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



                                                        S. Hrg. 109-345

       ALTERNATIVE AUTOMOTIVE TECHNOLOGIES AND ENERGY EFFICIENCY

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

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 28, 2005

                               __________

          Printed for the use of the Joint Economic Committee


                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES             SENATE
Jim Saxton, New Jersey, Chairman     Robert F. Bennett, Utah, Vice 
Paul Ryan, Wisconsin                     Chairman
Phil English, Pennsylvania           Sam Brownback, Kansas
Ron Paul, Texas                      John Sununu, New Hampshire
Kevin Brady, Texas                   Jim DeMint, South Carolina
Thaddeus G. McCotter, Michigan       Jeff Sessions, Alabama
Carolyn B. Maloney, New York         John Cornyn, Texas
Maurice D. Hinchet, New York         Jack Reed, Rhode Island
Loretta Sanchez, California          Edward M. Kennedy, Massachusetts
Elijah E. Cummings, Maryland         Paul S. Sarbanes, Maryland
                                     Jeff Bingaman, New Mexico

               Christopher J. Frenze, Executive Director
                  Chad Stone, Minority Staff Director


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                            C O N T E N T S

                              ----------                              

                      Opening Statement of Members

Statement of Hon. Jim Saxton, Chairman, a U.S. Representative 
  from the State of New Jersey...................................     1
Statement of Hon. Carolyn B. Maloney, a U.S. Representative from 
  the State of New York..........................................     2
Statement of Hon. Thaddeus G. McCotter, a U.S. Representative 
  from the State of Michigan.....................................    13
Statement of Hon. Maurice D. Hinchey, a U.S. Representative from 
  the State of New York..........................................    15

                               Witnesses

Statement of Hon. David K. Garman, Under Secretary of Energy, 
  U.S. Department................................................     4
Statement of Joe Loper, Vice President, Alliance to Save Energy..    19
Statement of Tom Stricker, National Manager, Technical and 
  Regulatory Affairs, Toyota Motor North America, Inc............    22
Statement of Mary Ann Wright, Director, Sustainable Mobility 
  Technologies and Hybrid and Fuel Cell Vehicle Programs, Ford 
  Motor Company..................................................    25
Statement of Mark Chernoby, Vice President, Advanced Vehicle 
  Engineering, DaimlerChrysler Corporation.......................    27

                       Submissions for the Record

Prepared statement of Representative Jim Saxton, Chairman........    37
Prepared statement of Representative Carolyn B. Maloney..........    37
Prepared statement of David K. Garman............................    38
    Responses to questions from:
        Hon. Jim Saxton, Chairman................................    63
        Hon. Maurice D. Hinchey..................................    63
Prepared statement of Joe Loper..................................    45
Prepared statement of Tom Stricker...............................    49
Prepared statement of Mary Ann Wright............................    53
    Response to question from Mr. Hinchey........................    61
Prepared statement of Mark Chernoby..............................    54

 
       ALTERNATIVE AUTOMOTIVE TECHNOLOGIES AND ENERGY EFFICIENCY

                              ----------                              


                        THURSDAY, JULY 28, 2005

             Congress of the United States,
                          Joint Economic Committee,
                                                     Washington, DC
    The Committee met, pursuant to call, at 10:00 a.m., in room 
2226, Rayburn House Office Building, Hon. Jim Saxton (Chairman 
of the Committee) presiding.
    Present: Representatives Saxton, McCotter, Maloney, 
Hinchey, and Cummings.
    Staff Present: Chris Frenze, Ted Boll, Chad Stone, Colleen 
Healy, and John Kachtik.

        OPENING STATEMENT OF HON. JIM SAXTON, CHAIRMAN, 
             A U.S. REPRESENTATIVE FROM NEW JERSEY

    Representative Saxton. Good morning. I am pleased to 
welcome Under Secretary Garman and the other expert witnesses 
before the Committee this morning.
    With oil prices in the neighborhood of $60 per barrel, it 
is not surprising that there is increased interest in fuel 
efficiency and alternative ways of powering cars and trucks. 
Increased demand for oil, especially from Asia, combined with 
the restrictive practices of the OPEC cartel, have together 
created a situation where oil prices have spiked in recent 
months. With OPEC members only last December complaining about 
an ``overproduction'' of oil, it is abundantly clear that we 
cannot depend on them to be reliable suppliers of petroleum. 
Unfortunately, according to many experts, OPEC has elevated oil 
prices and they may be with us for quite some extended period 
of time.
    It is interesting to point out that while OPEC members have 
70 percent of the oil reserves, they produce only a total of 40 
percent of our needs. Gasoline accounts for about 45 percent of 
American oil consumption each day, so it is appropriate to 
consider the long-term potential of alternative automotive 
technologies that would reduce our dependency on foreign oil.
    The purpose of this hearing is to explore these 
alternatives and examine which of them seem to be the most 
feasible over the short, medium and long terms. Greater 
efficiency in internal combustion engines, using methods such 
as shutting off half the cylinders when maximum power is not 
needed, is already being realized. Flexible fuel vehicles, 
capable of burning a mixture of gasoline and up to 85 percent 
alcohol are already in production. Recently I have introduced 
legislation to enhance tax incentives for the purchase of 
flexible fuel vehicles. U.S. auto companies already make 
millions of flexible fuel vehicles that are only slightly more 
expensive to produce than cars that run on conventional 
engines.
    The market for hybrid vehicles is also expanding far beyond 
small economy cars and this promises additional savings. Small 
hybrid cars demonstrated the feasibility of this technology, 
and it is now being applied to mid-sized passenger cars, as 
well as to SUVs. As a matter of fact, the Department of Defense 
has even manufactured a tank with a hybrid engine. There are 
some exciting new refinements of hybrid technology that could 
produce significant increases in fuel efficiency. Perhaps the 
future hybrid and electric vehicles could even be recharged 
using the existing power grid.
    None of these technologies alone is likely to reduce our 
oil consumption significantly over the short run. But over the 
next decade or two, they could make a real difference and 
synergies between them offer the potential for further gains. 
For example, improved efficiencies of the internal combustion 
engine could be combined with hybrid and other technologies to 
maximize fuel savings.
    Over the long run, the high price of oil is likely to 
create incentives for other technology breakthroughs that will 
produce even more dramatic savings. Hydrogen fuel cells offer 
one promising technology for the long term. Since power can be 
most efficiently generated in power plants, there are those who 
argue that a transition to hydrogen fuel cell or electric 
vehicles offers the most promising technologies for coming 
decades.
    In any event, continued Federal Government and industry 
support for research and development, and the vision of 
entrepreneurs and inventors, are needed to ensure the 
advancements in technology that will enable us to eventually 
increase our energy security.
    [The prepared statement of Representative Jim Saxton 
appears in the Submissions for the Record on page 37.]
    I turn now to Mrs. Maloney.

         OPENING STATEMENT OF HON. CAROLYN B. MALONEY, 
              A U.S. REPRESENTATIVE FROM NEW YORK

    Representative Maloney. Thank you very much, and thank you, 
Chairman Saxton, and welcome, Mr. Garman. The question of what 
role alternative automotive technologies will play in our 
energy future is an extremely important one, and I hope we will 
be able to learn things from this hearing that can inform our 
future policy choices.
    We are heavily reliant on oil to power our cars and fuel 
our lifestyle and 58 percent of the oil we consume is imported, 
often from politically volatile regions of the world. Promoting 
conservation, raising efficiency standards and supporting 
research and development can all play an important role in 
overcoming our dependence on oil and reducing our reliance on 
imports.
    Today more than two-thirds of the oil consumed in the 
United States is used for transportation, mostly for cars and 
light trucks. Increasing fuel efficiency would lower pressures 
on oil prices, enhance our national security, curb air 
pollution and reduce the emission of greenhouse gases, which 
cause global warming. Clearly, alternative fuel and automotive 
technologies are needed to help achieve these goals, but we 
cannot overlook the importance of other approaches.
    CAFE standards, the Corporate Average Fuel Economy 
standards, for cars have remained static for 2 decades and the 
average vehicle fuel economy has actually declined since the 
late 1980s when sales of SUVs begin to climb. Car manufacturers 
could increase the average fuel economy from today's 27.5 miles 
per gallon to 46 miles per gallon just by implementing existing 
technologies, according to a recent MIT report. This would 
reduce our dependence on foreign oil by three-fourths and cut 
greenhouse gas emissions by nearly a third.
    The auto industry is pursuing a variety of advanced vehicle 
technologies, such as hybrid vehicles, fuel cells and hydrogen 
fuel. While hybrid vehicles have received a great deal of 
attention, they still make up only 1 percent of the 17 million 
vehicles sold in the United States each year. However, some 
hybrids don't contribute much to energy efficiency, as car 
companies are building more high end, high-performance 
vehicles.
    Congress needs to be careful about which technologies it 
subsidizes. We should make sure that we are not prematurely 
committing to any particular technology and neglecting other 
potentially beneficial approaches. We also should make sure 
that tax incentives are well targeted to achieving their 
objectives, rather than simply subsidizing behavior that would 
have taken place anyway. It doesn't make much sense to give a 
tax break when manufacturers are wait-listing customers for 
certain models. The demand is already there. The cars are not.
    My sister-in-law had to wait 3 years to get a hybrid car. 
There is a waiting list for them. People want them. The auto 
industry is not developing or putting them out for sale fast 
enough.
    I will be interested to learn more about whether the 
President's initiative to promote hydrogen fuel and fuel cells 
has realistic goals or is just science fiction. Right now there 
is a danger that hydrogen and hydrogen fuel cells may never be 
commercialized because they are so expensive and this 
initiative may draw funding away from near-term technologies 
such as hybrids.
    I have more questions, but I will stop here, because we 
have a panel--two panels, as I understand it. I hope that they 
will be able to provide us with more information on the 
intriguing technological possibilities that lie before us.
    So I look forward to getting more solid information, and I 
thank you for calling this hearing.
    [The prepared statement of Representative Carolyn B. 
Maloney appears in the Submissions for the Record on page 37.]
    Representative Saxton. Thank you very much. We are going to 
hear first from Under Secretary of Energy, the Honorable David 
K. Garman, from the Energy Department. Then we are going to 
turn to three important representatives of industry who are 
knowledgeable about the technology that we have been fortunate 
to have developed, which goes to the issues that Mrs. Maloney 
and I have just been talking about.
    I would just like to make one other short comment. I 
recently had the opportunity to read something that was written 
in 1999 by the People's Liberation Army representatives of 
China. It was titled ``Unrestricted Warfare,'' and it talks 
about the long-range strategies of some of our foes overseas, 
in this case of course China. The notion of unrestricted 
warfare relates to the national security of our country, and 
essentially what it talked about was strategies that some of 
our foes could use to accomplish goals which perhaps 
traditionally have been accomplished through military means, 
such as information technology, and other various means that 
our foes could use to affect our economy and, therefore, 
disadvantage us. It is pretty clear to me that unrestricted 
warfare is not as new as we might think it is by reading what 
the Chinese write.
    As a matter of fact, over the last several decades, OPEC 
has used a strategy to disadvantage our economy. Today some 
OPEC members produce oil at about $1.50 a barrel. Think of 
that. We are paying $60 a barrel. That is primarily, from my 
point of view, because of underproduction by OPEC countries who 
produce about 40 percent of what we need. They could be 
producing much more than that inasmuch as they control about 70 
percent of the oil reserves that exist in the world. So it 
would behoove us as a society to become energy independent, so 
that we don't have to rely on those who are underproducing 
petroleum.
    So, Mr. Garman, thank you for being with us here today. To 
me this is an extremely important subject and one that through 
government and through industry we need to move on to rectify 
this problem that we find ourselves in.

 STATEMENT OF HON. DAVID K. GARMAN, UNDER SECRETARY OF ENERGY, 
                   U.S. DEPARTMENT OF ENERGY

    Mr. Garman. Thank you, and understanding that my full 
statement will be inserted into the record, I will summarize 
briefly.
    Representative Saxton. Without objection.
    Mr. Garman. The global economy consumes roughly 80 million 
barrels a day and 20 million barrels are consumed in the United 
States each day. Therefore, any impact that we might have in 
making our country less reliant on oil has implications not 
only for the United States and our balance of trade and our 
security and our foreign oil dependence, but for the world.
    Here in the United States, transportation accounts for two-
thirds of our daily oil use, and most of that is due to the 230 
million cars and light trucks on the road. President Bush laid 
out a vision in his 2003 State of the Union Address that ``the 
first car driven by a child born today could be powered by 
hydrogen and pollution free.''
    Since that time, we have established an aggressive research 
program to overcome the cost and technology obstacles to 
affordable, practical hydrogen fuel cell vehicles. These 
obstacles include the challenges of hydrogen production, 
distribution and storage, including storage aboard the vehicle.
    We are also working to lower fuel cell costs while 
improving durability and performance, and we are doing so in 
partnership with the private sector. Some have characterized 
our efforts towards hydrogen fuel cell vehicles as an 
abandonment of other automotive technology work. This is not 
the case. Allow me to explain.
    The hydrogen fuel cell vehicle of 2020 shares many of the 
same components of the hybrid vehicles of today, electric 
drive, power electronics, advanced lightweight materials, and 
even the batteries that are crucial systems in hybrid vehicles 
are also likely to play important roles in the fuel cell 
vehicles of the future. Therefore, we have very robust programs 
to advance hybrid systems, energy storage, power electronics 
and advanced materials that are making technological 
contributions to the hybrid gasoline vehicles of 2010 as well 
as the hydrogen fuel cell vehicles of 2020.
    In addition to the work on technologies that I have 
mentioned, we are also doing a great deal of work on advanced 
combustion engines and fuels, including light duty diesels that 
will never find their way into a hydrogen fuel cell vehicle. It 
is important to note that these component technologies can be 
brought together in different ways to meet consumer demands 
while reducing petroleum use.
    As an example, our work on batteries, electric drive, power 
electronics, renewable fuels and advanced internal combustion 
engines contribute to the potential of plug-in hybrid vehicles 
that could conceivably use a high percentage of blended 
renewable fuels if consumer tastes and markets take us in that 
direction. In other words, our portfolio will advance component 
technologies that can make significant contributions in the 
near term, mid-term and long-term.
    How successful can we be with our portfolio of automotive 
technologies? Some insights can be gained by two different 
scenarios outlined by the National Academy of Sciences 2004 
report on the hydrogen economy.
    The chart that I have here illustrates these two scenarios 
against business as usual in this chart, which is identified as 
case A. In the business as usual case, as projected by DOE, oil 
use in light duty personal vehicles roughly doubles by 2050.
    Case B in the chart assumes that hybrids will be 
successful, but that fuel cell vehicles will not. In this 
venue, the oil savings in 2025 are 3 million barrels a day 
rising to 6 million barrels a day in 2050. While oil use for 
light duty transportation levels in the near term, it will 
resume its rise after 2035 or so.
    Case C in that chart illustrates why we believe getting to 
hydrogen is so important over the long term. Based on what we 
know today, this approach has the greatest potential to drive 
oil use in personal transportation to zero. Of course, we don't 
intend these scenarios to be predictions of the future, but 
rather a way to think about what we can and should do to reduce 
our dependence on foreign oil.
    Finally, Mr. Chairman, let me stress the importance of 
partnership, not only with the automotive companies represented 
here today, but with the energy providers of today and the 
future. One of the most important accomplishments of this 
administration has been the creation of the FreedomCAR and Fuel 
partnership comprised of major automotive manufacturers, as 
well as the energy providers of today's fuels and tomorrow's 
hydrogen. Vehicle technologies, fuels and refueling 
infrastructure cannot be developed in isolation from one 
another, which is a reality that we are fully cognizant of.
    With that, Mr. Chairman, I would be pleased to stop and 
answer any questions that you or this Committee may have either 
today or in the future.
    [The prepared statement together with chart entitled 
``???'' of Hon. David K. Garman appear in the Submissions for 
the Record on page 38.]
    Representative Saxton. Well, thank you very much, Mr. 
Garman, for your statement. I am interested in your chart. I 
notice that you are fairly optimistic, over the long-term, of 
finding other means of power that we can use for our 
transportation needs. Regarding the hybrid technology that 
exists today, would you say that it is a mature type of 
technology or is it something that we need to continue to 
develop?
    Mr. Garman. We need to continue to improve the technology, 
just to cite an example. The type of battery used in today's 
hybrid is a nickel hydride battery. We can improve performance 
of hybrid vehicles if we are successful in moving to a more 
expensive but lighter weight technology, a lithium ion battery 
that on an energy-to-weight ratio could both reduce the weight 
of the vehicle but provide a lot more energy and contribution 
to the drive.
    There are a couple of issues we have to overcome. Chief 
among them is cost. Lithium ion batteries are still 
comparatively expensive compared to nickel hydride batteries. 
We have a technology program in partnership which is focused on 
bringing down the cost and improving the performance of that 
battery. That, again, is one of those examples of a technology 
that would not only be used in a hybrid vehicle, but could 
conceivably be used in a fuel cell vehicle in the future.
    Representative Saxton. Now, you have also made reference to 
the longer term here with regard to hybrid electric and fuel 
cell vehicles kicking in, perhaps, a decade from now?
    Mr. Garman. Our expectation--of course, hybrid electric 
vehicles are in the market today, and I have been privileged to 
buy a couple of them myself. I think they work terrific, and I 
think they will get better.
    Mrs. Maloney raises a very important question about the 
trade-offs inherent. Hybrid technology can be used not only to 
improve fuel economy, but to improve performance. It will be 
interesting to see how consumer demands will evolve and what 
manufacturers will be offering in this regard.
    But over the longer term, we see the transition to hydrogen 
fuel-cell vehicles as very, very important, because that is the 
only thing that reverses and ends our dependence on petroleum 
for light duty transportation. We envision that if we are 
successful in overcoming the technology targets as we 
understand them today, we could get to a commercialization 
decision in 2015.
    Let me point out that I think that nearly every attempt we 
have made in the past at pushing alternative fuel vehicles on 
the public have not been successful. We will be successful when 
we are able to offer a vehicle that consumers want to buy and 
drive. That is something that we are keeping very much in mind 
as we go ahead.
    There has to be a business case to offer these vehicles. We 
have to overcome the technology obstacles, and we are hoping 
that around 2015 a commercialization decision can be made by 
industry where they say we have the technology and the 
technology is at a cost where we can make the business case for 
both the vehicles and the infrastructure in the marketplace. 
Because these can be very exciting vehicles that consumers will 
want to buy and drive. If we are successful that the technology 
and business case can be made, one would hope that government 
incentives to push the technologies in the marketplace will not 
be as expensive as they might otherwise be.
    Representative Saxton. Mr. Garman, I think this is a great 
goal for the long term. Let us talk short term for just a 
moment. It is my understanding that there is a technology 
available that is generally referred to as flexible fuel, 
vehicles which combine a mixture of gasoline and alcohol or 
gasoline.
    We generally talk about alcohol that is made from organic 
material. I noted you don't show the use of flexible fuel 
vehicles, at least on your chart. I am wondering if there is a 
reason for that. It seems to me that if technology is available 
today, there are some things that we need to do perhaps to make 
it feasible to use it in terms of supplying, creating a supply 
line for fuel for flexible fuel vehicles. Could you talk about 
that a little bit?
    Mr. Garman. Sure, absolutely. First of all, I think it is 
important to make the observation that manufacturers are 
offering in the marketplace today literally hundreds of 
thousands of flex fuel vehicles. Those are available. Some 
consumers are buying them without even knowing it. They are out 
there. I believe that every manufacturer produces them and some 
of the manufacturers can talk to the specific models and 
numbers.
    The interesting question is, is the fuel available for 
those flex fuel vehicles. Most flexible fuel vehicles, I can 
tell you, that are driven and used in the Federal Government, 
where we have requirements for purchases of flexible fuel 
vehicles, many of them are not being fueled with renewable 
fuels, which is the goal after all. Part of that is being 
addressed, we believe, in the energy bill that will come before 
the House, I believe, today in the conference report with an 
increased mandate in the production of ethanol. Ethanol is, of 
course, the component, the E85, or 85 percent ethanol fuel 
blend that flexible fuel vehicles use. So part of it is not 
only having the vehicles available, but having the fuel 
available.
    As you pointed out in your statement, the manufacturers are 
getting quite good at lowering the cost differential between a 
flexible fuel vehicle and a conventional vehicle. In fact, some 
of the manufacturers are actually getting to the point where 
instead of using a sensor in the vehicle to determine when 
flexible fuel is being used, they are actually using computer 
algorithms so that no hardware is actually needed and they can 
basically offer a flexible fuel vehicle at no additional cost. 
That is, I think, an important breakthrough.
    But we also have to get more fuel in the market, and that 
gets us to the limits of ethanol and corn-based ethanol and how 
much corn-based ethanol can we make. There is a mandate in the 
energy bill which helps. It would bring us from about 4 gallons 
a year to 7.5 gallons a year in 2012. But compare that with the 
reality that we use about 135 gallons of gasoline each year. So 
it will still be a relatively small amount. If we want to move 
beyond corn-based ethanol to actually produce a lot more 
ethanol than we can from corn, we have to develop a 
breakthrough in what we call cellulosic ethanol, ethanol that 
is made from agricultural residues, clippings, certain kinds of 
organic wastes, a wider variety of feedstock than what we use 
to make ethanol today.
    Unfortunately, our cost of producing that ethanol today is 
around $2.75 a gallon. We think we could make a lot of it, 
perhaps up to 60 million--I am sorry, billion gallons a year, 
which would make an appreciable impact on our oil dependency. 
But no one is going to buy it at that price. That is untaxed. 
So we have to do a better job and continue to work. We at the 
Department are spending on the order of about $70 million a 
year just on this problem of producing more cellulosic ethanol 
so that we can fuel increasing numbers of flexible fuel 
vehicles that are coming into the market.
    Representative Saxton. I notice that you refrained from 
mentioning the actual names on the vehicles that they consider 
flex fuel vehicles.
    Mr. Garman. Only because I was afraid of leaving some out.
    Representative Saxton. I understand. One of the reasons we 
have public hearings though is to let the public know what 
actually exists. So I would like to try to do that a little bit 
with regard to some of the vehicles that are available today.
    I notice that we have representatives from DaimlerChrysler 
here today. We have representatives from Ford Motor Company. We 
have representatives from Toyota here today. I know that there 
are also General Motors vehicles that are considered flex fuel 
vehicles.
    Let us just run down the list of some of these, because 
they are going to be very familiar and the public is going to 
be surprised when they hear, for example, that a Ford Taurus is 
a flex fuel vehicle.
    Mr. Garman. That is right.
    Representative Saxton. And that a Chevrolet Suburban is a 
flex fuel vehicle, or in some cases are.
    Could you please just list common-day cars that people 
drive that are flex fuel vehicles?
    Mr. Garman. The Dodge Sebring. A complete list can be found 
on the website, fueleconomy.org that is maintained by the 
Department of Energy----
    Representative Saxton. You are still being too careful.
    Mr. Garman. That is because, again, Ford, Chevrolet, 
DaimlerChrysler, most of the major motor companies offer a wide 
variety of flex fuel vehicles in a number of different classes. 
I would almost be at the point of guaranteeing that almost any 
type of car that you want to buy has a flexible fuel offering 
in that class. There are that many vehicles out there.
    Representative Saxton. Every day, if we went out on 
Independence Avenue and stood there and watched cars go by, 
what percentage of them would be capable of burning flexible 
fuels?
    Mr. Garman. I would have to provide that for the record. I 
can tell you that I came to this hearing in a flex fuel 
vehicle. They are out there. They are numerous. As I said, some 
consumers are actually driving them without knowing it.
    [The information requested appears in the Submissions for 
the Record on page 63.]
    Representative Saxton. Is a Sable a flex fuel vehicle?
    Mr. Garman. I believe it is, but I would have to check my 
website to be sure.
    Representative Saxton. Yes, all right. I just want to make 
this point for my friends on the panel here and for the public 
that flex fuel vehicles are out there. And you can burn up to 
85 percent alcohol, mixed with gasoline, in those cars.
    Now, you talked about our energy bill that is going to 
require, mandate the production at a certain level. That 
doesn't go to solve the whole problem from what I understand 
it. It has to be delivered, it has to be pumped. It has to be 
available to put in the car, the flex fuel vehicle, and a 
distribution system is another part of the problem, isn't it? 
Would you talk about that a little bit?
    Mr. Garman. That is correct. I think it is fair to say that 
if you were a consumer with a flexible fuel vehicle--I know 
there is a station in Lanham, Maryland. I know there is a 
station at the Pentagon. I know there is a station at the Navy 
Yard, but I am hard pressed to think of many more stations that 
are offering E85 in this immediate area. That is one of the 
problems.
    Representative Saxton. E85 is?
    Mr. Garman. Eighty-five percent ethanol.
    Representative Saxton. Eighty-five percent ethanol and----
    Mr. Garman. 15 percent gasoline.
    Representative Saxton [continuing]. Fifteen percent 
gasoline.
    Mr. Garman. Correct.
    Representative Saxton. You have to have special pumps as 
part of the distribution system, right?
    Mr. Garman. Not a special pump but a dedicated tank.
    Representative Saxton. Because it has to be cleaner?
    Mr. Garman. Right, ethanol and alcohol have an affinity for 
water. So it is a little bit more difficult to move it through 
a conventional petroleum pipeline than certain other kinds of 
petroleum products that don't have that affinity for water.
    Representative Saxton. For economic reasons, I suspect, 
gasoline filling stations have been reluctant to convert and 
dedicate a pump to E85, right?
    Mr. Garman. Many have, yes. It is an added investment 
without an assurance that that supply of ethanol is going to be 
there for them.
    Representative Saxton. I am going to say that I have spent 
a fair amount of time working on this in the last couple of 
months. In fact, Joni Zielinski, sitting in the back of the 
room, my staffer, has done great yeoman's work in making me 
able to ask the questions that I have asked today.
    We have actually introduced some legislation which does a 
number of things. It recognizes that flexible fuel vehicles are 
available. It also recognizes that we are neither producing nor 
able to distribute E85 to the extent that we could to make it a 
viable fuel today.
    So our legislation provides a tax deduction of up to 
$100,000, which currently exists, and it says within 5 years--
now, this is Draconian, but it gets people's attention--within 
5 years any filling station with, I believe it is 8 pumps or 
more, would have to dedicate one of them to E85, and the 
government would be willing to help pay for that with this tax 
deduction situation.
    So I hope we can make your chart look even more optimistic 
than it is in the short term by taking advantage of technology 
that already exists that we are not able to use because we are 
not able to produce ethanol to the extent that we should or 
distribute it in an efficient way. We really need to get on 
that, and that will help us bridge these new technologies that 
you are talking about. At least that is my opinion.
    Mrs. Maloney, it is your turn.
    Representative Maloney. Thank you for calling the hearing, 
I feel we are becoming--that becoming more fuel independent as 
a nation is a top priority of our economic strategy as a 
nation. I will take a serious look at your bill. I just have 
one question of the Chairman. Who gets the 100,000 deduction? 
Is it the filling station or the car producer? Who gets the 
deduction?
    Representative Saxton. In this case it is the filling 
station owner.
    Representative Maloney. I will take a look at it. Thank you 
for being here and talking to us about this really important 
issue. You mentioned the President's vision that he spoke about 
in his address in 2003 to move to hydrogen fuel engines and 
pollution free.
    My question is where did this vision come from? Was this 
something that was plucked out of the air, was it pure vision 
or was it based on solid research, that this was the area we 
should be focusing on and going to? Are we now scrambling to 
just put flesh and bones on that vision, or how developed was 
it with the scientific community behind it?
    Mr. Garman. I can tell you, as someone who is intimately 
involved with the development of this initiative, this was not 
one of those ideas that was thought up on the way to the podium 
at the State of the Union Address. This was undergirded with 
analytical work in my office and in other places, that preceded 
the State of the Union by more than a year.
    Representative Maloney. How would you respond to some of 
the critics of the President's hydrogen initiative who suggest 
that its real purpose was to divert attention and forestall 
efforts to raise CAFE standards? I cite, really, and I would 
like to put in the record an article that appeared today on EPA 
Holds Back Report on Car Fuel Efficiency.
    Holding back the report itself is newsworthy, but the 
contents of it showed that the loopholes--and I am quoting from 
it directly--in the American fuel economy regulations have 
allowed auto makers to produce cars and trucks that are 
significantly less fuel efficient on average than they were in 
the late 1980s.
    In other words, we are going in the wrong direction. Your 
comment on--I mean, these are not--these are criticisms that 
have been well published, editorialized and so forth, that it 
was really to forestall raising CAFE standards.
    Mr. Garman. Sure, let me make a couple of points. First of 
all, this administration did increase CAFE standards on light 
trucks. We did so--it was the first increase in CAFE standards 
since the 1996 model year, and it was the largest increase in 
CAFE standards in 20 years. So the Administration has increased 
CAFE standards on light trucks.
    Representative Maloney. Yet the report says that--let us 
take trucks out of it. Cars, that the cars are now less fuel 
efficient on average than they were in the late 1980s. That is 
an astonishing report coming out of our government, EPA.
    Mr. Garman. Yet, they are meeting the legislated statutory 
cafe standard for automobiles, which if memory serves is 27----
    Representative Maloney. That is the point. The point is the 
legislative statute has allowed loopholes and has not upheld 
higher fuel efficiency standards. That is what it is saying.
    I just would like to ask some questions about the hybrid 
cars. As I mentioned earlier, my sister-in-law has a hybrid 
car. She says she sold 10 of them just from people coming up 
and asking her about her hybrid car finding out it is fuel 
efficient and really as citizens wanting to be a part of 
conserving our energy.
    She tells me that there is a waiting list. I am not going 
to tell you the company. It is an American company. There is a 
3-year waiting list just to get one of these cars. If this is 
the stated policy, the Chairman supports it, that most 
Americans should get hybrid cars, then why can't we get them 
produced and out on the market?
    Other people tell me that the foreign countries are 
producing these hybrid cars. A lot of Americans are buying from 
the foreign country--foreign cars because they can't get them 
from the American manufacturers. My question is why aren't we 
moving with full speed, instead of cars that consume more and 
more gasoline, moving towards the hybrids.
    I have had this conversation with Mr. Dingell, who is very 
supportive of the American automobile industry. Why aren't they 
moving to produce these hybrid cars at a faster rate? The 
foreign industries are just going to undercut us because the 
American people want it. They will even pay more. They will pay 
even substantially more to get a hybrid car.
    Mr. Garman. I would make the following points. First of 
all, we are very much encouraging the purchase of hybrid 
vehicles. The President, in 2001----
    Representative Maloney. Everyone is encouraging them. Why 
are they not producing them?
    Mr. Garman [continuing]. Offered a tax incentive for the 
purchase of hybrid vehicles. The question as to why aren't 
manufacturers producing more of them or offering more of them 
is a question I respectfully submit you might want to ask the 
manufacturers, and you have that opportunity in a minute.
    Representative Maloney. I am sure we will hear from the 
other panel, but I am sure you have discussions with them every 
day. I would like your own perspective.
    Mr. Garman. My only perception is that hybrid vehicles are 
relatively new. Folks are figuring out the market. Is this an--
and very few numbers have actually been bought. The question 
is, who has been buying the vehicles? Are they just early 
technology adopters who just like the hybrid vehicle concept or 
are they everyday Americans who are making a direct economic 
choice? Is this a flash in the pan, or is this going to be a 
sustained demand for this new technology?
    Most hybrid vehicles, the extra additional cost for the 
components in the hybrid vehicles, cannot be repaid with gas 
savings over the normal 5-year ownership of the vehicle. So 
some will say that the purchase of a hybrid vehicle is not an 
economically rational choice for a consumer. Yet consumers are 
buying them anyway. I think the manufacturers are trying to 
understand the market and look at the market and trying to--of 
course, they are only successful if they meet consumer tastes 
and demands.
    If this consumer taste and demand is something that is real 
and sustained, I am certain that the manufacturers--not only 
from foreign-based auto companies but U.S.-based auto 
companies--will fill that demand if that demand is real and 
sustained. We want to help, as you do, because there is a 
public benefit.
    Representative Maloney. People that I know that are buying 
them are making an environmental choice. They want our country 
to be more energy independent. They will pay more money to be 
part of that. But what I am hearing is they cannot even buy 
them. They are not even out there for them to buy.
    I would like to ask, what was the process for deciding that 
hydrogen vehicles should get the attention, and how does that 
affect the ability to fund other worthwhile investments in 
achieving greater energy efficiency? I think this is really 
important. I think we all share the goal of moving to greater 
energy efficiency.
    In fact, many of my constituents are concerned that maybe 
we are in Iraq--now that they find out we are not finding 
weapons of mass destruction--for the reason--I don't believe 
it--but for oil. There is a huge concern about the American 
public, and I hear it every day from my constituents.
    Why aren't we moving more, like we are with the ethanol, as 
the Chairman said, to be more energy efficient? But how does 
that--in other words, how does the trade-off between hydrogen 
vehicles and having the money and the technology and the 
research dollars to go after other windmills of efficiency or 
other ways we could approach it?
    Mr. Garman. Thank you for that question. That is a great 
question. The first part of it, why hydrogen, is answered in 
the following way. As you look at that chart, hydrogen is the 
only method that we foresee that over the long term actually 
gets personal transportation out of the oil business, out of 
the geopolitical implications of oil, out of the environmental 
impact of oil, over the long term.
    Hydrogen is a common fuel that can be produced from a 
variety of domestic resources we have right here in the United 
States. You can make hydrogen from wind power, you can make 
hydrogen from solar power, you can make it from nuclear power. 
You can make it from natural gas. You can make it from coal if 
you sequester the carbon dioxide.
    We have lots of choices of making carbon-free hydrogen for 
a common fuel. That kind of flexibility we don't have with any 
other fuel. So that is the short answer to why hydrogen. It was 
the only thing that could get us completely off of oil, and it 
was something that gave us the flexibility to make that fuel a 
variety of different ways.
    Now as to the question--which I take the question to mean, 
are we putting all of our eggs in the hydrogen basket? Are we 
spending too much on hydrogen to the detriment of other 
technologies that can make a contribution in the near term? I 
would argue that the answer is no. Based on the President's 
budget submissions in the last 3 fiscal years, you have seen 
our requests for funding for some of the nearer-term 
technologies, hybrid vehicles, batteries, energy storage, power 
electronics, some of these things that can advance internal 
combustion, some of these things that can make contributions in 
the near term have been going up, not down.
    So we haven't been stealing the dollars from the near term 
to pay for the long term. Our dollars focused on the oil 
problem. Vehicle technologies R&D have been on an upward trend, 
not a downward trend. So that is how I would respond.
    Representative Maloney. Thank you. There are many other 
panelists with questions. Thank you.
    Mr. Garman. Thank you.
    Representative Saxton. Thank you, Mrs. Maloney.
    Mr. McCotter.

            STATEMENT OF HON. THADDEUS G. McCOTTER, 
              A U.S. REPRESENTATIVE FROM MICHIGAN

    Representative McCotter. Thank you, Mr. Chairman. I get 
asked the Iraq question too. Our reliance on foreign fuels, has 
that driven us to Iraq? Are we there to go take Iraq's oil? The 
response that I generally find helpful is the fact that if we 
were there to steal it we wouldn't be paying for it. So I don't 
think we are there for the oil itself. We would have taken it 
by now.
    Secondly, I come from Detroit. I am graced to have the 
champion of the auto industry, Congressman Dingell, as my 
neighbor to the South. One of the things that I think he and I 
agree on is that the auto industry is not in the robust health 
that it was in earlier days. A lot of that has to do with the 
erosion of the North American market for the Big Three.
    One of the problems that led to that is it made some 
missteps in the marketplace. So we have to go back to the 
concept that while we may think that it would be nice for the 
Big Three to drive market demand, the reality in a free 
marketplace is that supply follows demand. While we may have a 
new development where people are making decisions on cars no 
longer on a cost-benefit basis but being able to have the 
economic luxury of adding something like an environmental 
consideration or a political consideration to their purchase of 
a vehicle, it is very difficult for the Big Three at this point 
in time to increase production and guess wrong again. That 
would not only cut into profits, that would cut into the number 
of jobs, which are becoming more and more scarce within our 
manufacturing industry every day.
    So my question would be--as we hear about 2015 and others, 
we hear about the past attempts to use incentives and perhaps 
the new rationale people are using to buy cars as a result of 
some of the incentives the legislation has put before consumers 
to look at alternative fuels.
    My question is, is it not so much of a forest that we miss 
it? One of the greatest market demands we are going to have, 
and continue to have, to drive the demand for these alternative 
fuels is staring us in the face every time we fill up our gas 
tank.
    The Unocal situation shows the national security interest 
of oil to the United States, but it also shows its scarcity. It 
shows that India, China and other developing nations are going 
to continue to put a continued strain on our oil supply even in 
the best situations of international comity.
    At this point in time, given the rising demands in the 
newly developing world and the prospect that the unstable 
situation in the Middle East will continue, what is the 
likelihood that the time line of having to make this decision 
on the Big Three's part or on our part as the government is 
going to be hastened?
    Mr. Garman. That is a very complicated question.
    Representative McCotter. That is what I get paid to do. I 
don't have to answer them. I just ask them.
    Mr. Garman. Oil analysts have many different answers to 
this question. There is one prevailing point of view held by 
thinkers such as Matt Simmons and others that we are at a point 
of reaching scarcity in recoverable hydrocarbons that even a 
tiny underperformance of a Saudi field, where, as the Chairman 
has pointed out, this production, excess production capacity 
exists, could have serious implications for the market, prices 
could rise. Yes, folks could be looking around more quickly 
than they otherwise would for alternatives.
    There is another point of view held by the Department of 
Energy's own Energy Information Administration which is an 
independent statistical agency that is not beholden to the 
political leadership. They take the view that there is lots of 
oil and that there will be on the order of 3 trillion barrels 
producible between now and 2025 and that this is not a problem. 
I don't know where the truth is.
    I think that if I did, if I could predict the future with 
certainty, I would just suggest I might not be in this job, I 
would be somewhere else. But I don't think anyone can predict 
the future with certainty. So I look at it as our job at the 
Department of Energy to partner with the private sector to give 
us options, a wide variety of technology options that can be 
brought into play when market circumstances warrant and when 
consumers are asking for it.
    Your point is extremely well taken that--and if my reading 
of recent market trends and purchases of vehicles is correct, 
consumers are responding to the price signal that they are 
getting at the pump and are looking to buy more fuel efficient 
vehicles, not necessarily because they are early technology 
adopters or not because they are driven by their environmental 
point of view, but because their pocketbook says it is the 
smart thing to do. So your point is extremely well taken.
    Representative McCotter. Well, that is my concern because I 
don't think Representative Maloney's constituents have an 
aberration, an ephemeral aberration. And I think that this is 
going to continue, and that the gas prices are going to stay at 
a relatively high level and continue to climb. Because you want 
to talk 2025--that to me is not a long time, I still won't even 
be eligible for Social Security at that point, if it is there.
    So my concern is that we don't want to be, as a government, 
doing anything that is, A, going to hinder the American 
producers of cars from being able to meet that demand, because 
there could be a spike in that or a very sharp rise in the 
demand for these cars that we cannot meet, that the fuel cannot 
meet.
    Even with the scenario of 2025--and I assumed that most of 
the people who came up with that analysis at the Department 
probably take the Metro to work. At the end of the day, I don't 
see the demand for oil going down. So even assume target 
traffic 2025, I can see the demand going up, up, up, up.
    I can also foresee the time when political currents will 
break in and cause problems with the market analysis that 
people have. My favorite example is when FDR slapped an oil 
embargo on the Japanese that was designed to bring them to 
their knees. That brought them to Pearl Harbor.
    So over time, I don't know how the cost of gas is ever 
going to get back down necessarily to where it was. If there is 
a continued steeper rise or a precipitous spike at some point, 
the demand for these cars is going to shoot through the roof, 
and we will not have the ability to meet that demand, and that 
is going to be a grave concern. But thank you.
    Representative Saxton. Thank you, Mr. McCotter.
    Mr. Hinchey.

             STATEMENT OF HON. MAURICE D. HINCHEY, 
              A U.S. REPRESENTATIVE FROM NEW YORK

    Representative Hinchey. Thank you very much, Mr. Chairman, 
and I thank you for holding this hearing. It is a fascinating 
subject. We appreciate the opportunity to take part in it.
    I think my colleague makes some very good points and your 
argument, not your argument, but the argument of others about 
the fact that there is plenty of oil in the world flies, of 
course, in the face of the market forces because we see a 
demand going up and the price going up very, very rapidly.
    I think he is absolutely right about increasing demand and 
we can see that particularly in places like China. And I 
understand that where you have 1 billion people in each of 
those countries, demand is going to go up and consequently the 
price of the product will go through the roof. But what 
troubles me, frankly, is we are not doing an awful lot to deal 
with it in this country.
    We have abandoned all of our energy conservation policies 
which were put in place in the second half of the decade of the 
1970s. We abandoned them in 1981 and we essentially haven't 
done anything to try to bring them back or to try to deal with 
the problem in an intelligent way since then. The issue of 
ethanol is fascinating.
    Can you tell me, Mr. Garman, how much oil or other fossil 
fuels it would require to produce a gallon of ethanol?
    Mr. Garman. I can. I recently had a report from the Argonne 
National Laboratory that said--and I will, of course, provide 
the complete information for the record--but as memory serves, 
and this is contrary to a recently publicized report from a 
Cornell researcher, but that the Argonne study found that 
ethanol yielded more energy than the fossil fuel inputs 
required to produce it. That for every million BTUs of ethanol 
produced, 750,000, roughly, BTUs, of fossil energy was used to 
produce it. So it is a winner. Ethanol is a winner, is the 
short answer.
    And the information that I will be happy to provide for the 
Committee will show you the various studies that have been done 
over the years and the various energy balance points that those 
studies came to. We find that most of the studies that are done 
find that ethanol is a winner.
    A researcher from Cornell finds that it is not a winner, 
and it all depends on the assumptions used in driving the study 
and some of this information is contained in the information 
that I will provide to the Committee.
    [The information requested appears in the Submissions for 
the Record on page 63.]
    Representative Hinchey. That is an Argonne study. Could you 
tell us a little bit more about it now so that we could pick it 
up quickly?
    Mr. Garman. Sure. Argonne National Lab looked at all the 
primary fossil fuel inputs that go into making a bushel of corn 
and transporting that corn. I am including the fertilizer 
inputs to the soil, the tractor in the planting, the harvesting 
of that corn, carrying that corn to the plant, producing the 
ethanol--the entire, if you will, value chain of the ethanol 
production.
    Representative Hinchey. No, I understand what you are 
saying, but that is the first I have heard that. Because every 
study I have seen, including the one from Cornell, shows that 
it takes about a third more--and some studies have shown even 
more than that--a third more of fossil fuels or other energy to 
produce a gallon of ethanol.
    A recent release from the Department of Energy shows that a 
gallon of ethanol contains only about two-thirds of the energy 
that a gallon of gasoline does.
    So if the other studies--not the Argonne study, but I will 
look at that very carefully--but if all the other studies that 
have come out on this, including the Cornell study, are right--
and your recent revelation about the fact that ethanol contains 
only about two-thirds of the energy of a gallon of gasoline, 
then it seems that we are putting our money in the wrong place. 
I don't think at this stage you can responsibly say it is a 
winner, because the information is at best conflicting.
    Mr. Garman. Actually, believe me, Congressman, you and I 
have a great history on the Appropriations Committee. I don't 
mean to be argumentative.
    Representative Hinchey. I do.
    Mr. Garman. The information that I will provide the 
Committee will show that the bulk of the studies, not the 
minority of the studies, but the majority of the studies show 
that ethanol is a winner, not a loser, in terms of energy 
balance.
    Representative Hinchey. Thanks. I am very interested in 
this. It is critical because so much attention is being paid to 
that. Now so much money has been put into the energy bill which 
we will be dealing with later tonight on the floor of the 
House, into ethanol, and I want to look at that study before 
that bill comes up for a vote tonight.
    Mr. Garman. We will get it to you this afternoon.
    Representative Hinchey. The issue of CAFE standards is also 
very critical. We had a dramatic increase--not dramatic but a 
significant increase in CAFE standards back in the 1970s, which 
proved to be very efficient in reducing the amount of gasoline 
that is used for transportation. As I understand it, about 70 
percent of the gasoline that we use in this country is used for 
transportation, cars, automobiles and other forms of 
transportation.
    Those CAFE standards reduced the gasoline usage very, very 
substantially, but we haven't done anything on it since then. 
But you just made the point a few moments ago that CAFE 
standards for light trucks, including SUVs, have gone up from 
20.7 to 22.2 by the year 2007.
    So 2 years from now, we will increase the CAFE standards 
for light trucks and SUVs by 1.5 miles per gallon, which is an 
increase. I don't want to denigrate it, but it is an awful lot 
less than we could be doing and should be doing.
    If we were serious about trying to reduce our dependence on 
foreign oil, we would be doing an awful lot more than that. 
Sixty percent of the oil that we use in this country now is 
imported, but that number is going to significantly increase in 
the years ahead.
    This is one of the basic elements of national security, 
which is not being addressed in that context. I just wish that 
the administration and this Congress would focus their 
attention on this issue much more than we have.
    Mr. Garman. I would--the National Highway Transportation 
Safety Administration, which promulgates corporate average fuel 
economy standards, in my understanding, is planning to shortly 
put out for public comment their new CAFE standard proposal for 
light trucks commencing in the year 2008 for public comment. We 
will be able to see what they are proposing and how they are 
looking to increase and improve the efficiency of the light 
truck market.
    Mr. Garman. We think the light truck market is key, 
because, frankly, we didn't have light trucks in this country 
outside of a very small number used in farms and light industry 
until CAFE standards were adopted. Folks used station wagons. 
And ironic-
ally----
    Representative Hinchey. I think you need to be very careful 
about that, establishing a causal relationship between the 
purchase of pickup trucks and the establishment of CAFE 
standards puts you on a very weak footing.
    Mr. Garman. I will say, and I would agree that that 
correlation does not necessarily mean causation. You are 
absolutely right, Congressman. But nevertheless, the sport 
utility vehicle market did not exist. And somebody with a 
family of five, such as mine, have a tougher time looking for 
the right kind of car, you know--I don't have a lot of station 
wagons to choose from. Thankfully, some more are now coming 
into the marketplace that aren't light trucks. And if you 
look--I guess my point, the interesting point is most of the 
petroleum use in the light-duty transportation sector has come 
from light trucks. SUVs, vans, cars are relatively flat. And if 
we can, if we can do something about the light truck sector, 
then that would be substantial. And that is why we have been 
focused on the light truck sector for corporate average fuel 
economic ruling.
    Representative Hinchey. Well, raising it by a gallon and a 
half in the next 2 years, after the next 2 years, is 
unquestionably a step in the right direction. But it is an 
awful small baby step in the right direction.
    Let me ask you a question about buses and mass transit, 
because this is something that I think is very important, it 
gives us an opportunity to do something constructive.
    We have been looking at this and we see that over 1,000 
heavy duty urban transit buses have been sold in the United 
States and Canada as of July of this month. And there is a 
movement going on towards hybrid propulsion to power these 
vehicles that are used in metropolitan areas. And our 
information is that we could see an awful lot of reduction in 
fuel consumption through the use of these vehicles if these 
statistics are correct.
    Is there anything within the Energy Department now that is 
focusing attention on mass transit, on these forms of hybrid 
buses, for example, in urban areas and also across the country?
    Mr. Garman. The heavy bus work is generally done in the 
Department of Transportation. I honestly don't know the history 
of that. The focus of the Department of Energy has generally 
been light duty vehicles. The focus of the Department of 
Transportation research and development has been heavy duty 
vehicles.
    I would say that the hybrid bus program that you mentioned 
appears to be fabulously successful and have a terrific impact. 
The early reports that I am hearing from fleets that have gone 
in this direction have been very favorable, not only in terms 
of fuel performance they are getting, but lower maintenance 
costs, higher availability, a whole host of reasons for transit 
authorities across the country to look very, very seriously at 
these new bus offerings.
    And I just commend the companies and others who have been 
involved in bringing these to the marketplace for doing that, 
because I think it can make an important contribution.
    In terms of the aggregate amount of oil we use, it is 
relatively small, but every bit helps, as you point out.
    Representative Hinchey. Yes. And you can make a big 
contribution, I think. In New York City, for example, there are 
4,500 buses just operating within New York City. And if you 
translate that to places like Los Angeles and Chicago and other 
places across the country, that number goes up significantly. 
So I am very happy to hear you say that.
    Mr. Garman. And one other point for everyone's benefit, not 
only is there a fuel economy benefit, but, of course, an air 
quality benefit as well.
    Representative Hinchey. Yes. Absolutely, I thank you very 
much, sir.
    Representative Saxton. Thank you and we are going to move 
to our next panel. And on the way there, I am just going to 
emphasize something that my friend, Mr. Hinchey, said. He 
talked a little bit about the national security implications of 
this petroleum situation. I am not an expert on these matters. 
But I am told that OPEC countries are sitting on 70 percent of 
the oil reserves that exist in the world, and that non-OPEC 
countries are therefore sitting on 30 percent of the reserve.
    I would make the case that through an intentional process, 
the OPEC countries today, with 70 percent of the oil reserves, 
are producing 40 percent of what the world uses, and non-OPEC 
countries, with 30 percent of the reserves produce 60 percent 
of what the world uses. This is a very troubling set of 
statistics because it appears that our friends in the OPEC 
countries who obviously think differently than we do on a 
number of issues have artificially controlled the price of 
petroleum and are one of the root causes of where we find 
ourselves--along with demand, the growth in the economies in 
places like China, which also has certainly contributed.
    But when we see the countries that control 70 percent of 
the oil reserves producing 40 percent of what we use, this to 
me, is a big red flag that has been run up the flag pole and we 
need to be very conscious of this, and we need to take steps to 
mitigate this and to become energy independent.
    Representative Hinchey. Thank you for that conclusion, Mr. 
Chairman. We should perhaps stop holding hands with the King of 
Saudi Arabia.
    Representative Saxton. I would suggest you may be right. 
And unfortunately, we are wedded to him by petroleum at this 
point. So this is an important subject.
    Mr. Garman, thank you very much for being with us. We 
really appreciate your attendance and the information that you 
have brought us this morning. And we look forward to working 
with you on this subject as we move forward.
    Mr. Garman. Thank you, Mr. Chairman.
    Representative Saxton. We are now going to move on to our 
second panel. I would like to welcome Mark Chernoby, who is the 
vice-president of Advanced Vehicle Engineering at 
DaimlerChrysler corporation; Mary Ann Wright, director of 
Sustainable Mobility Technologies and Hybrid Programs from Ford 
Motor Company; and Tom Stricker, national manager of Technology 
and Regulatory Affairs, Toyota Motor company of North America.
    Representative Saxton. Also, Mr. Loper, you're from----
    Mr. Loper. I am from the Alliance to Save Energy and I will 
give more introduction.
    Representative Saxton. Very good. We will start with you 
then, Mr. Loper, if that is all right. And we will go from left 
to right across and then we will have questions for you.

            STATEMENT OF JOE LOPER, VICE PRESIDENT, 
                    ALLIANCE TO SAVE ENERGY

    Mr. Loper. Thank you Mr. Chairman. I am Joe Loper, vice 
president of the Alliance to Save Energy. I appreciate the 
opportunity to speak with you today. The Alliance to Save 
Energy is a bipartisan, nonprofit coalition of more than 90 
business government and consumer leaders. Our mission is to 
promote energy efficiency worldwide to achieve a healthier 
economy, a cleaner environment, and greater energy security.
    We were founded in 1977 by Senators Charles Percy and 
Hubert Humphrey, and currently enjoy the leadership of Senator 
Byron Dorgan as Chairman, amongst many other distinguished 
Members of the Congress.
    Attached for the record are lists of the Alliance's board 
of directors and its associate members. For the last 4 years, 
Congress and the President and groups like ours have spent 
innumerable hours trying to agree on ways to address the 
Nation's dependency on oil and its adverse impacts on climate 
and air and water quality. There has been much discussion about 
how to ease the burdens on States and cities trying to meet 
Clean Air Act requirements and who is going to pay for leaks 
from underground storage tanks.
    Congress has even debated several measures to reduce 
greenhouse gas emissions. Meanwhile we have watched oil prices 
climb from $30 to $60 per barrel, as oil supplies get rocked 
almost daily by events that are largely out of our control. 
These range from Venezuelan uprisings to hurricanes in the gulf 
of Mexico, to the growing demand for oil in China.
    With less than 2 percent of the proven oil reserves within 
our borders, we have limited control over our oil supplies and 
prices. We can, however, control our demand for oil. That makes 
this hearing particularly important. Given that the 
transportation sector accounts for two thirds of U.S. oil use 
and that passenger cars and light trucks consume 40 percent of 
that oil use, it is critical that we address vehicle fuel use.
    We applaud the efforts of Congress to address the Nation's 
energy challenges in the current conference energy bill. The 
tax incentives for hybrid and advanced diesel vehicles, along 
with technology, research and demonstration programs are 
certainly useful. However, we cannot pretend to think that the 
bill before Congress will have any significant impact on U.S. 
petroleum use.
    In fact, when it came to addressing energy use in vehicles, 
Congress flat out missed the onramp. Most, if not all, of the 
oil savings in the conference energy bill will be cancelled out 
by the increased energy use resulting from extension of the 
corporate average fuel economy credit for dual-fuel vehicles. 
This provision, as many of you are familiar with, will allow 
vehicle manufacturers to take credit for vehicles that are 
capable of, but almost never do, run on alternative fuels.
    As Mr. Garman noted earlier, many consumers are buying 
alternative fuel vehicles without even knowing it. And if a 
large percentage of the vehicles are already capable--alt-fuel 
capable--then one has to ask the question whether we need 
government incentives to encourage more. It seems to us that 
incentives to develop the infrastructure, as proposed in the 
Chairman's bill, would make far more sense.
    There is no shortage of technologies to improve vehicle 
fuel efficiency. Many of these technologies are already in the 
vehicles, in fact. And other technologies are being pulled off 
the shelf and increasingly deployed in new vehicles. They 
include variable cylinder management, hybrid drive trains, 
regenerative braking, and a host of other technologies that I 
won't inventory today.
    These are not pie-in-the-sky technologies. They are not 
expensive gimmicks, but rather, they are technologies that are 
here now. On the horizon we have plug-in hybrids and hybrid and 
fuel cell vehicles which have also been mentioned.
    But while advanced technologies have been incorporated into 
vehicles and will continue to be deployed in vehicles, we are 
not getting more miles per gallon as a result. In fact, the 
average fuel economy in miles per gallon of model year 2004 
vehicles is 6 percent lower than in the 1987 to 1988 model 
years. Instead of getting better fuel economy, we are getting 
more towing capacity, we are getting more acceleration, we are 
getting more weight, we are getting more space.
    For example, America's best selling truck, the Ford F-150, 
claims almost 5 tons of towing capacity. That is enough 
capacity to pull a 36-foot horse trailer with 4 horses in it. 
The average passenger car sold today has about 185 horsepower, 
which is 40 percent more than a car sold 15 years ago. It is 
the same horsepower as a large Caterpillar bulldozer.
    This decade looks like it could displace the 1960s as the 
decade of the muscle car. According to the classic car and 
vintage automobile registry, more than half of the fastest 
production car models offered since the 1960s have been offered 
since the year 2000. In other words, the number of production 
hot rods offered in the last 5 years exceeds the number offered 
in the last 4 decades.
    Vehicle fuel economy is a huge reservoir of low-cost energy 
waiting to be tapped. According to EPA estimates, if automakers 
had applied the technology gains made since 1987 to improving 
fuel economy, average fuel economy would be 20 percent higher.
    If the Nation had taken this path, we could be consuming 
between 1 and 2 million barrels per day less than we are. That 
is equivalent to the more optimistic estimates of the resources 
from the Arctic National Wildlife Refuge.
    For the last 20 years, the Nation's oil policy has, in 
effect, been made in America's car showrooms. It is time for 
the Federal Government to provide more guidance in the vehicle 
marketplace. There are many policies that could be employed to 
ensure that at least a position of these advances get used to 
improve fuel economy. These policies are familiar, in fact, 
perhaps too familiar.
    Between 1975 and 1985, fuel economy standards were used to 
help achieve a 70-percent improvement in new vehicle fuel 
economy. Since the mid-1980s, CAFE standards have been 
unchanged due to political pressure. The current standard of 
27.5 miles per gallon for cars, for passenger cars, has been in 
place since 1985. The current 21-miles-per-gallon standard for 
light trucks is only 0.5 miles a gallon above the 1987 
standard. To the extent that fuel economy standards are based 
on fuel economy levels that were achievable 2 decades ago, 
their effectiveness is seriously undermined.
    There are some loopholes that also need to be addressed 
with the CAFE standards. Old testing methods for one: EIA 
estimates that the actual fuel economy of vehicles is about 20 
percent lower than the CAFE standard test result suggests. In 
other words, a 27.5 miles-per-gallon CAFE standard is really 
equivalent to a 22 miles-per-gallon standard. Fuel economy 
testing methods should be revised to better reflect real world 
driving.
    Fuel economy standards allow vehicles classified as trucks 
to meet less stringent standards than are imposed on passenger 
cars. When this loophole was created, less than 1 quarter of 
light duty vehicles sold were classified as trucks. Now, fully 
half the vehicles sold receive this special designation. Most 
of these trucks are sport utility vehicles and minivans that 
are primarily, if not exclusively, used for transporting 
passengers. As noted earlier by Mr. Garman, it is easier to put 
station wagons on truck chasses than to increase fuel economy 
under the current regime. This needs to be fixed.
    Vehicle manufacturers, as I noted earlier, receive credit 
against their fuel economy requirements for sales of dual fuel 
vehicles that can run on either ethanol or gasoline. We would 
argue that this should be terminated, at least modified, to 
require that the vehicles are actually using the alternative 
fuels for which they are getting the credit.
    Finally, large vehicles up to 10,000 pounds should be 
subject to the labeling and CAFE standards.
    Representative Saxton. Mr. Loper, I am sorry. I have been 
informed that we are going to have a series of votes around 12 
o'clock. And when we have a series of votes, it can take up to 
an hour, so I am going to ask you if you could summarize your 
statement so that we can move on to the other witnesses.
    Mr. Loper. To summarize, Government and industry have made 
great strides in developing technologies that can improve the 
fuel efficiency of the transportation sector. Many of these 
technologies are not, however, being widely used to improve the 
fuel economy of today's vehicle fleet, instead they are being 
used to increase overall vehicle acceleration and power and 
size.
    Without government policy interventions, the next 20 years 
could be just like the last with fuel economy being sacrificed 
to increase acceleration, horsepower, weight and size. By 
widely using the tax code and increasing and reforming CAFE 
standards, we could begin to see improvements in the fuel 
economy of vehicles.
    Despite the arguments of the auto industry, these policies 
would not deny consumer choice. These policies would simply 
change the relative price of various vehicle amenities. They 
would make increased fuel economy less expensive and would make 
hot rods and large tow vehicles more expensive. They would make 
people think about how much car or truck they really need. They 
would encourage manufacturers to make more vehicles with better 
fuel economy available to consumers, and then market them.
    Improving fuel economy is not a technical challenge. The 
technologies are here. Rather, it is a matter of political 
priority and will. With the Nation continuing to rely on 
imported oil from volatile regions of the world and concerns 
about the impact of oil use on the environment quality and 
climate, it is increasingly imperative that our Nation 
translate more of our technical advances into improvements in 
fuel economy. I appreciate the opportunity to speak with you.
    Representative Saxton. Thank you, Mr. Loper.
    [The prepared statement of Mr. Loper appears in the 
Submissions for the Record on page 45.]
    Representative Saxton. Mr. Stricker.

  STATEMENT OF TOM STRICKER, NATIONAL MANAGER, TECHNICAL AND 
      REGULATORY AFFAIRS, TOYOTA MOTOR NORTH AMERICA, INC.

    Mr. Stricker. Good morning and thank you for the 
opportunity to be here today.
    Representative Saxton. If I may just reiterate this, we 
probably have about an hour to finish up here or maybe a little 
bit less. So if you could summarize your statements in 5 
minutes or so, we would appreciate it.
    Mr. Stricker. Certainly. I will submit the full statement 
for the record.
    My statement today was going to address fuel cell vehicles, 
diesel vehicles and hybrid vehicles. I will just quickly 
summarize a couple of comments on fuel cells and diesel 
vehicles, and then I will spend the 5 minutes on hybrid 
vehicles.
    On the fuel cell side, obviously the vehicles offer great 
promise, as Mr. Garman mentioned, for eliminating the vehicle 
from the environmental equation, assuming that hydrogen can be 
made in a clean way. There are a lot of challenges, still, to 
the marketability of hydrogen. In fact, the biggest challenge 
we see on the vehicle side is the storage of hydrogen on the 
vehicle to improve the range of the vehicle.
    There are infrastructure issues as well in terms of 
establishing the infrastructure and producing hydrogen in a 
clean way, as I said.
    On the diesel side of the technology equation, of course, 
diesels are very popular in Europe right now but we see some 
uncertainty, in just how extensively light diesel vehicles will 
penetrate the U.S. market. Market demand is not really clear to 
us right now. The fuel price advantage and tax policies that 
exist in Europe aren't present here for diesel fuel. And really 
the big challenge for diesel in the U.S. market is meeting 
EPA's tier 2 emissions standards for 2007 and beyond.
    As you know, Toyota is aggressively pursuing hybrid 
technology because we feel it can provide increased fuel 
economy, reduce fuel consumption, cleaner emissions and improve 
vehicle performance without changes in refueling 
infrastructure.
    Hybrids combine an internal combustion engine with an 
electric motor and a battery. There are several types of hybrid 
systems that are out there, and their differences are important 
in terms of their costs and benefits.
    Toyota's Hybrid Synergy Drive that we market here in the 
United States, is what is called a full or strong hybrid. The 
advantage of that type of system is that the vehicle can 
operate on the battery alone, electric motor alone, or the 
internal combustion or combinations of the two power sources. 
The ability to operate on the electric motor only is the key to 
achieving the significant fuel economy improvements.
    In addition, braking energy is captured and reused to 
recharge the battery and, of course, the vehicles never need to 
be plugged in. It is amazing how many people still don't know 
that.
    Representative Saxton. Would you say that again? I didn't 
quite get that.
    Mr. Stricker. The hybrid vehicles don't need to be plugged 
in. On our system, the battery is recharged while braking, 
called regenerative braking, and also we use the gasoline 
engine at times to recharge the battery. So no plug in is 
required. And a lot of people don't understand that about 
hybrids. They still think there is a little yellow cord that 
they have to plug into the wall.
    Since we first introduced the Prius in Japan in 1997, we 
have made substantial improvements. The first generation was a 
subcompact car rated at about 42 miles per gallon that met low-
emission vehicle requirements. Acceleration from 0 to 60 was 
about 14.5 seconds. With each subsequent generation of Prius, 
we have increased size, performance and fuel economy while 
lowering emissions. The current Prius is a mid-sized sedan with 
an EPA rated fuel economy of 55 miles per gallon and goes from 
0 to 60 in about 10.5 seconds. Compared to the average mid-
sized car, Prius saves about 350 gallons of gasoline per year. 
Today's Prius meets Tier 2 bin 3 levels, making it about 50 
percent cleaner for smog forming emissions than the tier 2 bin 
5 level, which is what the average new car will be required to 
meet in 2007.
    The major reason that we focused on hybrids rather than 
diesel for the U.S. market is that we achieve the fuel savings, 
plus there really isn't any question about whether you can meet 
the emission standards or even exceed the current emission 
standards.
    And the market has begun to react. The sales of 2005 alone 
equaled the total sales for the previous 4 years. However, it 
was mentioned earlier today despite this relative success, the 
hybrid vehicles still make up only about 1 percent of the 
annual vehicle sales in the country.
    Earlier this year, we announced two new hybrids. In April 
we launched the Lexus RX400h SUV, and in June, the Toyota 
Highlander Hybrid.
    The Lexus RX400h is an all wheel drive system, so it 
combines the gasoline engine with a front motor and a rear 
motor. And the result is a V-6 SUV that gets superior fuel 
economy. It gets the same fuel economy as the average compact 
car. Yet it has the acceleration and performance of competing 
V-8s. We estimate the RX400h saves about 350 to 400 gallons per 
year of fuel compared to comparable luxury SUVs.
    And further, it is certified to the tier 2 bin 3 level as 
well, just like the Prius.
    The Highlander Hybrid is available in two- or four-wheel 
drive, and basically has similar environmental performance.
    We envision a day when consumers will be able to choose 
from a hybrid power train option just like they currently 
select between a 4 cylinder, or 8 cylinder conventional engine. 
With that in mind, we have recently announced the upcoming 
production of two additional models, the Lexus GS450h, which is 
a luxury Sedan and the Toyota Camry. And the Camry will be our 
first hybrid produced here in the United States at our 
Georgetown, Kentucky plant. We expect these vehicles, as well, 
to have superior fuel economy performance.
    And the final point I want to make about hybrids, and I 
think Mr. Garman mentioned as well, concerns its applicability 
in the future to a wide range of power trains, including fuel 
cells. Some view hybrids as a temporary measure that is going 
to be replaced eventually by fuel cells. We view the hybrid 
technology as an integral part of the future fuel cell vehicle. 
The only fundamental difference right now between our hybrid 
system and our fuel cell hybrid vehicle, the FCHV is that the 
gasoline engine is simply replaced by the fuel cell stack, a 
slight oversimplification, but essentially that is the only 
difference.
    The hybrid portion of the system remains effectively 
unchanged. So the battery improvements and technology 
development and control systems improvements and our experience 
in the production phase of these components, and cost 
reductions that we are able to achieve will all be applicable 
directly to fuel cells in the future as we see it.
    So in summary, we view hybrids as a core technology as we 
pursue more sustainable transportation. The reality is that 
various types of power trains and fuels are likely going to be 
needed to address the energy issues that we are here to discuss 
and public health concerns. Which technology is eventually 
going to win out, and when they win out, depends really on our 
being able to develop a product that meets consumer 
expectations at a reasonable cost compared to the other 
alternatives that are going to be out there. This concludes my 
remarks. Thank you.
    Representative Saxton. Thank you very much, sir.
    [The prepared statement of Mr. Stricker appears in the 
Submissions for the Record on page 49.]
    Representative Saxton. Ms. Wright.

 STATEMENT OF MARY ANN WRIGHT, DIRECTOR, SUSTAINABLE MOBILITY 
             TECHNOLOGIES AND HYBRID AND FUEL CELL 
              VEHICLE PROGRAMS, FORD MOTOR COMPANY

    Ms. Wright. Thank you. My name is Mary Ann Wright. I am 
with Ford Motor Company, and thanks for including me in the 
hearing today. Energy security and rising fuel prices are 
significant issues facing our Nation. Industry, Government and 
consumers all have important roles to play in addressing our 
Nation's long-term energy needs. We, as industry, should 
continue to invest in the development of energy efficient 
technologies that provide cost-effective solutions for our 
customers. And government needs to take steps to bring advanced 
technologies to market more quickly and cost effectively 
through customer incentives. Ford is committed to improving 
vehicle fuel economy by developing a portfolio of fuel 
efficient advanced technology vehicles.
    Product solutions to improve fuel economy must result in 
vehicles that customers can afford and they are willing to 
purchase because they want to drive them. We know that when 
consumers consider purchasing a vehicle, they are concerned 
with affordability, quality, reliability, styling, safety and 
appearance. So from our perspective, we can't compromise on any 
of those important attributes.
    Our vision for the 21st century is to provide 
transportation that is affordable in every sense of the word, 
socially, environmentally, as well as economically for business 
sustainability. In other words, sustainable transportation. And 
we need to do that by offering innovative technology that makes 
a difference for our customers and the world in which they live 
in, and it is not just the right thing to do. It is smart 
business for us.
    As a result, we are doing substantial development work with 
renewable fuels and four advanced powertrain technologies, 
including gasoline electric hybrids, clean diesels, hydrogen-
powered internal combustion engines and hydrogen fuel cell 
vehicles.
    We do believe that renewable fuels will play an 
increasingly important role in addressing U.S. energy security 
and energy diversity. All of our gasoline vehicles are capable 
of operating on blends, including up to 10 percent renewable 
ethanol. In addition, Ford has produced approximately a million 
and a half flex fuel vehicles capable of operating up to 85 
percent ethanol. Overall, the industry has seen about 5 million 
vehicles.
    Now, in our Ford fleet today, the Taurus, the Explorer and 
the Mountaineer are flex fuel vehicles. Next year, the vehicles 
that will be offered as flex fuels are the F-150, the Crown Vic 
and the Grand Marquis. I think--although the number of E-85 
vehicles continue to grow, there is less than 300 of these 
fueling stations in the country. We are working with the 
various States that are major ethanol producers, such as 
Illinois. And we are working to increase consumer awareness 
that these alternatives do exist out there.
    We are also at the leading edge of hybrid vehicle 
development. Ford Escape Hybrid and Mercury Mariner hybrid are 
great examples, our hybrid SUVs can do virtually anything that 
the regular gas Escape Mariners SUVs can do, but with 
approximately 75 percent better fuel economy in city. And I 
also want to tell you that it only produces one pound of smog 
forming pollutants over 15,000 miles of driving. And I am also 
very proud to say that we have over 139 patents that my 
engineers and scientists developed in creating the Escape 
Hybrid, which I want everybody to recognize was engineered here 
in the United States and is the only full hybrid SUV produced 
here in the United States in our Kansas City assembly plant.
    Additionally, over the next 3 years, we are going to have 
three other hybrids joining our fleet of vehicles. We will 
include the Mazda Tribute, and then we will be taking our next 
generation technology and putting that into our new Ford Focus 
and Mercury Milan. And again, we are emphasizing in-sourcing 
and bringing in house this technical capability.
    Much of what we have learned in developing these hybrids 
will help us as we explore other advanced technologies. 
Nevertheless, the key challenge facing hybrids is incremental 
costs, both in terms of the higher prices for the components as 
well as the engineer expenses associated with it. And that 
needs to be overcome for the technology to transition into what 
I call mainstream product viability.
    We are also working on advance light duty diesels. Today's 
clean diesels offer exceptional driveablity and can improve 
fuel economy by 20 to 25 percent. All you have to do is go over 
to Europe and look under the hood of about half the vehicles 
over there and it is demonstrated. I think, as we said today, 
in the interest of time, I think the key challenges ahead of us 
are the incremental costs and the infrastructure associated 
with the clean fuel and the after treatment.
    We are also working on what we think is the next step on 
the road to sustainable transportation, and that is hydrogen 
powered internal combustion engines. We are a leader in this 
technology. And we do think that it is a bridge to the 
development of a hydrogen infrastructure, and ultimately the 
fuel cell vehicles. We recently announced that we are 
developing hydrogen powered E-450 shuttle buses that we are 
going to be putting into demonstration fleets across North 
America. We have a fleet that will be down in Orlando at the 
airport, and we also have a fleet out in California as well as 
working with the Dallas Airport Authority.
    And what this will do for us is, as we are maturing the 
fuel cell technology itself, allows us to focus on things like 
infrastructure development, as well as one of our key technical 
challenges, and that is fuel range.
    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 
feed stocks to increase energy diversity, and fuel cells are 
extremely efficient and produce no emissions. The Ford Focus 
Fuel Cell vehicle is a state-of-the-art hybridized fuel cell 
system which is being deployed right now across the United 
States. We are putting a fleet in California, Southeast 
Michigan, and Florida. We have a fleet already deployed in 
Vancouver, Canada as well as Germany.
    Fuel cells are promising but there is also a lot of vehicle 
and infrastructure challenges that must be addressed before 
they can reach commercial viability. Frankly, that is cost, 
reliability, and feed stocks.
    We also need to ensure that we get the appropriate 
infrastructure developed.
    Solutions will require technological breakthroughs and the 
concerted efforts of Government, the auto industry and energy 
providers.
    In conclusion, our objective is simple. We need to give 
consumers more of what they want, which is performance 
driveablity, affordability, utility and a cleaner environment. 
Advanced vehicle technologies can increase fuel efficiency 
without sacrificing these attributes.
    We support policies that promote research and development 
of advanced technologies in the development of renewable fuel 
sources. In addition, market-based consumer incentives need to 
be a key element of a coordinated strategy, effectively address 
stable transportation and energy security. Consumer tax credits 
for advanced vehicles will help consumers overcome initial cost 
premiums associated with early market introductions, bringing 
more energy efficient vehicles into the marketplace more 
affordably and at higher volumes. Ford Motor Company believes 
that the current U.S. energy bill contains many important 
policies and incentives to address our Nation's energy needs, 
and we encourage Congress to pass this legislation. Thank you.
    [The prepared statement of Mary Ann Wright appears in the 
Submissions for the Record on page 53.]
    Representative Saxton. Mr. Chernoby.

          STATEMENT OF MARK CHERNOBY, VICE PRESIDENT, 
         ADVANCED VEHICLE ENGINEERING, DAIMLERCHRYSLER 
                          CORPORATION

    Mr. Chernoby. Thank you, Mr. Chairman, and distinguished 
Members of the Committee. I want to thank you for the 
opportunity to appear today. I am going to be as brief as I can 
because I know we are time limited and try not to be 
repetitive.
    At DaimlerChrysler we agree with many of the points of view 
that my colleagues have made this morning. It is interesting to 
note while oil prices are high and we take a look at the 
overall metrics of the auto industry and the economy actually 
total vehicle sales in June are up 2 percent. Market share of 
trucks is actually slightly higher than the prior year. So, to 
us, that doesn't mean that we can sit on our laurels and not 
work on these advanced technologies. In fact, just the 
opposite.
    DaimlerChrysler is absolutely focused on creating and then 
supplying a very broad portfolio of technologies because in the 
end, what matters is market penetration. If we don't have 
market penetration of both the vehicle and then the fuels in 
the vehicle, we will not see the benefits to the environment 
nor will we see the reduction in oil consumption in this 
country. So we absolutely must succeed, and DaimlerChrysler, 
like my peers have said, will not pick which technology will 
win. The consumer is going to do it. So we are definitely 
focused on continuous improvement of IC engines as the Chairman 
mentioned, things like cylinder deactivation, in our 5.7 liter 
HEMI, have provided millions and millions of gallons of fuel 
savings already in the marketplace today, not tomorrow. We are 
focused on light-duty diesels. We think they have an 
exceptional place in the market. Again, it is going to be 
providing the highest value to the consumer.
    Hybrids provide tremendous value to the customer who drives 
in city environments. Unfortunately on the highway, at high 
speeds, a hybrid can be nothing more than hauling around an 
extra 400 or 500 pounds in the vehicle with very little 
benefit. This is the place where we think diesel or cylinder 
deactivation technologies provide an excellent benefit to the 
consumer. So we are focused on providing a range of 
technologies in all these areas. Hybrids as well.
    DaimlerChrysler has announced a joint program with General 
Motors. We think we have come up with a program that will allow 
us to get scale of volume, and as Ms. Wright mentioned, a lot 
of this is about component costs. We have to get a cost-
effective system out there. We believe that the program we have 
done with General Motors will help us get this scale of volume 
and reduce costs so we can have a viable business case.
    As the Under Secretary mentioned, we must have a business 
case to remain a viable entity and it is all about coming to 
the market at the right time at the right scale of volume to 
make that happen.
    DaimlerChrysler is also very focused on collaborative 
efforts on fuel, things like biodiesel we think is an excellent 
example of another alternative fuel. We talked about renewable 
fuels earlier and FFE, we think ethanol is also an excellent 
alternative for the customer. And that is why we built more 
than a million and a half ethanol vehicles out there for the 
customer to consider. These vehicles are on the road today.
    But as was mentioned, unfortunately the fueling 
infrastructure is not there for these vehicles to actually 
realize the benefits to the environment or reductions in oil 
consumption.
    And then finally, I want to mention one more technology. We 
cannot forget about things other than the propulsion system. We 
must remember the weight of the vehicles, advance materials are 
a very important part of our pre-competitive research that we 
do jointly with the government through the Department of 
Energy. If we can drop vehicle weight, and implement 
technologies which enable aerodynamics, we will also realize 
incremental benefits, because in the end, I don't think there 
is going to be any one answer that is going to fix this 
problem. It is going to be a lot of little things that will add 
up.
    In closing, DaimlerChrysler is also very focused on the 
longer-term approach with hydrogen fuel cells. We spent more 
than a billion dollars in R&D on this effort. We have the 
largest worldwide fleet out there in three different 
continents. And then we participate very strongly in the 
Department of Energy's efforts, both in the demonstration 
program and in the pre-competitive research. Because in the 
long run, we do agree that this is probably the key technology 
that is going to break the entire subject loose 20, 30 years 
from now.
    With that I want to thank the Committee for allowing us to 
speak today. And we must continue to work together to support 
the joint programs of government, academia and industry to 
ensure that we tap the best resources this country has to offer 
to find the answers to these difficult questions. Thank you.
    [The prepared statement of Mark Chernoby appears in the 
Submissions for the Record on page 54.]
    Representative Saxton. Thank you all very much.
    My other job here is to be a member of the Armed Services 
Committee and it is really encouraging to see the kinds of 
advancement in technology that you have each talked about. And 
on the Armed Services Committee last week, or perhaps earlier 
this week, we were trying to solve a problem that has to do 
with the security of our Marines. And I was made aware that 
there is a weapons systems which has been designed and 
prototyped called the Thunderbolt, which is a 40,000-pound 
tracked vehicle that is driven by a hybrid electric engine. And 
I was actually shocked to find that out, because I didn't know 
that that kind of technology actually exists. And that engine 
will drive that vehicle for 600 miles with 140 gallons of 
diesel, and it will go 60 miles per hour.
    I learned this because we are going to try to produce this 
system for an armored vehicle for our Marines. And when I found 
out that that technology actually exists today, I was 
surprised, and of course, heartened that there is a future 
going down this road. So I am really taken with what I have 
learned here in the last few months about the technologies that 
have been developed both in this country and overseas.
    And as I look at the chart--I wonder if we could get that 
chart back up. Thank you.
    As I look at the chart, and, going forward, it is very 
encouraging to see that as was noted earlier, maybe by 2025, or 
thereabouts, 2030, we would begin to see that we really have a 
significant potential for dropoff in our dependence on 
petroleum.
    But in the short term, these technologies apparently are 
not expected, at least by the Department of Energy, to be 
players in a major way that will reduce our dependence on 
foreign oil. And as I mentioned earlier, we do have some 
technology which Ms. Wright spent some time talking about, and 
Mr. Loper mentioned it also, although in a not so positive way. 
Flex fuel vehicles, which represent a technology that is 
available today, which could make a significant difference if, 
as Mr. Loper suggested, and as my bill suggest, we had an 
infrastructure to deliver--to deliver this fuel with alcohol 
and I am wondering what is your take on this?
    Mr. Stricker, you, and Ms. Wright and Mr. Chernoby, you all 
talked about hybrid vehicles and fuel cell vehicles as being 
the answer in the future. We have some immediate needs. How can 
we solve this problem with the immediate need given the fact 
that we have technology available today that could, if managed 
correctly, I believe, solve the problem short term? Or at least 
help solve the problem short term?
    Mr. Stricker. I would make two points in response to the 
question. I wasn't able to see this chart when I was sitting 
down, so this is the first time I have glanced at it. But one 
point I would note is the hybrid vehicle case there is not 
insignificant, and it is fairly near term. So I think from our 
view, while hybrids are just now starting to penetrate the 
market, it depends on your definition of ``near term.'' I think 
we see it as a very viable technology that can, as that chart 
reflects, provide some significant reductions in petroleum.
    On the issue of flex-fueled vehicles, in particular, Toyota 
does not currently make flex fuel vehicles here in the United 
States and you wouldn't see one out there on Independence 
Avenue driving by. The problem, as your legislation apparently 
tries to address, is the availability of the fuel. We don't see 
a real need, per se, right now or benefit to adding the extra 
cost to the vehicles and putting a whole bunch of vehicles out 
there when there really isn't any fuel, so I think we would be 
interested in looking more closely at your bill to see how that 
might spur some of the fuel to actually get out there.
    Representative Saxton. What is the cost during the 
manufacturing process to build a car or a vehicle that can burn 
E-85?
    Mr. Stricker. My colleagues will have to answer that 
because we don't currently make that.
    Representative Saxton. Before you get to that question, 
what are the prospects, short term, in the next, say, 5 years 
of making a difference with flex fuel cars?
    Mr. Chernoby. From a DaimlerChrysler perspective, I would 
respond to a couple of your statements. I don't know the exact 
number of the cost, but essentially it is the difference in the 
E-85 flex fuel vehicle, that was mentioned earlier it is a 
question that number one, sensing the field, whether they use a 
sensor or software. And the other thing is you have to change 
some materials to handle the more corrosive nature of the fuel 
and throughout the fuel system and into the engine.
    But the bottom line to think about is those changes and 
those technologies are things we can buy at high volume today. 
We could do it now. We can turn the spigot on at greater 
numbers than we are doing today. And the costs are a minimum of 
a decimal point, if not more than a decimal point different 
than the hybrid technology.
    Even if we wanted to crank up if the demand was there in 
the market at a cost where we could recover in a business case, 
even if you wanted to crank it up by multiple volumes today, 
you couldn't because the component supply base is not there. It 
takes time for infrastructure and industry to build up the 
capability to build technologies and volume and that is where 
the FFE and the ethanol example is an interesting one, because 
those technologies at high volume, I think, could be reached in 
a much faster than time if we wanted to build more vehicles 
than we are building today and at a much higher value quotient 
than we can with the hybrid technology as it stands today.
    Now obviously, those costs can change in the future as the 
scale of volume of the hybrid components increases.
    Ms. Wright. I agree, I am not going to repeat everything he 
said. It is primarily in the fuel system. I actually did the 
2000 Taurus flex fuel so I lived through that. And Ford is very 
committed to the flex fuel market. We will be producing the F-
150s, the Crown Vics and Grand Marquis in significant 
quantities. I think the key is providing awareness to customers 
that this is out there and what the benefits are.
    The infrastructure, we all understand what the issues are 
there. I think Mark is absolutely right and that is that, in 
addition to not having frankly an onshore capable supply base 
to help boost the economic and the technical viability, we also 
have a skillset shortfall here in the United States. My group 
is growing exponentially as we continue to develop more hybrids 
and more of our advanced technologies. I am struggling, quiet 
frankly, to get the skillsets that I need to fill the technical 
positions. It is a real dilemma that we have here.
    The business case cannot be ignored. And one of the things 
that we are very--one of my top priorities frankly is working 
with our domestic supply base to help develop that capability 
so that I can leverage them as well as the universities to help 
fill these gaps so that we can get these to a more commodity-
like alternative.
    Representative Saxton. You are talking now about hybrids?
    Ms. Wright. Hybrids, and frankly all of our advanced 
technologies. I think someone, I don't know if it was Mr. 
Garman or it was perhaps you who had talked about the 
components of these technologies that frankly go across the 
whole span of the technologies, power electronics, control 
architecture, advanced propulsion, those are consistent whether 
you are talking about hybrid electrics, fuel cells or hydrogen 
internal combustion engines. And there are skillsets that we 
need to build all of those alternatives.
    Representative Saxton. So we all agree that short-term 
technology exists to make a real difference through flex fuels, 
however, the supply of flex--of ethanol is a huge problem. 
Producing and delivering it are two separate problems, right?
    Ms. Wright. Right.
    Representative Saxton. Mr. Hinchey.
    Representative Hinchey. Mr. Chairman, thanks, thank you all 
for the presentation. They were very, very interesting. Let me 
just ask you a very simple and direct question first off. What 
is the energy industry's position with regard to increasing 
CAFE standards? Mr. Stricker, do you want to start?
    Mr. Stricker. Well, I can speak to Toyota's position. I 
won't speak for the entire industry. I am not here to represent 
the whole industry today.
    Toyota has always exceeded the CAFE standards for both 
passenger cars and light trucks. There was mention earlier 
today about the growing market share of light duty trucks, and 
that is the reality that we are facing today and that is one of 
the reasons that Toyota has gone into the SUV market with 
hybrids to try to get the technology out there in the truck 
sector so that there are real options out there in order to 
improve fuel economy on those vehicles. And it has been 
mentioned several times, even, I think by the Members of the 
Committee, that trucks are really where the focus needs to be. 
Our passenger car CAFE today is, of course, in two separate 
fleets. There is an import fleet and a domestic fleet, the way 
the legislation and regulations are set up. But our CAFE stands 
at about 33, 34 miles a gallon compared to 27.5-miles-per-
gallon standard. And the industry, as a whole, does fairly well 
on passenger car CAFE. But the issue does seem to be light 
trucks. And that is one of the reasons that we are trying to 
get the hybrid technology out there and have it be an option 
and tool that is available.
    Ms. Wright. I am going to be quite candid with you. I am 
Ford's top engineer for all the advanced technologies and the 
strategies, so I am not the CAFE expert, and I am frankly not 
prepared to provide our perspective on that. But we can follow 
up in writing.
    [The information requested from Mr. Hinchey appears in the 
Submissions for the Record on page 61.]
    Representative Hinchey. Thank you.
    Mr. Chernoby. And unfortunately, I am going to have to 
ditto Ms. Wright. I am the vice president of vehicle 
engineering. I am not on the regulatory side. So certainly we 
can provide input.
    Representative Hinchey. Mr. Chernoby, DaimlerChrysler is 
doing a lot of work with hybrid buses, and as you pointed out 
in your testimony, this is an area where the hybrids really 
make sense, in your urban areas.
    Can you give us a little update on where you think this is 
going and what DaimlerChrysler is doing to move this forward, 
to put more of these vehicles in cities across the country?
    Mr. Chernoby. As you know, DaimlerChrysler is very much a 
worldwide leader in terms of heavy fleet vehicles, and buses 
are no exception. Like you said, we think it is just a fabulous 
application, it is absolutely stop-and-go driving so there is 
tremendous amounts of energy that can be captured and stored 
back in the electrical system.
    DaimlerChrysler is doing everything we can to make that 
technology available at volume quantities and in every one of 
the buses we built, but we are not going to stop there. We have 
actually got many, many buses running around the world, and 
like Ms. Wright and Mr. Stricker said, many of the same 
components can be applied to the hydrogen fuel cell vehicle as 
well.
    And that is what we have done. We actually have hydrogen 
fuel cell buses running in many sectors over the world, and we 
think that is the next step answer even above the hybrids, but 
certainly the technology is there. We are ready to put the 
product out there for the market. It is a matter of supply and 
demand.
    Representative Hinchey. What is the market? How are you 
dealing with mayors and city councils in places across the 
country where these kinds of buses would make sense to them?
    Mr. Chernoby. I am not involved in those discussions. I 
can't speak to that piece of it. But in certain areas 
certainly, the market has responded. But I think typically it 
has been due to a specific government focus and initiative in a 
local area. But I will certainly follow up and I will get you a 
response of what we are doing from a government perspective.
    Representative Hinchey. And you're looking at it from a 
international point of view, global point of view as well?
    Mr. Chernoby. Absolutely.
    Representative Hinchey. Mrs. Wright, the Ford Motor Company 
has been very active for many decades in the European market 
and the European market has been much more conducive early on 
because of taxes and the price of fuel for vehicles that have 
higher fuel economy. Isn't the Opel a Ford product?
    Ms. Wright. GM.
    Representative Hinchey. But am I wrong that you have been 
very active, Ford Motor Company, very active in the European 
economy?
    Ms. Wright. We are a very significant player in Europe and 
very significant players in the diesel market, yes.
    Representative Hinchey. Is there any transformation of the 
technology that has been successful over there, the cars that 
work over there that get much better fuel mileage than ours do 
over here? Any transfer of that technology back?
    Ms. Wright. I think it actually works both ways in answer 
to your question, yes, if you take a look at the diesels and 
the really terrific work that is going on over in Europe and we 
are planning on, you know, migrating it over to the United 
States.
    I think, quite frankly, we have a public perception, not 
just Ford, as an industry we have a public perception issue to 
overcome relative to the reputation of diesels from 25 years 
ago. They were dirty and smelly and poor starting and poor 
performing. Well, anymore, most people who get into a diesel 
wouldn't even know that they were in a diesel. Extremely 
efficient, extremely good on carbon dioxide emissions.
    Representative Hinchey. And the noise is down too.
    Ms. Wright. Oh, you can't even tell. So yes, that 
technology transfer is taking place.
    Now, conversely, I have global responsibility for all our 
advanced technologies that I am, my group is working with all 
of our global brands, not only address the issues that are 
taking place here in the United States, but as well as the 
pressures that frankly are coming hard and fast over in Europe 
as well.
    Representative Hinchey. Thank you very much.
    Mr. Stricker, the issue that you talked about in the Lexus 
which is an interesting SUV, and you are presenting this as an 
SUV that has all the qualities of that kind of vehicle, but 
gets a lot more in gas mileage. Can you talk a little bit about 
that?
    Mr. Stricker. Sure, I would love to.
    The RX400h is a Lexus, mid-sized SUV. It has a combined EPA 
fuel economy rating of about 28 miles per gallon, which, as 
mentioned in my prepared remarks, is about the average for a 
compact car today. It is an all-wheel drive system. One of the 
advantages of the all-wheel drive system aside from some 
performance enhancements and traction improvements, is the 
ability to recapture additional braking energy.
    With a front-wheel drive or a rear-wheel drive system, you 
only have two wheels with which you can capture braking energy. 
But with an all wheel drive system, you can capture energy from 
all four wheels improving the efficiency of the product. The 0 
to 60 time is just about 7.3 seconds, which is on par with a 
lot of the competing luxury SUVs.
    Representative Hinchey. And it makes sense out on the open 
road as well?
    Mr. Stricker. Yes, the comment earlier with respect to 
hybrids and city operation, our hybrid system performs better 
on fuel economy in the city than on the highway. You can just 
look at the EPA ratings and see that. There is a lot more 
starting and stopping in city operation. Although, the system 
does use electric motor power during highway type operation. 
The other interesting point is, I am not really sure what is 
city and highway anymore when it comes to the real world. I 
live in an area out in Howard County, and I drive 35 miles to 
work each day and it is amazing if I can get over about 35 mile 
per hour, and I am on I-95 or the BW Parkway, so it is really 
hard to say what is city and highway anymore.
    It is that way up and down the whole east coast, it is that 
way pretty much up two thirds of California as well. We think 
the technology obviously provides terrific benefits, clean 
emissions, and we are heading in that direction as quickly as 
we can.
    Representative Hinchey. You almost have to get out into 
those red States to really experience it.
    Well, thanks very much.
    Mr. Loper, you made some comments on the energy bill, and 
our Chairman here is a leader in this regard, and as you heard 
him express himself today, he is very interested in producing 
legislation trying to deal with this problem from an immediate 
point of view.
    The energy bill just started on the floor about 10 minutes 
ago, and frankly, I think it would have been a great bill and 
very progressive had it been introduced in about 1955, but I 
think it has a long way to go in trying to meet the demands of 
today.
    So would you comment a little bit for us, Mr. Loper, on 
what are the things we ought to be doing now to improve energy 
efficiency particularly in transportation?
    Mr. Loper. Well, as I suggested in my remarks, I think we 
are already doing a lot of things to increase efficiency. The 
problem is it is not being translated into fuel economy. And I 
am a little bit--I find this kind of graph, at least suspect. 
Hybrid vehicles have enormous potential and we are fully 
supportive of the technology and their deployment. But if the 
hybrid technology is used to bring Thunderbolt armored vehicles 
in and put them on America's highways like the GM's Hummer, 
then you are not going to get the fuel economy gains that are 
being predicted here.
    We have gone out and tried to look for new policies, magic 
bullets that would help us crack this nut, and quite honestly, 
we come back to the same very familiar policies that we are all 
aware of and can't quite seem to get to. The National Academy 
of Sciences in 2001 said that you could get CAFE to 30 miles 
per gallon combined fuel economy for trucks and cars and cost 
effectively for consumers. When they did that study, gasoline 
prices were $1.30. They are well over that now--at my local 
pump they were $2.44 this morning; and so the economics of high 
fuel economy vehicles has improved. The industry needs to bring 
more of them to market. They need to market those technologies 
as well.
    One of the other speakers mentioned the HEMI technology as 
a fuel-saving technology. I am a racing enthusiast and I watch 
the Speed Channel. The advertisements on the Speed Channel are 
not for HEMI trucks that get good fuel economy, they are for 
HEMI trucks that will beat you off the line. And I think that 
is sending the wrong message to American consumers and that 
Congress can help communicate a different message.
    Representative Hinchey. Certainly is reminiscent of the 
1950s.
    Mr. Loper. Yes. The good old days.
    Representative Hinchey. Or 1960s.
    Representative Saxton. I just have one further question. 
Mr. Chernoby, in your statement you mentioned that there was a 
technology called two mode hybrid, and I understand that that 
involves having two electric engines in a transmission rather 
than one engine in an engine bay.
    Would you talk a little bit about this? I think I 
understand most of what was said this morning, but this was 
new.
    Mr. Chernoby. Try to make it in the simplest terms. 
Basically the two motors and where they are placed within the 
drive line with the transmission. Again, the joint program with 
General Motors what it allows you to do is not only use hybrids 
in the context of the systems that are there in the market 
today, but also use those motors in conjunction with each other 
to actually shift the operation of the gasoline engine in 
higher speed highway environments, and virtually all operating 
conditions to a much more efficient operating condition. The 
analogy would be somewhat similar to what you might do with a 
continuously variable transmission. In other words, actually 
shift the engine to a different RPM level where that engine 
runs more efficiently and then use those two motors to assist 
in making that happen.
    Representative Saxton. And so what are the advantages here, 
greater fuel efficiency?
    Mr. Chernoby. Absolutely yes, the engine is basically 
operating in a more efficient condition in addition to all the 
traditional hybrid operations that you get out of a hybrid.
    Representative Saxton. Mrs. Wright, you look like you are 
dying to say something.
    Ms. Wright. No.
    Mr. Stricker. I would just add, Mr. Chairman, that the 
Toyota Hybrid Synergy System is not architecturally exactly the 
same, of course, but it utilizes a generator to vary the 
gasoline engine speed to accomplish that effect of a 
continuously variable transmission as well.
    Basically there is certain speeds and loads at which the 
gasoline engine is most efficient. And if you can force the 
gasoline engine to operate in the most efficient range, then 
that obviously improves the efficiency over all of the system. 
So you can use a second motor or generator to vary the speed of 
the gasoline engine to where it is most optimal.
    Representative Saxton. All right. Well, thank you all for 
being here, thank you for your interest and your hard work on 
what is obviously a tremendously important set of issues. We 
appreciate you sharing this information with us here this 
morning. And hopefully we will find some ways to work together 
in the future to effect these efficiencies that you talked 
about today. Thank you very much.
    [Whereupon, at 11:58 a.m., the hearing was adjourned.]
                       Submissions for the Record

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

Prepared Statement of Hon. Jim Saxton, Chairman, a U.S. Representative 
                            from New Jersey
    I am pleased to welcome Under Secretary Garman and the other expert 
witnesses before the Committee this morning.
    With oil prices in the neighborhood of $60 per barrel, it is not 
surprising that there is increased interest in fuel efficiency and 
alternative ways of powering cars and trucks. Increased demand for oil, 
especially from Asia, combined with the restrictive practices of the 
OPEC cartel, have together created a situation where oil prices have 
spiked in recent months. With OPEC members only last December 
complaining about an ``over-production'' of oil, it is abundantly clear 
that we cannot depend on them to be reliable suppliers of petroleum. 
Unfortunately, according to many experts, OPEC and elevated oil prices 
may be with us for an extended period of time.
    Gasoline accounts for about 45 percent of American oil consumption 
each day, so it is appropriate to consider the long-term potential of 
alternative automotive technologies that would reduce our dependency on 
oil. The purpose of this hearing is to explore these alternatives and 
examine which of them seem to be most feasible over the short, medium, 
and long terms. Greater efficiency in internal combustion engines, 
using methods such as shutting off half of the cylinders when maximum 
power is not needed, is already being realized.
    Flexible fuel vehicles capable of running on a mixture of gasoline 
and up to 85 percent alcohol are also already in production. Recently I 
have introduced legislation to enhance tax incentives for the purchase 
of flexible fuel vehicles. U.S. auto companies already make millions of 
flexible fuel vehicles that are only slightly more expensive to produce 
than cars with conventional engines.
    The market for hybrid vehicles is also expanding far beyond small 
economy cars and promises additional savings. Small hybrid cars 
demonstrated the feasibility of this technology, and it is now being 
applied to mid-sized passenger cars as well as to SUVs. There are some 
exciting new refinements of hybrid technology that could produce 
significant increases in fuel efficiency. Perhaps in the future hybrid 
or electric vehicles could even be recharged using the existing power 
grid.
    None of these technologies alone is likely to reduce our oil 
consumption significantly in the short run. But over the next decade, 
they could make a real difference, and synergies between them offer the 
potential for further gains. For example, improved efficiencies of the 
internal combustion engine could be combined with hybrid and other 
technologies to maximize fuel savings.
    Over the long run, the high price of oil is likely to create 
incentives for other technological breakthroughs that will be more 
dramatic. Hydrogen fuel cells offer one promising technology for the 
long term. Since power can be most efficiently generated in power 
plants, there are those who argue that a transition to hydrogen fuel 
cell or electric vehicles offers the most promise in coming decades.
    In any event, continued Federal Government and industry support for 
research and development, and the vision of entrepreneurs and 
inventors, are needed to ensure that advancements in technology will 
enable us to eventually increase our energy security.
                               __________
 Prepared Statement of Hon. Carolyn B. Maloney, a U.S. Representative 
                             from New York
    Thank you, Chairman Saxton. The question of what role alternative 
automotive technologies will play in our energy future is an important 
one, and I hope we will be able to learn things from this hearing that 
can inform our future policy choices.
    We are heavily reliant on oil to power our cars and fuel our 
lifestyle, and 58 percent of the oil we consume is imported, often from 
politically volatile regions of the world. Promoting conservation, 
raising efficiency standards, and supporting R&D can all play an 
important role in overcoming our dependence on oil and reducing our 
reliance on imports.
    Today, more than two-thirds of the oil consumed in the United 
States is used for transportation, mostly for cars and light trucks. 
Increasing fuel efficiency would lower pressures on oil prices, enhance 
our national security, curb air pollution, and reduce the emission of 
greenhouse gases, which cause global warming. Clearly, alternative fuel 
and automotive technologies are needed to help achieve these goals, but 
we cannot overlook the importance of other approaches.
    Corporate Average Fuel Economy (CAFE) standards for cars have 
remained static for two decades and average vehicle fuel economy has 
actually declined since the late 1980s when sales of SUVs began to 
climb. Car manufacturers could increase the average fuel economy from 
today's 27.5 miles per gallon to 46 miles per gallon just by 
implementing existing technologies, according to a recent MIT report. 
This would reduce our dependence on foreign oil by three-fourths and 
cut greenhouse gas emissions by nearly a third.
    The auto industry is pursuing a variety of advanced vehicle 
technologies, such as hybrid vehicles, fuel cells, and hydrogen fuel. 
While hybrid vehicles have received a lot of attention, they still make 
up only about 1 percent of the 17 million vehicles sold in the United 
States each year. However, some hybrids don't contribute much to energy 
efficiency, as car companies are building more high-end, high-
performance vehicles.
    Congress needs to be careful about which technologies it 
subsidizes. We should make sure that we are not prematurely committing 
to any particular technology and neglecting other potentially 
beneficial approaches. We also should make sure that tax incentives are 
well targeted to achieving their objectives, rather than simply 
subsidizing behavior that would have taken place anyway. It doesn't 
make much sense to give a tax break when manufacturers are wait-listing 
consumers for certain models--the demand is already there, the cars are 
not.
    I will be interested to learn more about whether the President's 
initiative to promote hydrogen fuel and fuel cells has realistic goals 
or is just science fiction. Right now, there is a danger that hydrogen 
fuel and fuel cells may never be commercialized because they are so 
expensive, and this initiative may draw funding away from near-term 
technologies such as hybrids.
    I have many more questions, but I will stop here because we have a 
panel of witnesses that I hope will be able to provide some answers, or 
at least provide us with more information about the intriguing 
technological possibilities that lie before us. Getting solid and 
reliable information is the first step toward developing sound policy. 
I don't think any of us believe that the current energy bill is the 
last word on energy policy, and much remains to be done to meet the 
challenges that lie before us.
    Mr. Chairman, I look forward to hearing the testimony of our 
witnesses today.
                               __________
Statement of Hon. David K. Garman, Under Secretary for Energy, Science, 

               and Environment, U.S. Department of Energy
    Mr. Chairman and Members of the Committee, I appreciate the 
opportunity to appear before you today to discuss the role of the 
Department of Energy (DOE or Department) in the development of advanced 
technologies for energy efficient vehicles.
    Recently, President Bush spoke on energy policy and economic 
security at the Calvert Cliffs nuclear power plant and said that to 
make this country less dependent on foreign sources of oil, we need the 
following things: (1) to encourage conservation with the help of new 
technology; (2) to diversify our energy supply by increasing the use of 
alternative and renewable sources like ethanol and biodiesel; and (3) 
to develop a hydrogen-powered automobile over the next decade or two. 
The President envisioned that a child born today would be ``able to 
take a driver's test in a hydrogen-powered automobile that has zero 
emissions, and at the same time will make us less dependent on 
hydrocarbons which we have to import from foreign countries.''

                        THE PETROLEUM CHALLENGE
    The President's remarks make clear the petroleum challenge that 
faces this country. The world is not running out of oil, at least not 
yet, but worldwide demand is increasing faster than production and 
prices are rising. Unless we reduce our dependence on foreign oil we 
risk that our energy economic security will be compromised.
    The most urgent need is to address our transportation sector, which 
consumes two-thirds of all U.S. oil and is still growing. Petroleum 
imports already supply more than 57 percent of U.S. domestic needs, and 
those imports are projected to increase to more than 68 percent by 2025 
under a business-as-usual scenario. Because petroleum-based liquid 
fuels, like gasoline and diesel, have a high energy density and are 
easily transported, they are ideal for transportation. The Department 
of Energy is committed to finding suitable alternatives, and developing 
the technologies that will use today's oil more efficiently.
    At the G8 Summit earlier this month, the President reiterated his 
policy of promoting technological innovation, like the development of 
hydrogen and fuel cell technologies, to address climate change, reduce 
air pollution, and improve energy security in the United States and 
throughout the world. The Department's research and development (R&D) 
in advanced vehicle technologies, such as hybrid electric vehicles, 
will help improve energy efficiency and reduce petroleum consumption in 
the near to mid-term. But, for the long term, we ultimately need a 
substitute to replace petroleum. Hydrogen and fuel cells, when 
combined, have the potential to end petroleum dependence and provide 
carbon-free, pollution-free power for transportation.
    Thus, our strategy for passenger vehicles has two components. For 
long-term energy independence, the Department is aggressively 
implementing the President's vision of working with industry to develop 
hydrogen-powered fuel cell vehicles. Hydrogen can be produced from a 
number of different feedstocks, and this supply diversity can help 
improve the Nation's energy security. Through the President's Hydrogen 
Fuel Initiative, research is being conducted step by step to eliminate 
the cost and technical barriers that need to be overcome before these 
vehicles can be widely available. Our near and mid-term strategy is to 
develop the component and infrastructure technologies necessary to 
enable significant improvements to the energy efficiency of the full 
range of affordable cars and light trucks. Such technologies as those 
used by hybrid electric vehicles can limit growth or begin to reduce 
our dependence on foreign oil right now, while also advancing some of 
the same technologies that will eventually be needed for fuel cells. 
These are described more fully in a document I am leaving with the 
Committee.
    We are also working on technologies that will increase the energy 
efficiency of commercial vehicles, which due to their high performance 
needs, are unlikely to run on hydrogen. While the majority of 
commercial vehicles are powered by diesel engines, which have a higher 
efficiency than gasoline engines, there remains room for considerable 
efficiency improvements. Fuel cells could also play a role with 
commercial vehicles by saving fuel and reducing emissions from engine 
idling.

                              PARTNERSHIPS
    Partnering with industry creates a common understanding of 
technical capabilities and barriers, which increases the likelihood 
that industry will pick up DOE's energy-saving technologies and that 
Federal research will target industry needs. To address the passenger 
vehicle market, we joined with the three domestic auto manufacturers 
and five energy companies to establish the FreedomCAR and Fuel 
Partnership. To address the commercial vehicle sector, we have the 21st 
Century Truck Partnership in which the Department teams with 3 other 
Federal agencies and 15 industry partners representing vehicle and 
component manufacturers, truck and bus manufacturers, and hybrid 
vehicle powertrain suppliers.
    We also partner internationally through the International Energy 
Agency (IEA) on research for motor fuels, internal combustion engines, 
advanced materials, and hybrid propulsion systems. Our hydrogen vision 
is now shared around the world. The International Partnership for the 
Hydrogen Economy (IPHE) was established in 2003 and currently includes 
16 nations and the European Commission. The IPHE partners represent 
more than 85 percent of the world's gross domestic product and two-
thirds of the world's energy consumption and greenhouse gas emissions. 
The Partnership leverages limited resources by bringing together the 
world's best intellectual skills and talents to coordinate 
multinational Research Development and Demonstration (RD&D) programs 
that advance the transition to a global hydrogen economy.
    Two DOE programs under the Office of Energy Efficiency and 
Renewable Energy (EERE) are leading the Department's R&D efforts for 
advanced vehicle technologies. The Hydrogen Program has the challenging 
task of fulfilling the President's vision of transforming our 
transportation system from dependence on petroleum fuels to a future 
with sustainable, pollution-free vehicles. The FreedomCAR and Vehicle 
Technologies Program is meeting the mid-term challenges of efficiency 
and alternative fuels for developing the best technology options for 
reducing the petroleum consumption of light duty vehicles over the next 
20 years. Progress in such areas as advanced internal combustion 
engines and emission control systems, lightweight materials, power 
electronics and motor development, high-power energy battery 
development, and alternative fuels will also contribute to fuel cell 
hybrids. Together, these two DOE programs provide a continuum of 
technologies that will revolutionize the way we drive.

          FREEDOMCAR AND VEHICLE TECHNOLOGIES (OFCVT) PROGRAM
    The following descriptions sample the range of technologies the 
Department is developing that will enable Americans to use less 
petroleum, reduce the impact on our environment, and still retain our 
mobility and freedom of choice when we purchase our vehicles.
    Hybrid Systems technologies combining an internal combustion engine 
and a battery-powered electric motor can potentially reduce vehicle 
fuel use by 40 percent or more. Without building entire vehicles, we 
conduct our research in a vehicle systems context that enables us to 
determine the impact that improving a component has on overall energy 
efficiency. When I was at Argonne National Laboratory, I saw first hand 
how their Powertrain Systems Analysis Toolkit (PSAT) model, winner of a 
prestigious 2004 R&D 100 Award, is used in conjunction with their 
Hardware-
In-the-Loop test facilities to validate vehicle components in a system, 
either virtually or with real devices.
    Energy Storage technologies, especially batteries, are critical 
enabling technologies for the development of advanced, fuel-efficient, 
hybrid vehicles and ultimately fuel cell vehicles. Our energy storage 
research aims to overcome such technical barriers as cost, weight, 
performance, life, and abuse tolerance that the Department and the 
automotive industry have identified. DOE's technical research teams and 
battery manufacturers are collectively addressing these barriers.
    Advancements we have made in batteries and electric drive motors, 
originally developed for battery-powered electric vehicles, have led to 
worldwide stimulation of hybrid vehicle technology. Every hybrid 
vehicle sold in the United States today, including those by foreign 
manufacturers, contains elements of battery technology licensed from 
one of our battery research partners. Other governments in both Europe 
and Asia have followed our example, creating partnerships with industry 
and supporting research in this area.
    Power Electronics are at the heart of advanced technology vehicles. 
Advanced hybrid vehicles and fuel cell vehicles will require 
unprecedented improvements in both power electronics and electric drive 
motors. These new technologies must be compatible with high-volume 
manufacturing; must ensure high reliability, efficiency, and 
ruggedness; and must simultaneously reduce cost, weight, and volume. Of 
these challenges, cost is the greatest. Key components for hybrid 
vehicles (with either fuel cell or advanced combustion engines as the 
prime mover) include motors, inverters/converters, sensors, control 
systems, and other interface electronics.
    Advanced materials are needed for structural components as well as 
powertrain components. The use of lightweight, high-performance 
materials will contribute to the development of vehicles that provide 
better fuel economy, yet are comparable in size, comfort, and safety to 
today's vehicles. The development of propulsion materials and enabling 
technologies will help reduce costs while improving the durability, 
efficiency, and performance of advanced internal combustion, diesel, 
hybrid, and fuel-cell powered vehicles.
    Because a 10-percent reduction in weight can save as much as 6 
percent in fuel consumption, our materials research goal is to enable 
vehicle weight reductions of as much as 50 percent by 2010 compared to 
the weight of 2002 vehicles. Carbon-fiber reinforced composites are an 
excellent candidate for these applications, but they are currently 
prohibitively expensive. To reduce these costs, we are developing a 
microwave-assisted plasma (MAP) manufacturing technique which indicates 
a potential savings of 40 percent in direct production costs and an 18 
percent reduction in the final carbon fiber cost because of faster 
processing speed, reduced processing energy demand, and a higher degree 
of product quality control. Other efforts focus on developing the new 
processes needed to recycle advanced materials.
    Advanced Combustion Engines have the potential to contribute over 
40 percent to the total efficiency improvements possible for both 
passenger and commercial vehicles. The most promising approach to 
reduce petroleum consumption in the mid-term (10-20 years) is the 
introduction of high efficiency internal combustion engines in 
conventional and hybrid vehicles. Our goals are to improve the 
efficiency of internal combustion engines for passenger applications 
and commercial vehicles while meeting cost, durability, and emissions 
constraints. Accelerated research on advanced combustion regimes, 
including homogeneous charge compression ignition (HCCI) and other 
modes of low-temperature combustion, is aimed at realizing this 
potential and making a major contribution to improving the U.S. energy 
security, environment, and economy.
    In parallel with fuels development, Advanced Combustion Engine 
research has made significant strides in the development of enabling 
technology to bring more efficient clean combustion engines into the 
market. Christina Vujovich, Vice President of Environmental Policy and 
Product Strategy of Cummins Engine Company, recently commented 
publicly,

          ``We have achieved some impressive technology advances to 
        meet the initial engine efficiency and emissions deliverables 
        of the program. . . . The Department of Energy provided an 
        invaluable level of cooperation throughout the program. It 
        demonstrates just how much can be achieved when Federal 
        agencies and industry work together toward a common goal in the 
        best interest of the Nation's environment and energy 
        security.''

    Fuels Technology supports research on advanced petroleum and non-
petroleum-based fuels and fuel blends to enable extremely high 
efficiency and the displacement of significant quantities of petroleum 
fuels. This work is coordinated with our EERE Biomass Program, which is 
developing technology to convert biomass (plant-derived material) to 
valuable fuels, chemicals, materials, and power.
    The DOE-managed Advanced Petroleum Based Fuels--Diesel Emissions 
Control Project (APBF-DEC) has provided crucial data supporting the 
U.S. Environmental Protection Agency rulemaking that is leading to the 
nationwide introduction of low-sulfur fuel.

                            HYDROGEN PROGRAM
    The Department's Hydrogen Program is developing advanced 
technologies for producing, delivering, and storing hydrogen, for 
affordable and reliable fuel cells, and for infrastructure technologies 
that will support the widespread introduction of hydrogen-powered 
vehicles. The use of hydrogen will get to the root causes of oil 
dependency, criteria pollutants and greenhouse gas emissions.
    Since the President launched the Hydrogen Fuel Initiative in 2003, 
we have made significant progress. The Department has developed a 
comprehensive technology development plan, the Hydrogen Posture Plan, 
fully integrating the hydrogen research of the Offices of Energy 
Efficiency and Renewable Energy; Science; Fossil Energy; and Nuclear 
Energy, Science, and Technology. This plan identifies technologies, 
strategies, and interim milestones to enable a 2015 industry 
commercialization decision on the viability of hydrogen and fuel cell 
technologies. Each Office has, in turn, developed a detailed research 
plan which outlines how the high-level milestones will be supported.
    Ongoing research has already led to important technical advances. 
As highlighted by Secretary Bodman in earlier Congressional testimony, 
I am pleased to report that our fuel cell activities achieved an 
important technology cost goal this past year--the high-volume cost of 
automotive fuel cells was reduced from $275 per kilowatt to $200 per 
kilowatt. This was achieved by using innovative processes developed by 
national labs and fuel cell developers for depositing platinum 
catalyst. This accomplishment is a major step toward the Program's goal 
of reducing the cost of transportation fuel cell power systems to $45 
per kilowatt by 2010.
    In hydrogen production, we have demonstrated our ability to produce 
hydrogen at a cost of $3.60 per gallon of gasoline equivalent at an 
integrated fueling station that generates both electricity and 
hydrogen. This is down from about $5.00 per gallon of gasoline 
equivalent prior to the Initiative.
    In the short term, the use of more efficient technologies, such as 
hybrid vehicles, will mitigate increases in greenhouse gas emissions. 
In the long term, hydrogen produced from renewables, nuclear, or coal 
with carbon sequestration can eliminate oil dependency, significantly 
reduce vehicular criteria air pollutants, and help stop and reverse the 
growth in greenhouse gas emissions.
    I will now briefly describe the activities of the Department to 
support the President's Hydrogen Fuel Initiative, which addresses both 
the development needed for the hydrogen infrastructure and for fuel 
cell technology.
    Hydrogen Production: The overall goal is to produce hydrogen in a 
way that is carbon neutral. To address energy security and 
environmental needs, an array of feedstocks and technologies such as 
solar, wind, and biomass, nuclear, and fossil fuels (with 
sequestration) are being examined for hydrogen production. The research 
focus for the transition to a hydrogen infrastructure is on distributed 
reforming of natural gas and renewable liquid fuels, and on 
electrolysis, to meet initial lower volume hydrogen needs with the 
least capital investment. Renewable feedstocks and energy sources are 
being investigated for the long term, with more emphasis on centralized 
options to take advantage of economies of scale when an adequate 
hydrogen delivery infrastructure is in place.
    Hydrogen Delivery: Hydrogen must be transported from the point of 
production to the point of use, including storing and dispensing at 
fueling stations. Due to its relatively low volumetric energy density, 
delivery can be one of the significant cost and energy inefficiencies 
associated with using hydrogen as an energy carrier. There are three 
primary options for hydrogen delivery. One option is to deliver 
hydrogen as a gas in pipelines or high-pressure tube trailers. A second 
option is to liquefy it and deliver it in cryogenic tank trucks. 
Gaseous and liquid truck deliveries are used today, but there is only a 
very limited hydrogen pipeline infrastructure. A third option is to use 
carriers such as natural gas, methanol, ethanol, or other liquids 
derived from renewable biomass, that can be transported to the point of 
end use and reformed to hydrogen. Further R&D is required for each of 
these options so that we can reduce cost, improve reliability, and 
determine the best approach. Carriers are the focus for the nearer 
term; pipelines and other options are being researched for the longer 
term.
    Hydrogen Storage is a critical enabling technology for the 
advancement of hydrogen and fuel cell power technologies for 
transportation, stationary, and portable applications. The Department 
is focused on the research and development of on-board vehicular 
hydrogen storage systems that will allow for a driving range of greater 
than 300 miles without compromising passenger or cargo space. 
Development targets include compressed hydrogen tanks for near-term 
storage of hydrogen. However, the Program emphasizes R&D on advanced 
materials such as metal hydrides, chemical hydrides, and carbon-based 
materials to allow low-pressure hydrogen storage options in the long-
term. As progress is made on solid-state or liquid-based materials, 
other issues such as vehicle refueling, thermal management or byproduct 
reclamation will need to be addressed.
    Codes and Standards will be necessary in the implementation of the 
hydrogen economy. Our DOE codes and standards activity will facilitate 
their development, and support publicly available research that will be 
necessary to develop a scientific and technical basis for such codes 
and standards. DOE is working with the Department of Transportation 
(DOT) in support of their regulatory role in vehicle safety standards, 
hydrogen pipelines, and global technical regulations. The DOE and the 
DOT are working closely together in the International Partnership for 
the Hydrogen Economy to promote uniform global hydrogen technology 
codes and standards.
    Safety is of paramount importance. The development of codes and 
standards is critical to ensuring the safety of hydrogen production and 
delivery processes, as well as hydrogen storage technologies for both 
transportation and stationary applications. Like other fuels in use 
today, hydrogen can be used safely with appropriate handling and 
systems design. Because of the smaller size of the molecule and the 
greater buoyancy of the gas, hydrogen requires storage and handling 
techniques that are different than those traditionally employed. The 
aim of our program is to ensure the safe use of hydrogen, and to 
understand, communicate and provide training on the safety hazards 
related to the use of hydrogen as a fuel. DOE is working with the DOT 
as well as other agencies, such as the Environmental Protection Agency, 
the National Institute of Standards and Technology, and the Department 
of Agriculture to promote and ensure the development of safe hydrogen 
and fuel cell technologies.
    Education is critical to the successful introduction of any new 
technology. DOE's hydrogen education effort focuses on providing 
information and training, with a focus on safety, to the specific 
target audiences involved in the transition to a hydrogen economy, 
including first responders, code officials, State and local government 
representatives, and local communities where near-term hydrogen 
demonstration projects are located. Over the long-term, the program 
also seeks to raise public awareness and foster the development of 
university and other education programs that will ensure the next 
generation of scientists, engineers, and technicians needed to develop 
and sustain the hydrogen economy.
    Fuel Cells have the potential to replace the internal combustion 
engine in passenger vehicles because they are energy efficient, clean 
and fuel flexible. Hydrogen or any hydrogen-rich fuel can be used by 
this emerging technology. For transportation applications the focus is 
on direct hydrogen fuel cells, in which hydrogen is stored on board and 
is supplied by a hydrogen generation, delivery, and fueling 
infrastructure. Fuel cell R&D activities address key barriers, 
including cost and reliability, to fuel cell systems for transportation 
applications. Activities support the development of individual 
component technology critical to systems integration, as well as 
systems-level modeling activities that guide R&D activities, benchmark 
systems progress, and explore alternate systems configurations on a 
cost-effective basis.
    Polymer electrolyte membrane fuel cell cost projections at high-
volume (500,000 units per year) have been reduced from $275 per 
kilowatt in 2002 to $200 per kilowatt in 2005. Performance improvements 
are based on progress in areas such as electrocatalyst design and 
materials, which reduce expensive platinum content; gas diffusion layer 
design, which reduces materials content; and advanced low-cost 
membranes. Changes in operating conditions have reduced the size of the 
fuel cell stack, resulting in lower raw materials costs. Manufacturing 
advances include molded bipolar plates manufactured by a net-shape 
molding process and economies of scale for membrane manufacturing. 
These advances set the stage for meeting the $45 per-kilowatt target 
for 2010.
    Technology Validation is conducted on components under real-world 
operating conditions in integrated systems to quantify the performance 
and reliability, document any problem areas, and provide valuable 
information to researchers to help refine and direct future R&D 
activities.
    An example of a project that ties all of the R&D activities 
together and validates the status of hydrogen and fuel cell 
technologies is the National Hydrogen Learning Demonstration. The 
National Hydrogen Learning Demonstration is the first effort of its 
kind to bring together, at a national level, major automobile and 
energy companies in a hydrogen infrastructure and vehicle demonstration 
project. The project will help DOE focus its research and development 
efforts, provide insight into vehicle and infrastructure interface 
issues and help address codes, standards and safety issues. We have 
partnered with four industry teams to work on projects that would 
assess the status of hydrogen infrastructure and fuel cell technology, 
in parallel, against time-phased, performance-based targets.
    This Learning Demonstration will collect data both on the open road 
and in controlled testing environments. Field validation of hydrogen-
powered fuel cell vehicles in controlled vehicle fleets in both hot and 
cold climates will provide valuable information. Infrastructure 
validation also includes hydrogen production, storage and delivery 
processes, and hydrogen refueling station technologies. Each of these 
teams is sharing at least 50 percent of the project cost, which is 
estimated to be about $350 million between fiscal year 2004 and fiscal 
year 2009, with the government share subject to appropriation. 
Information from this demonstration will help DOE focus its R&D efforts 
on fuel cells and hydrogen production and provide valuable information 
to industry to make a 2015 commercialization decision. With a positive 
commercialization decision and a successful research program, it is not 
unreasonable to think we could see the beginning of mass-market fuel 
cell vehicle penetration by 2020.

                            BIOMASS PROGRAM
    The Department's Biomass Program is the major EERE renewable effort 
that addresses the development of alternative liquid transportation 
fuels, namely ethanol and biodiesel. The development of these fuels has 
a direct bearing on our Nation's ability to reduce imported oil because 
they can be directly blended into gasoline and diesel fuels. The 
current domestic industry has the production capacity of about four 
billion gallons with capacity for almost another billion gallons under 
construction. Provisions in the conference version of the Energy Bill 
could provide an incentive to increase this supply to 7.5 billion 
gallons by 2012.
    While the domestic renewable fuels industry has been growing at a 
rapid pace, there is little doubt that this industry will have a 
brighter future if R&D at USDA and DOE is successful. A recent report 
jointly conducted by the two departments indicates that over one 
billion tons of biomass could one day be sustainably produced from 
various biomass sources and meet at least 30 percent of today's U.S. 
transportation demand. In the longer term, when this renewable supply 
is coupled with advancements projected by the EERE vehicle and hydrogen 
technologies, a carbon neutral and renewable transportation suite of 
technologies could greatly reduce our dependence on imported oil.
    Recent breakthroughs and accomplishments in ethanol and bio-based 
products include technologies developed by the National Renewable 
Energy Laboratory, working with two of the major world industrial 
enzyme manufacturing companies. In 2004, these public private 
partnerships won a prestigious R&D 100 Award (shared by the three 
entities) for developing an innovative, lower cost method for 
transforming biomass into sugars that could then be fermented to 
produce ethanol and other chemicals. Before this breakthrough, this 
conversion step was considered a showstopper for biomass biological 
conversion.
    More recently, there has been a stepped-up interest in combining 
the forces of DOE's Office of Science with EERE's Biomass Program to 
address research barriers facing biomass to ethanol technologies. It is 
believed that some of the fundamental tools and understanding being 
considered and developed by the Office of Science can be more directly 
targeted to the EERE Biomass Program and industry. This synergism could 
greatly reduce the time needed to make ethanol more economically 
competitive. The two DOE Offices are currently planning a joint 
workshop and a joint solicitation to occur before the end of the 
calendar year.
    Biomass represents a bridge to the hydrogen economy. Ethanol and 
methanol from biomass are both potential hydrogen carriers that can 
also be used in fuel cells or can directly replace gasoline. Recently, 
DOE and USDA signed a Memorandum of Understanding aimed at developing 
more cost-effective ways to produce hydrogen from biomass resources. 
Transitioning to hydrogen technologies in the agriculture industry and 
in rural communities is important for a number of reasons: hydrogen 
could be produced from renewable, farm-based biomass; agricultural 
vehicles could be fueled by hydrogen; and hydrogen fuel cell technology 
could potentially provide power for rural communities and remote farm 
and forest sites.

                          SUGARS PLATFORM R&D
    The Sugars Platform involves the breakdown of biomass into raw 
component sugars that can be fermented to produce a range of chemical 
and biological processes. The research target for the mid-term is to 
reduce the cost of sugars from 15 cents per pound in 2003 to 10 cents 
in 2012. The corn refining industry, which currently includes wet and 
dry mills, is an example of a sugars-based industry that produces 
ethanol and other chemicals, as well as food and fiber. Ongoing 
research tasks in the Sugars Platform include feedstock conditioning, 
pretreatment, enzyme biomass degradation, process integration, and 
targeted fundamental research.

                      THERMOCHEMICAL PLATFORM R&D
    The Thermochemical Platform's current emphasis is on converting 
non-fermentable biomass such as lignin to intermediate products such as 
synthesis gas. These intermediates can be used directly as raw energy, 
or may be further refined to produce fuels and products that are 
interchangeable with existing commercial commodities such as oils, 
gasoline, synthetic natural gas, and high purity hydrogen. Current R&D 
is focused on synthesis gas clean-up making it suitable for the 
production of high-valued mixed alcohols.

                              PRODUCTS R&D
    The area of bio-based products represents a major market 
opportunity for domestically grown biomass resources. The Products R&D 
utilize the outputs from the Sugars and Thermochemical Platforms to 
develop higher valued products. The Products focus is on platform 
chemicals that can be converted to a multitude of high-valued products. 
As an example of success, industrial partners have had a breakthrough 
in developing a novel microbial process that can convert corn sugars to 
a chemical intermediate. When fully commercialized, the industrial 
biotech process will convert dextrose derived from corn to a chemical 
intermediate known as 3 hydroxypropionic acid (3HP), one of the top 
chemical intermediates identified by the Biomass Program. The chemicals 
that can be produced from 3HP include acrylic acid, acrylamide, and 1,3 
propanediol. Acrylic acid and its derivatives are used to create a wide 
range of polymer-based consumer and industrial products such as 
adhesives, paints, polishes, protective coatings, and sealants. The new 
process will use agricultural feedstocks instead of petroleum to 
produce 3HP.

                        INTEGRATED BIOREFINERIES
    An integrated biorefinery is the ultimate deployment strategy of 
the Biomass Program. A biorefinery embodies a facility that uses 
biomass to make a range of fuels, combined heat and power, chemicals, 
and materials in order to maximize the value of biomass. Much like an 
oil refinery, the biorefinery has the flexibility to make adjustments 
to the quantities of the various products that it makes, depending on 
fluctuating market conditions. The barriers to an integrated 
biorefinery are largely addressed through the other R&D areas. However, 
certain barriers are specific to the integrated biorefinery such as the 
challenge of feedstock-to-product process integration and the 
financial, engineering, and marketing risks inherent in scaling up 
first-of-a-kind, pioneer technology. In fiscal year 2002, the Biomass 
Program awarded six major biorefinery development projects to industry 
partnerships (minimum 50 percent cost-share).
    When achievement of technical targets justifies industrial-scale 
demonstrations (again, with a minimum 50 percent cost share), the 
Biomass Program will conduct a competitive solicitation in order to: 
(1) complete technology development necessary for start-up 
demonstration of an integrated biorefinery; and (2) help U.S. industry 
establish the first large-scale sugars-based biorefinery based on 
cellulosic agricultural residues by 2010.

                         BENEFITS TO THE NATION
    In conclusion, I believe that the Department of Energy is 
maintaining a balanced portfolio of near-term and long-term options to 
decrease oil consumption today, and to launch our Nation into a bold 
new energy future. Gasoline and diesel-hybrid electric vehicles are the 
most promising technology options over the next two decades, and 
hydrogen-powered vehicles offer the best potential to achieve long-term 
energy independence through use of diverse, domestic feedstocks. The 
Department's plan is ambitious but allows time to overcome the 
significant technical and economic challenges.
    I continue to be excited by the Department's programs in advanced 
automotive technology and look forward to the security, economic, and 
environmental benefits that will accrue to our Nation as progress is 
made. Emissions reduction comes hand-in-hand with putting more 
efficient vehicles on the road. We estimate that the cumulative savings 
in oil by 2030 from several aspects of our research, assuming complete 
technical success, could be almost 20 billion barrels compared to a 
``business-as-usual'' scenario. That's about a trillion dollars at $50 
a barrel, or more at today's prices. Staying at the forefront of 
vehicle R&D can help keep the United States as the world's leader in 
vehicle production, provide future exports, protect U.S. jobs, and 
improve our national energy security.
    Mr. Chairman, I look forward to working with you and the Members of 
this Committee as we pursue our mission of providing for the Nation's 
energy future by reducing our dependence on foreign oil. I would be 
pleased to answer any questions you may have.
                               __________
           Prepared Statement of Joe Loper, Vice President, 
                        Alliance to Save Energy
    The Alliance to Save Energy is a bipartisan, nonprofit coalition of 
more than 90 business, government, environmental and consumer leaders 
whose mission is to promote energy efficiency worldwide to achieve a 
healthier economy, a cleaner environment, and greater energy security. 
The Alliance, founded in 1977 by Senators Charles Percy and Hubert 
Humphrey, currently enjoys the leadership of Senator Byron Dorgan as 
Chairman; Washington Gas Chairman and CEO, James DeGraffenreidt, Jr. as 
Co-Chairman; and Representatives Ralph Hall, Zach Wamp and Ed Markey 
and Senators Bingaman, Collins and Jeffords as its Vice-Chairs. 
Attached for the record are a list of the Alliance's Board of Directors 
and its Associate members.

                              INTRODUCTION
    For the last 4 years, Congress and the President have spent 
innumerable hours trying to agree on ways to address the nation's 
dependency on oil and its adverse impacts on climate, and air and water 
quality. There has been much discussion about how we might ease the 
burdens on states and cities trying to meet Clean Air Act requirements 
and who is going to pay for leaks from underground gasoline storage 
tanks. We have debated measures to reduce greenhouse gas emissions. 
Meanwhile, we've watched oil prices climb from $30 to $60 per barrel as 
oil supplies get rocked almost daily by events that are largely out of 
our control--Venezuelan uprisings and increased animosity toward U.S. 
government policies, threatened takeovers of Nigerian oil fields, 
hurricanes in the Gulf of Mexico.
    While we have limited control on oil supplies and prices, we can 
control our own demand for oil. That makes this hearing particularly 
important. Given that the transportation sector accounts for two-thirds 
of U.S. oil use and that passenger cars and light trucks consume 40 
percent of that oil use, it is critical that we address vehicle fuel 
use.
    We applaud the efforts of Congress to address the Nation's energy 
challenges in the current conference energy bill. The tax incentives 
for hybrid and advanced diesel vehicles, along with technology research 
and demonstration programs are certainly useful. However, we cannot 
pretend to think that the bill before Congress will have any 
significant impact on U.S. petroleum use.

                            THE ENERGY BILL
    This week the House and Senate will be voting on the conference 
energy bill. This bill contains many provisions to encourage energy 
efficiency improvements in buildings and appliances. We applaud 
Congressional actions to get inefficient air conditioners, clothes 
washers, ceiling fans and lighting equipment out of the marketplace. We 
applaud the tax incentives for more efficient homes, buildings and 
equipment, and those that encourage the production of high-efficiency 
appliances.
    We applaud the tax incentives for hybrid and advanced learn burn 
technology vehicles. We support funding authorizations for a variety of 
advanced transportation technology programs that could improve the 
efficiency of the transportation sector, including programs to 
encourage railroad efficiency, idle reduction technologies for heavy 
trucks, and ultra-efficient energy technology for air crafts.
    The energy efficiency policies in the energy bill could reduce 
overall projected energy use by between 1 and 2 percent by 2020. It is 
important to note, however, that the bill is, in large part, an 
ambitious to-do list at this point. To achieve these savings, Federal 
agencies, appropriators, states and local governments, and others will 
need to fully fund, implement and participate in these programs.
    When it came to addressing energy use in vehicles, Congress flat 
out missed the on-ramp. Most, if not all, of the oil savings in the 
conference energy bill will be canceled out by the increased energy use 
resulting from extension of the Corporate Average Fuel Economy (CAFE) 
credit for dual fuel vehicles. This provision allows vehicle 
manufacturers to take credit for vehicles that are capable of, but 
almost never do, run on alternative fuels. Optimistically, we would 
like to think that the energy bill could reduce oil use in 2020 by 
about 100,000 barrels per day--about 0.5 percent of anticipated oil use 
or between 1 and 2 days of consumption. Realistically, the overall 
impact on petroleum consumption will probably be a fraction of that 
amount.

                 EFFICIENCY TECHNOLOGIES ARE HERE TODAY
    There is no shortage of technologies to improve vehicle fuel 
efficiency. Many of these technologies are already in vehicles, 
including electronic controls and ignition, light weight materials, 
improved engine designs. Other technologies are now being pulled off 
``the shelf '' and increasingly deployed in new vehicles. They include 
(for example):
     Variable Cylinder Management--turns off cylinders when not 
in use.
     Advanced Drag Reduction--further reduces vehicle air 
resistance.
     Variable Valve Timing and Lift--optimizes the timing of 
air intake into the cylinder with the spark ignition.
     Reductions in Engine Friction--using more efficient 
designs, bearings and coatings that reduce resistance between moving 
parts.
     Hybrid Drive Trains--internal combustion engine combined 
with electric motor and regenerative braking.
    These are not pie in the sky technologies or expensive gimmicks, 
but rather technologies that are here now. Other major technology 
advances appear to be on the horizon, such as plug-in hybrids and fuel 
cell electric vehicles.
   efficiency technologies are not being used to improve fuel economy
    While advanced technologies have been, and continue to be, deployed 
in new cars and trucks, we're not getting more miles per gallon (mpg) 
as a result. In fact, the average fuel economy (ie., mpg) of model year 
2004 vehicles is 6 percent lower than in the 1987-88 model years.
    Instead of getting better fuel economy, we are getting more towing 
capacity, more acceleration, more weight, and more space. For example, 
America's best-selling truck--the Ford F-150--claims almost 5 tons of 
towing capacity. That's enough capacity to pull a 36-foot horse trailer 
with 4 horses inside it. In most states, that is one-eighth of the 
total legal weight (including truck and cargo) of a semi-hauler.
    Our average car is a real workhorse too. The average passenger car 
sold today has about 185 horsepower--40 percent more than a car sold 15 
years ago. To put this in perspective, a typical passenger car sold 
today has the engine capacity to raise 185 soccer moms, along with 370 
children, 10 stories into the air in 1 minute. It's about the same 
horsepower as a large (60,000 pound) bulldozer.
    And this decade looks like it could displace the 1960's as the 
``Decade of the Muscle Car.'' According to the Classic Car and Vintage 
Automobile registry, more than half of the fastest production car 
models offered since the 1960's were offered in model years 2000 or 
since. The number of muscle cars offered in the last 5 model years 
exceeds the number of muscle cars in the 1960's, 1970's, 1980's and 
1990's combined.
    Vehicle fuel economy is a huge reservoir of low-cost energy waiting 
to be tapped. According to EPA estimates, if automakers had applied the 
technology gains since 1987 to improving fuel economy, average fuel 
economy would be 20 percent higher. If the Nation had taken this path, 
we could be consuming between one and two million barrels per day less 
than we are--that's about equivalent to the more optimistic EIA 
projections of oil output from the Arctic National Wildlife Refuge 
(ANWR).

                   POLICIES TO INCREASE FUEL ECONOMY
    For the last 20 years, the Nation's oil policy has in effect been 
made in America's car showrooms. It is time for the Federal Government 
to provide more guidance in the vehicle marketplace. There are many 
policies that could be employed to ensure at least a portion of these 
advances gets used to improve fuel economy. A few of them are discussed 
here.
Increase and Reform Corporate Average Fuel Economy Standards
    Today's supply disruptions are of similar magnitude to the 1970's 
as OPEC exercised its market power to raise prices. Back then, 
America's response was to take serious measures to encourage 
improvements in automobile fuel economy. Between 1975 and 1985, fuel 
economy standards were used to help achieve a 70 percent improvement in 
new vehicle fuel economy. According to the National Academy of 
Sciences, CAFE standards are still saving 2.8 million barrels per day.
    Since the mid-1980's, CAFE standards have been largely unchanged 
due to political pressure from the automobile industry. The current 
standard of 27.5 miles per gallon (mpg) for automobiles has been in 
place since 1985. The current 21 mpg standard for light trucks is only 
0.5 mpg above the 1987 standard (it is now set to rise to 22.2 mpg by 
2007). To the extent that fuel economy standards reflect fuel economy 
levels achievable two decades ago seriously undermine their 
effectiveness.
    Old testing methods, a loophole for ``trucks'', and other loopholes 
have further undermined the effectiveness of existing CAFE standards. 
EIA estimates that the actual fuel economy of vehicles is about 20 
percent lower than the CAFE standard test results suggest. In other 
words, the 27.5 mpg standard for cars is really a 22 mpg standard and 
the 21 mpg truck standard is really a 17 mpg standard. Fuel economy 
testing methods should be revised to better reflect real-world driving.
    Fuel economy standards allow vehicles classified as trucks to meet 
less stringent standards than are imposed on passenger cars. When this 
loophole was created, less than one-quarter of light duty vehicles sold 
were classified as trucks. Now, fully half of vehicles sold receive 
this special designation. Most of these trucks are sport utility 
vehicles and minivans primarily, if not exclusively, used for 
transporting passengers. The ``passenger car'' category should be 
redefined to include SUVs and minivans.
    Vehicle manufacturers receive credit against their fuel economy 
requirements for sales of ``dual-fuel'' vehicles that can run on either 
ethanol or gasoline. This credit has encouraged manufacturers to put 
millions of dual fuel vehicles on the road. The problem is that they 
are fueled almost exclusively with gasoline. As noted above, the new 
conference energy bill extends this credit for at least 5 more years. 
This credit should be terminated or modified to require actual use of 
the alternative fuel.
    Finally, vehicles up to 10,000 pounds should be subjected to 
labeling and standards. CAFE standards and labeling requirements apply 
only to vehicles up to 8,500 pounds gross vehicle weight. Manufacturers 
are selling more and more of these super-large SUVs and pickup trucks, 
such as GM Hummers and Ford Excursions. The weight limit should be 
raised to include these heavier vehicles.

                             TAX INCENTIVES
    Tax deductions and credits can help steer buyers toward vehicles 
with higher fuel economy. There is currently a $2,000 Federal tax 
deduction for purchase of a hybrid vehicle (the deduction will be 
reduced to $500 in 2006). Importantly, the current deduction does not 
take into account the vehicle's fuel economy. The buyer of a hybrid 
vehicle gets a tax deduction regardless of whether the vehicle achieves 
a small or significant fuel economy improvement.
    The energy bill conference report improves on the current Federal 
incentive, providing tax incentives for hybrid, advanced diesel, fuel 
cell and alternative fuel vehicles in varying weight classes. The new 
tax incentives for hybrid vehicle passenger cars and light trucks would 
be based on two factors: fuel economy improvements over a baseline and 
lifetime fuel savings. This tax incentive approach can assist in 
assuring that the hybrids that achieve better fuel economy are 
receiving the highest level of credit.
    In sum, if the policy objective of these tax incentives is to 
encourage adoption of energy-saving technologies, the tax incentives 
should ideally be based on fuel economy, not just technologies.

                           GAS GUZZLER TAXES
    The Gas Guzzler Tax was established as a result of the Energy Tax 
Act of 1978. The Act established a tax on the sale of new model year 
vehicles whose fuel economy fails to meet certain statutory levels. 
Currently, the gas guzzler tax applies only to passenger cars with fuel 
economies below 22.5 mpg. The maximum rate is $7,700, which is applied 
to cars that achieve a fuel economy value of less than 12.5 mpg. To 
further discourage purchase of inefficient vehicles, the gas guzzler 
tax could be revised to (1) increase the amount of the tax; (2) apply 
the gas guzzler tax to trucks; and/or (3) increase the mpg value so 
that more vehicles are captured within the tax structure (e.g., instead 
of starting the tax at 22.5 mpg, the tax could apply to vehicles that 
achieve an unadjusted mpg of 24.5 mpg).

                                FEEBATES
    A national ``feebate'' would impose a fee or rebate on new vehicles 
based on the expected lifetime fuel use of the vehicle. The feebate 
could be revenue neutral or not, depending on where the ``set-point'' 
is established; purchasers of vehicles above the set-point (with poor 
fuel economy) would pay a fee and purchasers of vehicles below the set 
point (with better fuel economy) would receive a rebate.
    Many variations of feebates have been suggested and discussed. The 
simplest would use a single gallon-per-mile (GPM) rate--say $500 per 
0.01 GPM--and a single set-point for all passenger cars and light 
trucks.\1\ Oak Ridge National Laboratory estimates savings from a $500 
per GPM revenue-neutral (approximately) feebate would increase car fuel 
economy to 31.8 mgp (13 percent) and light truck fuel economy to 26 mpg 
(25 percent) after about 6 years. A $1,000/0.01 GPM feebate would 
increase car fuel economy to 35.2 mpg (25 percent) and light truck fuel 
economy to 29.2 (40 percent) after 6 years.
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    \1\ Most economists prefer feebates based on gallons-per-mile (GPM) 
since this equates to gallons of fuel used by the vehicle. MPG, on the 
other hand, is not by itself a sufficient parameter to measure 
efficiency since it is inherently higher for smaller cars and lower for 
larger vehicles. For example, an increase in a large truck's fuel 
economy from 10 MPG (equal to 0.1 GPM) to 12 MPG (0.083) would be 
rewarded the same as a small car improvement from 40 MPG (0.025) to 80 
MPG (0.0125). By contrast, a feebate based on MPG would give 20 times 
more incentive to the small car with a 40 MPG improvement than the 
large truck with only a 2 MPG improvement. But over the life of the 
vehicles, the savings from the 2-MPG improvement in the truck will be 
far greater than the savings from the small car.
---------------------------------------------------------------------------

                         SUMMARY AND CONCLUSION
    Government and industry have made great strides in developing 
technologies that can improve the fuel efficiency of the transportation 
sector (e.g., lightweight materials, variable valve transmissions, 
electric motors and controllers, low-rolling resistance tires, etc.) 
Many of these technologies are not, however, being widely used to 
improve the fuel economy of today's vehicle fleet; instead, they are 
being used to increase overall vehicle acceleration, power and size. 
Without government policy intervention, the next 20 years could be just 
like the last, with fuel economy being sacrificed to increased 
acceleration, horsepower, weight and size.
    By wisely using the tax code and increasing and reforming CAFE 
standards, we could begin to see improvements in the fuel economy of 
vehicles. Despite the arguments of the auto industry, these policies 
would not deny consumer choice. These policies would simply change the 
relative price of various vehicle amenities. They would make increased 
fuel economy less expensive. They would make hot rods and large tow 
vehicles more expensive. They would make people think about how much 
car or truck they really need. They would encourage manufacturers to 
make more vehicles with better fuel economy available to consumers, and 
then market them.
    In sum, improving fuel economy is not a technical challenge--the 
technologies are here. Rather it is a matter of political priority and 
will. With the Nation continuing to rely on imported oil from volatile 
regions of the world, and concerns about the impacts of our oil use on 
environmental quality and climate, it is increasingly imperative that 
our Nation translate more of our advancements in vehicle technologies 
into improvements in fuel economy.
         Prepared Statement of Tom Stricker, National Manager, 
    Technical & Regulatory Affairs, Toyota Motor North America, Inc.
    Good morning. My name is Tom Stricker, and I am National Manager of 
Technical & Regulatory Affairs for Toyota Motor North America. I want 
to thank Chairman Saxton and the Committee for the opportunity to be 
here today.
    Toyota is a company that has undergone a lot of change over the 
years, especially here in the United States. We have been fortunate to 
evolve from solely an importer of small economy vehicles to a local 
producer offering vehicles in virtually every market segment. However, 
one thing that has not changed is our concern for the environment and 
our pursuit of advanced environmental technology. Our company's Guiding 
Principles and Earth Charter serve as the fundamental management policy 
for all our operations. These principles reflect Toyota's commitment to 
providing clean, safe and innovative products, while respecting the 
environment and culture of the local communities in which we operate.
    In the interest of time, I will focus my remarks on hybrids, 
diesels and fuel cells. To begin, let me state the obvious: if we want 
to eliminate reliance on petroleum, then we must develop alternative 
energy sources to power vehicles or dramatically reduce the energy used 
by current vehicles. Hydrogen fuel cells are an attractive long-term 
option because they can dramatically reduce the automobile's 
environmental footprint--provided the hydrogen can be produced in a 
clean and efficient way.
    Toyota began investing in fuel cell research and development in 
1992. Our latest vehicle--the Fuel Cell Hybrid Vehicle or FCHV--has a 
range of up to 180 miles and a top speed of 96 miles per hour. Fuel is 
supplied in the form of high-pressure gaseous hydrogen. We currently 
have 12 vehicles in operation here in the United States and another 11 
in Japan. As it's name implies, the FCHV utilizes hybrid technology to 
achieve even greater efficiency than a typical fuel cell. I will discus 
hybrid technology more in a few minutes.
    Key challenges remain before fuel cells can enter the mainstream 
market. Some of these challenges, such as fuel cell stack efficiency 
improvements, system reliability, and so forth, can be solved--in 
time--through engineering. On the other hand, more fundamental 
scientific breakthroughs are needed to address on-board hydrogen 
storage--the critical factor in determining vehicle driving range. 
While Toyota and many others are working hard to find breakthroughs, no 
clear solution is in sight.
    Even if automakers eventually develop a product that meets customer 
expectations at reasonable cost, significant challenges remain on 
fueling and infrastructure. As automakers, there is only so much we can 
do in this area. Energy suppliers and governments must take the lead--
in collaboration with the auto industry--in order to solve these 
issues.
    Because they do offer such promise, Toyota is working hard to 
develop fuel cells, but we are not certain exactly when the scientific, 
engineering and production challenges will be solved. We expect to see 
expanded fleet use by the end of this decade and perhaps limited 
commercial introduction in the next decade. But as with any technology, 
whether and how quickly the market accepts fuel cells will depend on 
our being able to meet customer expectations at a reasonable cost 
compared to other available alternatives. And as I will describe, those 
alternatives are improving as well.
    One alternative that has garnered a lot of attention recently is 
diesel engines. No doubt, diesels have advanced rapidly over the past 
decade by using high-pressure common rail fuel injection, 
turbocharging, and other advances. And because diesels have higher 
thermal efficiency than gasoline engines they use less fuel energy per 
mile. In Europe, diesels now account for about half of new vehicle 
sales. But, there are several key differences between the United States 
and European markets.
    First, fuel prices in Europe are much higher and tax policies 
provide a significant price advantage for diesel fuel, while in the 
U.S. diesel is more expensive than unleaded regular and in some areas 
more expensive than unleaded premium. In addition, diesel fuel quality, 
such as cetane level and aromatics content, is better in Europe.
    Second, and more importantly, European diesel emission standards 
are less stringent than gasoline emission standards. In the United 
States, both diesel and gasoline vehicles are required to meet the same 
standards. Further, the U.S. standards are more stringent overall 
compared to Europe. The result is that diesels in Europe do not require 
the same level of emissions control technology and associated costs 
that diesels in the United States would require.
    But, whether diesels can meet U.S. emission standards remains to be 
seen. For example, a Corolla-sized vehicle equipped with Toyota's 
advanced D-CAT diesel catalyst designed for Europe appears to meet EPA 
Tier 2 Bin 5 emission levels when new. Tier 2 Bin 5 is the level the 
average new car and truck must meet in 2007. However, our analysis 
indicates catalyst performance degrades over time, even with ultra-low 
sulfur diesel fuel, causing emissions to more than double from the U.S. 
Tier 2 Bin 5 level to the Tier 2 Bin 7 level after 125,000 miles of 
operation. Besides meeting the basic emission standards, vehicles must 
also meet requirements under various conditions such as high-altitude, 
high speed, and cold temperature. These present additional cost and 
technical challenges.
    Given the added cost of emission-control hardware, the lack of 
diesel fuel price advantage, uncertain customer demand for diesels 
and--most of all--the challenge of meeting emission standards, the 
prospect for widespread use of diesels in the United States remains 
unclear. One thing that is clear--we should not tradeoff public health 
for energy savings, especially when hybrid technology offers the 
potential to accomplish both.
    As you know Toyota is aggressively pursuing hybrid technology 
because it can provide increased fuel economy, reduced fuel 
consumption, cleaner emissions and improved vehicle performance without 
changes in the fueling infrastructure. Hybrids combine an internal 
combustion engine with an electric motor and battery. There are several 
types of hybrids and their differences are important in terms of cost, 
performance and environmental benefit. The Toyota Hybrid Synergy Drive 
(HSD) that we market in the United States is a ``full'' or ``strong'' 
hybrid meaning that power is supplied by either the electric motor, the 
gasoline engine, or a combination of the two. The ability to operate 
solely on the electric motor is a unique feature of a full hybrid 
system and is key to achieving exceptional fuel economy. In addition, 
braking energy is captured and used to recharge the battery--and they 
never need to be plugged in.
    Since we first introduced the Toyota Prius in Japan in late 1997, 
we have made substantial improvements. The first-generation Prius was a 
subcompact car EPA-rated at about 42 miles per gallon that met Low 
Emission Vehicle requirements. Acceleration from 0-60 miles per hour 
was an unspectacular 14.5 seconds. With each subsequent generation, we 
have increased the size, performance and fuel economy while lowering 
tailpipe emissions. The current Prius is a mid-size sedan with an EPA-
rated fuel economy of 55 miles per gallon--and it goes from 0-60 in 
just over 10 seconds. Compared to the average mid-size car, Prius saves 
about 350 gallons of gasoline per year. Today's Prius meets Tier 2 Bin 
3 emission levels--making it about 50 percent cleaner for smog-forming 
emissions than the Tier 2 Bin 5 level. A major reason Toyota has 
focused on gasoline hybrids rather than diesel for the U.S. market is 
that hybrids provide fuel savings benefits plus there is no question 
about meeting and even exceeding existing U.S. emissions standards.
    And the market has begun to react--sales in 2005 alone equaled the 
total sales for the previous 4 years. However, despite the relative 
success, total hybrid sales in the United States still represent just 
over 1 percent of new vehicle sales.
    Earlier this year we introduced two new hybrids. In April we 
launched the Lexus RX400h SUV--followed in June by the Toyota 
Highlander Hybrid SUV.
    The all-wheel-drive Lexus RX400h combines a 208 horsepower V-6 
engine with front and rear electric motors to produce an overall peak 
of 268 horsepower. The result is a V-6 SUV with acceleration on par 
with competing V-8 models, yet with an EPA-rated combined fuel economy 
of 28 miles per gallon--about the same as the average compact car. The 
RX400h saves about 350-450 gallons of gasoline per year compared to 
comparable luxury SUV's. Further, it is certified to Tier 2 Bin 3 
emission standards just like Prius. The Toyota Highlander Hybrid is 
available in either 2 or 4 wheel drive and has similar environmental 
performance.
    We envision a day when consumers can choose a hybrid powertrain 
option on any vehicle just like they currently choose between 4-
cylinder, 6-cylinder and 8-cylinder conventional engines. To that end, 
we recently announced the upcoming introduction of two new models--the 
Lexus GS450h luxury sports sedan and the Toyota Camry Hybrid, which 
will be our first hybrid produced here in the United States--at our 
Georgetown, KY plant. We expect both of these vehicles to deliver 
superior fuel economy and improved performance.
    The final point I want to make about hybrid technology concerns its 
applicability to a wide range of future powertrains, including fuel 
cells. Some view hybrids as a temporary measure to be replaced 
eventually by fuel cells. We view hybrids as an integral part of the 
future fuel cell. The only fundamental difference between our current 
gasoline hybrid system and our FCHV system is that the fuel cell stack 
replaces the gasoline engine. The hybrid portion of the system remains 
effectively unchanged. So the battery and control system improvements, 
production experience and cost reductions we are able to achieve with 
gasoline hybrids will have direct applicability in the future when fuel 
cells emerge.
    In summary, we view hybrids as a core technology as we pursue 
sustainable transportation. The reality is that various types of 
powertrains and fuels are likely to be needed to address energy issues 
and public health concerns. Which technologies eventually win-out will 
depend on meeting customer expectations at a reasonable cost and on 
local market and regulatory conditions.
    This concludes my remarks. Thank you for your attention.
    [GRAPHIC] [TIFF OMITTED] T4915.001
    
 Prepared Statement of Mary Ann Wright, Director, Sustainable Mobility 
  Technologies and Hybrid and Fuel Cell Vehicle Programs, Ford Motor 
                                Company
    Members of the Joint Committee:
    Thank you for allowing me to address the Committee on this 
important issue. My name is Mary Ann Wright and I am the Director of 
Sustainable Mobility Technologies and Hybrid and Fuel Cell Vehicle 
Programs at Ford Motor Company.
    Energy security and rising fuel prices are significant issues 
facing our nation. I appreciate the opportunity to share with you Ford 
Motor Company's views on the most promising, advanced vehicle 
technologies.
    Industry, government and consumers all have important roles to play 
in addressing our nation's long-term energy needs. Industry should 
continue to invest in the development of energy-efficient technologies 
that provide cost-effective solutions for our customers. And, 
government needs to take steps to bring advanced technologies to market 
more-quickly and cost-effectively through customer incentives.
    Ford is committed to improving vehicle fuel economy by developing a 
portfolio of fuel-efficient advanced technology vehicles. Product 
solutions to improve fuel economy must result in vehicles that 
customers can afford and are willing to purchase. We know that when 
customers consider purchasing a vehicle, they are concerned with 
vehicle affordability, quality, reliability, performance, safety, 
appearance, comfort and utility. From our perspective, no one factor 
can be ignored in the highly competitive U.S. marketplace.
    At Ford we're committed to developing better ideas and innovative 
solutions, and we are investing significant resources to develop 
advanced vehicle technologies. Henry Ford's vision was to provide 
affordable transportation for the world. Ford Motor Company's vision 
for the 21st century is to provide transportation that is affordable in 
every sense of the word--socially and environmentally, as well as 
economically. In other words, ``sustainable transportation.'' Offering 
innovative technology that makes a difference for our customers and the 
world in which they live is not just the right thing to do--it's smart 
business.
    As a result, we're doing substantial development work with 
renewable fuels and four advanced powertrain technologies, including 
gasoline-electric hybrids, clean diesels, hydrogen-powered internal 
combustion engines and hydrogen fuel cell vehicles. I'll briefly cover 
some of our efforts and accomplishments in each of these areas.
    We believe that renewable fuels will play an increasingly important 
role in addressing U.S. energy security and energy diversity. All of 
our gasoline vehicles are capable of operating on blends including up 
to 10 percent renewable ethanol. In addition, Ford Motor Company has 
produced approximately 1.5 million Flexible Fuel Vehicles capable of 
operating on up to 85 percent ethanol. Overall, the U.S. auto industry 
has produced over 5 million FFVs. Although the number of E85 vehicles 
continues to grow, there are only approximately 300 E85 fueling 
stations in the United States. As U.S. gasoline prices rise, the price 
of E85 has made it an increasingly attractive option to consumers. We 
continue to encourage a renewed focus on Federal policies and 
incentives that accelerate E85 infrastructure development to support 
flex fuel vehicles.
    We are also at the leading-edge of hybrid vehicle development--the 
Ford Escape Hybrid and Mercury Mariner Hybrid are great examples. Our 
hybrid SUVs can do virtually anything that our regular Escape or 
Mariner SUVs can, but with approximately 75 percent better fuel economy 
in city driving. But it isn't just a sensible solution or a new 
technology that led to 56 U.S. patents for Ford, with an additional 83 
U.S. patents pending, these are hot new products creating a lot of 
market buzz and the Escape Hybrid was recently named North American 
Truck of the Year.
    Over the next 3 years, we'll have three other hybrids joining the 
Escape and Mariner--the Ford Fusion, the Mercury Milan, and the Mazda 
Tribute. Much of what we've learned in developing these hybrids will 
help us as we explore other advanced technologies. 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.
    Ford is also working on advanced light duty diesel engines. Today's 
clean diesels offer exceptional driveability and can improve fuel 
economy by 20-25 percent. 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 United States. We are working to overcome the 
technical challenges of meeting the extremely stringent Federal and 
California tailpipe emissions standards. Remaining issues include fuel 
quality, customer acceptance and retail fuel availability.
    We are also working on what we think is the next step on the road 
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. Ford recently announced that we will develop hydrogen powered 
E450 shuttle buses for fleet demonstrations in North America starting 
next year. Ford is also working on applying this engine technology to 
stationary power generators and airport ground support vehicles to 
further accelerate the technology and fueling infrastructure 
development.
    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 extremely energy efficient and 
produce no emissions. Our Ford Focus Fuel Cell vehicle is a state-of-
the-art hybridized fuel cell system. We have already placed a small 
fleet of these vehicles in Vancouver and are working with the U.S. 
Department of Energy and our program partner BP to deliver vehicles and 
fueling in California, Florida and Michigan in the near future.
    Fuel cells are promising, but there are also tremendous vehicle and 
infrastructure challenges that must be addressed before they can reach 
commercial viability. Solutions will require technological 
breakthroughs and the concerted efforts of government, the auto 
industry and energy providers.
    In conclusion, our objective is simple . . . give consumers more of 
what they want which is performance, drivability, affordability, 
utility and a cleaner environment. Advanced vehicle technologies can 
increase vehicle fuel efficiency without sacrificing these other 
attributes. We support policies that promote research and development 
of advanced technologies and the development of renewable fuel sources. 
In addition, market-based consumer incentives need to be a key element 
of a coordinated strategy to effectively address sustainable 
transportation and energy security. Consumer tax credits for advanced 
vehicles will help consumers overcome initial costs premiums associated 
with early market introductions; bringing more energy efficient 
vehicles into the marketplace more-affordably and in higher-volumes.
    Ford Motor Company believes that the current U.S. Energy Bill 
contains many important policies and incentives to address our nation's 
energy needs and we encourage Congress to pass this legislation.
    Thank you again for the opportunity to address the Committee.
                               __________
 Prepared Statement of Mark Chernoby, Vice President, Advanced Vehicle 
                Engineering, DAimlerChrysler Corporation
    Mr. Chairman and distinguished Members of the Joint Economic 
Committee, I want to thank you for the opportunity to appear before you 
today.
    I am coming before you today to describe DaimlerChrysler's efforts 
in developing and implementing alternative technologies for powering 
automobiles and what we are doing in advanced technologies with respect 
to the hydrogen economy.

                      PETROLEUM PRICES REMAIN HIGH
    Crude oil prices remain very high, especially in contrast to the 
lows reached in 1998 and 1999. They are still considerably lower than 
the peak in real oil prices which was reached in the early eighties. 
The monthly average price for June was $57 per barrel and in July oil 
prices have closed above $60 on several days. While most analysts think 
prices have probably peaked, prices are expected to remain above $50 
per barrel for some time. While the consensus outlook for oil prices 
has continued to move higher, most economists still expect prices to 
decline steadily from the current price of $57 per barrel. The 
consensus is for oil to decline to less than $50 per barrel next year 
and with additional declines in the following years.
          current oil prices have limited impact on consumers
    Despite oil prices consistently much higher than predicted, 
economic growth has slowed only moderately. The economy and the auto 
industry seem to be weathering very high oil prices much better than 
expected. Though it is a near certainty that the economy will slow in 
the face of both expensive oil and continued central bank rate 
increases, the slowing appears to be gradual and modest so far. Total 
vehicles sales through June are about 2 percent above the comparable 
period in 2004. In addition, the market share of trucks is slightly 
higher then in the prior year. Based on the sales data for 2005, 
consumers do not seem to be altering their purchasing preference due to 
more expensive oil.
    While the economic effects of high oil prices have not had as 
dramatic effect as originally anticipated, DaimlerChrysler is focused 
on in improving automobile energy efficiency in short-term and long-
term and is pursuing a broad portfolio of alternatives.

  IMPROVING ENERGY EFFICIENCY VIA ALTERNATIVE AND ADVANCED PROPULSION 
                          RELATED TECHNOLOGIES
    DaimlerChrysler is engaged in a broad range of advanced propulsion 
technologies. Fuel cell vehicles are a long term focus of this 
technology portfolio, which also includes efficient gasoline engines, 
advanced diesels, and hybrid powertrain systems. (See Figure 1: 
DaimlerChrysler's Advanced Propulsion Technologies)
    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. Each of the short term technologies 
optimizes its benefit to the consumer in specific drive cycles, hence 
its value to the customer.
    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 are also working on further development of gasoline direct-
injection which considerably enhances fuel economy by closely 
monitoring fuel atomization.
    While enhancements to existing internal combustion engine (ICE) 
technology offer opportunities for improvements in fuel economy in the 
short to mid-term, these improvements to ICEs must be accompanied by 
continuous improvements to the fuels on which they run. Thus, the 
availability of sulfur-free gasoline and diesel fuels, with other 
properties tightly controlled is a critical enabler for significant 
improvements in fuel economy.
    DaimlerChrysler offers four different diesel powertrains in the 
United States, not including heavy trucks. Advanced diesel technology 
offers up to 30 percent better fuel economy and 20 percent less 
CO2 emissions when compared to equivalent gasoline engines. 
While the fuel economy advantages of some vehicle propulsion 
technologies, such as hybrids may be limited to, or accentuated in a 
single mode of driving, an advantage of the diesel engine is that it 
offers significant fuel economy improvements under all driving 
conditions. Advanced diesel is a technology that is available today and 
can help reduce our nation's dependency on foreign oil. According to a 
J. D. Power and Associates study, light duty diesels are expected to 
grow from a 3 percent market share in 2004 to 7.5 percent in 2012.
    Designing more engines to run on Biodiesel is a current objective 
at DaimlerChrysler. Biodiesel fuel reduces emissions of diesel 
vehicles, including carbon dioxide, and lowers petroleum consumption. 
Each Jeep Liberty Common Rail Diesel (CRD) built by DaimlerChrysler is 
delivered to customers with B5 biodiesel fuel. Nationwide use of B2 
fuel (2 percent biodiesel) would replace 742 million gallons of 
gasoline per year, according to the National Biodiesel Board. 
DaimlerChrysler is also investigating the potential use of B20 fuel.
    While alternative, renewable fuels such as ethanol or biodiesel 
offer an attractive opportunity to reduce petroleum dependence, we do 
not see these fuels completely replacing petroleum in the foreseeable 
future. Rather, alternative fuels should be seen as pieces in the 
puzzle which represents the reduction of petroleum dependence. The role 
of renewable ethanol and biodiesel, and ultimately, renewable hydrogen, 
should be considered in the context of improved efficiency of 
conventional gasoline and diesel powertrains, hybrids, and fuel cells. 
Innovative public policy aimed at reductions in vehicle miles traveled 
(VMT) can also be part of this equation. DaimlerChrysler has set itself 
the goal of systematically promoting the development, testing and 
market launch of renewable fuels.
    Rising gasoline prices in the United States have increased the 
interest in Flexible Fuel Vehicles (FFVs). Chrysler Group has sold 
nearly 1.5 million FFVs capable of running on E85 (85 percent ethanol), 
gasoline or a mixture of the two. In total, over 4 million FFVs have 
been produced by the U.S. auto industry. Internal estimates have 
calculated that if the current fleet of over 4 million FFVs on the road 
today was operated on E-85 made from corn using the current 
fermentation and distillation processes, CO2 emissions would 
be reduced by 10 million tons/yr and gasoline use would be reduced by 
130 thousand barrels per day. Shifting to a new process of ethanol 
production from herbaceous biomass would result in essentially the same 
petroleum reduction, but CO2 emissions would be reduced by 
over 22 million tons/yr. However, there currently is only minimal 
infrastructure to support vehicles capable of running alcohol based 
fuels (ethanol and methanol) and the cost for alcohol based fuels is 
higher than gasoline on an energy equivalency basis. (See Figure 2: 
Energy and Cost Comparison of Fuels)
    DaimlerChrysler and GM 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. The first use of the system by DaimlerChrysler will be in 
early 2008 with the Dodge Durango.
    We are also looking at market niches where alternate technologies 
can have an impact in reducing our dependence on gasoline for 
transportation. One such opportunity is the Neighborhood Electric 
Vehicle (NEV), all-electric, battery-powered vehicles for use in 
reduced-speed on- and off-road settings. Some 30,000 DaimlerChrysler 
GEM electric vehicles are in use around the country, mostly for short 
trips--the kind of trip in which gas-powered vehicles produce most of 
their emissions.
    In addition to the propulsion related activities underway, 
mentioned above, DaimlerChrysler sees opportunities in using advanced 
materials as a way to reduce vehicle mass and therefore improve vehicle 
efficiency. Materials currently being investigated for new or increased 
vehicular application include: advanced high strength steel, aluminum, 
composites, titanium, magnesium, and improved alloys for casting. With 
each of these materials comes the challenge of new joining methods and 
technologies as well as compatibility with other materials.

  CONSUMER RESPONSE POTENTIAL FOR ADVANCED AND ALTERNATIVE PROPULSION 
                              TECHNOLOGIES
    Consumers are rational and will purchase vehicles embodying 
advanced fuel saving technologies when the purchase makes economic 
sense. This implies that the added cost of the technology must be less 
than the net present value of the fuel savings. In this regard, both 
higher fuel prices and higher tax subsidies for advance technology 
vehicles make such vehicles more attractive to consumers.
longer term advanced technologies--daimlerchrysler's efforts to advance 

                        THE ``HYDROGEN ECONOMY''
    DaimlerChrysler has been working on fuel cell technology for 
transportation utilizing hydrogen for over 10 years. We have invested 
over $1 Billion in R&D and have developed multiple generations of 
varying types of vehicles, including five generations of passenger cars 
(NECAR1, 2, 3, and 4, and the F-Cell). Of all manufacturers, we have 
the largest worldwide fleet of fuel cell cars and buses (more than 100 
vehicles) participating in several international demonstration projects 
in the United States, Europe, and Asia. (See Figure 3: DaimlerChrysler 
Fuel Cell History)
    As a member of the United States Council for Automotive Research 
(USCAR), DaimlerChrysler is a partner in the Department of Energy's 
(DOE) FreedomCAR and Fuel Partnership along with General Motors and 
Ford Motor Company, and BP America, ChevronTexaco Corporation, 
ConocoPhillips, Exxon Mobil Corporation, and Shell Hydrogen. The recent 
addition of these five major energy providers has strengthened the 
Partnership considerably, by providing expertise to solve the 
infrastructure challenges. DaimlerChrysler has also been working with 
the DOE since 1993 on advanced automotive technology research. We 
support the initiative as members on technical teams related to 
advanced automotive technology, including:
     Energy Storage
     Light Weight Materials
     Advanced Combustion
     Hydrogen Storage
     Fuel Cell
     Codes & Standards
     Electrical and Electronics
     Vehicle Systems Analysis
    Through these tech teams, we help develop priorities based on 
future needs and manage a portfolio of research projects directed at a 
set of research goals and objectives.
    We also are one of four recipients to participate in the DOE 
Hydrogen Learning Demonstration Project. By the end of 2005, we will 
have 30 vehicles located in three ecosystems (Southern California, 
Northern California, and Southeastern Michigan) and were the first OEM 
to provide valuable technical data to the DOE. (See Figure 4: DOE 
Hydrogen Fleet & Infrastructure Demonstration & Validation Project)
    The current technology is being evaluated in several fleet 
demonstration projects around the world. The largest is the DOE's 
program in the United States. These programs include a few hundred 
vehicles worldwide and several hydrogen fueling stations.
    DaimlerChrysler projects that the hydrogen fueled vehicle 
technologies will evolve in discreet phases driven be the following 
cadence of events:
     Breakthrough in basic research
     Bench/laboratory development
     ``On road'' testing and development
     Parallel manufacturing process development
    Technological breakthroughs are required in hydrogen storage and 
fuel cell technology (focused on cost & durability). DaimlerChrysler 
shares a commitment with our partners in the FreedomCAR and Fuel 
Partnership effort to achieve these gains. It is a challenge to predict 
a definitive timeline for technological discovery. The vehicle fleet 
could grow to tens of thousands if significant shifts occur in the 
infrastructure and value to the consumer. The infrastructure must 
expand to a much larger scale beyond local support. This will be 
critical to support the freedom to travel that consumers will demand 
when we move from a market dominated by local ``fleet'' customers to 
the average consumer.
    High volume commercialization will require a highly distributed 
infrastructure capable of delivering cost competitive hydrogen and fuel 
cell powered vehicles that can compete with other fuel efficient 
technologies. It is likely that this will require continued government 
policy support for vehicle and fuel. Additionally, transitioning the 
manufacturing sector and supply base will require large investments in 
both time and resources. Along with DOE and the Department of Commerce, 
DaimlerChrysler is participating in identifying and addressing the most 
significant issues associated with this transition.
    In addition to the technology challenges identified above, the cost 
challenges are significant barriers. To realize large scale market 
penetration, we will have to approach the value that customers enjoy 
with current propulsion technologies.
    Even with a viable vehicle, the hydrogen economy will not become a 
reality without a highly distributed infrastructure. Our energy 
partners in the FreedomCAR and Fuel effort are committed to the 
research and technology development required to realize this goal. 
Industry and government will need to work together to develop an 
implementation plan with financial viability for all entities.
    Due to the enormity of the transition to a hydrogen economy, 
DaimlerChrysler actively participates in the FreedomCAR and Fuel 
Partnership. The research required to solve the technical challenges of 
the hydrogen economy is universally viewed as ``high risk'' by 
industry. The enabling, pre-competitive research sponsored by DOE 
through the FreedomCAR and Fuel Partnership is very important to the 
industry and is focused on overcoming the aforementioned challenges. 
These challenges can not be solved by any one company, industry or 
country. As a global company we also support DOE's participation in the 
IPHE and other activities around the world to address these challenges.

   THE PATH TO THE FUTURE--ADVANTAGES OF DEVELOPING ADVANCED VEHICLE 
          TECHNOLOGIES FOR MORE TRADITIONAL PROPULSION SYSTEMS
    As stated earlier, DaimlerChrysler is working on a broad portfolio 
of technologies to improve the efficiency and environmental impact of 
transportation. In the short-term we continue to improve the internal 
combustion engine (ICE). In the mid-term we are developing hybrid 
vehicles utilizing electric drive systems, integrated power modules and 
advanced batteries. In the long term fuel cell vehicles with on-board 
hydrogen storage from a national hydrogen infrastructure will emerge.
    The current portfolio of R&D within the DOE's FreedomCAR and Fuel 
Initiative is focused on the long term hydrogen vision, but many of the 
technologies are useful and will mature in the shorter term as 
transition technologies. Cost effective, light-weight materials can be 
applied to vehicles in the short term to improve fuel efficiency 
regardless of the propulsion technology. Advanced energy storage and 
motors will benefit both hybrid and fuel cell vehicles. Novel 
approaches to hydrogen storage are uniquely required by hydrogen fueled 
vehicles, but can support stationary and portable applications in the 
industrial and consumer markets.
    It is important to advance and mature many of the aspects of the 
technology as early as possible. There are many challenges and 
breakthroughs needed to realize the President's vision of a ``Hydrogen 
Economy''. (See Figure 5: Technology Relationship Strategy)
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      Responses by David K. Garman to Hon. Jim Saxton, Chairman, 
                     House Joint Economic Committee
    According to the National Ethanol Vehicle Coalition, there are 6.75 
million flexible fuel vehicles on the road in the United States. That 
is approximately 3.2 percent of the 209,624,000 light duty trucks and 
cars in 2002. Five manufacturers currently supply 24 different models 
to the U.S. market.
                                 ______
                                 
        Response by David K. Garman to Hon. Maurice D. Hinchey, 
                          U.S. Representative
    A number of studies have recently been conducted which address the 
question of how much energy is needed to produce a gallon of ethanol. 
Calculations of the energy inputs required for ethanol production and 
distribution include energy used throughout the process: the energy 
expended to grow and harvest the corn, transport the corn to the 
ethanol plant, convert the corn to ethanol and other products, and 
transport the ethanol to refueling stations. Agricultural inputs 
include the energy used to produce and transport fertilizers and 
pesticides, the fuel used in tractors and other farm equipment, and the 
energy needed for irrigation.
    A commonly used metric for evaluating ethanol production is the 
fossil energy balance, which is the ratio of the energy out (the energy 
in a gallon of ethanol) to the fossil energy inputs (the fossil energy 
used to produce the gallon of ethanol). A 2004 study by the U.S. 
Department of Agriculture (USDA) (Ref. 1) concluded that approximately 
600,000 Btus of fossil energy are used to produce about one million 
Btus of corn ethanol, resulting in a 1.67 fossil energy balance. A 2005 
study led by General Motors (Ref. 2) used the Argonne National 
Laboratory (ANL) Greenhouse Gases, Regulated Emissions, and Energy Use 
in Transportation (GREET)) model to calculate fossil fuel inputs to 
produce or transport ethanol. The GREET model estimated that roughly 
760,000 Btus of fossil energy are used to produce about one million 
Btus of corn ethanol. The fossil energy balance is 1.32.
    The report (Ref. 3) by Professors David Pimentel (Cornell 
University) and Tad Patzek (University of California) estimated that 
roughly 1.2 million Btus of fossil energy are used to produce about one 
million Btus of corn ethanol. The energy balance for the Cornell report 
is 0.833. The differences between the Cornell energy balance and the 
USDA and ANL energy balances are due primarily, but not entirely, to 
different assumptions for energy inputs. Energy consumption in 
agriculture and ethanol production has decreased significantly over the 
past 15 years. Professor Pimentel uses energy consumption data that are 
less updated than the data used in the USDA and ANL studies. In 
addition, the Cornell study also included several energy input 
categories not included in the USDA and ANL studies--the energy used to 
manufacture farm equipment and construct the ethanol plant, and the 
caloric energy consumed by workers.
    By comparison, accounting for the energy expended for oil 
extraction and gasoline refining, roughly 1.238 million Btus of fossil 
energy are needed to produce 1 million Btus of gasoline. Comparing the 
gasoline energy balance to the USDA and ANL corn ethanol energy 
balances, the fossil energy requirements for corn ethanol are about 48 
and 60 percent, respectively, of those of gasoline. Most of the fossil 
energy inputs for corn ethanol are natural gas and coal. The GREET 
model estimates that approximately 90,000 Btus of petroleum are used to 
produce one million Btus of corn ethanol. That is, about 90 percent 
less petroleum is used to produce a Btu of ethanol than a Btu of 
gasoline.
    With the exception of the 2005 Cornell study and previous Cornell 
studies, nearly all studies conducted from 1994 on show positive energy 
balances for corn ethanol. A 2005 presentation by Dr. Michael Wang of 
ANL (Ref. 4) discussed some of the key differences in assumptions used 
in the ANL and Cornell studies. Driven by economics, ethanol plant 
operators have cut down on energy consumption and their plants are 
significantly more efficient than a dozen years ago.
    Ethanol plants also produce animal feed products from the corn 
feedstock, and some of the energy inputs should be allocated to these 
co-products. The most common ways for calculating co-product credits 
are the displacement and energy methodologies. For the displacement 
methodology, the co-product credit is based on the energy used to 
produce the comparable animal feed product being substituted for 
(displaced). For the energy methodology, the energy used to produce the 
ethanol and co-products are accounted for separately. The Cornell study 
estimated a lower co-product credit for the animal feed than the USDA 
and ANL studies, another cause of the difference in results between the 
Cornell studies and the other studies.
                               References
    1. Shapouri, H., et al, The 2001 Net Energy Balance of Corn-
Ethanol, USDA, 2004.
    2. Brinkman, N., Wang, M., Weber, T., and Darlington, T., Well-to-
Wheels Analysis of Advanced Fuel/Vehicle Systems--A North American 
Study of Energy Use, Greenhouse Gas Emissions, and Criteria Pollutant 
Emissions, General Motors Corp. Report, May 2005.
    3. Pimentel, D. and Patzek, T., Ethanol Production Using Corn, 
Switchgrass, and Wood; Biodiesel Production Using Soybean and 
Sunflower, Natural Resources Research, Vol. 14, No. 1, March 2005, 
Pages 65-76.
    4. Wang, M., The Debate on Energy and Greenhouse Gas Emissions 
Impacts of Fuel Ethanol, Argonne National Laboratory, August 3, 2005.
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