ATA) has endorsed the 
use of B5 as a way to supplement our nation's energy supply.  
Likewise, Sysco Corporation, the largest private truck fleet in the 
nation has begun using B5 it its trucks.  Truckers often become 
interested in biodiesel because they would rather rely more on 
farmers for their fuel and less on the Middle East.  However, after 
they begin using it, they are most often impressed by its premium 
fuel characteristics.  Biodiesel contains oxygen so it burns cleaner, 
reduces smoke and smell, increases cetane, and improves lubricity.  
As ultra-low sulfur diesel (USLD) fuel gets phased in beginning in 
June of this year through June of 2007, biodiesel is well positioned 
to replace the lubricity that will be lost in ULSD.  Diesel fuel 
injection systems rely on the lubricating characteristic of fuel to 
keep them functioning properly.  Just 2 percent biodiesel can 
improve lubricity by as much as 65 percent.
        Recent regulatory changes aimed at improving the emission 
profile of diesel engines and improving air quality requires 
significant advancement in engine and emission control 
technologies.  Auto and engine-makers are stepping up to meet the 
challenges presented by these regulatory standards which take 
effect in model years 2007/2010.
        A critical element in meeting these standards will be the fuel 
that is used in advanced engine and emission control technologies.  
Biodiesel will be a fuel used in these engines and consumers are 
ever increasing their demand for biodiesel both in fleet 
applications and light-duty passenger markets.  It is therefore 
imperative the necessary research is conducted to demonstrate 
biodiesel's compatibility with new engine technologies to meet this 
growing demand.  
        The biodiesel and OEM industries are committing significant 
resources toward this effort.  The biodiesel industry has spent $1.4 
million dollars to date with an additional $700,000 committed for 
fiscal year 2007.  Automakers and engine makers are also 
committing significant time and resources toward this effort.  
        Additionally, three federal policy measures have been 
extraordinarily effective in stimulating biodiesel's increased 
production and use.  Because of these three policy measures, 
biodiesel is beginning to make a small but significant impact on 
our nation's energy supply.  These three measures are all working 
extraordinarily well, but are soon scheduled to expire, and must be 
continued in order to keep the growth in biodiesel going strong.  
        First, the biodiesel blenders tax credit, which was part of the 
restructured Volumetric Ethanol Excise Tax credit or "VEETC" 
legislation in the JOBS Act of 2004.  The new blender's tax credit 
for biodiesel went into effect in January of 2005.  It functions 
similarly to the ethanol tax credit, and it has been extraordinarily 
effective incenting the blending of biodiesel into the nation's diesel 
fuel supply.  It has been the primary stimulant in 2005 for the 
dramatic increase in new plants, jobs, and local investment in 
biodiesel, bringing economic opportunity to both rural and urban 
areas.
        The second policy measure that has been very effective in 
energizing biodiesel's growth is the Bioenergy Program.  The 
program was initiated by the USDA in 2000 to stimulate the use of 
crop surpluses for energy needs.  It was memorialized as part of 
the 2002 Farm Bill.  However, the program is set to expire in July 
of this year.  This program provides a production incentive which 
has been highly effective in the growth of the biodiesel industry.  
A 2005 OMB Program Assessment Rating Tool or "PART" 
evaluation reported that the program did an excellent job of 
stimulating biodiesel growth, and indicated that the program could 
continue to be effective for the emerging biodiesel industry.  The 
report stated, "Increases in the production of biodiesel indicate a 
rise in the supply of domestically produced renewable fuels.  It's 
also an indicator of the viability of the biodiesel industry and its 
expanded consumption of agricultural commodities."
        The third program that has greatly contributed to biodiesel's 
success is the USDA's Biodiesel Fuel Education Program.  This 
program was a part of the energy title of the 2002 Farm Bill.  The 
program provides educational funding to support increased fuel 
quality measures, increased acceptance of biodiesel by engine and 
equipment manufacturers, petroleum partners, users, and the 
general public.  The USDA has done a superb job in implementing 
this program and it has been a key ingredient to biodiesel's recent 
growth.  A recent survey done to benchmark the program's 
progress showed that the public's awareness of biodiesel rose from 
27 percent in August 2004 to 41 percent in December of 2005.  To 
impact the American public's awareness that significantly on any 
given issue is remarkable.  In addition to greater awareness from 
the general public, market research shows familiarity among 
trucking executives increased from 27 in 2004 to 53 in 2005.  Also 
of note:
	 Four-in-five consumers continue to support a tax incentive 
that would make biodiesel cost-competitive with regular 
diesel fuel.
	 88 percent of environmental group leaders and 84 percent 
of health organization leaders support biodiesel as a 
transitional fuel, because biodiesel can make an immediate 
impact on reducing emissions until zero emissions 
technology is developed. 
 
Looking Ahead
        We foresee strong growth for biodiesel and it becoming further 
integrated into the national fuel distribution system and energy 
pool.  
        During the 2006 State of the Union speech, President Bush 
outlined his Advanced Energy Initiative, which stated the goal of 
reducing petroleum imports from the Middle East by 75 percent by 
the year 2025.  Biodiesel and ethanol can be the first tools used to 
begin reaching that goal, because they are liquid renewable fuels 
that are available right now, ready for blending into our existing 
fuel supply and used in our existing vehicles.  As an illustration of 
how biodiesel can play a role in that effort, please note that Iraq is 
the second largest provider of crude oil into the United States from 
the Persian Gulf region.  Of the crude that comes from Iraq, 
approximately 1.85 billion gallons of diesel fuel is refined for the 
US market.  If long-term, America was to replace just 5 percent of 
its 37 billion gallons of on-road diesel fuel with biodiesel, it would 
equal 1.85 billion gallons - the same amount of diesel fuel that we 
get from Iraq.
        In addition to the significant benefits that biodiesel offers to 
increase our domestic refining capacity and overall energy supply, 
biodiesel offers enormous benefits to our agricultural sector.  
Biodiesel does much more than just utilize surplus agricultural 
commodities; it adds multiple layers of value to agricultural 
economics.  There have been 5 major comprehensive economic 
studies evaluating biodiesel in the last 4 years.  All of these studies, 
using different economic models, had similar conclusions:  that 
increased utilization of fats and oils for biodiesel increases the 
value that farmers receive for their crops, while making protein 
meal cheaper as a feed for our domestic livestock producers and 
more competitive in international protein markets for food and 
feed.  Not only does this allow farmers to more profitably supply 
global food markets, it may have the effect of increasing 
agricultural processing in the United States.  Additional biodiesel 
production further increases domestic chemical processing from 
renewable by-products.

Conclusion
        Rising crude oil prices and political uncertainties in 
strategically sensitive regions of the world are focusing the 
public's attention on the need to enhance our nation's energy 
security.  Biofuels are a viable option to begin re-taking control of 
our energy future.   There are many market dynamics that are 
working in favor of the biofuels industry today and which if 
continue into the future, as anticipated, will provide a bright future 
not only for the industry but the nation overall.
        Biodiesel is and will continue to be a strong player and partner 
in the growth of the biofuels industry.   Biodiesel can be a 
substantial tool in the nation's overall move toward energy security 
as it:
	 Adds to the distillate fuel pool;
	 Adds to U.S. "refining" capacity;
	 Directly replaces imported finished diesel fuel;
	 Utilizes domestic agricultural products;
	 Stimulates rural and urban economies and creates jobs; and 
	 Helps potentially create new chemical industry jobs and 
activity.

        Mr. Chairman, members, we appreciate the opportunity to 
come before you today on this most critical issue.  On behalf of the 
biodiesel industry, I want to thank you for all of the support you 
have given not only to the biodiesel industry, but the development 
of the biofuels industry overall.  We look forward to continue 
working with you in this important endeavor.  I would be happy to 
answer any questions you may have.

        MR. HALL.  Mr. Pratt. 
 	MR. PRATT.  Good afternoon, Chairman Hall and members of 
the committee.  
        My name is Mitchell Pratt.  I am before you today representing 
Clean Energy, North America's leader in clean transportation, and 
as the company's Senior Vice President of Operations in 
Governmental Affairs.  
        Clean Energy provides fueling daily for over 30,000 vehicles 
with clean, affordable, and domestically produced natural gas.  Our 
company has over 160 fueling stations and is on track to sell 73 
million gallons of natural gas this year.  We at Clean Energy 
strongly believe that natural gas has an important role to play in 
providing an immediate solution to help combat our rising fuel 
prices, foreign oil dependency, urban air pollution challenges, and 
offers the purest and cleanest bridge to a hydrogen future.  Natural 
gas as a transportation fuel is the best untold story and is a solution 
today that will remain so well into the future.
        I would like to quickly highlight several main points to 
demonstrate the immediate feasibility of launching a natural gas 
national program.  
        First, fuel supply.  We have over 70 years of current reserves, 
30 more than oil, with no accounting for biomethane or other new 
sources and supplies, including the long-range hope of methane 
hydrates.  
        Next, price.  How would you like to pay substantially less 
today for the fuel you are burning?  With all the costs rolled in, 
capital recovery and placed on an energy equivalent cost per gallon 
of natural gas today, it is approximately $1.82 per gasoline gallon 
or $2.02 per diesel gallon equivalent, a substantial savings that is 
critical for the fleets that we serve and those that are serving the 
backbone of our economy in moving goods and services today.  
        On to emissions.  Natural gas is and will remain substantially 
cleaner than gasoline and diesel.  In 2007, while diesel engines 
struggled to achieve the new standards, natural gas will be at the 
2010 emissions standard, over 80 percent cleaner.  
        On to the critical piece you all have talked about and heard 
about today.  The critical component of launching any new 
alternative fuel is infrastructure.  We have found through an anchor 
tenant cost model and through public-private partnerships that we 
can and will cost-effectively finance and build the infrastructure 
necessary to rapidly expand the market.  Also, with a newly 
introduced home refueling appliance that simply plugs in at your 
house, this will allow consumers greater convenience to fill up at 
home overnight, and it is helping to provide confidence as the 
public station network grows.
        Now to vehicles.  We have targeted the introduction of natural 
gases, viable fuel through fleet applications, systematically 
building infrastructure to support that and the growing product 
line.  With thousands of NGVs in operation, they have proven to 
be safe and reliable, with many success stories like Los Angeles' 
MTA, the transit property with over 2,000 natural gas buses in 
operation daily.  In fact, there are nearly 9,000 transit buses 
running on natural gas.  Nearly one in four new transit buses on 
order are specified to run on natural gas.  More than 25 airports 
around the country are using buses, shuttles, runway sweepers, 
dump plows, security, and maintenance vehicles that also run on 
natural gas.  
        Refuse is one of the fastest-growing areas for NGVs, with 
more than 2,500 vehicles in use today and more than 500 being 
added each year.  
        More than 140 school districts across the country are using 
natural gas buses and shuttles as well as deploying light-duty 
NGVs in white fleets for maintenance personnel.  And there are 
dozens of short haul and port application fleets that make great 
sense.  Just think of all the vehicles that pull into a 7-Eleven each 
morning.  Snack foods, bakeries, soda and water, dairy distributors, 
etc., all great applications for natural gas.  
        Unfortunately, the growth in the U.S. has been slow.  Globally, 
between August 2003, and January 2006, NGVs grew by more 
than 65 percent, to more than 4.6 million vehicles, and stations 
grew by more than 40 percent.  Many automakers offer 
tremendous selection of fully integrated natural gas vehicle 
products throughout Europe and other countries but have pulled 
back here at home.  More action is required to have these bio fuel 
and dedicated natural gas vehicles made available to U.S. 
consumers.  
        Finally, natural gas is the best bridge to a hydrogen future.  The 
road to a hydrogen future has many challenges, and the greatest is 
creating an infrastructure that enables society to utilize gaseous 
fuels.  Natural gas provides this critical experience for society, and 
the stations can be modified to sell natural gas, blended natural 
gas, hydrogen, and pure hydrogen.  With these blends, near zero 
emissions can be achieved much more cost effectively than with 
pure hydrogen.  
        So, in conclusion, as you can see, natural gas vehicles have had 
a wide experience of applications, truly successful applications, 
and are the best untold story, ready for immediate and tremendous 
growth in all light, medium, and heavy-duty vehicle applications.  
Federal and State fleet NGV purchase priority directives and DOE 
RD&D funding are needed to encourage new product development 
and introduce those foreign available OEM, NGV products here at 
home.  
        As we scan and consider all the feasible alternative fuels that 
are out there, natural gas makes the most sense commercially for 
all types of vehicles.  With greater support, NGVs can provide an 
immediate and important solution to our urban air pollution issues.  
Foreign oil security challenges create a bridge to a hydrogen 
future, all in an excellent fuel price, thereby preventing the 
economic train wreck which can be caused from spiraling oil 
prices.  
        Thank you.  
        [The prepared statement of Michael Pratt follows:] 

THE PREPARED STATEMENT OF MICHAEL PRATT, SENIOR VICE 
PRESIDENT, CLEAN ENERGY

Natural Gas is an Immediate Solution
	 Natural gas provides an immediate solution to our foreign 
oil dependency, urban air pollution challenges, and serves 
as the clearest bridge to a hydrogen future.
	 World demand-production gap could be as high as 30 
million barrels/day by 2020.
	 Natural gas is a domestic energy source (over 97 percent of 
current U.S. use comes from North America) today with 
over 70 years of additional supply.
	 11,000,000 light-duty vehicles, or 5 percent of the existing 
U.S. light-duty fleet, if powered by natural gas, would only 
account for 4 percent of the country's current natural gas 
usage.

Natural Gas is Clean
	 Natural gas vehicles meet near-zero emissions levels for 
light-duty applications, already meet or exceed 2007 heavy-
duty emission standards, and are targeted to certify to the 
2010 heavy-duty standards for the 2007 model year.

Natural Gas is Economic
	 Natural gas is priced very competitively at a $1.82 gasoline 
gallon equivalent or a $2.02 diesel gallon equivalent versus 
today's national average price of a gasoline gallon at $2.88 
and a diesel gallon at $2.89.
	 Clean Energy can guarantee a long term fixed price for 
vehicle fleets for up to 5 years under today's gasoline and 
diesel prices.

Natural Gas Infrastructure
	 Natural gas, unlike other alternative fuels, enjoys the 
advantage of a vast nationwide network of existing 
pipelines capable of delivering natural gas product to nearly 
every American community.
	 Strategic use of public-private partnerships has lead to an 
extensive network of natural gas fueling stations in key 
national markets.

Natural Gas Vehicles
	 Natural gas vehicles are currently used in transit, refuse, 
shuttle, taxi, police, airport, and municipal fleet 
applications throughout the United States.
	 American and foreign auto manufacturers produce a wide 
range of natural gas vehicle offerings in Europe and 
elsewhere to combat high oil prices at the pump.

Natural Gas is the Bridge to Hydrogen
	 Natural gas as a transportation fuel introduces gaseous fuel 
vehicles, fueling stations, and the societal experience 
necessary to make hydrogen fuel a reality.

Conclusion
	 The country needs more national policies to help natural 
gas and other alternative fuels penetrate the marketplace 
and provide consumers with real options beyond oil.


                       Introduction
        Good afternoon Chairman Hall and Honorable Members of the 
Subcommittee on Energy and Air Quality.  My name is Mitchell 
W. Pratt and I am before you today representing Clean Energy, 
North America's leading clean transportation fuel provider, as the 
company's Senior Vice President of Operations and Government 
Affairs.  Clean Energy provides fueling daily for over thirty 
thousand vehicles nationwide with clean, affordable, and 
domestically produced natural gas.  Our company has over 160 
fueling stations and is on track to sell approximately 73 million 
gallons of natural gas this year.  We, at Clean Energy, strongly 
believe that natural gas has an important role to play in providing 
an immediate solution to our foreign oil dependency, urban air 
pollution challenges, and the clearest bridge to a hydrogen future.  
Natural gas as a transportation fuel is a solution today and will 
remain so well into the future. 

                       Global Oil Supply
        Some believe that the current run up in oil prices is a blip and 
that by 2010 we will be awash in oil.  We are in the opposite camp.  
We believe we are looking at a looming supply-demand problem.  
Oil is a finite and dwindling resource and the world's demand for it 
keeps growing.  That is why we believe that the world will 
continue to face stubbornly high prices for the long term.  
        Let's take a look at the facts.  In the Arab embargo back in the 
70s, we were importing approximately 25 percent of our oil.  In the 
first Gulf War, we were importing 42 percent of our oil.  Today we 
are importing 57 percent.  By 2010, we will be over 60 percent oil 
imports.  We've been pumping oil out of the ground since 1859.  
The last time a world class oil field was found was in the Caspian 
Sea in the late 1990s.  The easy oil has been found.  There are no 
surprises out there.  We've either peaked as far as oil production 
goes, or it's right around the corner.
        Demand is growing globally.  For example, ten years ago 
China used 3.4 million barrels of oil per day.  Today they are using 
6.5 million barrels per day.  There are forecasts showing them 
using 11 million barrels per day a decade from now.  Wait until 
they really start buying automobiles.  We are using more than 30 
billion barrels of oil a year worldwide.  The last time we found as 
much oil in a year as we consumed was about 1985.  Production 
worldwide is 84-85 million barrels a day.  Current demand is about 
85 million barrels a day and demand projections for 2007 are 
easily north of that given China and India's increasing demand.
        The treadmill is getting faster and faster.  The decline curve for 
oil production is steady.  Saudis say they can produce 10.5 million 
barrels per day, but they're only producing 9.5 million barrels per 
day.  We all heard talk two years ago of Iraq production reaching 3 
million barrels per day.  They are producing less than 2 million 
barrels.  To make matters worse, we've also got some serious 
geopolitical problems:  Iran, Venezuela, Nigeria, and Russia.  They 
are all wild cards.  The Alaskan pipeline used to be full, running at 
2 million barrels per day.  It now carries less than half of that or 
800,000 barrels per day.  Further, because there are pipeline 
constraints, opening up ANWAR will not solve the problem 
because almost half the pipeline's capacity is already in use.

                       Alternatives to Oil
        We must look at all solutions and we need to get serious about 
fuel diversity.  We have known an oil shortage was coming for 
some time.  Clean Energy believes that ethanol, biodiesel, and 
natural gas - as transportation fuels - each have a role to play.  In 
fact, even if you assume biofuels achieve their greatest forecasted 
production targets, we believe demand will still outstrip supply by 
3 million barrels per day by 2020.  Over time, we believe that 
natural gas will be moved out of the power generation business by 
coal and nuclear, increasing the availability of domestic natural gas 
supplies for our country's transportation needs.  Even assuming 
optimistic new production sources coming on line, balanced with 
estimated production decline curves, the demand-production gap 
could be as high as 30 million barrels per day in 2020.  This gap 
requires federal actions supporting alternatives today.

                   Natural Gas is Domestic
        Natural gas is a domestic source of transportation fuel with an 
estimated 77 years of additional supply or 30 years extra supply 
over oil.  Over 97 percent of our current use of natural gas is 
produced in North America, which helps protect us from unstable 
international political situations which increases our energy 
independence by not importing as much foreign oil.  To put natural 
gas and transportation fuel use into perspective, if we powered 
11,000,000 light-duty vehicles or 5 percent of the U.S. light-duty 
fleet with natural gas today, it would only account for 4 percent of 
the country's current natural gas fuel usage.  



                   Natural Gas is Clean
        Natural gas is a clean and efficient fuel.  Natural gas vehicles 
(light duty, medium and heavy duty trucks) are all cleaner than 
gasoline or diesel vehicles.  Natural gas vehicles meet near-zero 
emission levels for light-duty applications and already meet or 
exceed 2007 heavy-duty emission standards with some engines 
targeted to certify to the 2010 standard as early as next year 
(2007).  Natural gas is inherently cleaner than gasoline or diesel 
and will continue to offer this benefit well into the future.  

                  Natural Gas is Economic
        Natural gas is economic.  The price for natural gas as a 
transportation fuel is very competitive with today's gasoline or 
diesel fuels.  In fact, natural gas was very competitive with oil at 
$30 a barrel, let alone at the market's current price of $70 a barrel.  
Clean Energy views natural gas as a commodity tracking at a 
discount to oil, especially when compared to diesel.  For example, 
if you assume a natural gas price at $7.20 per million cubic feet 
and 92 cents to cover transport, compression, taxes, and capital 
recovery costs, you can achieve a very competitive $1.82 gasoline 
gallon equivalent or a $2.02 diesel gallon equivalent.  Today diesel 
ranges between $2.90 to $3.24 per gallon.  
        We further believe that when ultra low sulfur diesel fuel hits 
the market later this year, it will be an additional 25 to 30 cents, 
putting it in the $3.50 range.  This assumes the overall oil market 
stays stable even though, historically, the market has suffered over 
a dozen global oil supply disruptions over the past half century 
lasting 1 to 44 months in duration with supply shortfalls of one to 
14 percent of world demand.  Despite the reality of volatile oil 
prices and unlike any energy provider we know, our company is 
able to guarantee a fixed price per gallon of natural gas to light, 
medium and heavy-duty fleet customers below today's gasoline 
and diesel prices for up to five years on a energy equivalent gallon 
basis.  
        In addition to the comparatively low cost of natural gas as a 
transportation fuel, Congress took an important step in passing the 
energy and highway bills last year.  As the cost of uncertain diesel 
technology increases in an effort to meet new federal clean air 
emission standards, the energy bill provides up to a $32,000 tax 
credit for a class 8 natural gas truck.  This will certainly help 
narrow the incremental cost differential between diesel and natural 
gas vehicles.  When fuel price and operational maintenance 
savings are factored in, natural gas vehicles become even more 
cost-effective than their diesel counterparts.  Because some of the 
incentives put in place are going to take awhile to have a real 
impact, we need Congress to continue to provide long-range 
policies that promote alternative fuels in the marketplace.

               Natural Gas Infrastructure
        Perhaps the greatest challenge for any alternative to oil is the 
ability to distribute product to the end user.   Natural gas, unlike 
other alternative fuels, enjoys the advantage of possessing a vast 
nationwide network of existing gas pipelines capable of delivering 
natural gas product to nearly every American community.  Clean 
Energy has developed a strategic business model enabling the cost-
effective development of a natural gas station network.  This 
revolutionary approach creates on secondary station infrastructure 
to gasoline and diesel by leveraging private and public-private 
partnerships to create an extensive network.  These turn-key 
partnerships enable high-volume fleet users to benefit from 
privately financed refueling stations while providing smaller 
volume users with public access at these stations.  Further, 
consumers can immediately take advantage of natural gas as a 
transportation fuel with the simple installation of a low cost home 
refueling system that is currently on the market.  Moreover, natural 
gas stations can provide an early introduction of hydrogen by using 
a 10 to 30 percent blend, reducing the immediate need for high-
cost fuel cells to achieve near-zero air emissions.

              Natural Gas Vehicle Availability
        Natural gas vehicles are currently available, proven, and tested 
in transit, refuse, shuttle, taxi, police, airport and municipal fleet 
applications throughout the United States.  These applications were 
primarily driven by the clean air benefits inherently derived from 
the use of natural gas.  However, for years American and foreign 
auto manufacturers have produced an ever increasing selection of 
natural gas vehicle products in Europe, and elsewhere, - both 
dedicated and bi fuel - for natural gas vehicles to address concerns 
over high oil prices.  These OEM produced vehicles are fully 
integrated providing consumers the mileage range and 
conveniences of gasoline vehicles.  Congress should follow 
Europe's lead by strongly encouraging auto manufacturers through 
incentives or mandates to produce a greater range of natural gas 
vehicles for the American consumer.

                 Natural Gas Bridge to Hydrogen
        Natural gas is also viewed as a bridge fuel to hydrogen as it 
continues to be the most cost-effective way to produce hydrogen, 
provides invaluable experience and knowledge to users on how to 
handle gaseous fuels, and natural gas infrastructure can be 
leveraged to provide hydrogen as well as blended hydrogen/natural 
gas dispersing.  In fact, the blending of hydrogen and natural gas 
provide even lower near zero emission performance.  With fully 
integrated OEM produced natural gas vehicles, these vehicles can 
be enabled to operate natural gas, hydrogen, and blended 
hydrogen/natural gas fuels.

                        Conclusions
        Natural gas vehicles offer a proven solution in light, medium, 
and heavy duty vehicles that are ready for wide-scale 
implementation today.  Our resources of natural gas can play a 
critical role in diversifying our nation's transportation fuel needs.  
Natural gas is clean, inexpensive and domestically produced, and 
excellent fuel formula.  In leveraging natural gas as a transfer fuel 
we not only support the creation of a secondary infrastructure but 
also foster more vehicle production.  The societal experience of 
operating a natural gas vehicle is likely the only realistic approach 
to achieving a hydrogen future.  That being said, we need more 
national policies like the 2005 energy and highway bills to help 
natural gas and other alternative fuels penetrate the marketplace 
and be available to the public.  Without the firm support of the 
Congress, our nation's ability to free itself from it's current oil 
dependence will most certainly put our nation's economy, security, 
and overall public health at risk.

        MR. HALL.  Thank you.  We will ask some questions here now, 
Mr. Pratt, on natural gas.  I have been a great believer in natural 
gas.  That may be the fuel of the future.  It may be accidental that 
we have an abundance of it in my State, my area, but, in the late 
1970s the President passed some terrible legislation, Fuel Use Act, 
a lot of that stuff.  It took us 2 or 3 years to get them off the books 
by the time we got here.  And I have a school district that adjoins 
my hometown school district that uses natural gas completely for 
their school buses.  And they have saved maybe 30 percent over 
the years.  And one of the questions that was always asked 
initially, because that is our school children was how dangerous 
was it.  Have there been any accidents or fatalities associated with 
natural gas refueling stations or consumers filling up on their own 
tanks or on the school buses or anything that you know of?
        MR. PRATT.  Not that I know of.  
        MR. HALL.  That really speaks well because it has been at least 
20 years that they have been doing that; 15 that I know of right 
there close to me.  How much energy is in a gallon of natural gas 
as compared with a gallon of gasoline?  
        MR. PRATT.  The prices that I quoted in my testimony are all 
on an energy equivalent basis.  So the $1.82 is on a gasoline gallon 
energy equivalent basis, and the $2.02 is on a diesel equivalent 
gallon basis.
        MR. HALL.  How long does it take to install natural gas 
refueling stations?  
        MR. PRATT.  Depending on the size of the station, it can take 
anywhere from 6 months to a year. 
        MR. HALL.  How long does the permitting cycle take?  
        MR. PRATT.  That is included in that same timeframe.
        MR. HALL.  You know, Chairman Barton and his energy bill 
that we passed some several months ago had provisions there 
where if a Federal entity didn't answer the way, a lot of times the 
way they would hold it up is just not give you an answer.  And you 
can't appeal unless you have a final answer from an entity.  He set 
a provision in there that I think is just simply great to anybody that 
wants to build and be productive in solving our energy problem.  
That if they make an application to them and in 60 days it is not 
either denied or granted, it is granted.  And I think that is a boon to 
those that want to build.  Along that line, I would ask you, what 
permits are required for a natural gas refueling station or pump?  
        MR. PRATT.  We have local city permits.  All the building and 
safety inspection requirements, fire department inspections are 
required for constructing a station.  Much like building anything at 
your home or a home addition, you have to go through all those 
standard permits.  For natural gas there is nothing unique.  And as 
there are so many stations that have been built, there is a lot of 
experience and our Fire Department officials are usually the most 
challenged in coming up to speed on it, but they have grown 
tremendously comfortable with natural gas stations.  
        MR. HALL.  About what does it cost to install a natural gas 
pump?  
        MR. PRATT.  Natural gas stations, again, it depends on size.  A 
home refueling unit that you can install in your garage wall and fill 
up overnight is a little over $1,000 dollars.  To a transit property 
that can handle hundreds of buses every night in a 6 to 8-hour 
window can be upwards between $1.5 and $3 million.  Our typical 
station that we build for a gasoline station is in the neighborhood 
of about $750,000.  We compare this, the ability to deliver natural 
gas just like you would a gasoline station, vehicle after vehicle 
with multiple dispensers for $750,000 investment, versus a 
hydrogen station, today that, with one reformer producing only 100 
gallons is over a million, $1.2 million.  
The economics and feasibility of natural gas is there today, and 
these stations can be equipped for that hydrogen future.
MR. HALL.  I thank you very much.  Quickly, Dr. Pacheco, 
could you tell me, what are the best types of plant material to make 
cellulosic biomass ethanol?  Can you give me that answer in about 
30 seconds?  
        MR. PACHECO.  Mr. Chairman, many forms of biomass can be 
used to make ethanol.  Switchgrass and corn stover and hardwoods 
are among some of the easiest feed stocks to use.  
        MR. HALL.  Gosh.  I have got 18 seconds left.  I have heard that 
the energy balance for ethanol from corn is about 1.4 units of 
energy output for each unit of energy input.  But for cellulosic 
biomass the ratio is much better, on the order of five or six times 
the units of output for each unit of input.  Why is cellulosic 
biomass so much higher than ethanol from corn?  
        MR. PACHECO.  The main reason for that is that in cellulosic 
biomass there is a component referred to as a lignin that doesn't 
exist in the corn feedstock.  That lignin some people refer to 
sometimes as like a young coal.  It is actually used for heat and 
power within the biorefinery so that the coal and natural gas that is 
currently used to provide heat and power for a corn ethanol mill is 
not required.  And that is shown in the third figure in my written 
testimony. 
        MR. HALL.  All right.  I thank you.  My time is expired, and I 
recognize the gentleman from Arkansas.  
        MR. ROSS.  I appreciate the gentleman from Texas.  Thank you 
all for being here today.  And my first question is for Mr. Hughes.  
I am impressed by the amount of growth in your industry from 22 
biodiesel plants in 2004 to 60 plants now.  Hopefully soon, two 
more, one in McGee and one in Pine Bluff, Arkansas, and over 40 
plants currently under construction.  I don't believe my area is 
unique in the talk about moving toward this technology and the 
jobs that it creates.  We are seeing it all over the country.  Is there 
any reason to believe that these plants are not meeting current 
environmental requirements?  
        MR. HUGHES.  No, sir, there is not.  We have not run into any 
kind of calls or situations that I am aware of in that respect. 
        MR. ROSS.  So I would be correct in assuming that State and 
local permitting authorities are issuing these plants whatever air 
and other environmental permits they need.
        MR. HUGHES.  That is my understanding. 
        MR. ROSS.  There haven't been any governmental regulations 
at the local State or Federal level that it have served as an obstacle 
or slowed the development of these type plants?  
        MR. HUGHES.  Not that I am aware of, and I have actually had 
some conversations with a few plants in that regard, and they have 
not indicated that is an issue.  
        MR. ROSS.  Good.  My next two questions are targeted for Mr. 
Warzel.  You mentioned in your testimony that Fischer-Tropsch 
fuels are not fully certified for use in aircraft.  I know there is a 
great deal of interest by both the Department of Defense and the 
private aircraft industry in the use of coal to liquids as a source of 
jet fuel.  Can you speak to the current status of this certification?  
And if so, what needs to be done before these fuels are ready for 
aircraft use?  
        MR. WARZEL.  Okay.  Yes.  Currently it is not certified.  Diesel 
fuel that you can also make from the Fischer-Tropsch process 
meets all the ASTM guidelines and requirements.  So it is fully 
fungible in today's market.  On the jet fuel, it really becomes an 
issue of OEM certification because of the amount of money spent 
on the infrastructure.  The Air Force has a very detailed plan put in 
place for certification which, depending on the best mechanism 
and blending that they look at, could be anywhere from a 3 to a 
6-year process.  
        To give you an idea, the last time they certified a new fuel or 
an additive to a new fuel, they have not certified a new fuel in 
decades, it took about 8 years.  The main component is going to be 
having supply of fuel for them to begin their work.  
        MR. ROSS.  Follow up to that.  It has been widely discussed 
that while the coal-to-liquids technology has been proven 
throughout the world, that its intense capital cost and lack of 
deployment in the United States are still barriers that must be 
addressed in order to gain the financing necessary to make the 
facilities more commercially viable for widespread use 
domestically.  What do you think is needed in order to further the 
use of coal, CTL technologies?  
        MR. WARZEL.  Let's kind of rephrase that.  There is a lot of 
coal gasification to different types of liquids.  There is only one 
plan as such now, Sasol, that does coal to liquid via 
Fischer-Tropsch.  What is needed in our opinion is from a U.S. 
perspective, let's move the military away from crude oil-based 
fuels, and move them in off-take agreements for the military.  That 
alone will provide a major impetus to the commercial sector to 
bring funding with long-term off-take agreements for the plants.  
        MR. ROSS.  Let me ask a question, probably for Mr. Pratt, but 
any of you that feel qualified can answer it.  I know there is some 
movement toward, and this is not really anything new, but 
automobiles that are operating today off of natural gas, and I guess 
the new component would be the fact that more people are now 
able to refuel at home in the evening while they sleep.  I think one 
of the challenges, especially for a rural district like mine, it is my 
understanding a typical car with natural gas can go like 225 miles, 
is that pretty accurate?  
        MR. PRATT.  That is for the product that is available today. 
        MR. ROSS.  And so in a district like mine I can get halfway to 
where I am going, but I can't get the rest of the way, and I can't get 
back home unless, and so it is the same issue that we run into with 
a lot of other things.  I applaud the efforts to get it to where you 
can refuel it at home at night.  But yet we still have the challenge 
when we move away from home, especially in rural areas to be 
able to have the infrastructure in place to be able to refuel, number 
one.  Number two, do we really want to go in this direction given 
that this is just another fossil fuel?  And then finally, given the cost 
of natural gas today, has it really become somewhat cost 
prohibitive compared to back when natural gas was running $2 to 
$4.  Now it is $10 to $14 or $15, or whatever it may be today.  
        MR. PRATT.  Sure.  The first question on vehicle types.  In 
Europe, they make over, I think it is, 22 different OEMs are 
making something in the magnitude of over 100 different vehicle 
types, maybe a little bit off on that, but it is a wide selection of 
natural gas vehicles.  And they make both dedicated and bifuel.  
And in those vehicles, both dedicated and bifuel, they get much 
greater range than what we have experienced, the 200 miles, 225 
that you talked about.  The bifuel vehicle allows you to operate 
both on gasoline and natural gas, so that you can fill in the gap of 
the infrastructure.  The infrastructure development for any 
alternative fuel here in the U.S., we believe we have figured out 
the right model to do that.  And that is focusing on the large fleets 
that allow you to expand rapidly the infrastructure, all your trash 
haulers, your transit bus fleets, your school bus fleets, your 
municipalities, all can create an infrastructure to help you get 
around your State and manage your transportation on a dedicated 
fuel, let alone a bifuel vehicle.  
        I think, of the other questions, the most important was fuel 
price.  And let me just walk you through that.  Now, today, natural 
gas is below $7 an MCF.  But even using $7.50 MCF, total rolled 
in capital cost recovery, profit, and operations is less than $2 a 
gallon.  So when you talk about fuel price supply, natural gas can 
be offered to you at less than $2 a gallon.  I think that is pretty 
price competitive, even as you talk about peaking, the last 
summers or last winters or winter before last, the peaking natural 
gas prices, we were still selling our customers fuel at $2 and a little 
bit more because we buy long-term contracts to manage that fuel 
supply. 
        MR. ROSS.  But 6 years ago, that would have been more equal 
to what, 50 cents a gallon.
        MR. PRATT.  It would have been equal to probably less than 
that.  But today's reality is that the price of natural gas provides 
you, even including building the stations, provides you a 
tremendous economic opportunity on fuel price, over and above 
anything else that we have and better than gasoline.  And for fuel 
supply, we have over 70 years of supply here.  We have renewable 
sources that they are doing in Europe that we haven't begun to tap 
here in biomethane well recovery and capturing, and then looking 
at methane hydrates as a long-term fuel supply that has more 
energy in it than all of the energy sources combined. 
        MR. ROSS.  Well, I want to thank you and I want to thank you 
all for what you do.  I mean, I have a strong conviction and believe 
that if we can put a man on the moon, if we can shoot a four 
wheeler on a rocket to Mars and control it from NASA in Houston, 
I mean, this is America, and I know we have got the technology 
and the people here that can help us develop alternative and 
renewable fuels that can really let us become self-sufficient and 
reduce our dependence, hopefully totally someday on this foreign 
oil.  So I want to thank you for all of the things that you are doing 
to try and see that dream become a reality, and certainly want to 
continue to work with you.  And again, Mr. Chairman, thank you 
for your gracious indulgence. 
        MR. HALL.  I thank you sir.  Mr. Shimkus, the gentleman from 
Illinois.
        MR. SHIMKUS.  Thank you, Mr. Chairman.  It is great to have 
you here.  I am sorry that I have been bouncing in and out.  But let 
me ask a question to the entire panel.  It may not apply, and it may, 
I don't know, to the natural gas side.  But in SAFETEA-LU we 
passed an alternate fuels excise tax credit that expires in 2009, 
which I think is, I personally think is an important provision.  We 
dropped--hopefully, again, I will use this opportunity to encourage 
my colleagues to get on the bill--yesterday, with Rick Boucher and 
myself and eight other members from five different committees, an 
extension of that to 2020.  Would that be helpful and why?  Why 
don't we go to Mr. Warzel first because this is really an industry 
question.  
        MR. WARZEL.  With regard to coal to liquids, there are specific 
coal to liquids, yes.  The move is incredibly helpful due to the 
plain and simple fact that if you look at the gas to liquids plant, 
which is an easier process to build and construct and operate than a 
coal to liquids plant in Qatar, which is much more favorable to 
construction because of regulatory issues, took about 7 years from 
the start of project till the time it starts operating.  That is the best 
that you could expect to do from now, if you had the money to, 
say, start building a plant would be 7 to 8 years. 
        MR. SHIMKUS.  And the money is about, what is the capital?  
        MR. WARZEL.  Right now, because there have been very few of 
them built, our best estimates for coal to liquids, and this has also 
been reiterated by Sasol, is about $80,000 to $100,000 depending 
on location per barrel.  So a nominal 20,000 barrel-a-day plant is 
about $1.6 billion.  We have looked at DOE work on lignite coal in 
particular, and some of the sub bituminous coals.  That achieves at 
$35 to $40 barrel crude, not looking at all the tax incentives, about 
a 15 to 18 percent rate of return project.  
        MR. SHIMKUS.  So if you are about an 80,000 barrel facility, 
you are talking about $7 billion and a 7-year delivery.  So if the 
current excise tax credit expires in 2009, you are not going to take 
advantage of it.  There is no incentive. 
        MR. WARZEL.  There is no incentive. 
        MR. SHIMKUS.  So if some incredibly smart Members of 
Congress decided to extend that to 2020, do you think that would 
provide some incentives for industry to deploy coal to liquid and 
other technologies?  
        MR. WARZEL.  It is helpful, but the real constraint is the 
companies that have the monies, i.e., the ExxonMobils and Shells 
that have announced their $7, $8 billion plants in Qatar are not 
coming to the U.S. right now for CTL.  What we view as being a 
smaller, small business is that for us to do it, we need an off-take 
agreement, and that is why we pushed so hard for the military.  
That is an after-the-fact incentive.  It doesn't allow me--
        MR. SHIMKUS.  I think my colleague from Arkansas addressed 
some of the DOD issues and the research, and I think that is step 
two.  I have been trying to follow this debate a lot, and I concur 
that there are two things that we need to do, one is extension of the 
excise tax credit and the other one is to look at a long-term 
purchasing agreement with a buyer.  The interesting thing we had 
about the slide, and if you notice what we did, but this is really, 
why does South Africa have coal to liquid technology?  Because 
the Government invested to help take on the risk because of the 
cost of doing this.  
        And at today's price per barrel, it is now doable.  But if you 
look at the slide, you have got the coal and it goes, look at there, 
you have got the military base for aviation fuel.  You are not 
constrained by the sea traffic of oil tankers that could be shut 
down.  We do have a strategic petroleum reserve to help address 
our national security concerns, but that is really small.  But if you 
are able to use our great coal reserves, then you have a current feed 
stock for in my case the war machines.  That is why we were very 
successful in getting Ike Skelton, the Ranking Member of the 
Armed Services Committee on our extension bill, and Duncan 
Hunter.  
        We hope to have continuing discussions about this process of 
long-term contracts by which will be the second step in ensuring 
deployment of coal to liquid.  Yes, sir.  Mr. Pratt.  
        MR. PRATT.  I would just like to add that if you are looking at 
extending the excise tax, and last August that was expanded to--for 
the fuel tax credits that were available--include natural gas.  And I 
would welcome that being extended for a longer period of time.  In 
doing so, we hopefully can encourage the automakers to bring 
those foreign available natural gas vehicles here to the U.S., be 
invested in the technology they are exporting and not bringing 
here.  I would welcome them to bring that back, and we can create 
the longer term proposition for them, for transit properties or 
refuse fleets to all go with cleaner fuels. 
        MR. SHIMKUS.  And I appreciate that.  And I will be honest 
with you.  Natural gas is always a confusing thing for a lot of us, 
because it is defined as an alternate fuel.  I mean, we know it is a 
fossil fuel.  We know it is above a lot of the crude oil, so 
sometimes a lot of us have trouble defining what that is especially 
as an alternate fuel.  I do know that we do have great concerns with 
additional users and the escalating price of natural gas, my farmers 
in the field, and that is a concern.  Manufacturers have grave 
concerns about the escalating cost of natural gas.  I believe in the 
market.  Everybody gets to the table, everybody competes, 
competition brings lower prices.  
        So with that, Mr. Chairman, my time has long expired.  I yield 
back. 
        MR. HALL.  I thank the gentleman.  The Chair recognizes the 
gentleman from Oklahoma, Mr. Sullivan.  
        MR. SULLIVAN.  Thank you, Mr. Chairman.  And I like what I 
have been hearing today.  It is very important when we are going 
to talk about energy policy and the future of energy in this country 
it is great to see people like you exploring different alternatives 
like we need to be doing.  And it is good to see John Warzel with 
Syantroleum, which is based in my district, the heart of my district, 
Tulsa, Oklahoma.  And Mr. Pratt, I don't know if you know it, but 
we have some of yours in our district too, Tom Sewell, I don't 
know if you know who he is or not.  But this it great.  
        And you know what is interesting is I always show people, and 
Congressman Shimkus has one too, bigger than mine, a thing like 
this, I mean.  You have got to be careful when you say things like 
that.  But this fuel is pretty interesting looking.  It looks like water.  
I was telling the girls back here, you could probably drink it and it 
wouldn't kill you.  And it doesn't smell like anything.  It is running 
in some buses even here in Washington, D.C., and it is very 
interesting.  
        And I was just going to ask you, John, if you could kind of 
explain the process of this and how you make the gasoline diesel 
jet fuel out of it and maybe the Department of Defense application 
of a one battle field fuel that has been talked about, a fuel that 
could be used actually in a tank as well as a jet.  
        MR. WARZEL.  In essence, as previously discussed, you are just 
reacting a carbon monoxide hydrogen stream to create a fuel.  The 
fuel is very similar to candle wax.  It is what they call a normal 
paraffin.  You then upgrade it and convert that a little bit to get the 
coal properties that the military is interested in.  Why we have 
focused so much attention on military applications is they have 
tested this fuel, and this is a quote from the senior researcher at the 
Air Force, and he has made it publicly and said, it is by far the best 
fuel they have ever tested in the military.  
        And he has been doing this for 20-plus years.  The reason is 
simply the fact that it has gotten phenomenal cold properties, 
meaning that when airplanes go up to the higher and higher 
altitudes such as the former SR-71, it doesn't freeze.  Conventional 
crude oil-based fuel will actually solidify, and that is never a good 
thing when you are 100,000 feet off the ground.  Second, it burns 
cleaner.  So therefore, you have less temperature in your exhaust, 
which reduces the maintenance cost to the military.  When they 
start looking at long-term impact, maintenance costs of their 
engines is one of the biggest cash drains.  Third to that is it reduces 
pollutants: 90-plus percent reduction in particulate matter.  Two 
aspects of that particulate matter is becoming one of the larger 
long-term health problems in congested cities such as L.A. or New 
York or Chicago.  
        Also, and they didn't go into much detail, and I guess I 
understand why, is that particulate matter is a carbon material.  It is 
soot like you see come off a candle.  That is what retains heat.  
Heat is what planes have, or radars detect the planes by.  So they 
didn't go into much detail, but it is being looked at for something 
like the F-35 joint strike fighter.  They have contacted us.  We 
have had the Navy come in to Tulsa and a lot of Air Force and 
Army for those specific military applications.  
        MR. SULLIVAN.  I think that is really--can you imagine, so on a 
battlefield, for example, we could some day have a mobile 
refinery, let's say, out on the battlefield.  Could that happen?  
        MR. WARZEL.  Depending on the location and how quickly.  
There is still work moving in that area.
        MR. SULLIVAN.  And it could be used to fuel a jet or a tank?  
        MR. WARZEL.  Yes.
        MR. SULLIVAN.  I think that is amazing.  And also, Mr. Pratt, 
compressed natural gas in vehicles, I used to sell gasoline and 
diesel fuel, and we were talking about getting an infrastructure in 
place for that, and it was in Oklahoma and a lot of people, the 
consumer would think, well, it kind of went like that when they 
pulled it off.  It scared them.  They thought they would blow up.  
But isn't it true that you--let's say an accident occurred with a gas 
vehicle, it occurred with a natural gas vehicle, wouldn't it be less 
dangerous because it would dissipate and wouldn't pool on the 
ground?  
        MR. PRATT.  Yes, sir.  That is the case.  The State of New York 
has some great anecdotal stories of a Honda Civic GX that was 
rear ended by none other than a gasoline tanker and drove the back 
tanks all the way up into the back seat.  And the safety investigator 
said if it wasn't for the natural gas tanks and the construction of 
that vehicle, the passengers would have been dead.  The safety 
protocols around natural gas are very high, well proven, and very 
safe.  I don't know if I could take a moment to address the fuel 
supply just one second.
        MR. SULLIVAN.  Sure.
        MR. PRATT.  Thank you.  Just to put it in perspective for 
everyone, if you took 11 million vehicles today, which is about 
5 percent of our vehicle fleet, that would only equate to about 
4 percent of the natural gas sent out annually.  It is a very small 
percentage to have a very big impact.  And as we look at electric 
generation today, natural gas is being market driven out of natural 
gas generation because it is the highest priced fuel over coal and 
nuclear, and so we look at that supply long term as potentially 
displacing up to 20 percent of both the gasoline and diesel 
available in the marketplace.  Thank you.  
        MR. SULLIVAN.  Thank you very much.  
        MR. HALL.  The gentleman from California, Mr. Radanovich.  
        MR. RADANOVICH.  Thank you, Mr. Chairman.  I think my 
question is going to be for you, Mr. Pacheco, but anybody else 
who wants to answer it.  I am from California and represent a large 
farming area.  It is about $35 billion, largest industry in California 
is specialty agriculture.  And in California, we have got about three 
ethanol plants that are starting to go in, which I think is good news, 
and even though there is limited amounts of corn grown in 
California the costs of production are so high, we are getting it 
from the Midwest to be brought in to fuel these ethanol plants, 
which is good news for my friend John over here.  
        But to tell you a story about California agriculture, about 
5 years ago, the price of grapes that are grown quite extensively in 
the valley went in the tank.  And usually, there is a place to sell, if 
you grow grapes you can sell it in the wine market, you can sell it 
in the juice concentrate market, or you can sell it as raisins.  And 
all three of them were just flat as a pancake.  And it would have 
been nice to have that other alternative to be able to sell it for some 
type of fuel afterwards.  
        So I am wondering, I guess my question is, and I think this is a 
methanol, as much as I know about this.  When are we going to be 
able to, in California have the option of selling some of these 250 
crops or byproducts from crops to be able to have that fuel option 
for the California ag industry?  And is it methanol?  And maybe 
you can educate me on that.
        MR. PACHECO.  No, you would be referring to ethanol in that 
case.
        MR. RADANOVICH.  It would be ethanol?  
        MR. PACHECO.  Yes.  And most of those food products, the 
sugar that is in them is fermentable directly.  So it could be a lot 
like what the Brazilians are doing with sugar cane, and what we do 
with corn so it doesn't face the hurdles that the cellulosic ethanol 
faces.  Also, in your State, you have a big rice industry, and the 
rice straw faces the same challenges that corn stover faces and that 
wood resources face, the cost of the technology to go from that 
cellulosic material.  A good way to separate it is if you can eat the 
biomass, then it is probably fermentable and would be cost 
effective.  And there are companies today that are taking waste 
from the food industry and producing fuel ethanol from them.  
        MR. RADANOVICH.  So for grapes, for the actual grape product 
you could, you are not too far away from, in the technology, being 
able to make ethanol from grapes, but it would be prunings and 
things out of the orchards or vineyards that are cellulose or lignin 
based, cellulose, those are the tougher ones to get energy out of, 
right?  
        MR. PACHECO.  Exactly.  In fact, I understand Europeans face 
the same issue, and some years when the wine is in true excess, the 
same technology that is used to make wine is, in fact, the 
technology that is used to make fuel ethanol, things like corn grain 
or potatoes or waste grapes.
        MR. RADANOVICH.  That is interesting.  Thank you.  Mr. Pratt, 
real quick question.  You had mentioned the natural gas 
infrastructure is more suitable, or would be a step toward a 
hydrogen-based economy.  Is that because you can mix the fuels in 
the same tank, or why is that for natural gas and not for anything 
else?  
        MR. PRATT.  Good question.  There are several layers to that.  
First, building the infrastructure is very similar to building a pure 
hydrogen station infrastructure.  So it gets all of our city officials 
and fire departments with longstanding experience in natural gas 
familiar with permitting natural gas stations and then that carries 
over to hydrogen.  Second, for societal experiences, as we heard 
from Mr. Sullivan, the experience on filling a vehicle up or filling 
a bus or refuse truck up on natural gas is handling a gaseous fuel.  
Now, it is all very safe.  It is a quick connect type of connection on 
to your vehicle.  But that is a different fueling experience than 
gasoline.  In fact, some people who fill with natural gas for a long 
period of time, I drive a natural gas vehicle every day and have 
been since 1998, after you go to a gasoline station, the most 
notable thing is you can smell the gasoline.  You don't smell 
anything with natural gas.  That experience carries over into all the 
rest of the societal experiences of body mechanics, auto parts 
maintenance, all of that has to become familiar with gaseous fuels 
to get to a hydrogen future.  
        And finally, on the station itself, the stations can be 
accommodated with booster compressors to include delivery of 
blended natural gas, a 20 percent blend of hydrogen into natural 
gas by volume will reduce emissions by 50 percent.  So it takes 
any car, or bus, or truck and makes it even cleaner.  And then you 
can also sell pure hydrogen as well.  So the stations have multi-
level societal experiences that are important to continuing over, 
carrying over the hydrogen experience.  
        MR. RADANOVICH.  Thank you.  And real quickly if I might, 
just one more brief question.  You had mentioned that it takes 
about what, 9 months to a year to convert a station or to add 
natural gas to a regular facility, petroleum facility.  Is that just 
because it is the normal course of constructing, probably take just 
as long to add a gasoline station to a particular site, right?  
        MR. PRATT.  That is correct.  And when we have compressors 
in stock, and we have some of our pre-packaged skids in stock, we 
can install it in 6 months.  And that is pretty much the permitting 
process and getting out the contracts all agreed to.
        MR. RADANOVICH.  I see.  Okay.  Thank you.  
        MR. PRATT.  Thank you. 
        MR. HALL.  Well, thank you.  The Chair recognizes the 
gentleman from Kentucky, Mr. Whitfield.  
        MR. WHITFIELD.  Mr. Chairman, thank you very much.  And I 
know you all have had quite an interesting and informative 
hearing, and I apologize very much for not being here earlier.  But 
I did have a few questions I would like to ask certainly, Mr. 
Hughes, with the National Biodiesel Board.  Certainly, at this time, 
with the energy prices being what they are, all of us are focusing 
on alternative fuel sources and certainly biodiesel is one of those.  
But Mr. Hughes, does the President appoint the members of the 
National Biodiesel Board?  How is it determined who sits on that 
board?  
        MR. HUGHES.  The National Biodiesel Board is a membership 
organization, so anybody who is a dues-paying member is a 
member of the National Biodiesel Board.  And then they have an 
election process for their governing board which is voted on by the 
full membership.  
        MR. WHITFIELD.  Okay.  Now it is my understanding that the 
ASTM standards became effective because of the American Job 
Creation Act of 2004.  Is that correct?  Or is that not correct?  
        MR. HUGHES.  No, the ASTM process, we actually started back 
in the late 1990s working with the engine makers, automakers who 
saw biodiesel starting to grow and becoming more prevalent in the 
marketplace, and they wanted to make sure that there was a 
national standard in place for kind of uniformity for a product.  
And that started, like I said, in the late 1990s.  They put in a 
provisional spec, I believe it was in 1999.  December of 2001, I 
believe, that was when the ASTM standard D 6751 was actually 
adopted and put into place.  It was in 2001.  
        MR. WHITFIELD.  It was adopted by the board or was it adopted 
by--
        MR. HUGHES.  No, the National Biodiesel Board does not 
develop the ASTM standard.  That is the American Society of 
Testing and Materials that does the ASTM standard.  They 
developed that.  We work with stakeholders, and ASTM for 
development of a standard.
        MR. WHITFIELD.  But is it a part of Federal statute today?  
        MR. HUGHES.  It is, yes, sir.
        MR. WHITFIELD.  And that was adopted in which Act?  
        MR. HUGHES.  That was included in the Jobs Act.
        MR. WHITFIELD.  So it became a Federal statute, those 
standards, in the Job Creation Act of 2004?  
        MR. HUGHES.  It became, it was included, it has actually been 
included, I believe, in other places, but that was the one that comes 
to mind.  It was in the Jobs Act as one of the requirements that 
must be met in order for a fuel biodiesel to be eligible for the fuels 
tax credit, the blenders tax credit.  
        MR. WHITFIELD.  And of course the board, which I certainly 
understand, will support only those technologies that meet those 
standards, the ASTM 6751 standard, of course, but there are, I am 
aware of more than one biodiesel producer who has come up with 
a fuel that, from at least the scientific evidence that I have seen, is 
actually cleaner burning with more BTUs, but because it doesn't 
meet that standard, cannot be approved.  And it seems to me that at 
a time when we are trying to do everything possible to encourage 
more development, that being very rigid on this standard can be 
counterproductive at times.  Would you agree with that or not 
agree with that?  
        MR. HUGHES.  Well, the National Biodiesel Board absolutely, 
100 percent supports domestic fuels, renewable, and other 
domestic fuels.  The automakers and engine makers and 
components manufacturers, when it comes to biodiesel, they 
wanted to have a very specific standard for what is biodiesel, so 
when people are selling biodiesel, there is uniformity in the 
marketplace about what this is.  We absolutely support any kind of 
a domestic fuel that has gone through the health effects testing, that 
has gone through an ASTM process and those kind of things, 
absolutely, sir.  
        MR. WHITFIELD.  Well, Mr. Chairman, I will yield back the 
balance of my time.  I do think that this matter is so important that, 
while this legislation that has formalized the standard was adopted 
in the Job Creation Act, I do think that may be something that 
maybe our Energy Committee could look at as well, because I 
think we have a vested interest in this issue.  And I want to thank 
all of you for your testimony today and the great leadership you are 
providing.  Thank you.  
        MR. HALL.  Thank you.  The gentleman said it all.  We 
appreciate you.  We thank you for your time and thank you for 
your ability to give us information on which to base good 
legislation.  You are dismissed.  The subcommittee is adjourned. 
        [Whereupon, at 3:58 p.m., the subcommittee was adjourned.] 

RESPONSE FOR THE RECORD BY SUSAN M. CISCHKE, VICE 
PRESIDENT, ENVIRONMENT AND SAFETY ENGINEERING, FORD 
MOTOR COMPANY

 

                   Questions for the Record
                     To Susan M. Cischke
              From The Honorable Henry A. Waxman


1. On June 7, 2005, eleven national science academies issued a 
joint statement entitled "Joint science academies' statement:  
Global response to climate change."  The joint statement was 
issued by the science academies of the United States, Brazil, 
Canada, China, France, Germany, India, Italy, Japan, Russia 
and the United Kingdom.  It can be reviewed online at the 
National Academy of Sciences website:  
http://www.nationalacademies.org/onpi/06072005.pdf.  The 
statement begins:

        Climate change is real
There will always be uncertainty in understanding a 
system as complex as the world's climate.  However, there 
is now strong evidence that significant global warming is 
occurring.  The evidence comes from direct measurements 
of rising surface air temperatures and subsurface ocean 
temperatures and from phenomena such as increases in 
average global sea levels, retreating glaciers, and changes 
to many physical and biological systems.  It is likely that 
most of the warming in recent decades can be attributed to 
human activities (IPCC 2001).  This warming has already 
led to changes in the Earth's climate.

The statement proceeds to state:

        We urge all nations . to take prompt action to reduce the 
causes of climate change, adapt to its impacts and ensure 
that the issue is included in all relevant national and 
international strategies.

        As the joint statement makes clear, climate change is clearly 
an issue of great importance to every nation on the planet.  
Given the substantial greenhouse gas emissions attributable to 
the transportation sector, climate change should clearly be a 
major factor in any discussion about the next generation of 
vehicles and fuels.  Unfortunately, climate change was not 
meaningfully discussed at the May 24, 2006 hearing.  
Accordingly, please provide answers to the following 
questions:

        a. Does Ford Motor Company agree that the joint statement 
represents the prevailing scientific views on climate 
change?

        Ford Motor Company has publicly stated and published in 
our Climate Change Report our view on climate change.  
We recognize that some key conclusions have earned 
widespread support by scientists, policy makers and 
business leaders and therefore define the assumptions 
underpinning our approach to climate change.  These 
conclusions are compelling enough to serve as a framework 
for our analysis and planning.  For example:

	 The growing weight of evidence holds that man-made 
greenhouse gas emissions are starting to influence 
significantly the world's climate in ways that affect all 
parts of the globe.

	 Many scientists, businesses and governmental agencies 
have concluded that stabilizing the atmospheric CO2 
concentration at around 550 parts per million may help 
forestall or substantially delay the most disruptive 
aspects of global climate change.

        It is in the interest of society and business to reduce the 
uncertainty and increase the predictability of policy 
frameworks and market conditions around the issue of 
climate change.  Ford Motor Company is committed to 
participating in a dialogue on energy policy and 
greenhouse gas emissions that promotes more energy 
security and lower GHG emissions across the entire 
economy, while ensuring stable economic growth and the 
viability of our business.

        b. Does Ford Motor Company agree that it is the prevailing 
scientific view that "the threat of climate change is clear 
and increasing"?

        See answer to 1a.

        c. Does Ford Motor Company agree that it is the prevailing 
scientific view that "there is now strong evidence that 
significant global warming is occurring"?

        See answer to 1a.

        d. Does Ford Motor Company agree that it is the prevailing 
scientific view that "most of the warming . can be 
attributed to human activities"?

        See answer to 1a.

        e. If Ford Motor Company disagrees with the joint statement, 
or a portion of the joint statement, based on a scientific 
disagreement, please identify the portion of the statement 
with which Ford Motor Company disagrees and explain 
the scientific basis for the disagreement.  Please provide 
references to any published, peer-reviewed studies that 
form the basis for Ford Motor Company's disagreement.

        See answer to 1a.

2. The joint statement referenced in question 1 also recommends 
taking action to reduce the causes of climate change.  It states:

        The scientific understanding of climate change is 
sufficiently clear to justify nations taking prompt action.  It 
is vital that all nations identify cost-effective steps that 
they can take now, to contribute to substantial and long-
term reduction in net global greenhouse gas emissions.

        It goes on to state:

        Action taken now to reduce significantly the build-up of 
greenhouse gases in the atmosphere will lessen the 
magnitude and rate of climate change.  As the United 
Nations Framework Convention on Climate Change 
(UNFCCC) recognizes, a lack of full scientific certainty 
about some aspects of climate change is not a reason for 
delaying an immediate response that will, at a reasonable 
cost, prevent dangerous anthropogenic interference with 
the climate system.

        Fortunately, the scientific academies report that "there are 
many potentially cost-effective technological options that 
could contribute to stabilizing greenhouse gas concentrations."  
They also warn that "failure to implement significant 
reductions in net greenhouse gas emissions now, will make the 
job much harder in the future."

        In order to understand Ford Motor Company's views on 
reducing the causes of climate change, please provide answers 
to the following questions.

        a. Does Ford Motor Company agree that current scientific 
understanding of climate change justifies nations "taking 
prompt action"?

        In June 2005, Ford Motor Company participated in the G8 
Climate Change Roundtable.  Among other assertions, this 
group stated "We agree that science is sufficiently 
compelling to warrant action by both the private and 
public sector, and we acknowledge that, because of the 
cumulative nature and long residence time of greenhouse 
gases in the atmosphere, action must be initiated now."

        Ford Motor Company published the industry's first report 
dedicated to the issue of climate change and its effect on 
our business as well as the automotive industry as a whole.  
The report can be found at 
www.ford.com/en/company/about/sustainability).  In this 
report, we describe our approach to GHG stabilization, 
which is based on four key principles:

	 First, technical, economic and policy approaches to 
climate change need to recognize that all CO2 molecules 
(or GHG equivalents) produced by human activity make 
the same contribution to the atmosphere's concentration 
of greenhouse gases.  The cost of mitigating those 
emissions, however, varies significantly depending on 
their source, and economically efficient decisions about 
how to reduce emissions depend on transparent cost 
signals.

        The relatively high costs of emission reduction make it 
important that control policies be as efficient as possible, 
which implies that the marginal costs of compliance be 
equalized across all sectors.  A pure pro-rata assignment 
of burden for reducing GHG emissions across individual 
sectors without the ability to trade-off costs and benefits 
may not be the most appropriate response.

	 Second, the auto industry represents a closely 
interdependent system, characterized by the equation:  
fuel + vehicle + driver = GHG emissions.  Each link in 
this chain depends on the other.  Automakers can 
produce a range of products to use fuels with varying 
carbon content; however, operating those vehicles on 
alternative fuels will require energy providers to bring 
the fuels to market and consumers to demand the vehicle 
and fuel.  In a system in which no single player controls 
all inputs, changes in output - in this case GHG 
emissions - will require unprecedented coordination 
across all sectors.

	 Third, the future developments of technologies, markets 
and political expectations are all uncertain.  Accordingly, 
the business strategies we implement - and the public 
policies that we encourage - must be based on the 
flexibility to meet a range of potential scenarios.  We 
know that almost any scenario will call for reduced GHG 
emissions, but inside that broad directional expectation 
lie a host of conflicting possibilities.  For example, will 
hydrogen, bio-fuels, battery electricity, diesel or some 
combination emerge as the powertrain technology of 
choice?  Will the emerging markets of China and India 
pursue a unique path toward lower GHG emissions in 
their road transport sectors?

	 Finally, Ford supports taking early affordable steps to 
reduce GHG emissions.  Lack of agreement on long-term 
solutions cannot be used as an excuse to avoid reasonable 
near term actions that provide the flexibility to account 
for a range of potential technological, market and 
political outcomes.

        b. Does Ford Motor Company agree that it is "vital" that all 
nations "identify cost-effective steps that they can take 
now, to contribute to substantial and long-term reduction 
in net global greenhouse gas emissions"?

        Yes, see response to 2a.

        c. Does Ford Motor Company agree that "a lack of full 
scientific certainty about some aspects of climate change is 
not a reason for delaying an immediate response that will, 
at a reasonable cost, prevent dangerous anthropogenic 
interference with the climate system"?

        Yes, see response to 2a.

        d. Does Ford Motor Company agree that "failure to 
implement significant reductions in net greenhouse gas 
emissions now, will make the job much harder in the 
future"?

        Yes, see response to 2a.

        e. What actions can be taken now "to contribute to 
substantial and long-term reduction in net global 
greenhouse gas emissions"?  What actions does Ford 
Motor Company anticipate can be taken in 5 years?  How 
about 10 years?

        Ford Motor Company is participating fully in the larger 
public dialogue on actions required by governments, 
businesses and individuals to address climate change.  

        We believe that policies that put constraints on carbon 
need to focus on all sectors of the economy.  They should 
encourage conservation and the introduction of lower-
carbon and renewable-carbon fuels and energy sources, 
while increasing the demand for more energy efficient 
products across all sectors at the lowest possible social cost 
and at a pace consistent with technology maturation, 
consumer demand and economic viability.  These policies 
need to be implemented in ways that mitigate any related 
transitions to avoid economic disruptions and unnecessary 
costs, with incentives playing a key role.

        Future reduction programs should be based on upstream 
carbon trading systems that gradually reduce the limits on 
carbon introduced into the economy.  In addition, they 
must include a safety valve that is based on 
economic/energy indicators that would allow for the 
release of additional emission allowances at reasonable 
prices to avoid unintended constraints on economic 
growth, maintain price stability and protect vital economic 
growth and social development needed to help spur 
demand for more efficient products and support long-term 
investment, research and innovation.

        f. What actions can be taken now in the transportation sector 
"to contribute to substantial and long-term reduction in net 
global greenhouse gas emissions"?  What actions does 
Ford Motor Company anticipate can be taken in that sector 
in 5 years?  How about 10 years?

        Within the transportation sector, vehicle, fuels and fuel-use 
must be addressed as a system.  Policies need to encourage 
the use of lower-carbon and renewable-carbon fuels and 
energy (e.g., bio-ethanol fuels and blends) through 
favorable market signals and incentives, as well as 
encourage energy efficiency, carbon sequestration 
initiatives, offsets, and credits across all phases of the 
energy value chain.  

        A properly structured, upstream system would allow all 
sectors of the economy to respond to the market signals 
and pursue the most cost-effective solutions to improve 
energy conservation and energy efficiency.  From a 
transportation point of view, an effective system would 
require gradual but substantial changes in our product 
and technology mix to remain consistent with shifting 
consumer demand for more efficient products.

        Initial policies can provide a foundation to help reduce 
GHGs.  For example, educating consumers on their role - 
through programs like eco-driving training - will be a very 
important part of a comprehensive and consistent market-
based solution.  A person who drives in an energy-
conscious way - by avoiding excessive idling, unnecessary 
bursts of acceleration and anticipating braking - can enjoy 
much better fuel consumption today.  Government can 
play a key role in raising public awareness.  Public 
awareness is a simple and effective early step to reduce 
GHGs, which is why we have introduced driver training 
programs in Europe and developed on-line training for all 
Ford Motor Company employees.

        We also must focus on vehicle performance through 
advanced technology research and development, as well as 
manufacturing incentives and investments that reach to 
suppliers and OEMs.  Finally, we must continue to pursue 
policies that improve road transport and infrastructure 
(e.g. mass transit) by reducing congestion and fuel 
consumption through improved traffic flow.  An early step 
that can be taken already by municipal governments is 
traffic light synchronization to reduce overall vehicle idle 
time.

        g. What actions can be taken now by Ford Motor Company 
"to contribute to substantial and long-term reduction in net 
global greenhouse gas emissions"?  What actions does 
Ford Motor Company anticipate can be taken in 5 years?  
How about 10 years?

        There are no simple solutions, and open debate among all 
the diverse stakeholders is necessary.  A long-term solution 
will take time to evolve, but we also believe that early 
foundational policies can help reduce GHGs.  

        Ford Motor Company has announced publicly several 
product actions that will increase the number of higher 
fuel economy, lower GHG emissions vehicles available to 
our customers.  For example, we have announced plans to 
continue our leadership in ethanol powered flexible fuel 
vehicles.  

        We are also expanding the application of existing 
technologies that deliver fuel economy benefits including 
variable valve timing, fuel shut off, direct injection gasoline 
engines, clean diesel and six-speed transmissions.  
Additionally, we are increasing our investment in a 
portfolio of technologies that deliver improved fuel 
economy and lower GHG emissions, including:
	 Weight stabilization and reduction
	 Expanded FFV vehicles and partnerships with fuel 
providers to increase infrastructure
	 Gasoline engine downsizing, combined with Direct 
Injection Spark Ignition (DISI) and pressure charging
	 Hybrid gasoline powerpacks, shared among the 
brands
	 Clean diesels and the technology to allow them to run 
on bio-diesel above 5% blends
	 Hydrogen Internal Combustion Engine (ICE) 
demonstration fleets
	 Hydrogen fuel cell research and demonstration fleets.

        h.	As an international business entity, please explain how 
your approach to climate change varies by the nation in 
which you are operating?  For example, compare your 
approach in the European Union to the United States, and 
the United State to China.

        The issue of climate change is closely related to the equally 
pressing issues of energy security and fuel prices (which 
drive market behavior).  GHG emissions are a common 
currency for all of these issues; however, international 
approaches to customer and policy priorities differ around 
the world.
 
        Ford Motor Company recognizes these differing customer 
and policy priorities and varies our approaches 
accordingly.  For example, our voluntary agreement as 
part of ACEA in Europe has been focused directly on CO2 
reduction.  Our aggressive investment in hybrid 
production in the U.S. has been driven, in part, by 
consumer demand for more fuel efficient vehicle choices 
and innovative technologies.  Our support for an expanded 
bio-ethanol infrastructure in the U.S. is underpinned by 
the call for less dependence on imported oil.  China has 
adopted weight-based fuel consumption standards for 2005 
with more stringent requirements set for 2008 vehicles.  
Each of these initiatives results in lower CO2 emissions, 
but emerges from different market and policy priorities.

        3.About 20% of the United States' greenhouse gas emissions are 
emitted by light duty vehicles.

        a. Does Ford Motor Company believe that the United States 
government should act to require a reduction of 
greenhouse gas emissions from light duty vehicles?

        Ford Motor Company believes that government support is 
needed with near-term actions, such as consumer 
education on eco-driving and incentives to increase E-85 
infrastructure.  

        Longer-term, government action on GHGs must include 
all sectors of the economy, including the other 80% of the 
contributors.  Even a substantial reduction of GHGs from 
the gasoline sector would have minimal impact on GHGs 
without including emissions from other fuel sources.   
Beyond the auto industry, producers of natural gas, coal 
and even other petroleum products must be part of the 
solution.

 

        Further, a simple pro-rata assignment of burden for 
reducing GHG emissions may not be the most appropriate 
response and will likely result in economic waste. All CO2 
molecules produced by human activity contribute equally 
to the atmospheric concentration of CO2; however, the 
cost of mitigating those emissions can vary significantly 
across sectors of the economy.

        b. If so, please discuss what requirements Ford Motor 
Company would consider reasonable to reduce greenhouse 
gas emissions while providing adequate time for 
adaptation by the auto industry.  What is an appropriate 
timeframe for a requirement?  What substantive 
requirements would Ford Motor Company suggest?

        Reduction programs should be based on upstream, carbon 
trading systems that gradually reduce the limits on carbon 
introduced into the economy.  This approach will most cost 
effectively involve all sectors of the economy and eliminate 
the need to regulate and enforce each sector/industry 
uniquely.  The upstream system must include a safety valve 
that is based on economic/energy indicators that would 
allow for the release of additional emission allowances at 
reasonable prices to avoid unintended constraints on the 
economy, maintain price stability and protect vital 
economic growth and social development needed to help 
spur demand for more efficient products and support long-
term investment, research and innovation.

        c. If Ford Motor Company does not believe that the United 
States government should act to require a reduction of 
greenhouse gas emissions from light duty vehicles, please 
explain what alternative approach Ford Motor Company 
suggests for reducing greenhouse gas emissions.

        See answers to 3a and 3b.



RESPONSE FOR THE RECORD BY WILLIAM REINERT, NATIONAL 
MANAGER, ADVANCED TECHNOLOGY GROUP, TOYOTA MOTOR 
SALES, USA, INC.


July 21, 2006


The Honorable Henry A. Waxman
Committee on Energy and Commerce
U.S. House of Representatives
c/o Mr. Peter Kielty
Legislative Clerk
2323 Rayburn House Office Building
Washington, DC 20515-6115

Dear Representative Waxman:

Thank you for your thoughtful questions and your committee's 
interest in Toyota's views on climate change.  We are pleased to 
have this opportunity to share our understanding and some of our 
current thinking on this important issue.

Toyota recognizes the broad and growing scientific consensus that 
climate change is occurring.  Although some uncertainties remain, 
we also understand that the majority scientific opinion links 
anthropogenic activities to increases in Earth surface temperatures, 
and that these activities, considered in total, appear to be having a 
significant impact on global climate.  Toyota also observes that the 
majority of the scientific community believes that both immediate 
and long term strategies and policies to reduce the impacts of 
climate change must be considered.  

Although there appears to be growing alignment in the scientific 
community about the problem, there appears to be much less 
consensus on solutions.  The prioritization of mitigation and 
adaptation options and objectives, the relationship between short-
term and long-term greenhouse gas reduction activities, the design 
and viability of a global response - these are just a few of the key 
questions that are open to significant public debate.   

Toyota Action

Although these types of critical questions and considerations 
remain, Toyota has long considered it prudent to look for ways to 
help reduce the impact of greenhouse gas emissions from our 
products and from our business operations. 



The greenhouse gas impact from motor vehicles is inexorably 
linked to their fuel economy.  As to Toyota's fleet in the United 
States, we have exceeded the Corporate Average Fuel Economy 
(CAFE) standards since their inception in 1978. In 2005 (the latest 
year for which complete public data are available), our combined 
car and truck CAFE was 28.9 MPG, exceeding the combined 
average of the rest of industry by 4.1 MPG, or nearly 17%.  
Further, we support the National Highway Traffic Safety 
Administration (NHTSA) raising future CAFE requirements for 
both cars and trucks and, indeed, in our comments on the recently 
promulgated light truck rule encouraged NHTSA to immediately 
undertake another multiyear rulemaking for trucks.  

 

Our commitment to reducing the greenhouse gas footprint of our 
products does not stop there, however--energy conservation and 
energy efficiency are core considerations in the full life cycle of 
our business.  To this end, we also participate in the Department of 
Energy's 1605(b) program, and have been reporting our 
greenhouse gas emissions from our U.S. manufacturing operations 
since 2003. In addition, we set an internal target to reduce energy 
consumption, and thus CO2, from our North American 
manufacturing operations by 15% per unit of production by 
FY2005 compared to a baseline year of 2000.  We achieved our 
15% reduction target two years ahead of schedule and are in the 
process of developing a new, even more challenging target.

 

We also have set targets to reduce energy use and track greenhouse 
gas emissions generated during the sales and distribution of our 
products.  In March 2005, we achieved our goal to reduce energy 
use from this part of our business by 15%, and we set a new target 
of 20% reduction (compared to 2000 base year).  In addition, we 
have developed a greenhouse gas inventory using a protocol 
developed by the World Business Council for Sustainable 
Development (WBCSD).

All of the goals and targets for Toyota's North American 
operations are contained in our 5-Year Environmental Action plan, 
which is published annually in our North American Environmental 
Report. This year's report, scheduled to be published in November 
2006, will contain an all new set of goals and targets that we will 
work to achieve over the next 5-year period.

Advanced Vehicle Technology and Alternative Fuels

As we work with these federal and voluntary programs and exceed 
federal fuel economy requirements, Toyota is also committed to 
developing and marketing advanced vehicle technology to address 
global climate change and the growing demand for fossil fuels.  
With these concerns in mind, the Prius and Toyota hybrid 
technology were launched in 1997 in Japan and in the U.S. market 
in 2000 (and at a time when gasoline hovered around $1 a gallon). 
Toyota sees hybrid technology as a core technology for the future 
that will increase the fuel efficiency and reduce the environmental 
impact of gasoline powered vehicles, as well as an essential and 
enabling element of future powertrains. Toyota pioneered the 
market development for hybrid vehicles and has sold over 600,000 
hybrids globally with more that 300,000 of them being sold in the 
United States.  We have previously announced the goal of hybrid 
sales in excess of 1,000,000 each year, starting in the early part of 
the next decade. We also have announced our intention to advance 
our research and development of plug-in hybrid vehicles. 

We also continue to explore the use of alternative fuels, including 
biofuels (ethanol) and hydrogen. We have hydrogen fuel cell 
demonstration programs in place in California, and are considering 
introducing flex-fuel vehicles in an effort to promote bioethanol 
fuels. Further into the future, we also continue to look to hydrogen 
fuel cells to one day replace traditional combustion engines.   
Other Sectors and Other Markets

Our primary business falls within the transportation sector; 
therefore, we do not have a formed opinion over how other sectors 
should be addressed.  Toyota does, however, recognize that there 
may be serious challenges ahead in shifting away from fossil fuels.  
In this sense, we encourage the move to more renewable fuel 
sources and practices in the production of electricity, hydrogen, 
biofuels or gasoline.  How fuels are produced and distributed is 
perhaps the key factor in determining the life cycle greenhouse gas 
impact of specific vehicle powertrain options.

As an automaker, Toyota believes its primary responsibility is to 
optimize the fuel efficiency of our products.  We must accomplish 
this, however, while also keeping our customers' needs and local 
markets in mind.  Toyota responds to the regulatory climate and 
market forces in each market where we do business.  In every case 
we meet, and most times exceed, all applicable regulatory 
requirements.  We believe that some markets, like the European 
Union and Japan, have long been shaped by regulatory and tax 
policies that favor carbon-equivalent reduction strategies based 
upon high fuel taxes.  Many economists believe that these policies 
have led to market conditions that favor smaller, more fuel 
efficient vehicles, and Toyota products in these regions reflect 
these preferences.

Similar conditions do not currently exist within the United States.  
In-use conditions and fuel prices are much different and reflect a 
different set of customer priorities.  Market conditions in the 
United States have historically favored larger, gasoline-fueled 
vehicles and a full line of vehicle offerings.  Again, Toyota's 
products within the United States reflect these conditions.  
However, Toyota strives to provide class-leading fuel economy in 
each market segment in which we compete.

Reducing In-Use Impacts and Fostering Technology 
Development

While we certainly have control over our product offerings, 
automakers' have little control over fuel supply, distribution and 
pricing.  In addition, although we can (and do) play a role in 
fostering consumer interest in fuel economy, we also cannot dictate 
how - and how much - consumers use our vehicles.  Toyota 
considers it worthwhile, therefore, for society to look for additional 
ways to influence how automobiles are used by the American 
public.  As examples, in-use impacts might  be reduced through  
smarter land use planning, increased reliance on mass transit and 
the greater use of so-called "intelligent transportation systems" to 
reduce traffic congestion and gridlock.  There may also be merit in 
additional government policy designed to foster consumer interest 
in advanced technology and fuel efficient vehicles, such as tax 
credits for hybrids.  

We also encourage the federal government to continue to play a 
leadership role in the development of alternatives to the internal 
combustion engine and conventional fuels.  Hybrids, "clean" 
diesel, biofuels, hydrogen - these are just a few possible pathways 
that show promise for addressing both climate change and energy 
diversity.   The federal government can continue to help these 
nascent technologies find their way into the mainstream. 
Addressing climate change will require some fundamental changes 
in how we view and use energy. There are certainly ways that 
energy conservation and energy efficiency can have positive 
economic effects for businesses and consumers, but it is critical 
that any mandatory requirements on business or on our society be 
viewed with the additional prism of economic impact.  We believe 
it critical that any government requirements be designed to 
distribute the burden for climate change impacts across multiple 
sectors, while also recognizing prior and voluntary action.  We 
therefore generally support energy intensity and performance 
based standards (such as the existing CAFE standards), as opposed 
to absolute caps or other limits that may penalize growing 
companies or companies that have taken early voluntary action to 
reduce their greenhouse gas impacts.

Continued Collaboration and Innovation

Toyota also strongly believes that addressing climate change and 
energy diversity in a meaningful way will require collaboration.  
Toyota is investing time, funding and know-how to joint efforts 
designed to respond to climate change and help diversify energy.   
These cooperative efforts include joint research projects with 
universities on climate change reduction technologies and 
participation in global and U.S. policymaking organizations, but 
we are also engaged in strategic alliances with energy providers to 
explore advanced technologies and alternative fuels.  We are also 
sharing our advanced hybrid technology with other automakers.

Tackling climate change and fostering energy diversity calls for 
careful deliberation and balancing with other priorities, but it also 
demands innovation, unconventional thinking and most of all, 
action.  Toyota is committed to continued action to do its share to 
help solve these challenges, and to exploring multiple pathways to 
achieving sustainable mobility.  Toyota continues its search for 
cost-effective, mass market solutions, and we encourage the U.S. 
government to continue to foster the flexibility and innovation that 
our industry - and our society--will need to reduce the greenhouse 
gas impact of the automobile. 

Thank you again for your interest in our views, and this 
opportunity to share some of our current thinking with you.

Sincerely yours, 



Bill Reinert
National Manager
Toyota Motor Sales, U.S.A.

RESPONSE FOR THE RECORD BY ELIZABETH LOWERY, VICE 
PRESIDENT, PUBLIC POLICY CENTER, GENERAL MOTORS


June 28, 2006


Congressman Ralph M. Hall						                                         
FE-6313
Chairman, Subcommittee on Energy and Air Quality
Committee on Energy and Commerce
U.S. House of Representatives
2323 Rayburn House Office Building
Washington, DC 20515-6115

Dear Congressman Hall:

Thank you for the opportunity to appear before the Subcommittee 
on Energy and Air Quality on Wednesday, May 24, 2006 at the 
hearing entitled "Vehicle and Fuels Technology: Next 
Generation."

General Motors Corporation is pleased to provide the attached 
responses to the follow-up questions that you sent us in your letter 
of June 9, 2006.

If you have any questions regarding this material, please let me 
know.


Sincerely,
	




Attachment

c:   Peter Kielty, Legislative Clerk (Fax 202-225-2899)	


The Honorable Henry A. Waxman

1. On June 7, 2005, eleven national science academies issued a 
joint statement entitled, "Joint science academies' statement:  
Global response to climate change."  The joint statement was 
issued by the science academies of the United States, Brazil, 
Canada, China, France, Germany, India, Italy, Japan, Russia, 
and the United Kingdom.  It can be reviewed online at the 
National Academy of Sciences website: 
http://www.nationalacademies.org/onpi/06072005.pdf.  The 
statement begins:

Climate change is real
There will always be uncertainty in understanding a system 
as complex as the world's climate.  However there is now 
strong evidence that significant global warming is 
occurring.  The evidence comes from direct measurements 
of rising surface air temperatures and subsurface ocean 
temperatures and from phenomena such as increases in 
average global sea levels, retreating glaciers, and changes 
to many physical and biological systems.  It is likely that 
most of the warming in recent decades can be attributed to 
human activities (IPCC 2001).  This warming has already 
led to changes in the Earth's climate.

The statement proceeds to state:

We urge all nations . . . to take prompt action to reduce the 
causes of climate change, adapt to its impacts and ensure 
that the issue is included in all relevant national and 
international strategies.

As the joint statement makes clear, climate change is clearly an 
issue of great importance to every nation on the planet.  Given 
the substantial greenhouse gas emissions attributable to the 
transportation sector, climate change should clearly be a major 
factor in any discussion about the next generation of vehicles 
and fuels.  Unfortunately, climate change was not meaningfully 
discussed at the May 24, 2006, hearing.  Accordingly, please 
provide answers to the following questions:

        a. Does General Motors agree that the joint statement 
represents the prevailing scientific views on climate 
change?

We are not experts in climate science, and thus are not 
in a position to judge the accuracy of the joint 
statement.  However, we are aware that the 
concentration of greenhouse gases in the atmosphere is 
increasing.  For this and other reasons, we are taking 
appropriate steps to reduce energy use and greenhouse 
gas emissions from our facilities and products.  
Development of advanced technologies for vehicles 
and manufacturing and alternative fuels are critical 
parts of this process.

        b. Does General Motors agree that it is the prevailing 
scientific view that "the threat of climate change is clear 
and increasing"?
 
See response to question 1a.

        c. Does General Motors agree that it is the prevailing 
scientific view that "there is now strong evidence that 
significant global warming is occurring"?

See response to question 1a.

        d. Does General Motors agree that it is the prevailing 
scientific view that "most of the warming . . . can be 
attributed to human activities"?

See response to question 1a.

        e. If General Motors disagrees with the joint statement, or a 
portion of the joint statement, based on a scientific 
disagreement, please identify the portion of the statement 
with which General Motors disagrees and explain the 
scientific basis for the disagreement.  Please provide 
references to any published, peer-reviewed studies that 
form the basis for General Motors's disagreement.

See response to question 1a.

2. The joint statement referenced in question 1 also recommends 
taking action to reduce the causes of climate change.  It states:

The scientific understanding of climate change is 
sufficiently clear to justify nations taking prompt action.  It 
is vital that all nations identify cost-effective steps that they 
can take now, to contribute to substantial and long-term 
reduction in net global greenhouse gas emissions.

It goes on to state:

Action taken now to reduce significantly the build-up of 
greenhouse gases in the atmosphere will lessen the 
magnitude and rate of climate change.  As the United 
Nations Framework Convention on Climate Change 
(UNFCCC) recognises, a lack of full scientific certainly 
about some aspects of climate change is not a reason for 
delaying an immediate response that will, at a reasonable 
cost, prevent dangerous anthropogenic interference with the 
climate system.

Fortunately, the scientific academies report that "there are many 
potentially cost-effective technological options that could 
contribute to stabilising greenhouse gas concentrations."  They 
also warn that "failure to implement significant reductions in 
net greenhouse gas emissions now, will make the job much 
harder in the future."

In order to understand General Motors's views on reducing the 
causes of climate change, please provide answers to the 
following questions.

        a. Does General Motors agree that current scientific 
understanding of climate change justifies nations "taking 
prompt action"?

See response to question 1a above.

        b. Does General Motors agree that it is "vital" that all nations 
"identify cost-effective steps that they can take now, to 
contribute to substantial and long-term reduction in net 
global greenhouse gas emissions"?

Climate change is a global issue.  Appropriately 
addressing concerns about climate change will require 
global involvement.

        c. Does General Motors agree that "a lack of full scientific 
certainty about some aspects of climate change is not a 
reason for delaying an immediate response that will, at a 
reasonable cost, prevent dangerous anthropogenic 
interference with the climate system"?

See response to question 1a.

        d. Does General Motors agree that "failure to implement 
significant reductions in net greenhouse gas emissions now, 
will make the job much harder in the future"?

GM believes the most effective way to improve energy 
efficiency and reduce greenhouse gas emissions is the 
development and global implementation of cost-
effective energy technologies in all sectors.  We are 
working hard to accomplish this in the products that we 
make and sell worldwide and in the facilities that we 
operate.

        e. What actions can be taken now "to contribute to substantial 
and long-term reduction in net global greenhouse gas 
emissions"?  What actions does General Motors anticipate 
can be taken in 5 years?  How about 10 years?

The basic challenge is to meet the world's growing 
demands for energy and mobility necessary to sustain 
economic growth while also addressing long-term 
concerns about the environment.  GM believes the most 
effective way to improve energy efficiency and reduce 
greenhouse gas emissions is the development and 
global implementation of cost-effective energy 
technologies in all sectors.

        f. What actions can be taken now in the transportation sector 
"to contribute to substantial and long-term reduction in net 
global greenhouse gas emissions"?  What actions does 
General Motors anticipate can be taken in that sector in 5 
years?  How about 10 years?

In the near term, the deployment of flex fuel vehicle 
technology and a biofuel fueling infrastructure holds 
great potential to begin to move us away from current 
U.S. dependence on fossil fuels in the transportation 
sector.  We believe investment in FFVs and biofuels 
will pay even greater dividends if cellulosic ethanol 
becomes a significant player in the marketplace.

In the longer term, fuel cells powered by hydrogen 
offer a sustainable energy pathway to decouple 
economic growth and personal transportation from CO2 
emissions.  It is important that the research being 
undertaken by automakers to develop the capability of 
fuel cell vehicles be complemented by research into 
ways to better and more economically use renewable 
and other non-carbon emitting energy pathways so that 
as 'zero emission' vehicles are commercialized, 'zero 
emission' fuels are also made commercially available, 
resulting in a substantial reduction or elimination of 
CO2 emissions on a well-to-wheels basis.

For developed countries, hydrogen fuel cells offer the 
opportunity for cleaner, more fuel efficient vehicles, 
enhanced energy security and reduced vulnerability to 
oil supply disruptions from unstable sources.  For 
developing countries, hydrogen fuel cells offer the 
opportunity for enhanced mobility, which is a key 
enabler of economic growth, with very limited or no 
environmental issues and from, in many cases, locally 
available energy sources.  However, as with any 
'leapfrog' technology, there are many technical and 
transitional issues still to be addressed before the 
benefits of hydrogen fuel cell vehicles can be widely 
realized.

        g. What actions can be taken now by General Motors "to 
contribute to substantial and long-term reduction in net 
global greenhouse gas emissions"?  What actions does 
General Motors anticipate that General Motors can take in 5 
years?  How about 10 years?

Products:  GM is implementing advanced technologies 
in its internal combustion engines (such as Active Fuel 
Management, flex fuel systems capable of running on 
renewable ethanol E-85, and clean diesels), in its 
hybrid vehicles (which include GM's hybrid bus 
transmission systems and SUV and car hybrid systems 
that will be rolled out over the next few years) and in 
its hydrogen powered fuel cell vehicles that emit only 
water (moving us toward the ultimate goal of removing 
the automobile from the environmental equation). GM 
believes the pursuit of a hydrogen economy ultimately 
provides the best opportunity not only to reduce 
greenhouse gas emissions from the automotive sector, 
but also to diversify away from dependence on 
petroleum.

Processes:  GM continues to set targets and monitor 
greenhouse gas emissions from its facilities and is 
taking steps to achieve near-term reductions. In 2004, 
GM's global facilities achieved a 12.5 percent 
reduction in CO2 emissions compared to 2000. 

        h. As an international business entity, please explain how your 
approach to climate change varies by the nation in which 
you are operating?  For example, compare your approach in 
the European Union to the United States, and the United 
States to China.

General Motors operates as one company around the 
world - looking for opportunities to maximize the use 
of advanced technologies in products and processes in 
all regions in which it operates.

3. About 20% of the United States' greenhouse gas emissions are 
emitted by light duty vehicles.

        a. Does General Motors believe that the United States 
government should act to require a reduction of greenhouse 
gas emissions from light duty vehicles?

No.  The most effective thing the US government can 
do is to assist in the development and implementation 
of the advanced vehicle technologies and alternative 
fuels described above through a balanced program of 
incentives for vehicle manufactures, consumers, and 
fuel providers.
  
        b. If so, please discuss what requirements General Motors 
would consider reasonable to reduce greenhouse gas 
emissions while providing adequate time for adaptation by 
the auto industry.  What is an appropriate timeframe for a 
requirement?  What substantive requirements would 
General Motors suggest?

        c. If General Motors does not believe that the Untied States 
government should act to require a reduction of greenhouse 
gas emissions from light duty vehicles, please explain what 
alternative approach General Motors suggests for reducing 
greenhouse gas emissions.

See General Motors' response to question 3a. 


RESPONSE FOR THE RECORD BY DEBEROH MORRISSETT, VICE 
PRESIDENT, REGULATORY AFFAIRS, DAIMLERCHRYSLER 
CORPORATION

 

The Honorable Henry Waxman

1. On June 7, 2005, eleven national science academies 
issued a joint statement entitled, "Joint science 
academies' statement: Global response to climate 
change."  The joint statement was issued by the science 
academies of the United States, Brazil, Canada, China, 
France, Germany, India, Italy, Japan, Russia, and the 
United Kingdom.  It can be reviewed online at the 
National Academy of Sciences website:  
http://www.nationalacademies.org/onpi/06072005.pdf.  
The statement begins:

Climate change is real
There will always be uncertainty in 
understanding a system as complex as the 
world's climate.  However, there is now strong 
evidence that significant global warming is 
occurring.  The evidence comes from direct 
measurements of rising surface air temperatures 
and subsurface ocean temperatures and from 
phenomenon such as increases in average global 
sea levels, retreating glaciers, and changes to 
many physical and biological systems.  It is likely 
that most of the warming in recent decades can 
be attributed to human activities (IPCC 2001).  
This warming has already led to changes in the 
Earth's climate.

The statement proceeds to state:
 
We urge all nations.to take prompt action to 
reduce the causes of climate change, adapt to its 
impacts and ensure that the issue is included in 
all relevant national and international strategies.

As the joint statement makes clear, climate change is 
clearly an issue of great importance to every nation on 
the planet.  Given the substantial greenhouse gas 
emissions attributable to the transportation sector, 
climate change should clearly be a major factor in any 
discussion about the next generation of vehicles and 
fuels.  Unfortunately, climate change was not 
meaningfully discussed at the May 24, 2006 hearing.  
Accordingly, please provide answers to the following 
questions.

1a. Does DaimlerChrysler Corporation agree that the joint 
statement represents the prevailing scientific view on 
climate change?

DaimlerChrysler supports the on-going climate change 
research and dialogue to ensure a fuller understanding of 
the controversies surrounding this issue and to avoid 
inappropriate responses by government or the private 
sector.  An example of controversy was highlighted by the 
U.S. NAS president when he expressed concern to the UK 
Royal Society President on the process that produced the 
joint statement.  Senator Craig entered this correspondence 
into the Congressional Record during the Energy Policy 
debate of 2005.

While DaimlerChrysler cannot assess whether this joint 
statement "represents the prevailing scientific view," we do 
share the concern expressed by many, that global climate 
change could affect future generations. 

Vehicle manufacturers such as DaimlerChrysler are only 
one stakeholder in the energy/greenhouse gas equation and 
can only influence vehicle technology and manufacturing 
processes - other pertinent stakeholders include 
governments, consumers, interested NGOs and other 
industry sectors (e.g., energy industry) and their suppliers.

DaimlerChrysler is developing and implementing new 
advanced technologies now to minimize any potential 
impact our vehicles and processes might have on global 
climate or the environment in general. Our objective is to 
achieve a sustainable road transportation system by 
focusing on technological advances in energy efficiency 
and innovation.  

We believe that the competitive marketplace is the best 
solution to this challenge and we expect to be a leader in 
developing and introducing advanced technologies 
designed to reduce greenhouse gas emissions.  
DaimlerChrysler is taking action on two of the conclusions 
in the joint statement now: 

         "Identifying cost effective steps that can be taken now 
to contribute to substantial and long term reductions in 
net global greenhouse gas emissions."   One example I 
included in my testimony is DaimlerChrysler's offering 
of MDS (Multiple Displacement System) technology on 
seven Chrysler Group vehicles. MDS seamlessly 
alternates between smooth, high fuel economy four-
cylinder mode when less power is needed and V-8 
mode when more power is demanded from the engine. 

	 "Show leadership in developing and deploying clean 
energy technologies and approaches to energy 
efficiency." One example I included in my testimony 
is DaimlerChrysler efforts to design more engines to 
run on biofuels with lower lifecycle greenhouse gas 
emissions, because the plants they are derived from 
absorb carbon dioxide from the atmosphere during 
growth. We have teamed up with the Detroit-based 
nonprofit NextEnergy, the nation's largest chain of 
biodiesel refiners, industry-leading suppliers, and local 
universities to conduct much-needed research and field 
testing.  I ask that Congress support funding requests 
for this and similar research programs.

DaimlerChrysler also continues to work cooperatively with 
government labs, suppliers and other companies in the 
industry to achieve breakthroughs in technology.  
Programs, such as FreedomCAR and the hydrogen 
initiative in the United States, and the Fuel Cell Partnership 
and Hydrogen Highways effort in California can have a 
long-term effect in reducing CO2 emissions from vehicles.

1b. Does DaimlerChrysler Corporation agree that it is the 
prevailing scientific view that "the threat of climate 
change is clear and increasing"?

See answer to 1a.

1c. Does DaimlerChrysler Corporation agree that it is the 
prevailing scientific view that "there is now strong 
evidence that significant global warming is occurring"?

	See answer to 1a.
1d. Does DaimlerChrysler Corporation agree that it is the 
prevailing scientific view that "most of the warming . 
can be attributed to human activities"?

	See answer to 1a.

1e. If DaimlerChrysler Corporation disagrees with the joint 
statement, or a portion of the joint statement, based on 
a scientific disagreement, please identify the portion of 
the statement with which DaimlerChrysler Corporation 
disagrees and explain the scientific basis for the 
disagreement.  Please provide references to any 
published, peer-reviewed studies that form the basis for 
DaimlerChrysler Corporation's disagreement.

See answer to 1a.

2. The joint statement referenced in question 1. also 
recommends taking action to reduce the causes of 
climate change.  It states:

The scientific understanding of climate change is 
sufficiently clear to justify nations taking prompt 
action.  It is vital that all nations identify cost-
effective steps that they can take now, to 
contribute to substantial and long-term 
reduction in net global greenhouse gas emissions.

It goes on to state:

Action taken now to reduce significantly the 
build-up of greenhouse gases in the atmosphere 
will lessen the magnitude and rate of climate 
change.  As the United Nations Framework 
Convention on Climate Change (UNFCCC) 
recognizes, a lack of full scientific certainty 
about some aspects of climate change is not a 
reason for delaying an immediate response that 
will, at a reasonable cost, prevent dangerous 
anthropogenic interference with the climate 
system.

Fortunately, the scientific academies report that "there 
are many potentially cost-effective technological options 
that could contribute to stabilizing greenhouse gas 
concentrations."  They also warn that "failure to 
implement significant reductions in net greenhouse gas 
emissions now, will make the job much harder in the 
future."

In order to understand, DaimlerChrysler Corporation's 
views on reducing the causes of climate change, please 
provide answers to the following questions.

2a. Does DaimlerChrysler Corporation agree that current 
scientific understanding of climate change justifies 
nations "taking prompt action"?

NGOs routinely point to the corporate average fuel 
economy (or CAFE) program as the policy for reducing 
greenhouse gases through improved vehicle fuel economy. 
DaimlerChrysler has supported the National Highway 
Traffic Safety Administration's (NHTSA) national fuel 
economy standard setting process. In March of 2006, 
NHTSA finalized a second round of rulemakings that has 
led to higher truck fuel economy standards for seven 
straight model years (2005-2011 MY).

DaimlerChrysler also participates in voluntary initiatives 
such as the DOE Climate VISION program to lower 
greenhouse gases from our facilities and reports its 
greenhouse gas emissions to the DOE 1605(b) program.

The United States government has committed billions of 
dollars to mobilize the science and technology community 
to enhance research and development efforts which will 
better inform climate change decisions.   In fact, the 
Administration has initiated a Climate Change Science 
Program Strategic Plan that the National Academy has 
reviewed and endorsed.  The United States is also engaged 
in extensive international efforts on climate change, both 
through multilateral and bilateral activities.  The United 
States is by far the largest funder of activities under the 
United Framework Convention on Climate Change and the 
Intergovernmental Panel on Climate Change. 
DaimlerChrysler supports these efforts to avoid 
inappropriate responses by government or the private 
sector.

2b. Does DaimlerChrysler Corporation agree that it is 
"vital" that all nations "identify cost-effective steps that 
they can take now, to contribute to substantial and 
long-term reduction in net global greenhouse gas 
emissions"?

Ambient greenhouse gases are global in nature.  Efforts to 
mitigate greenhouse gas emissions must be embraced by all 
sectors in developed and developing countries alike. 
Without a global commitment to reducing greenhouse gas 
emissions, little or no environmental benefit will be 
realized and economic disruption will result.

The U.S. Department of Energy's Energy Information 
Agency projects that developing country greenhouse gas 
emissions will exceed developed country greenhouse gas 
emissions within a decade, primarily due to the rapidly 
growing economies of China and India.   Efforts that seek 
to include these countries, such as the Asia-Pacific 
Partnership on Clean Development and Climate, with its 
focus on technological development and deployment, have 
the potential to reduce global greenhouse gas emissions.

2c. Does DaimlerChrysler Corporation agree that "a lack 
of full scientific certainty about some aspects of climate 
change is not a reason for delaying an immediate 
response that will, at a reasonable cost, prevent 
dangerous anthropogenic interference with the climate 
system"?

While there are many unanswered questions, 
DaimlerChrysler continues to develop and implement 
advanced technology in its product line-up.  We continue to 
support NHTSA and their charge from Congress to set 
national fuel economy standards for light duty vehicles at 
the "maximum feasible" level.  

2d. Does DaimlerChrysler Corporation agree that "failure 
to implement significant reductions in net greenhouse 
emissions now, will make the job much harder in the 
future"?

	See answer to 2c.
2e. What actions can be taken now "to contribute to 
substantial and long-term reduction in net global 
greenhouse gas emissions"?  What actions does 
DaimlerChrysler Corporation anticipate can be taken 
in 5 years?  How about 10 years?

There are three fundamental actions available to reduce 
fossil fuel energy use/greenhouse gas emissions:
         Conserve energy through behavior changes
	 Improve energy efficiency 
	 Switch to a lower carbon energy source

Many economists have noted that the most efficient way to 
lower greenhouse gas emissions is to implement carbon 
controls on all fossil fuels at their upstream production 
point (i.e., the mine-mouth or well head).  Controls that 
operate "upstream" on fuel producers versus "downstream" 
on fuel users hold the greatest promise for large greenhouse 
gas reductions at the lowest cost by educating the market 
regarding the overall value of all forms of energy.

While setting fuel economy standards will only impact new 
vehicles, upstream controls on fossil fuel carbon content 
will cause all energy end users, including owners of older 
vehicles, to value energy.  

As I highlighted in my original testimony (attached), 
DaimlerChrysler continues to work on a broad portfolio of 
technologies to improve the energy efficiency and reduce 
greenhouse gas emissions of transportation through the 
implementation of advanced technology and increasing the 
use of renewable biofuels.

Advanced Technology

For the near-term, we continue to improve advanced 
gasoline and diesel internal combustion engines (ICE) with 
the development and implementation of technologies 
(including many noted by National Academies of Science 
"Effectiveness and Impact of Corporate Average Fuel 
Economy (CAFE) Standards" in 2002).

	 DaimlerChrysler currently has seven models (The 
Chrysler 300, Dodge Magnum, Dodge Charger, Jeepr 
Grand Cherokee, Dodge Durango, Dodge Ram, and the 
Jeepr Commander) that feature the Multiple 
Displacement System (or MDS) fuel saving technology.  
By 2007, MDS is estimated to save over 60 million 
gallons of gasoline per year.

	 The new Dodge Caliber and soon to arrive Jeepr 
Compass and Jeepr Patriot, feature the all new, more 
fuel-efficient World Engine and continuously variable 
transmission (CVT).  This inline 4 cylinder engine 
comes in three displacements and features dual-cam 
Variable Valve Timing (VVT) and electronic throttle 
control (ETC).

	 On June 13, 2006, we announced a new 3.0-liter turbo 
Common Rail Diesel (CRD) will debut in the 2007 
Jeepr Grand Cherokee. The engine will have more 
torque than most eight-cylinder engines, equal 
acceleration and the fuel economy of a small six-
cylinder gasoline engine.  The Mercedes built 3.0-liter 
CRD is one of the most advanced powerplants available 
in the marketplace today. New clean diesel vehicles 
improve fuel economy by up to 30 percent in all driving 
conditions, when compared to an equivalent gasoline 
engine, while providing durable and smooth 
performance.  DaimlerChrysler also offers a Mercedes-
Benz E320 diesel, which provides the highest fuel 
economy of any gasoline or diesel-powered mid-size 
car as well as diesel versions of its larger Dodge Ram 
pickup trucks.  Later this year the company will 
continue its expansion of diesel offerings.

For the mid-term, we are developing a state-of-the-art full 
hybrid system, whose components are being co-developed 
by General Motors Corp., DaimlerChrysler and the BMW 
Group, utilizing electric drive systems, integrated power 
modules and advanced batteries initially to be used in the 
2008 MY Dodge Durango.

In the long term, fuel cell vehicles with on-board hydrogen 
storage, fueled by hydrogen from a national hydrogen 
infrastructure will emerge.

Biofuels

Biofuels also have a key role in reducing petroleum use and 
greenhouse gas emissions. A recent study by Argonne 
National Laboratory's Center for Transportation Research 
compares gasoline to corn ethanol and cellulosic ethanol 
(ethanol made from plant stalks, agricultural byproducts, 
grasses or garbage). On a per-gallon basis, corn-based 
ethanol reduces greenhouse gases by 18%-29%, and 
cellulosic ethanol reduces greenhouse gases by 85%, the 
study found.

On April 25, 2006, our CEO, Tom LaSorda, had the honor 
of following President Bush to the podium of the 
Renewable Fuels Association conference and announced 
that, beginning in the 2007 model year, our Jeepr Grand 
Cherokee and the new Jeepr Commander with the 4.7 liter 
engine option will be capable of running on E-85 fuel 
(blend of 85% ethanol and 15% gasoline).  This is in 
addition to DaimlerChrysler's other current flexible fuel 
vehicle (or FFV) offerings: the Chrysler Sebring, Chrysler 
and Dodge minivans, Dodge Dakota and Dodge Ram 
pickups, and the Dodge Durango SUV.  

Our commitment to renewable fuels extends beyond 
ethanol use in FFV engines.  Diesel fuel can also be 
blended with renewable fuels known as biodiesel.  
DaimlerChrysler is the only manufacturer to offer a diesel 
vehicle that leaves the factory fueled with bio-diesel.  We 
have also announced that beginning this Fall, we will 
endorse the use of B20 diesel fuel, for use by our military, 
government and commercial fleet Dodge Ram customers.  
As the President said in his visit of May 16, 2005, to 
Virginia BioDiesel Refinery, "Biodiesel is one of our 
nation's most promising alternative fuel sources."

In May, Mr. LaSorda made a new commitment to 
renewable fuels when he met with Congressional leaders 
along with Ford CEO, Bill Ford and General Motors CEO, 
Rick Wagoner and committed to the "25 x '25" campaign - 
an effort by the Energy Future Coalition to aim to get 25 
percent of the country's transportation energy needs from 
renewable sources by 2025.
  
On June 28, 2006, DaimlerChrysler, General Motors and 
Ford reaffirmed work towards this commitment and 
pledged to double the annual production of vehicles 
capable of running on renewable fuels to two million cars 
and trucks by 2010.  This production increase represents 
the single largest commitment to renewable fuels in the 
nation's history. The pledge toward more flex fuel vehicles 
that can use E-85 ethanol or biodiesel came in a letter to all 
Members of Congress from Mr. LaSorda and the other 
CEOs. 

For DaimlerChrysler specifically, this translates to 
manufacturing nearly 500,000 E-85 FFVs annually by the 
2008 MY building upon the 1.5 million FFVs 
manufactured since the 1998 model year.  These 1.5 
million vehicles represent about 10 percent of our total 
production since 1998, and the 500,000 figure is nearly 25 
percent of our expected annual production.  Both 
percentages are the highest for any manufacturer, a fact of 
which our company is very proud.

Today, there are more than 5 million flex fuel vehicles on 
the road and the three domestic automotive companies will 
add an additional million cars and trucks this year alone. If 
all of these vehicles were running on E-85, they would 
displace more than 3.5 billion gallons of gasoline a year, an 
amount comparable to the yearly gasoline consumption of 
Tennessee.

"We need business and government to work together to 
enhance the production, distribution and use of renewable 
biofuels," the CEOs said. "Our hope is that with this 
commitment, fuel providers will have even more incentive 
to produce ethanol and other biofuels and install pumps to 
distribute them." 

As President Bush noted in his State of the Union Address 
regarding the Advanced Energy Initiative, additional 
research/invention on ethanol production methods from 
both corn and cellulosic biomass (e.g., wood chips, stalks 
or switch grass) is still needed to make ethanol a "practical 
and competitive" fuel to gasoline.  

The CEOs noted that, "vehicles alone will not get the job 
done. To capitalize on this commitment, Congress and the 
Administration need to continue to promote the production 
of biofuels, increase incentives for refueling infrastructure, 
and continue incentives for automakers to produce biofuel 
vehicles."  "Eventually, we need to get to the point where 
most Americans have reasonable access to these fuels at a 
price that is competitive with gasoline," they said. "Without 
this alternative fuel infrastructure, the U.S. could miss the 
opportunity to displace gasoline with homegrown and 
produced biofuels." Currently, there are only about 700 E-
85 pumps among the nation's 170,000 gas stations. 

DaimlerChrysler's  renewable fuel commitments, coupled 
with our continuing efforts to improve the efficiency of 
gasoline-powered vehicles, increase our use of diesel 
engines, and our leadership in fuel cell vehicles (with more 
than 100 vehicles, ranging from small cars to transit buses, 
in operation around the world today) are testimony to our 
commitment to reducing petroleum consumption and 
greenhouse gases.

2f. What actions can be taken now in the transportation 
sector "to contribute to substantial and long-term 
reduction in net global greenhouse gas emissions"?  
What actions does DaimlerChrysler Corporation 
anticipate can be taken in that sector in 5 years?  How 
about 10 years?

See answer to 2e.

2g. What actions can be taken now by DaimlerChrysler 
Corporation "to contribute to substantial and long-term 
reduction in net global greenhouse gas emissions"?  
What actions does DaimlerChrysler Corporation 
anticipate that DaimlerChrysler Corporation can take 
in 5 years?  How about 10 years?

		See answer to 2e.

2h. As an international business entity, please explain how 
your approach to climate change varies by the nation in 
which you are operating?  For example, compare your 
approach in the European Union to United States, and 
the Unites States to China.

DaimlerChrysler is one company operating in many 
markets. For any vehicle technology to be successful, it 
must be accepted by the marketplace and accommodate 
regional market differences such as differing: regulatory 
requirements, fuel taxation, engine size taxation, fuel 
quality, average distances driven, vehicle utility (size, 
towing, 4WD, etc.).

In the EU, where fuel prices are considerably higher than in 
the U.S., almost 50% of the new vehicle market (60% of 
Chrysler and Jeepr vehicles) is powered by advanced 
diesel engines compared to about 3% in the U.S.   Diesel 
can improve fuel economy by an average of 30% and lower 
CO2 emissions when compared to an equivalent gasoline 
engine. 

The EPA has also noted that if the U.S. had a light duty 
fleet that was one-third diesel it would save up to 1.4 
million barrels of oil per day.  If Chrysler Group's diesel 
mix in the U.S. were the same as in Europe, its Corporate 
Average Fuel Economy (or CAFE) would improve by three 
miles per gallon.  J. D. Power and Associates estimate that 
light-duty diesels could grow from a 3% market share in 
2004 to 12% in 2012.  

3. About 20% of the United States' greenhouse gas 
emissions are emitted by light duty vehicles.  

3a. Does DaimlerChrysler Corporation believe that the 
United States government should act to require a 
reduction of greenhouse gas emissions from light duty 
vehicles?

Carbon dioxide (CO2) accounts for 97% of vehicle 
greenhouse gases and is a direct result of fuel combustion.  
Controlling CO2 emissions is therefore akin to controlling 
fuel economy.  DaimlerChrysler is committed to develop 
new advanced technologies to minimize any potential 
impact our vehicles might have on global climate and 
continues to work with NHTSA, which was charged by 
Congress, to set maximum feasible national fuel economy 
standards. 

The United States, specifically NHTSA, is acting now to 
reduce petroleum consumption by light-duty vehicles.  
DaimlerChrysler supported NHTSA's efforts for its two 
light-duty truck rules that defined new fuel economy 
standards for the 2005-2011 MY vehicles.  NHTSA's 
environmental analysis estimated the effect of these rules 
will be to lower greenhouse gas emissions by nearly five 
billon metric tons of CO2 over the lifetime of these 
vehicles.  President Bush has also recently asked Congress 
to authorize NHTSA to also reform fuel economy standards 
for passenger automobiles.  DaimlerChrysler supports this 
effort.

While actions being taken by NHTSA address new vehicle 
fuel economy, upstream carbon controls would impact all 
vehicles on the road today.

3b. If so, please discuss what requirements 
DaimlerChrysler Corporation would consider 
reasonable to reduce greenhouse gas emissions while 
providing adequate time for adaptation by the auto 
industry.  What is an appropriate time frame for a 
requirement?  What substantive requirements would 
DaimlerChrysler Corporation suggest?

	See answer to 3a.

3c. If  DaimlerChrysler Corporation does not believe that 
the United States government should act to require a 
reduction of greenhouse gas emissions from light duty 
vehicles, please explain what alternative approach 
DaimlerChrysler Corporation suggests for reducing 
greenhouse gas emissions.
	
See answer to 3a.	






SUBMISSION FOR THE RECORD BY HUNT RAMSBOTTOM, CEO AND 
PRESIDENT, RENTECH, INC.

        Rentech is a publicly held, Denver-based firm listed on the 
American Stock Exchange.  For 25 years, Rentech has engaged in 
research and development, focusing on enhancing the production 
of ultra-clean fuels made from coal, petroleum coke and natural 
gas.

Rentech's Clean Diesel
        It is very different from petroleum diesel.  It is clear, refined to 
a high degree of purity and extremely low in both particulates and 
sulfur.  The familiar belching cloud you see when a diesel truck or 
bus starts to accelerate is caused by particulates, and recent studies 
have shown that they potentially have long-term harm to human 
and environmental health - but our fuel eliminates most of that 
concern.  When the Air Force tested our fuels and similar fuels 
made by competitors, the tests showed reductions in particulates of 
up to and over 80%.  The Rentech fuel is also extremely low in 
sulfur - less than 1 part per million, far under the new EPA 
standard of 15 ppm.
        Rentech's fuel doesn't require any engine modifications.  It can 
be used as is as the operating fuel for trucks, buses and barges.  It 
can also be blended with petroleum diesel or alternative fuels such 
as biodiesel.  It can even be processed into jet fuel.
        The basic chemistry behind our fuel products has been known 
for 7 decades.  The basic technology has been developed and used 
extensively in other countries.  Rentech currently holds 20 US and 
4 foreign patents making the process more efficient and effective.  
We have tested our innovations in six pilot plants over the past 20 
years.
        This technology is now being deployed in the US. The 7th pilot, 
our Process Demonstration Unit (PDU), is scheduled to be 
operating by the first half of 2007.  It will produce 10 barrels per 
day (bpd) for demonstration, analysis and training by potential end 
users.  And it will allow us to optimize our technology for 
variations in coal and other site-specific factors.  We now have 
developed our technology extensively around Coal-to-Liquids - or 
CTL - gasification, and for Rentech, the future of CTL in the 
United States is no longer a theoretical, what-if, conversation. We 
plan to have a fully commercial, fully operational CTL plant up 
and running by 2010.  
        Our focus as a company is now on making clean transportation 
fuels in the US, from US resources for US consumption.  We are 
targeting our commercial investments to production based on coal 
and petroleum coke (a byproduct of oil refining) feedstocks.  We 
can locate plants anywhere with sufficient access to these 
resources, from coal-producing states to Hawaii (which has 
petroleum coke from its refinery).

Environmental Benefits
        The product has none of the typical odor of diesel.  There are 
two other critical differences between this and typical diesel.  Our 
fuel has a shelf-life of at least 8 years, rather than 3-4 months for 
petroleum diesel - meaning that for the strategic reserve, for 
emergency first-responders, and the military, our fuel has 
incredible advantages.  Next, our fuel is biodegradable.  If it spills, 
it does not cause extensive or irreparable damage to waterways or 
wells. 
        Rentech is committed to being environmentally friendly - and 
both our production and fuels have environmental benefits.
   	As we manufacture our fuel, we remove most of the harmful 
regulated pollutants in the gasification stage.  Sulfur and mercury 
come out as elements - they do not go up a smokestack to be 
scrubbed out, and do not leak into the environment.  We are also 
working to reduce unregulated emissions, such as greenhouse 
gases.  Our proposal for a second plant, to be located in Natchez, 
Mississippi, offers the opportunity for 100% carbon capture and 
storage.  Our carbon dioxide output would be pumped into nearby 
older oil well fields, both helping to produce additional oil by 
forcing out additional supplies and trapping the carbon 
underground.   
        Additionally, our fuel runs cleaner than petroleum diesel.  
Diesel itself has significant advantages over gasoline, providing 
greater power with fewer emissions - and using Rentech's diesel 
keeps the power advantage and reduces emissions even further.

Economic Challenges
        At the moment, a number of trends are converging to jump-
start the clean fuels industry in the United States--the soaring price 
of gas, the very real concerns about America's energy dependence 
and energy security, and  the challenges posed by both the 
geopolitical and global environmental situations.  Our fuel is part 
of the solution for each of these concerns.
        With oil prices at historic highs, our fuel is also economically 
competitive.  Including the financing and development costs, we 
can produce finished fuels for $36 to $42 per barrel, the equivalent 
of buying raw crude at $30 to $35 per barrel. 
To start this industry however, you need to open the first plant 
in the US.  Each successive plant will build on the economies of 
scale, improve on the lessons learned at previous plants, and 
expand the market.  It is very capital intensive to build the 
industry, and one plant is only the start.  You have to build second, 
third, fourth, and then successive plants.  But, as the Governor of 
Montana likes to note, everyone wants to build the second plant.  
Nobody wants to finance the first in the US, even though these 
plants exist in several other countries.
        Rentech has developed a five-point strategy for 
commercialization, designed specifically to overcome the financial 
hurdles of getting started in the US.  First, we are jump-starting the 
deployment of our proprietary Rentech process by pairing off-the-
shelf gasification and finishing plant technologies with our 
Rentech Reactor using our low temperature, iron-based catalyst.  
Second, we are aggressively pursuing multiple strategic projects in 
the US, with the goal of getting plants up and running at several 
sites very quickly.  
        Third, we are developing a repeatable and scalable design that 
allows for expansion of production up to 50,000 bpd per plant that 
will provide for a very rapid expansion of the industry once the 
first plants are operational and proved out.  Fourth, we are 
continuing to invest heavily in research and development, to push 
the optimization of our technologies even farther.  And fifth, we 
are examining selected licensing opportunities to expand use of our 
process and our proprietary technologies.

East Dubuque, Illinois:  The First Clean Fuels Production 
Plant in the U.S.
        Our first clean fuels plant is underway right now.  In April 
2006, Rentech purchased the fertilizer plant in East Dubuque, 
Illinois, and we plan to convert it in phases to CTL poly-generation 
over the next 3 to 4 years.  By polygeneration, I mean that we will 
ultimately produce 3 core products:  ultra-clean transportation 
fuels, ammonia fertilizer and electricity.  When the conversion is 
complete, the overall plant emissions of criteria pollutants will 
decrease (as shown on the attached chart), while the plant 
production increases.
        The plant currently makes ammonia fertilizer from natural gas, 
and it already incorporates basic technologies that are critical to 
successfully implementing CTL.  The conversion will include 
changing the feedstock from expensive natural gas to affordable 
Illinois coal.  In phase one, we will add a coal gasification unit to 
the fertilizer production line, generating syngas which is the first 
step in each of the products that will ultimately be generated.  
        Fertilizer will still be made in large quantities.  Domestic 
fertilizer plants are shutting down rapidly because of high natural 
gas prices--the current primary feedstock for fertilizer.  Since 
1999, the US has switched from producing all its own fertilizer to 
becoming a net importer.  We will demonstrate that fertilizer 
production can still be a thriving domestic industry using clean 
coal technologies. 
        Electricity will also be produced, primarily for the plant's own 
use.  A small surplus, however, will be provided to the local grid.  
But our primary focus is the production of our fuels.  So in later 
stages, we will add a Rentech Reactor and a finishing plant, 
allowing production of 1,800 bpd of our diesel.  Those additions 
will be on-line and producing in 2010.
        Later, in phase two of our East Dubuque build-out, we will add 
a second gasifier.  That will allow us to raise fuel production up to 
6,800 bpd.  Under our timeline, the East 
        Dubuque plant will be first commercial plant in the U.S. to 
produce marketable quantities of clean fuels from CTL.  

Looking Ahead
        Rentech is also pursuing a second larger scale plant in Natchez, 
Mississippi - the Natchez Adams Strategic Fuels Center - which 
would produce up to 11,000 bpd in phase one.  We were invited by 
the local community to consider the possibility after Hurricane 
Katrina when Mississippi ran disastrously low on diesel. At 
Natchez, we can use two feedstocks--coal and petroleum coke, a 
byproduct of the local petroleum industry.  And , there is the very 
real possibility of capturing and storing 100% of the carbon 
dioxide emissions through enhanced oil recovery in nearby oil 
fields.  To our knowledge, this would be the first large-scale U.S. 
commercial capture and storage of man-made carbon emissions.   
Carbon dioxide injection is already being used in this oil-
producing basin, but additional supplies are needed.
        Looking even further ahead, we are considering several 
development opportunities in various regions of the US, including 
discussions with coal companies to utilize a replicable, iterative 
plant model at the mouths of mines.  There, we would size a basic 
plant model that could be expanded.  For twenty years, Rentech 
has researched and optimized its technology.  We have refined our 
process to make it more effective and more environmentally-
friendly.  Now we are commercializing it.
        Today, the US produces and consumes over 2 million barrels 
per day of diesel, and many experts project demand to double in 
the next twenty years.  A thriving clean fuels industry is vital to 
our nation's future, both for our energy security and our 
environmental sustainability.
        This is doable. Rentech (and Sasol) use a low temperature iron 
based catalyst and its use has been used commercial for years.  
Other industry vendors which use a cobalt catalyst have claimed 
that 34 foot reactors are needed, making transport and fabrication 
difficult. This is not the case for low temperature, iron-based 
catalyst as you can make smaller reactors so transport and 
fabrication is not an issue. The reactors will be 14 feet in diameter 
in the East and 20 feet in the West. The height of the reactors is not 
the 180 feet claimed, but rather 120 feet. The US has fabricated 
and built the most advanced processes in use so while initial plants, 
like any first, will be challenging, it will be done.  Using low 
temperature, iron based catalyst, about 2.2 barrels of Fischer-
Tropsch liquids will be produced from one ton of Illinois coal. 

What the Government Can Do
        As we launch this industry, we are planning to make full use of 
the EPACT 2005 incentives that the Congress designed to jump-
start clean fuels.  The States are also lending their assistance.  The 
State of Illinois has been extraordinarily helpful - they helped us to 
complete feasibility studies, engineering studies and provided 
grants to assist with conversion to coal.  The State of Mississippi 
has also been exceptionally supportive of the possibility of our 
second plant being located in Natchez, and just passed a $15 
million bond bill for the proposal.
        We are not asking the government to subsidize clean fuels.  We 
need your help to create a climate where we can use private-sector 
funding to establish a fully commercial industry.  There are four 
ways than you can help us jump-start the industry.

A Four-Point Plan to Jump-Start the Clean Fuels Industry
        1)  Support Appropriate Investment Tax Credits.  To meet 
our aggressive timeline, we will apply for the industrial 
gasification investment tax credit provided by the Energy Bill.  
Recent initiatives to raise the current $350 million cap to $850 
million would help even more.  If Congress is serious about trying 
to reduce our dependence on foreign oil import then allow me to 
offer two observations. First, maintaining the current cap of 
$350M could slow the rollout of industrial gasification using coal 
to the point where the US winds up losing more industry.  Even an 
$850M cap will assist the development and deployment of only 3 
to 4 more plants - hardly the creation of a full-fledged industry.  At 
$75 per barrel, the price of oil last week, the U.S. is paying $850 
million to foreign countries for oil every two days.  To create a real 
incentive, it might be better to lift the caps altogether.  The second 
proposal is an additional investment tax credit specific to clean 
fuels to accelerate production 
        2)  Make the Fuel Excise Tax Credit Available to Clean 
Fuels.  Make the 50 cent-per-gallon fuel excise tax credit provided 
in the Highway Bill available to CTL fuels.  To do that, you could 
extend the expiration of the current credit from 2009, when no 
CTL plants will yet be operational in the U.S., to 2020.  
        3)  Fully Fund and Implement the Federal Loan 
Guarantees.  We will also apply for the self-pay guarantees that 
the Congress initiated at the Department of Energy (DOE).  This 
program is absolutely vital to our efforts.  We understand that 
DOE's implementation has begun and we commend the 
Department for quickly moving to implement the authorized 
programs.  We appreciate and hope you will continue your efforts 
to ensure that both of the DOE loan programs are fully funded and 
implemented expeditiously.  And, 
        4)  Support Military Consideration of Clean Fuels.  The 
final idea for the government to help catalyze commercial 
deployment of the CTL industry is to examine usage of clean fuels 
for military applications.  Long-term contracts for military use of 
diesel and jet fuel would assist greatly with private-sector 
financing of the first plants.

        The Energy Information Administration's AEO 2006 projected 
long-term oil costs at $50 and above.  The same forecast shows 
CTL production growing to 700,000 barrels per day by 2030.  To 
get there, the first plants must be financed and built, paving the 
way for the industry to flourish.  This 4-point combination of 
incentives and contracts would provide the initial climate and 
stability needed to propel private investment.

Conclusion
        The great potential of clean fuels, especially using CTL, is that 
American resources, American know-how, and American 
innovation will help create environmentally-friendly energy and 
sustain American jobs.  A robust clean-fuels sector can help us 
meet the challenge of our national energy needs, foster greater 
energy independence, and preserve a full measure of our energy 
security.  At Rentech, we are moving today to produce clean fuels 
for America's future.
        Thank you for all that you have already done to allow a jump-
start of CTL and clean fuels in the Energy Policy Act of 2005.  We 
intend to make use of your help to do just that - jump-start full 
scale utilization of CTL, and jump-start a new clean fuel 
manufacturing industry.  

Cost Analysis of PEM Fuel Cell Systems for Transportation, September 30, 
2005, Carlson, E.J., et.al., Tiax, LLC

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