[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
ALTERNATIVE TRANSPORTATION FUELS: AN OVERVIEW
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND AIR QUALITY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
APRIL 18, 2007
__________
Serial No. 110-31
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan, JOE BARTON, Texas
Chairman Ranking Member
HENRY A. WAXMAN, California RALPH M. HALL, Texas
EDWARD J. MARKEY, Massachusetts J. DENNIS HASTERT, Illinois
RICK BOUCHER, Virginia FRED UPTON, Michigan
EDOLPHUS TOWNS, New York CLIFF STEARNS, Florida
FRANK PALLONE, Jr., New Jersey NATHAN DEAL, Georgia
BART GORDON, Tennessee ED WHITFIELD, Kentucky
BOBBY L. RUSH, Illinois BARBARA CUBIN, Wyoming
ANNA G. ESHOO, California JOHN SHIMKUS, Illinois
BART STUPAK, Michigan HEATHER WILSON, New Mexico
ELIOT L. ENGEL, New York JOHN B. SHADEGG, Arizona
ALBERT R. WYNN, Maryland CHARLES W. ``CHIP'' PICKERING,
GENE GREEN, Texas Mississippi
DIANA DeGETTE, Colorado VITO FOSSELLA, New York
Vice Chairman STEVE BUYER, Indiana
LOIS CAPPS, California GEORGE RADANOVICH, California
MIKE DOYLE, Pennsylvania JOSEPH R. PITTS, Pennsylvania
JANE HARMAN, California MARY BONO, California
TOM ALLEN, Maine GREG WALDEN, Oregon
JAN SCHAKOWSKY, Illinois LEE TERRY, Nebraska
HILDA L. SOLIS, California MIKE FERGUSON, New Jersey
CHARLES A. GONZALEZ, Texas MIKE ROGERS, Michigan
JAY INSLEE, Washington SUE WILKINS MYRICK, North Carolina
TAMMY BALDWIN, Wisconsin JOHN SULLIVAN, Oklahoma
MIKE ROSS, Arkansas TIM MURPHY, Pennsylvania
DARLENE HOOLEY, Oregon MICHAEL C. BURGESS, Texas
ANTHONY D. WEINER, New York MARSHA BLACKBURN, Tennessee
JIM MATHESON, Utah
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
Professional Staff
Dennis B. Fitzgibbons, Chief of
Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
Bud Albright, Minority Staff
Director
(ii)
Subcommittee on Energy and Air Quality
RICK BOUCHER, Virginia, Chairman
G.K. BUTTERFIELD, North Carolina, J. DENNIS HASTERT, Illinois,
Vice Chairman Ranking Member
CHARLIE MELANCON, Louisiana RALPH M. HALL, Texas
JOHN BARROW, Georgia FRED UPTON, Michigan
HENRY A. WAXMAN, California ED WHITFIELD, Kentucky
EDWARD J. MARKEY, Massachusetts JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland JOHN B. SHADEGG, Arizona
MIKE DOYLE, Pennsylvania CHARLES W. ``CHIP'' PICKERING,
JANE HARMAN, California Mississippi
TOM ALLEN, Maine STEVE BUYER, Indiana
CHARLES A. GONZALEZ, Texas MARY BONO, California
JAY INSLEE, Washington GREG WALDEN, Oregon
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
MIKE ROSS, Arkansas SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York MICHAEL C. BURGESS, Texas
JIM MATHESON, Utah JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex
officio)
Professional Staff
Sue D. Sheridan, Chief Counsel
Lorie J. Schmidt, Counsel
Bruce C. Harris, Policy Advisor
David J. McCarthy, Minority Counsel
C O N T E N T S
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Page
Hon. Rick Boucher, a Representative in Congress from the
Commonwealth of Virginia, opening statement.................... 1
Hon. J. Dennis Hastert, a Representative in Congress from the
State of Illinois, opening statement........................... 3
Hon. G.K. Butterfield, a Representative in Congress from the
State of North Carolina, opening statement..................... 4
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 5
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 6
Hon. Charles W. ``Chip'' Pickering, a Representative in Congress
from the State of Mississippi, opening statement............... 6
Hon. Jane Harman, a Representative in Congress from the State of
California, opening statement.................................. 7
Hon. Joe Barton, a Representative in Congress from the State of
Texas, prepared statement...................................... 9
Hon. Jay Inslee, a Representative in Congress from the State of
Washington, opening statement.................................. 13
Submitted material........................................... 15
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 18
Hon. Darlene Hooley, a Representative in Congress from the State
of Oregon, opening statement................................... 18
Witnesses
John Ward, vice president, Headwaters Incorporated............... 19
Prepared statement........................................... 22
Donald W. Maley, Jr., vice president, Leucadia International
Corporation.................................................... 33
Prepared statement........................................... 35
Brian Foody, chief executive officer, Iogen Corporation.......... 49
Prepared statement........................................... 51
Scott Hughes, director, government affairs, National Biodiesel
Board.......................................................... 57
Prepared statement........................................... 60
Phil Lampert, executive director, National Ethanol Vehicle
Coalition...................................................... 65
Prepared statement........................................... 67
Alexander E. Farrell, assistant professor of energy and
resources, and director, Transportation Sustainability Research
Center......................................................... 72
Prepared statement........................................... 75
ALTERNATIVE TRANSPORTATION FUELS: AN OVERVIEW
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WEDNESDAY, APRIL 18, 2007
House of Representatives,
Subcommittee on Energy
and Air Quality,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:15 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Rick
Boucher (chairman) presiding.
Members present: Representatives Butterfield, Barrow,
Waxman, Wynn, Doyle, Harman, Gonzalez, Inslee, Baldwin, Ross,
Hooley, Matheson, Dingell, Hastert, Hall, Upton, Shimkus,
Shadegg, Pickering, Burgess and Barton.
Staff present: Bruce Harris, Lorie Schmidt, Laura Vaught,
Chris Treanor, Margaret Horn, David McCarthy, Tom
Hossenbochler, and Peter Kielty.
OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF VIRGINIA
Mr. Boucher. The subcommittee will come to order.
This morning we begin a series of hearings on ways to
achieve a higher degree of American energy self-reliance. Our
goal is to make a legislative contribution to the Independence
Day measures which the Speaker has announced that the House
will consider in the mid-summer time frame. This committee's
contribution to that effort will consist of legislation to
encourage domestic alternatives to petroleum for transportation
fuels and energy efficiency and conservation measures that will
reduce energy consumption.
Until today, the subcommittee has been focused exclusively
on a U.S. response to the challenge of climate change. I would
underscore again this morning that we will propose a mandatory
control program for greenhouse gas emissions and later this
year report that measure for consideration by the House during
the fall time frame. The climate change control program will
not be a part of the mid-summer energy independence agenda.
Instead, climate change legislation will be taken up during the
period September-October this year, taken up on the floor
during that period.
Today, as we begin our focus on this committee's
contribution to energy independence, we examine transportation
fuels and ways to develop domestic alternatives. Later hearings
in this series will focus on energy efficiency and
conservation.
Our Nation has an unhealthy reliance on petroleum, 60
percent of which is imported from other countries and much of
that importation comes from some of the least politically
stable places in the world. In my view, our need to protect the
flow of petroleum ties our hands diplomatically and makes it
difficult for the United States to assert its larger national
interests in a broad range of international policies. Our
reliance on oil imports involves us in conflicts that we would
be better served to avoid. And so both for our economic
security and for our national security, we must exert maximum
effort to develop domestic alternatives to petroleum for
powering transportation.
Over the long term, we can anticipate that more of
transportation will be electrically powered through fuel cells
and through plug-in hybrids. In the near term, ethanol, both in
the corn-based and cellulosic varieties, holds great promise.
The future use of biodiesel also holds promise. This morning we
will examine this role this committee can play in advancing
those promising alternatives.
We will also focus this morning on another promising
alternative. In the coming days, I will join with our Illinois
colleague, Mr. Shimkus, and other interested members of this
subcommittee, our full committee and the House in introducing
legislation to promote the launch of a domestic industry to
produce a liquid fuel derived from coal. Since the days of
World War II, coal-to-liquid processes have been in use. Today
South Africa derives a substantial portion of its
transportation fuels from coal. The technology to convert coal
to a liquid fuel is well understood and the process is
commercially feasible when the world price of oil is at $40 per
barrel or higher. While today's process is well above $40,
there is hesitation in the investor community about the long-
term outlook for oil prices. A large portion of today's oil
price is political risk. The resolution of diplomatic
differences in the Middle East, for example, could lend greater
assurance to the future export of oil to the world market and
create downward pressure on the world price of oil. This
uncertainty about future oil prices has inhibited the
investment of private capital in coal-to-liquids facilities in
the United States. Legislation which Mr. Shimkus and I will
introduce will serve to bolster investor confidence and pave
the way for the launch of a U.S.-based coal-to-liquids
industry.
I want to thank Mr. Shimkus for his partnership with me on
this measure, which is an important step in our effort to
achieve a higher degree of energy self-reliance.
This morning we will welcome testimony from our witnesses
on the future of ethanol, coal-to-liquids and biodiesel, and
suggestions for the role of Government policy in order to
advance each. President Bush announced, in his State of the
Union address, a goal of consumption in this Nation of 35
billion gallons of alternative fuel per year by the year 2020.
Today we consume approximately 5\1/2\ billion gallons of
ethanol and so the President's goal is ambitious but in my
view, it needs to be achieved. Each of the approaches we will
examine this morning can help us to achieve it.
So I want to say welcome to our witnesses. Thank you for
joining us and sharing your views. We will hear from you
shortly.
Now it is my privilege to recognize the ranking Republican
member of our subcommittee, the gentleman from Illinois, Mr.
Hastert.
OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. Hastert. Thank you, Chairman Boucher, for holding this
important hearing on the future of alternative transportation
fuels.
Let me begin by expressing my condolences to the families
and students of Virginia Tech. That university has certainly
suffered. My thoughts and prayers are with those victims, the
families and all your constituents. Mr. Chairman, I know you
will find the strength and your folks will find the strength as
a community to cope with this horrific event.
I would like to thank again each of these witnesses today
for being here to share their thoughts and insights and
increasing our Nation's use of alternative transportation
fuels. I have always believed good energy policy is good
environmental policy and that the reverse is also true. Good
environmental policy should be good energy policy. Increasing
the use of alternative transportation fuels accomplishes just
that. It provides our Nation with greater energy independence
while at the same time offering a positive environmental
impact.
The key to our future energy security is technological
innovation and commercial deployment. Take coal, for example.
There is more coal underneath Gillette, WY, or southern
Illinois or western Virginia or southern Indiana than anywhere
in Iran or Saudi Arabia but that energy happens to be coal.
With the abundance of coal in this country, we need to continue
to push the development and deployment of coal-to-liquid
technology. And although CTL technology is not new, there are
still uncertainties regarding its economic viability. Most of
the uncertainty centers on the fact that the U.S. has not built
a large-scale commercial CTL facility. It is my belief,
however, that we can solve this problem and prove the long-term
viability of this fuel.
As many of you know, the Air Force is currently testing the
use of CTL fuels in their planes. So far these tests have been
successful. Congress should step forward now and allow the
Defense Department to enter into a long-term agreement to
purchase CTL fuel. Such an agreement will provide the economic
certainty needed to draw investment into CTL facilities. As
these facilities are built, economies of scale will then work
to lower the cost of the fuel and make it available for others
to use in commercial aircraft, trains and passenger cars. For
the long-term security of America, I would much rather worry
about who is the next mayor of Gillette, WY, instead of who is
the next ruler of Iran. Imagine the benefits of being able to
rely on millions of barrels of clean diesel produced right here
at home to meet our transportation needs rather than oil from
an unreliable foreign source.
Like coal, America has an abundant source of renewable
clean bio-based fuels like ethanol and soy diesel. In the past
few years we have made tremendous strides in the use of these
fuels yet we can still do more. In order to make ethanol a
larger part of our fuel mix, we need to continue research into
increasing the yield of ethanol from corn, push the development
of cellulosic sources of ethanol and get the infrastructure in
place to make the ethanol more widely available. America
already has the energy resources it needs for its future energy
security. It is in every cornfield in Illinois and every coal
mine in Virginia. The question becomes whether we do what is
necessary in the form of policy to provide the means to make
these sources more widely available and economically viable.
In the long run, Mr. Chairman, energy security is national
security. Loan guarantees, long-term purchase agreements,
investments in research and other incentives to increase the
sources of domestically produced alternative fuels gives
America an opportunity to claim our energy independence back
from the unstable foreign sources we have become so reliant
upon. It refocuses our priorities on cleaner, safer, less-
expensive sources of energy and puts us on the path of energy
independence.
Thank you, and I yield back the balance of my time.
Mr. Boucher. Thank you very much, Mr. Hastert, and I
particularly appreciate your expression of condolence for the
loss that we experienced earlier this week.
I have to go to the floor in order to take part in the
passage of a resolution about that very subject and I am going
to ask the vice chairman of our subcommittee, the gentleman
from North Carolina, Mr. Butterfield, to assume the chair and
he actually will be giving the next opening statement and can
begin by recognizing himself.
OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NORTH CAROLINA
Mr. Butterfield [presiding]. Thank you very much, Chairman
Boucher, and we wish you well as you go to the floor to pay
tribute to those lives that were lost in the State of Virginia.
I too want to thank the chairman of this committee for
convening this important hearing today. It is absolutely
critical that we begin this discussion and debate. We cannot
afford to delay it any longer.
I want to thank the witnesses for coming forward today. I
have looked at each one of your bios and each of you brings a
credential to this committee that is very important. We are
committed on this committee to develop bipartisan legislation
that will put us on the path to energy independence and to do
it within the foreseeable future and so I want to thank you for
your testimonies. I look forward to what you have to say. We as
a government cannot do this alone. We are going to need the
participation of the energy sector to resolve this problem.
Certainly we are going to do our part in making the resources
available and developing the policy that needs to be developed
but we are going to have to depend on each one of you to help
us in this process, and so thank you very much for coming.
The American people are beginning to pay attention to this
issue. We in this country are 5 percent of the world yet we
consume 25 percent of the energy, and in the transportation
sector, 28 percent of transportation fuels are being used or
devoted to transportation fuels and we must reduce this figure
and we must do it significantly, so thank you very much for
coming.
We are now going to have opening statements from some of
the other members. At this time the chair recognizes Mr. Upton,
the gentleman from Michigan.
Mr. Upton. I am going to defer and claim the 3 minutes
later. Thank you, Mr. Chairman.
Mr. Butterfield. The gentleman defers.
Mr. Shimkus, and as the chairman mentioned a moment ago,
you are going to see legislation introduced any day now, the
Boucher-Shimkus Act. Is that what we call it?
Mr. Shimkus. I hope we get you as an original cosponsor.
Mr. Butterfield. I look forward to joining with you. The
gentleman is recognized.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. Thank you. I hesitate to do an opening
statement, but when I read the committee briefing, the full
committee briefing, it really reminded me about how we can as
legislators affect public policy in a very important way. If
you believe that we are over-reliant on imported crude oil, you
don't have to go back very far in history to see some
successes. The 1992 Clean Air Act really was a segue for
ethanol to get its foot in the door. I wasn't here then. But I
was here in 1997-98 and I think it was 1998 that I joined with
Karen McCarthy, Democrat from this committee, and we were
successful in changing EPACT to include biodiesel as a credible
item for fuel mix, which really changed the dynamics of that
industry and I think have got a long way to go to catch up with
the success we have done in the ethanol area but it is a great
product that we should take great credit. And I wanted to
remember Karen in this debate because that was one that
President Clinton signed. I remember walking over to the Senate
floor with Karen to lobby an Arkansas Senator to let the bill
move and so that was a success, and I hope that in this world
environment when we are really frustrated with our reliance on
imported crude oil that we can use the same type of work that
we have in other past pieces of legislation and really help
make another dent in our reliance on imported crude oil, and
that is why I am honored to be working with the chairman of the
subcommittee who everyone acknowledges is an expert in the
field, a diligent legislator and a good friend. As we move that
legislation, we do hope that people will get a good look at it
and that we work with them to help perfect it to a point where
we can move it expeditiously to the floor.
I am a supply guy, and the more supply you have, the lower
the cost, and we are just tired of being held hostage by the
international community, especially areas of the world. I am a
big democracy freedom guy. I talked at a class last night and I
said, if we are going to be all over the world to fight for
democracy, freedom and the global war on terror, let us let it
be about that issue, and let us not have another side debate,
well, we are really there for oil, and you all can help us get
there. I look forward to your testimony.
Mr. Chairman, I yield back my time.
Mr. Butterfield. The gentleman yields back.
At this time the chair is pleased to recognize the chairman
of the full committee, my friend from the State of Michigan,
Mr. Dingell.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Chairman Dingell. Mr. Chairman, I thank you for your
courtesy and I commend you for holding this important hearing.
Today the committee will turn its attention to alternative
transportation fuels, a topic that has frequently been at the
center of the committee's work on energy issues. Our country's
dependence on foreign sources of energy is a well-known
deficiency in our energy policy and has been so for decades.
According to the Energy Information Agency, EIA, in 2005 the
U.S. consumed approximately 20 million barrels of crude oil per
day, 60 percent of which was imported. Alternatives to
petroleum-based transportation fuel are a critical component of
enhancing our Nation's energy security.
This committee advanced the cause of alternative fuels in
the Energy Policy Act of 2005 by creating the renewable fuel
program which required that a certain percentage of our retail
gasoline supply be comprised of renewable fuel. By most
assessments, that program has been a success. For 2006, the
program required gasoline supply to contain a minimum of 4
billion gallons of renewable fuel. Thanks to the productivity
of American agriculture and the ingenuity of the entrepreneurs
who joined this emerging market, the number of gallons actually
produced in 2006 was 5 billion gallons. Most analysts agree
that we will meet the 2012 requirement for 7.5 billion gallons
much sooner than required by law. All this is good news. The
question now becomes what else should we do to encourage the
use of alternative fuels. I note the vast majority of ethanol
produced in the country is derived from corn kernels but there
are other feedstocks that can play an important part in ethanol
production such as cellulose. In addition, there are other
alternative fuels that we should examine to see what role they
can play in our fuel mix including biodiesel and liquids fuels
derived from coal. We have witnesses here today who can speak
to these issues. Another witness will examine the various
impacts of alternative fuels on climate change, a critical
perspective given this committee's focus on climate policy, and
I look forward to their testimony.
There are other issues that I hope the subcommittee will
continue to examine in future hearings. We must find ways to
increase biofuels infrastructure so that more than 6 million
consumers who already own flexible-fuel vehicles can actually
purchase the alternative fuel and that the alternative fuel is
available in the marketplace. We must also continue to examine
ways to increase the number of flexible-fuel vehicles. Any
action on these issues must also account for how they can
affect our broader efforts to address climate change and
enhance energy security.
I want to thank you again, Mr. Chairman, and I look forward
to the testimony of our witnesses, whom I welcome at this time.
Thank you. I yield back the balance of my time.
Mr. Butterfield. Thank you very much, Mr. Chairman, and the
gentleman yields back.
At this time the chair recognizes Mr. Pickering from
Mississippi.
OPENING STATEMENT OF HON. CHARLES W. ``CHIP'' PICKERING, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSISSIPPI
Mr. Pickering. Mr. Chairman, I thank you for this hearing
and I look forward to the testimony of the panel.
This is a critical issue of gaining energy independence and
security and enhanced supply. In my home State of Mississippi,
we are doing everything from ethanol to clean coal to nuclear
to traditional fuels to animal waste, to fish waste, poultry
waste, wood waste. Mississippi State has the leading patent on
converting wastewater, sewage, into a biofuel. This is an
exciting time for us to have a transformation of energy in the
country that powers the way our country runs, our homes, our
lives, and I think that this is a good time to find common
ground and consensus on both sides of the aisle to achieve a
very important security and economic objective for the country.
Thank you, Mr. Chairman.
Mr. Butterfield. Thank you.
At this time the chair recognizes the gentlelady from
California, Ms. Harman.
OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Harman. Thank you, Mr. Chairman, and good morning to
our witnesses. The tragedy at Virginia Tech shows us just how
fragile we are, a campus in a peaceful part of the country
could all of a sudden be the site of a violent massacre.
The subjects we are addressing today may not be as sudden
but surely they show us too how fragile we are, and it is our
responsibility, and I hope we will rise to it on a bipartisan
basis to do something about it. I drive hybrid vehicles on both
coasts and I applaud the breakthroughs the auto industry has
made in recent years, many of them actually developed at Toyota
and Honda facilities in my district.
As my colleagues have pointed out, transportation in the
age of global warming and in the age of terrorism requires a
wholly new approach to how we power our cars and trucks. The
automakers can give us the engines but the fuel producers must
meet them halfway. Bringing alternative fuels to market depends
on fuel production and fuel infrastructure. Without more
ethanol pumping stations--presently there are only about 1,100,
mostly located in a handful of midwestern States--we cannot
expect to see more flex-fuel vehicles on the road.
Manufacturers won't make them and the public won't buy them.
We should also explore synergies between transportation
fuels and other clean energy initiatives. In Carson,
California, just outside my district, BP and GE are building a
carbon capture and sequestration coal power plant that can also
produce hydrogen. Plants like these can produce raw materials
for hydrogen fuel cell vehicles and lay the groundwork for
their commercialization years from now. This kind of creative
thinking should color our policymaking. I look forward in the
near future to driving my granddaughter Lucy around in a
vehicle fueled with cellulosic ethanol and other alternative
fuels. I hope that by the time she is old enough to drive
herself, the alternative will be the mainstream.
I yield back.
Mr. Butterfield. Thank you.
I understand that we have been joined by the ranking member
of this committee, the distinguished gentleman from Texas, Mr.
Barton.
Mr. Barton. Thank you, Mr. Chairman. I will put my
statement in the record and pass.
I do want to extend my prayers with everybody else's for
Congressman Boucher and his constituents at Virginia Tech.
I yield back.
[The prepared statement of Hon. Joe Barton follows:]
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Mr. Butterfield. I thank the gentleman for his comments.
At this time the chair recognizes the gentleman from the
State of Washington, Mr. Inslee.
OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mr. Inslee. Thank you. I just hope that we look at these
hearings with a sense of great optimism. I think it is
warranted. The technological advances are truly remarkable and
we are going to be able to skin this cat of global warming, I
believe, with the technologies, some of which we will hear
about today.
I think I am the first Congressman to drive on the Hill a
plug-in hybrid 2 weeks ago. You get 150 miles per gallon on the
gasoline and have electricity for the first 40 miles at a penny
a mile, and that will be commercially available this fall from
A-123 Battery Company, and of course, GM has plans several
years from now. There are just tremendous things going on. But
the one caution I want to note is that all men are created
equal but not all fuels are created equal, and right now we
have a renewable fuels standard that essentially doesn't
distinguish in the global warming characteristics of fuel, and
I think that is an enormous loophole that we have to close. I
will be introducing a bill here shortly to introduce a fuel
standard to make sure that our alternative fuels are
alternative with a capital A when it comes to global warming.
We do have limited resources to invest in our future and we
have to do it with fuels that will in fact skin the cat of
global warming as well as national security, and I think we
will need to have a standard that recognizes that.
Now, that leads to this discussion of coal-to-liquids, and
I hope that my fellow members will educate themselves about
what this really means because I will be putting into the
record a document from the EPA that shows that coal-to-liquids
without sequestration actually has 118 percent more carbon
dioxide, more global warming gas, comes out from a gallon of
coal-to-liquids than gasoline, 118 percent in the wrong
direction. If you do sequester the CO\2\ that is generated
during the process of making a gallon of coal-to-liquid, you
are still, according to this chart, 3.7 percent worse than
gasoline on CO\2\, and I have to tell you, I have great qualms
about spending large amounts of taxpayer dollars to develop a
whole new industry that is going to be worse than gasoline. We
have to reduce our CO\2\ emissions by 80 percent ultimately by
2050 to avoid distinct problems in our climate, and to start a
new industry that will actually go backwards on carbon dioxide
emissions. I have real qualms about that, and I think we are
going to have to have a discussion about that and I hope our
members will acquaint themselves. Coal-to-liquids with existing
technology, and I stand to be educated if I am wrong, cannot be
considered a green technology. It can help us with our energy
security issues, but to do one but go backwards in the other, I
have great concerns about. That is even assuming we can
sequester all the CO\2\ during this development, which is an
unknown at this point. I am hopeful that we can but it is still
an unknown.
So I think that is worthy of discussion. I look forward to
the testimony today and get to a point where we can really
develop alternative fuels that will deal with global warming.
Thank you.
[The EPA document follows:]
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Mr. Butterfield. Thank you.
The gentleman from Texas, Mr. Burgess.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman.
It is really exciting to sit on this committee and hear all
of the initiatives that are happening across the country, so I
am going to tell you one that is happening in my backyard in
Denton, TX, with Biodiesel Industries. This is a real exciting
time for me because this small company uses the recovered
methane gas from a landfill to power their heaters that
saponifies the fat in the process, and I don't completely
understand but what a great deal. In Texas, a well-prepared
chicken-fried steak--I am a physician so I can say this with
medical authority but a well-prepared chicken-fried steak will
count as two of our five servings of vegetables on a daily
basis so we do have a lot of restaurant grease to dispose of,
and the great thing about Biodiesel Industries is, they go
around to restaurants around the Dallas-Fort Worth metroplex,
collect this restaurant grease and recycle it and sell it as B-
20. The primary customers are people who want the B-20
biodiesel because of the lubricity that the bio part of the
biodiesel provides in the diesel engines that are manufactured
to run on low-sulfur diesel, so in fact there are flex-fuel
vehicles already coming off the lines and even our Peterbilt
plant there in Denton is starting to use the new Cumins engine
which will accept biodiesel. So this is a great story that is
happening back home. My one concern is that the renewable
diesel is eligible for $1 per gallon tax credit while the
biodiesel created from restaurant grease is only eligible for a
50-cent-per-gallon tax credit. So I introduced legislation,
H.R. 927, that would provide parity for biodiesel produced from
recycled restaurant grease and of course we have got a lot of
that in Texas.
Cellulosic ethanol, I love the concept. Humans ought to be
smart enough to do what a termite can do with its salivary
gland. All the time we start our presidential processes in
Iowa. I suspect we are going to have a starch-based source of
ethanol but I am excited about the prospect of being able to
use the more abundant cellulosic feedstock for ethanol
production in this country. But it is an exciting time and it
is because of American exceptionalism, it is because of
American ingenuity. I applaud the work that you all do.
Mr. Chairman, I will yield back.
Mr. Butterfield. Thank you, Dr. Burgess.
At this time the chair recognizes the gentlelady from
Oregon, Ms. Hooley.
OPENING STATEMENT OF HON. DARLENE HOOLEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Ms. Hooley. Thank you, Mr. Chairman. I too would like to
add my words of sympathy to not only the Members that serve
that area but all the families of the students, the horrible
tragedy that happened.
I would like to thank all of our witnesses for being here
today. There is just really one thing I want to say. As we talk
about becoming energy independent for national security
reasons, I think it is absolutely imperative as we look at new
technologies, we look at new ways of making fuels that we look
at not only the upside but the downside. Right now corn is a
hot commodity. We have a lot of people making a lot of money
off of corn, they are turning it into ethanol. But at what
point are we driving up the food prices and how much land do
you have to put in to really provide enough corn to produce
enough fuel so it is a viable source. I just think it is
important whether we are looking at coal-to-liquids, we are
looking at ethanol, looking at biomass, we are looking at any
of the alternative fuels that we also understand not only the
upside of it but the downside of it, and we understand what the
consequences are and I think it is really important as we go
through all of these issues because not only are we looking at
energy independence for security purposes but we are also
looking at global warming and how to deal with that, and I
would hope today that as you testify, that you talk about not
only the great things that can happen with this but also what
some of the downsides are that can happen with it.
So I look forward to your testimony today. Thank you very
much for being here.
Mr. Butterfield. I thank the gentlelady.
Are there any other opening statements that we have
omitted?
That completes the opening statements. At this time I am
pleased to introduce our panel for this morning. First we are
going to hear from Mr. John Ward, who is the vice president of
Headwaters Incorporated, and incidentally, he is also a
constituent of our good friend from Utah, Mr. Matheson.
Following Mr. Ward's testimony, we will hear from Mr. Donald
Maley, Jr., who is the vice president of Leucadia
International. Next will be Mr. Brian Foody. Mr. Foody is the
chief executive of Iogen Corporation. I am from the South, I
may not have pronounced that correctly, but I think it is Iogen
Corporation. We will then hear from Scott Hughes, who is the
director with the National Biodiesel Board. Then we will hear
from Mr. Phil Lampert, who is executive director of the
National Ethanol Vehicle Coalition. Finally, we will hear from
Dr. Alexander Farrell, who is assistant professor and director
of the Transportation Sustainability Research Center at the
University of California at Berkeley. Gentlemen, your full
statements will be made part of the hearing record and at this
time you will each be recognized for 5 minutes.
Mr. Ward, we will begin with you.
STATEMENT OF JOHN WARD, VICE PRESIDENT, HEADWATERS INCORPORATED
Mr. Ward. Thank you, Mr. Chairman. Honorable members of the
committee, I am John Ward, vice president of Headwaters on
whose behalf I am testifying today. I also serve as immediate
past president of the American Coal Council and as a member of
the National Coal Council as appointed by the Secretary of
Energy.
Headwaters is a member of the Coal-to-Liquids Coalition.
This is a broad group of industry, labor, energy technology
developers and consumer groups. The coalition is interested in
strengthening U.S. energy independence through greater
utilization of domestic coal to produce clean transportation
fuels.
The opening statements have done an excellent job of
reminding us of the hazards of dependence on foreign oil and
the abundance of our own coal here in the United States and
also the need to develop future energy resources in an
environmentally responsible way. Coal-to-liquids has an
opportunity to help us in all of those areas. My written
testimony includes more detailed information about the history
of coal-to-liquids technology and the types of technologies
that exist today.
I will summarize by pointing out that any product that can
be made from oil can be made from coal. Coal-to-liquids
technologies are already proven and they are being deployed at
commercial scale overseas. They are economically competitive
when oil prices are above about $40 a barrel, and oil prices
are above $60 a barrel today. In the United States, potential
coal-to-liquids projects are being discussed in at least 15
different States. From a product perspective, coal-to-liquids
refineries make the same range of products as petroleum-based
refineries. This includes gasoline, diesel fuel, jet fuel and
chemical feedstocks. These fuels can be distributed in today's
pipelines. They can be used directly in today's cars and trucks
and buses and trains and airplanes without modifications to the
engines. Fuels produced by coal-to-liquids processes are
exceptionally clean when compared to today's petroleum-derived
transportation fuels. Coal-to-liquids fuels contain
substantially no sulfur and exhibit lower particulate and
carbon monoxide emissions. These fuels also contribute less to
the formation of nitrogen oxide then the petroleum-derived
fuels and they are readily biodegradable. Coal-to-liquids
refineries generate carbon dioxide in a highly concentrated
form that allows for carbon capture and storage. Coal-to-
liquids refineries equipped with carbon dioxide capture and
storage can produce fuels with life cycle greenhouse gas
emissions profiles that are as good as or better than
petroleum-derived fuels.
Although coal-to-liquids projects are economically viable
in today's oil price environment, there are still significant
hurdles to get the first projects built. For the first plants,
financial institutions will be reluctant to fund multi-billion-
dollar projects without significant technology and market
performance guarantees. This includes some assurance that
plants will not be rendered uneconomic by oil-producing nations
or cartels that may seek to artificially reduce oil prices just
long enough to prevent the formation of this new competitive
industry.
Other nations are moving forward more aggressively than we
are to deploy coal-to-liquids technologies. In China, for
instance, the government has already committed more than $30
billion to commercialization of coal liquefaction technologies
and the construction of the first plants has already begun.
Now, as long as oil prices remain high or climb higher,
market forces will lead to the development of a coal-to-liquids
infrastructure in the United States but that development will
come slowly and in measured steps. If for energy security
reasons the United States would like to speed the development
of a capability for making transportation fuels from our most
abundant domestic energy resource, then incentives for the
first coal-to-liquids projects are appropriate.
Now, one example of incentives, Chairman Boucher and
Congressman Shimkus have publicly discussed an approach that
would establish a oil-price collar to guide the government's
investment. If oil prices were to drop below a specified level,
the United States would make payments to coal-to-liquids
projects that are participating in the program to ensure their
viability, and alternatively, if oil prices rose above a
certain level, those projects would pay back to the Federal
Government. Properly constructed, such a program could have a
meaningful impact on addressing the market risks associated
with fluctuating oil prices.
The Coal-to-Liquids Coalition has also identified five
specific actions the Federal Government can take to overcome
deployment barriers. More-detailed descriptions are in my
written testimony, but in summary, they include front-end
engineering and design assistance, providing purchases of fuels
by the Department of Defense and other Federal agencies,
extending the excise tax credit treatment for coal-derived
fuels, loan guarantees and investment tax credits.
The advantages to developing a coal-to-liquids capability
in the United States are numerous. Some of the billions of
dollars we now send overseas to buy oil would be kept at home
to develop American jobs using American energy resources. We
could expand and diversify our liquid fuels production and
refining capacity using technologies that are already proven.
We would produce clean-burning fuels that can be distributed
throughout existing pipelines and service stations to fuel our
existing vehicles with no modifications to their engines and we
would take a real and immediate step towards greater energy
security.
Thank you for the invitation to testify and for your
interest in this important topic. I will be happy to answer any
questions at the appropriate time.
[The prepared statement of Mr. Ward follows:]
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Mr. Butterfield. The witness is thanked.
Mr. Maley.
STATEMENT OF DONALD W. MALEY, JR., VICE PRESIDENT, LEUCADIA
INTERNATIONAL CORPORATION, NEW YORK, NY
Mr. Maley. Good morning, Mr. Chairman and members of the
committee. My name is Don Maley. I am a vice president at
Leucadia National Corporation based in New York. First of all,
I would like to apologize for my attire. I was in Indianapolis
yesterday expecting to fly home to New York last night before
coming down here, and the weather in New York caused a 3-hour
delay and then cancellation of my flight and so here I am today
in casual attire, which is all I had.
Mr. Butterfield. If there is any group that would
understand, it is this group, so it is alright.
Mr. Maley. Thank you very much, Mr. Chairman.
Leucadia National Corporation is a holding company with
investments in a wide variety of different industries. Energy,
mining, manufacturing, real estate, health care are a few
examples of some of our investments. My background, I have been
with Leucadia for 7 years now. I am responsible for our energy
investments. Prior to that time, I spent 22 years as an energy
banker working on large energy projects around the world. For
the last 5 years I have been focused on gasification as a
technology that we think holds a lot of promise. Some of the
things that we like about gasification is that it promotes
economic development. When we go into a community, we see
strong support for the development of these kinds of projects.
It is using out natural energy resources in the United States
so it is promoting energy independence and the technology is
doing it in an environmentally advanced way, which we think is
an important part of the puzzle.
Currently, we are in development of four projects around
the United States. One of our projects is a coal-to-liquids
project located in Illinois. We are working on a pipeline-
quality natural gas project in Indiana using Indiana coal, that
we gasify that coal. We are working on a similar project in
Louisiana. That project, however, would take petroleum coke to
make the pipeline-quality natural gas. And then lastly, we are
working on a project in Texas that would again take petroleum
coke but use it to make feedstocks for chemicals for industrial
use.
What I would like to address today is, I would really like
to differentiate the three other projects we are working on
from the coal-to-liquids project in terms of the challenges of
trying to get these projects financed, and there are really two
key areas to focus on. One is with coal-to-liquids a perception
in the financial community of a greater technology risk than
would be inherent in some of the other applications of
gasification technology. The second area is what we see
currently as the inability to achieve price certainty on a
coal-to-liquids project where on the other hand for some of the
other projects we are finding that there is an opportunity to
get long-term contracts that provide the kind of price
certainty that you need for these projects that are very high
capital investment program that need long-term price stability
in order to assure the adequate return of the investment, the
repayment of the loan and have a successful project.
With existing gasification technology, you have over 100
gasification plans operating around the world. They have been
operating for over 20 years. You have over 300 individual
gasifiers or gasification units operating at these different
facilities, so as an old banker I can go around and say I can
touch and feel and see these facilities and get reasonably
comfortable that this technology is a proven technology and is
going to work. When you start to look at coal-to-liquids
technology, while it has been around for a long time, there is
really only one large commercial-scale operation in the world
and that is in South Africa. It was constructed over 20 years
ago. And so on Wall Street and the financial community and
equity investors like ourselves, we are quite concerned about
building this next generation of facilities and how we raise
the dollars in the financial community to support the
construction of these plants. So I think with this particular
risk, we do see the benefits of loan guarantees and these kinds
of programs to help these projects get through the construction
phase, get some of the bugs worked out and get them into
commercial operations. But we don't really see that kind of
program addressing the question of price certainty and the lack
of price certainty in the transportation fuels markets.
We see many ways that could potentially be addressed but I
agree with my colleague that the legislation introduced last
fall by Chairman Boucher and Mr. Shimkus is an excellent way to
promote the development of this technology. It would become a
basis on which not only the Wall Street community could finance
these projects but another key portion of it is that developers
like ourselves need to spend $35, $50 million to develop these
projects. We are not going to spend that money unless it is
going to lead to a successful project.
Thank you very much.
[The prepared statement of Mr. Maley follows:]
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Mr. Butterfield. Thank you very much.
Mr. Foody.
STATEMENT OF BRIAN FOODY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, IOGEN CORPORATION, OTTAWA, ONTARIO, CANADA
Mr. Foody. Good morning, Mr. Chairman and members of the
committee. Thank you for the opportunity to testify, and I will
be talking about cellulosic ethanol.
My name is Brian Foody. I am the CEO of Iogen Corporation.
We are one of the leading companies in cellulosic ethanol. We
have been working in the field since the late 1970's and have
designed, built and now run a cellulosic ethanol demonstration
plant, and it has been making cellulosic ethanol since April
2004. On the corporate side, we have both Shell and Goldman
Sachs as important strategic investors in our business.
Finally, for myself, I have been working in the field of
cellulosic ethanol development for over 25 years, so I have
been around some time with this.
Now, in regard to the role of cellulosic ethanol and what
it can play in advancing America's energy security, my key
messages are first, it is very realistic to expect cellulosic
ethanol to make a major contribution to U.S. energy security,
and second, what investors are looking for is clarity about the
future rules. If you want to encourage cellulosic ethanol or
other alternative fuels, make sure people in the investment
community know what to expect.
Now, one of the important innovations in the Energy Policy
Act of 2005 was the introduction of renewable fuel standards,
or the RFS. There has been a lot of talk about expanding the
RFS and I would like to offer our perspective. First, we
believe this type of approach can and will make a major
contribution towards driving the market forward, establishing
the expectations and clarity needed to see significant flows
into advanced biofuels and other alternative fuels. A revised
Renewable Fuels Standard could play a big role in helping build
the secure domestic fuel supply America is looking for.
Now, in respect to an expanded RFS, there are several
recent proposals that call for producing roughly 20 billion
gallons of advanced biofuels or alternative fuels beyond what
is being made from corn by the 2017-2022 time frame. I believe
certainly within the 15-year time frame these targets are
realistic and doable, and let me explain why. First, I will be
speaking principally about cellulosic ethanol. The DoE and USDA
recently completed a study called ``Billion Ton Study'' that
asks the question, ``does America have the capability to
produce enough cellulosic biomass resources to displace 30
percent of its present petroleum consumption?'' Now, that is
three times what those targets I told you about were and the
short answer to that question was yes, America has the capacity
to deliver on these targets. Second, cellulosic ethanol is not
some far-off esoteric technology. It is real, practical and
being made today. When I drove to the airport, I drove in a car
fueled with cellulosic ethanol, the same cellulosic ethanol
that fuels our company's fleet of flex fuel vehicles, so this
is a product which is actually in cars. It is not just
theoretical. Now, I have been doing this for last 3 years, so
cellulosic ethanol is real. If anyone doubts this, I would be
pleased to invite them out to our Ottawa demonstration plant.
We had the pleasure to host Chairman Boucher on a visit last
year.
Finally, if you are concerned about the ability to build
these facilities, let me say that the energy industry has an
enormous capability to deploy energy technology. Just as one
small example to put this in context, you may have heard about
the tar sands in northern Alberta in Canada. Well, last year
over $30 billion was invested in developing this unconventional
resource. The capacity commitments in 2006 alone would add 10
billion gallons per year of annual production capacity. Now, I
have to say if the energy industry can build 10 billion gallons
in northern Alberta in just 1 year, they can certainly build 20
billion gallons in America over a decade. So cellulosic ethanol
really can make a major contribution and an expanded RFS would
be a major impetus for the market.
Now, with respect to crafting legislation for an expanded
Renewable Fuel Standard, I would like to make one key point. I
believe it is crucial to establish clarity about what happens
if things go wrong, what are the safety valves. Now, by safety
valves I mean, what do you do if the prices go too high and
what do you do if there is just not enough volume to meet the
target. There is a whole range of approaches that have their
advantages and disadvantages. Take as a specific example the
notion that the Secretary of Energy would have a discretionary
waiver. In essence, if things go wrong he could suspend the
program. That will certainly work to protect against shortages
and price gouging but it creates a tremendous uncertainty in
the market and risks robbing any bill of its power to spur
investments. Remember what I said about priority being crucial.
If the rules can change, it is hard to expect investors to come
to the table.
There are a number of ways to tackle this problem and let
me just illustrate one. As to volume, it doesn't make sense to
force people to buy a product that isn't there. If volume
doesn't materialize, the safety valve has to adjust to the
volume that is there. And as to price, the safety valve might
be in the event some waiver is needed, permitting the Secretary
to sell credits under a pre-established buyout formula. That is
simple, it would solve the problem and would create much more
certainty for investors.
Now, as I said, there are many approaches you can take but
one thing you should keep in mind, the more clarity and
certainty you can provide in your policy, the more investments
and the more energy security you will be able to get.
Thank you.
[The prepared statement of Mr. Foody follows:]
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Mr. Butterfield. Thank you.
Mr. Hughes.
STATEMENT OF SCOTT HUGHES, DIRECTOR, GOVERNMENTAL AFFAIRS,
NATIONAL BIODIESEL BOARD, WASHINGTON, DC
Mr. Hughes. Good morning, Mr. Chairman, Ranking Member
Hastert and members. It is a great pleasure to be here and we
really want to thank you all for holding this, what we think is
a very important hearing.
My name is Scott Hughes and I am the director of
governmental affairs for the National Biodiesel Board. NBB is
the national trade association representing the commercial
biodiesel industry as a coordinating body for research and
development in the United States. Our membership encompasses
over 400 members and is comprised of biodiesel producers, fuel
marketers and distributors, State and national feedstock
processor organizations and technology providers.
We are here today to examine alternative transportation
fuels and the roles that they can play in helping enhance our
Nation's energy security, and I would like to focus my comments
this morning on the contributions that we see biodiesel making
to the national energy pool. Biodiesel is a diesel fuel
replacement that is made from agricultural fats, oils and
recycled cooking oils and meets the specific commercial fuel
definition and specifications established by the American
Society for Testing and Materials. It is one of the best tested
alternative fuels in the country and the only alternative fuel
to meet all of the testing requirements of the 1990 amendments
to the Clean Air Act.
Our industry's roots are based in agriculture, and to date,
farmers have invested more than $50 million of their check-off
dollars to conduct research and development on biodiesel. Our
industry has shown slow but steady growth since the early
1990's. However, in the past 2 years it has grown
exponentially. In 2004, there were approximately 25 million
gallons of biodiesel sales. That increased to around 250
million gallons this past year. Likewise, we have seen
significant additional investment in production facilities.
Back in 2004, we had 22 biodiesel plants online, and at the end
of last year we had 105 plants currently in operation, and that
represents about 865 million gallons of production capacity,
and there are 77 more plants currently under construction or
under an expansion and that growth will account for an
additional 1.7 billion gallons of production capacity.
Biodiesel is marketed primarily as a blended product with
conventional diesel fuel and it goes through the existing fuel
distribution infrastructure with most of the blending occurring
below the rack by jobbers. We are seeing biodiesel now being
offered at petroleum terminals around the country and we have
space at about 35 terminals right now. Our industry has
committed funds and is looking at the technical needs required
to move biodiesel through U.S. pipelines. We are seeing
biodiesel moving through pipelines in Europe today in low
blends and we believe extending that capability to the U.S.
would be substantial.
As far as energy security goes, the National Biodiesel
Board has a vision of the future that by 2015 biodiesel will be
viewed as an integral component of a national energy policy
which increasingly relies on clean domestic renewable fuels and
that will meet 5 percent of the Nation's demand for diesel
fuel. Biodiesel and ethanol can be the first tools used to
reach our goals of energy security because they are liquid
renewable fuels that are available right now and ready for
blending into our existing fuel supply and our existing
vehicles.
On economic development, biodiesel can add significantly to
the United States economy. A vibrant biodiesel industry will
positively impact the economy in multiple ways. Conservative
modeling of biodiesel growth indicates our industry will add
$24 billion to the U.S. economy over the next decade. Biodiesel
production will create 40,000 new jobs in all sectors and
additional tax revenues from biodiesel production will more
than pay for Federal tax incentives provided to the industry to
date. Equally as important, it will keep billions of dollars in
America that would otherwise be spent on foreign oil.
Biodiesel contributes to cleaner air and life cycle
reductions of greenhouse gases. Biodiesel is the only
alternative fuel to voluntarily conform to EPA's Tier 1 and
Tier 2 testing requirements to quantify emissions
characteristics and health effects. That study found that we
reduce harmful exhaust pollutants including potential cancer-
causing emissions.
We can also help meet the national goals for the net
reduction of atmospheric carbon. As a renewable fuel derived
from organic materials, biodiesel and blends of biodiesel
reduce the net amount of carbon dioxide. A Department of Energy
study found that biodiesel production and use in comparison to
petroleum diesel produces 78.5 percent less CO\2\ emissions on
a life cycle basis. This makes biodiesel an extremely positive
technology currently available for heavy-duty diesel
applications to reduce atmospheric carbon, and when you talk
about energy balance, that same study noted that for every one
unit of energy that was needed, fossil energy that was needed
to produce a gallon of biodiesel, 3.2 units of energy are
gained. So that high energy balance I think really is in favor
of our ability to help add to our domestic energy security.
On regulatory and public policy, it will play a very strong
role, we think, in the future maturity of the biodiesel
industry for years to come. The volumetric biodiesel tax credit
that was put in place in the Jobs Act of 2004 has really been a
primary driver for our industry's growth and investment in that
industry and so seeing a long-term extension of that credit is
our top priority.
So in closing, Mr. Chairman, rising crude oil prices and
political uncertainties in strategically sensitive regions of
the world are focusing the public's attention on the need to
enhance our Nation's energy security. Biodiesel is a viable
option to begin retaking control of our energy future.
Biodiesel can be a substantial tool in the Nation's overall
move toward security as it adds new net gallons to the
distillate fuel pool, adds new U.S. fuel production capacity,
directly replaces imported finished diesel fuel, utilizes
agricultural products, stimulates rural and urban economies and
creates jobs, and helps potentially create new chemical
industry jobs and activities here in the United States.
So Mr. Chairman, we appreciate you having this hearing and
we appreciate you inviting the biodiesel industry to
participate, and I would be happy to answer any questions.
[The prepared statement of Mr. Hughes follows:]
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Mr. Boucher [presiding]. Thank you very much, Mr. Hughes.
Mr. Lampert, we will be pleased to hear from you.
STATEMENT OF PHIL LAMPERT, EXECUTIVE DIRECTOR, NATIONAL ETHANOL
VEHICLE COALITION, JEFFERSON CITY, MO
Mr. Lampert. Thank you, sir. I appreciate the opportunity.
Mr. Chairman, Ranking Member Hastert, members of the
committee, my name is Phil Lampert. I am the executive director
of the National Ethanol Vehicle Coalition and we have been
doing E-85 before E-85 was cool. Back in 1993, General Motors
produced 272 flexible fuel vehicles, very limited in their
distribution. At the end of this model year, we will have more
than 6 million flexible fuel vehicles on the Nation's highways.
The automakers appeared with the President in the Rose Garden
March 30 and indicated that if infrastructure was going to be
available, that by model year 2012, 50 percent of their total
production would be flexible fuel vehicles. A flexible fuel
vehicle can run on zero percent alcohol or 85 percent alcohol
with no switches to flip, with no characteristics change for
the driver, absolutely transparent to the driver.
The issue today is, there are 168,000 locations in our
Nation where you can purchase unleaded gasoline. As of this
morning, there are 1,182 locations where you can purchase E-85.
We obviously need to increase the numbers of E-85 fueling
stations. We believe that the most appropriate way to do that
is through the additional provision of incentives, not
mandates. We do not believe it appropriate to require the
petroleum industry or the transportation fuel industry to sell
E-85 but rather if we continue to incentivize the sale of that
fuel, the entrepreneurs will make the fuel available to
customers. We like to say that the majors have never innovated
anything, it is the little guys that do, and it is the little
guys that will take advantage of the Federal income tax credits
that are available today and that we would encourage you to
consider as we draft new energy legislation. Today's tax credit
provides 30 percent, up to $30,000 of the total cost to build
an alternative fueling station. We would suggest that that
potentially be reviewed up to 50 percent, maybe 75 percent for
a very short period of time.
Second, it doesn't take hundreds of thousands of dollars as
many of our colleagues from the API and others would have you
think to put in an E-85 fueling system. In most cases, last
year our organization helped foot the establishment of 569 new
E-85 fueling stations. Each of those was a conversion of a mid-
grade product or premium product to use E-85. We assist the
vendor with determining whether their equipment can handle E-
85. We help them find an organization that can assist them with
cleaning the tank. We put on some different equipment. We can
do that for less than $5,000. It is not necessary to dig a hole
and to build gold-plated E-85 fueling systems and to spend
$200,000. I have never in the 1,182 E-85 fueling systems that I
have personally been involved with--because our organization
has supported through Federal appropriations each of those new
stations with marketing materials, with imaging materials, with
technical assistance. That is what needs to be provided to the
small entrepreneurs. They are the ones who will find this as a
new profit center and they will put it in very voluntary
fashion.
Finally, we would believe that additional flexible fuel
vehicles could and should be manufactured by the automakers but
we do need to look at the financial situation of our domestic
three or Detroit three, however, we want to characterize those
today. We do not believe that we should require every vehicle
to be a flexible fuel vehicle. There is a cost associated with
the upgrade to an FFV. It is arguable that is $50 or $500. It
is somewhere in between. We believe that additional incentives
could and should be made available. I believe the staff
provided you some copies of slides.
The last point that I would make, even if we open 15,000
new E-85 fueling stations this year, we will not do that
because we do not have the resources to do that. If we had all
those facilities and we had all the vehicles, unless the
product is priced correctly, a consumer is not going to use it,
and I have I think on the last page of that handout a
photograph of two stations, one that is pricing E-85 20 percent
above the cost of regular unleaded, the other one a picture of
an E-85 fueling station, same date that those photographs were
taken, one in Minnesota, one in Missouri, where the price of E-
85 is 20 percent less than regular unleaded, and we have to
acknowledge that there is a BTU deficiency or difference in
ethanol. It is simply the chemistry of it. So to make E-85 a
mainstream transportation fuel rather than an alternative fuel
in the future, we need to address the issue of this BTU
differential.
I would be happy to answer any questions, and thank you so
much for the opportunity.
[The prepared statement of Mr. Lampert follows:]
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Mr. Boucher. Thank you very much, Mr. Lampert.
Dr. Farrell, we will be pleased to hear from you.
STATEMENT OF ALEXANDER E. FARRELL, ASSISTANT PROFESSOR, ENERGY
AND RESOURCES, AND DIRECTOR, TRANSPORTATION SUSTAINABILITY
RESEARCH CENTER, BERKELEY, CA
Mr. Farrell. Thank you, Chairman Boucher, and Chairman
Boucher, on behalf of myself and UC Berkeley, I extend our
condolences to the students and the staff and the faculty at
Virginia Tech.
Chairman Boucher, Ranking Minority Member Hastert and
members of the subcommittee, thank you for the opportunity to
come and talk with you today about alternative fuels. My main
point today is that the United States must act to address all
three challenges in the transportation fuel sector, strategic,
economic and environmental, or it faces the prospect of failing
to solve any of them.
My second point is that by themselves, requirements for
alternative or renewable fuels are inadequate and can even make
the problem worse. Strong environmental regulation is required
to ensure good environmental performance. As was mentioned
earlier, alternative fuels are not all created equal and they
can either improve or degrade the environment. Research from my
group shows that the current set of laws and regulations do not
give the private sector adequate incentive to produce
environmentally friendly fuels. But it is my belief that the
American energy and agriculture industries can do so if
properly motivated.
My third and final point is that a sectoral approach to
managing greenhouse gas emissions will be far more successful
in addressing the three challenges in transportation fuels than
a single economy-wide approach. I will mention one such policy,
California's low fuel carbon standard, and I will invite
subcommittee members to attend an international symposium on
this topic at the Lawrence Berkeley National Laboratory to be
held on May 18 to discuss how this policy may be implemented.
For reference, I am an assistant professor of energy and
resources at the University of California Berkeley and director
of the Transportation Sustainability Research Center. I
published over two dozen peer-reviewed papers and journals such
as Science, Energy Policy and Environmental Science and
Technology. While most of my recent work is on energy and
climate change policy, as a graduate of the U.S. Naval Academy
and former submariner, I can assure you that I take national
security very seriously. My background is why I find current
policy so disappointing. Two important goals of the United
States, national security and economic growth, are frustrated
by failing to act responsible on environmental protection and
in particular on climate change. Let me be clear: failing to
adequately address climate change increases the national
security and economic risks facing America.
A transition in transportation energy has begun. This
transition involves a shift to alternative fuels as substitute
for conventional petroleum and it is critical to understand and
manage the three risks that this transition will bring.
Importantly, this is an integrated problem. As we act to
achieve one goal, we unavoidably affect our prospects in
dealing with the others.
Some aspects of the security implications of alternative
fuels are obvious. Energy security is enhanced by diversifying
both the types of resources we use and the geographic locations
they come from. However, there is more to it. Developing
alternative fuels without a strong climate change policy brings
additional strategic risk. Specifically and directly, this is
because climate change itself presents strategic risk as has
been noted recently by CNA Corporation study and others. In
addition, continuing to ignore climate change will make the
national consensus on energy policy more difficult to achieve,
delaying any policies that might reduce our strategic risks.
And finally, the current path also tends to encourage
disrespect for international processes and disrespect for
international agreements on common problems which lessens the
security of all countries, United States included. Regarding
the economic risks, many of these have been mentioned. They are
largely complementary. In my view the key economic policy of
alternative fuels is how to manage the complementary risks to
consumers and investors.
Environmental risks posed by the production and use of
alternative fuels are, has been mentioned, quite many. This
includes water use, soil erosion, land disturbance such as
mountaintop removal, air pollution, land use and many other
issues. In this testimony, I will focus only on the risks of
climate change due to greenhouse gas emissions. All alternative
fuels entail tradeoffs among positive and negative
environmental effects and amongst cost and convenience as well.
I believe you were distributed a color copy of figure 1, which
is on page 3 of the written testimony. This provides some
representative values for the life cycle greenhouse gas
emissions of three categories of fuels: fossil-based liquid
hydrocarbons, which are on the left, biofuels in the center,
and electricity on the right. To focus on the fuel qualities
themselves, these values hold vehicle technology constant so
the same vehicle is using the fuels. In this figure, emissions
from different sites of activities are shown differently. So
for instance, you can see that gasoline made from petroleum,
upstream emissions which are caused by crude oil production,
transport and refining are equal to about 50 grams per mile
while tailpipe emissions are over 180 grams per mile, and I
would also note in passing there are a number of caveats and
notes to this figure. What figure 1 most importantly
illustrates is that there is no automatic relationship between
any particular fuel and greenhouse gas emissions. It all
depends on how the fuel is made. Gasoline produced from tar
sands, for instance, has emissions about 25 percent higher than
gasoline made from ordinary petroleum and coal-to-liquids have
emissions that are about 75 percent higher. As has been noted,
greenhouse gas emissions made from tar sands and coal-to-
liquids could be about the same as those from conventional
gasoline production if much of the upstream emissions were
captured and sequestered using CCS technology but they would
not get much better than ordinary petroleum.
Therefore, the use of fossil-based alternative fuels in a
way that addresses all three challenges, strategic, economic
and environmental, will require careful consideration and
balancing. For instance, the requirement that all fossil-based
alternative fuels use CCS and have in addition their greenhouse
gas emissions accounted for in a mandatory planet policy would
enhance domestic energy production----
Mr. Boucher. Dr. Farrell, if you could wrap up in just a
bit. You are well over your 5 minutes.
Mr. Farrell. I apologize.
Mr. Boucher. Thank you.
Mr. Farrell. Encourage technological innovation and signal
to other countries that the United States is taking its area in
this responsibility seriously.
Thank you very much.
[The prepared statement of Mr. Farrell follows:]
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Mr. Boucher. Thank you, Dr. Farrell, and the committee
thanks each of the witnesses for joining us here. Mr. Maley, we
particularly thank you for your presence, given your difficulty
in making all of our flight connections, and even though you
are a little differently attired from the rest of us, we very
much welcome you here today.
Let me begin my questions with you, if I may. I think you
are generally familiar with the price guarantee legislation
that Mr. Shimkus and I will be introducing very shortly for
coal-to-liquids technology.
Mr. Maley. Yes, I am.
Mr. Boucher. I know that your company is interested in
building a coal-to-liquids facility in the United States. Our
price guarantee is designed to give confidence to the investor
community that if the price of petroleum declines below the
benchmark of about $40 per barrel, that facilities that are
constructed to manufacture coal-to-liquids would not be
stranded. Would our legislation in your mind achieve that
result, and would it create the confidence necessary for you to
go forward and construct a coal-to-liquids facility in the
U.S.?
Mr. Maley. Yes, it would. I believe the volatility, the
historic volatility of oil prices is a major impediment to
investment, and being able to--but over time, when you see the
long-term price trend, we believe that between the lows and the
highs that you have a viable project and the legislation allows
that project to survive those good times as well as the bad
times.
Mr. Boucher. Are you aware of other companies that might be
considering making coal-to-liquids facility investments in the
U.S.?
Mr. Maley. Yes, I am.
Mr. Boucher. Have you had any conversations with them about
any reluctance that they have today borne of uncertainties
about the future price of oil and whether or not the passage of
our price guarantee provision would give them the confidence
they are seeking?
Mr. Maley. Yes. We have had conversations with a number of
major U.S. industrial companies and investment companies and
they view that as the major impediment to developing this
technology.
Mr. Boucher. And our legislation would overcome that
impediment?
Mr. Maley. Yes, I believe it would.
Mr. Boucher. Thank you, Mr. Maley. Those were great
answers.
Mr. Maley. Thank you.
Mr. Boucher. Mr. Ward, you probably are aware of the back-
and-forth competing statements, controversy, if you will, over
whether or not a gallon of liquid fuel created from coal has a
carbon content that is any greater than a gallon of traditional
diesel. The research that I have seen suggests that there is
certainly no greater carbon content in a gallon of coal-to-
liquids fuel than there is in traditional diesel and some of
the studies even suggest that the coal-to-liquid variety has a
lower carbon content than does traditional diesel. I know you
have looked at this subject and you have some expertise on it.
Can you enlighten us about the relative carbon content of coal-
to-liquids fuel versus traditional diesel?
Mr. Ward. Yes, sir. Thank you, Mr. Chairman. We have looked
at that, and one of the things to preface the answer would be
also to remind the members that the fuel itself in terms of all
the other criteria pollutants far exceeds the standards that
have been set by petroleum fuels. So when you are talking about
sulfur and nitrogen oxides and particulates and all the other
things that come out when you burn fuel in an automobile, from
that perspective the coal-to-liquids fuels are much, much
cleaner. From a carbon perspective, in my testimony on page 7,
I refer to a Department of Energy study that looks at it from a
life cycle assessment perspective, from the well to the wheels
all the carbon emissions that go into producing the fuel and
then using it in different products. If you look at that on a
life cycle basis, the coal-to-liquids fuels are going to be--
and if you capture the carbon in the manufacturing process, the
coal-to-liquids fuels are going to be no worse and probably a
little better than petroleum-derived fuels. Depending on the
type of coal-to-liquids technology that you use, you can
actually end up with a more energy-dense fuel from the coal-to-
liquids projects that will give you more power when you use it
in the engine and that is also in effect where you are getting
more power for approximately the same amount of carbon.
Mr. Boucher. Thank you very much, Mr. Ward.
Let me ask a question of Mr. Foody about Iogen and its
plans. I know that you have under consideration the
construction of a commercial-scale cellulosic ethanol
manufacturing facility, I believe in the State of Idaho. Is
that correct?
Mr. Foody. Yes, that is right.
Mr. Boucher. Can you give us a sense of where you are in
the development of that plan and at the same time talk about
your potential interest in building other commercial-scale
cellulosic facilities in the U.S.? And finally--and I will turn
the balance of the time over to you to answer these questions--
what do you think the overall capacity in the United States for
the creation of cellulosic ethanol is measured in number of
gallons per year that could be produced?
Mr. Foody. OK. Let me first of all talk about where we are
at with our project in Idaho. We are developing a site based
upon the development work at our demonstration facility. We
have acquired the site. We have already got contracts with
farmers to supply all the feedstock that is necessary. We have
undertaken a significant engineering program. As you might be
aware, we were selected by the U.S. Department of Energy for an
award of up to $80 million in support of that facility. We also
have filed a pre-application for a loan guarantee for another
portion of the financing with the Department of Energy. We have
begun negotiations on the grant and look forward to hearing
back about the state of the loan guarantee. We anticipate that
within a period of about 30 months from the time at which we
have full clarity of our funding we will be able to have a
project up and running. So that is a quick picture of the
situation in Idaho. Following on that, it is our company's
intent and plan to be the leading supplier of cellulosic
ethanol in America. We are committed to doing a large-scale
deployment of technology in North America and we believe we can
build a significant industry.
As to America's overall capacity, I would point to the
Billion Ton Study conducted by the U.S. Department of Energy
and USDA that estimated that America has the capacity to
produce about 30 percent of its total petroleum resources from
cellulosic biomass on a continuing basis. That is roughly 60
billion gallons a year. During my testimony, I outlined that
there are a number of proposals to increase the Renewable Fuel
Standard to a range of something like 20 billion gallons that
would point to cellulosic ethanol, and I believe that that 20
billion gallons is very doable and very realistic.
Mr. Boucher. Thank you very much, Mr. Foody. My time has
expired.
The gentleman from Illinois, Mr. Hastert.
Mr. Hastert. I thank the chairman, and I have more
questions here than I think I am going to have time for
answers, but let me just say, Mr. Lambert, last August I went
out and bought a flex fuel vehicle, a pickup truck. I thought
that was a good thing to do. My problem is, I have to drive 40
miles round trip to fill it up, and if you start to look at the
numbers, sometimes that doesn't pay. A recent Wall Street
Journal article highlighted certain policies and practices that
are making it more difficult for franchise service stations to
install E-85 pumps. Are you aware of these practices, and if
so, what is the impact and what we can do about it, briefly?
Mr. Lampert. We have certainly been made aware of franchise
issues and how they have prohibited--just very quickly as an
example, if I were to own the corner gas station, my personal
family owned the canopy, owned the equipment, owned the tanks
and I was supplying a major brand for purposes of credit card
receipts and marketing, et cetera, in most cases I would not be
able to install an alternative fueling system even if I paid
for all of it and if I wanted to because of the franchise
restrictions. So yes, Congressman, that has been a great burden
to overcome. The State of New York and the State of Iowa have
addressed that in franchise laws within their----
Mr. Hastert. So you are saying the big guys, the big three
or big four, big five, whatever, if you are--and I will use
names. If you have a Shell or a BP or whatever station, you
can't sell this stuff?
Mr. Lampert. That is correct.
Mr. Hastert. OK. Let me ask you another question. What
about--here is something that I have experienced. If you go out
and talk to the Wal-Mart people or if you talk to the Circle K
or if you talk to 7-Eleven folks, they are very reticent about
putting these pumps in because they haven't got UL
certification and there is a liability issue. Have you found
that to be true?
Mr. Lampert. Yes, sir, absolutely, and you are well aware
of that. We have worked on this issue for a year and a half.
For the members of the committee, Underwriters Laboratory
rescinded the previous certifications that we had received for
E-85 fueling equipment on October 5 of last year. Underwriters
Laboratory indicated that there was no evidence of failure, no
evidence of corrosion, no anecdotal evidence, but, however, the
certifications were rescinded and we now expect to have a new
process in place by the end of the year. I still do not believe
that we will have any E-85 equipment available until mid-2008.
Mr. Hastert. Do you know why that rescinding took place?
Mr. Lampert. No, sir, I have not been able to determine
that.
Mr. Hastert. Let me ask you another question. I had a
meeting with Underwriters Laboratory and the head of
Underwriters Laboratory said that they weren't even asked to do
an E-85 discovery or certification until last June. Do you know
who asked them to do that?
Mr. Lampert. Well, CleanFuel USA, one of our members, along
with Gilbarco and Dresser Wayne had been working with UL for
some period of time.
Mr. Hastert. But prior to June, right?
Mr. Lampert. Oh, absolutely, yes, sir, and our
organization, through Federal appropriations actually provided
financial resources to assist that effort.
Mr. Hastert. Do you know of many major oil companies that
made contributions to Underwriters Laboratory to redo this
study?
Mr. Lampert. Not to my knowledge.
Mr. Hastert. Would that be possible if somebody didn't ask
them until June that this June date became a request by a major
oil company?
Mr. Lampert. I suppose that is possible. It is certainly
coincidental.
Mr. Hastert. Wouldn't it be strange that we were promised
to have Underwriters Laboratory certification by June of this
year, a new request came in and then all of a sudden this stuff
is rescinded?
Mr. Lampert. It is quite unusual.
Mr. Hastert. Is there a skunk in the woodpile someplace?
Mr. Lampert. That is--I will leave that to your nose, sir.
Mr. Hastert. In your testimony, you mentioned that leading
U.S. car manufacturers made a commitment to have 50 percent of
their vehicles flex fuel by 2012, the infrastructure is there.
Besides issues surrounding E-85 pump certification, what other
barriers exist to meeting this infrastructure demand? Do you
believe you have appropriate steps to removing these barriers?
Mr. Lampert. The primary issue is lack of technical
support. The Department of Energy has provided large numbers of
grants. There are funds available through competitive
processes. We applied for money last year. Our project did not
rank high enough. We applied with the States of Illinois, Iowa,
Wisconsin, Minnesota in a corridor project. Our program did not
rank high enough. Michigan was included in that. Technical
support, marketing materials, education, promotional materials,
when you drive to that station, sir, we want to be able to have
one sign, and when Mr. Boucher drives to a station we want him
to see the same sign so there is consistency there, and that is
lacking.
Mr. Hastert. Thank you.
Mr. Foody, very quickly, my time is running out, but I want
to ask you a question. The new cellulosic plant, and I am in
support of cellulosic ethanol, but the new cellulosic plant
that you are talking about is in Idaho. Is that correct?
Mr. Foody. That is right.
Mr. Hastert. There happens to be a growing season in Idaho,
and while I was in Idaho in the wintertime, it is pretty cold,
not a lot of grass is growing. So you have to have a feedstock
that is continuous, right, to keep these plants running 12
months a year?
Mr. Foody. No, actually in most cases we are targeting on
using agricultural residue that is harvested just at one time
in the year so----
Mr. Hastert. So you didn't actually put hay or silage-type
materials----
Mr. Foody. We put hay or silage--in the case of Idaho, it
will be weed and barley straw, or if it was in Illinois, it
would be corn stocks and corn stover. We collect after harvest
season, store at a central location and then use throughout the
year.
Mr. Hastert. And you can take like saw grass and store that
and make hay out of it whatever?
Mr. Foody. Yes, absolutely. I think the big vision for
cellulosic ethanol includes using corn stover as well as
switchgrass as a major energy source.
Mr. Hastert. Thank you.
Mr. Boucher. Thank you very much, Mr. Hastert.
The gentleman from Georgia, Mr. Barrow, is recognized for 5
minutes.
Mr. Barrow. I waive.
Mr. Boucher. The gentleman waives.
The gentleman from Utah, Mr. Matheson, is recognized for 5
minutes.
Mr. Matheson. Thank you, Mr. Chairman.
Mr. Ward, in your testimony at the end you list several
possible incentives to help with the development of coal
liquefaction. In a constrained world, what would be your
priority out of those incentives? What do you think is the most
important for us to be looking at from a public policy
perspective?
Mr. Ward. Well, clearly we have already discussed the
pending bill coming from Chairman Boucher and Congressman
Shimkus which if it is administered correctly--the key to that
bill will be where the price collar is set, and if the price
collar is set in such a way and the program is administered,
that could be a very powerful incentive. Another of the
incentives that is on the table is the extension of the Excise
Tax Credit, which was given to coal-to-liquid fuels as part of
the SAFETEA-LU Act in 2005 but it expires in 2009. This is a
very powerful incentive. It addresses the market price risk
associated with fluctuating oil prices and there is a minimal
amount of opportunity for what you might call bureaucratic
impediments that may be able to creep into the program. So I
think those would be the two top priorities.
Mr. Matheson. Mr. Hughes, I was going to ask you, what do
you think about the importance of fuel specification standards?
Is the National Biodiesel Board working with any engine
manufacturers to assure reliable operation of today's ultra-
low-emission diesel engines and biodiesel?
Mr. Hughes. Congressman, that is a great question, and the
answer is absolutely. We see full quality as, in the words of
Ford, job one, and we have been working since day 1 to provide
industry with the ASTM, the American Society of Testing
Materials, with the engine makers, automakers, petroleum
industry in the development of a fuel specification and ASTM
standard for biodiesel. There is one in place. It is ASTM
D6751. That is for B100, used as a blend stock with
conventional diesel fuel. We are continuing to work with all of
those entities under the ASTM umbrella for a finished fuel
specification for finished blends and are moving that ball
forward as quickly as is absolutely possible.
Mr. Matheson. Do you have a sense what the time frame might
be on that?
Mr. Hughes. Well, sometimes they say ASTM moves at a
glacial pace but that is a good thing because all of the
stakeholders that are involved look at the issue from many
various angles. I would say probably maybe within the next year
you might see a finished spec for a finished blend of biodiesel
up to B-20.
Mr. Matheson. Dr. Farrell, we have had a lot of climate
change hearings before this subcommittee and most witnesses
that come before us from different sectors and whatnot have
discussed the need for economy-wide action and your testimony
says the opposite. Can you expand on why you think we shouldn't
be doing it economy-wide?
Mr. Farrell. I do think we should do an economy-wide
approach. That is correct. But a unified, single economy-wide
approach is probably not appropriate, and the reason is that
the U.S. economy is very diverse, and one of the key things
that we need is technological innovation across the entire
continent, and a single approach that has, for instance, put a
cap on the entire economy essentially would put the same price
on the transport sector, the electricity sector, manufacturing
sector. Because of differences in cost structure, in the
ability for fuels to compete head-on-head on tax structure and
regulation, you get very differential responses and most likely
very little technological innovation in some sectors of the
economy and particularly possibly in the transport sector,
which would in the long run lead to the detriment of achieving
the goals of both energy security and climate policy.
Mr. Matheson. We also had the previous question from the
chairman about the conflicting information we are getting about
potential carbon emissions from fuel derived from coal-to-
liquids. You put out a table here that really shows it being
exceptionally high. How do we resolve these differences we are
hearing about of carbon emissions from coal-to-liquids?
Mr. Farrell. Thank you, Mr. Matheson. I am pleased to try
and resolve this. I don't think there is that much of a
difference. In the figures that I show, the top half of the
figures were this fossil-based fuels are the upstream
emissions, and I would agree. If those are largely captured and
sequestered, then you will end up with the tailpipe emissions
that are essentially the same as gasoline.
Mr. Matheson. So you would submit that with that caveat,
that the DoE information referred to earlier is consistent with
what you are talking about?
Mr. Farrell. That is correct.
Mr. Matheson. That is real helpful.
Thanks, Mr. Chairman.
Mr. Boucher. Thank you, Mr. Matheson, and thank you for
obtaining that clarification.
The gentleman from Texas, Mr. Barton, the ranking member of
the full committee, is recognized for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman. I don't think I will
take that much time.
I am obviously, as all of us are, a supporter of
alternative fuels and I think debate and let the marketplace
determine the best ones or the multiples of ones is good, but I
just read something this morning that I didn't know, and I am a
little bit troubled by it so I am just going to ask the panel
this question. This is an AP story. It is from the Washington--
it is reprinted in the Washington Post this morning, and the
headline is ``Study: Ethanol May Cause More Smog Deaths,'' and
I will just read the top paragraph
Switching from gasoline to ethanol, touted as a green
alternative at the pump, may create dirtier air, causing
slightly more smog-related deaths, a new study says . . . it
is not green in terms of air pollutant, said study author Mark
Jacobson, a Stanford University civil and environmental
engineering professor. If you want to use ethanol, fine, but
don't do it based on health grounds. It is no better than
gasoline, apparently slightly worse.
His study based on a computer model is published in
Wednesday's online edition of the peer-reviewed Journal of
Environmental Science and Technology and adds to the messy
debate over ethanol.
Mr. Lampert, what is your take on that?
Mr. Lampert. Thank you so much for the question. We were
aware of that study, Congressman, and had been working with the
author for some period of time. The first couple paragraphs
makes a notation if 100 percent of the Nation's automobiles
operated on E-85, then these next steps may occur. We have no
more interest in having 100 percent of the Nation's vehicles
operate on E-85. We don't believe that any more prudent than we
believe it is prudent today to have our Nation depend on one
form of transportation fuel. So I think that the prerequisite
there is that if all of our Nation operated on E-85, that is
not going to happen, so I just--frankly, I think that it is a
very nice research analysis and will leave it at that.
Mr. Barton. Does anybody else want to comment?
Mr. Foody. I would like to just say something from the
perspective of people developing cellulosic ethanol. We are
generally of the view that the growth of this industry
shouldn't result in a stepping back on environmental standards,
and to the extent that the massive studies which go on in all
sorts of different directions point to certain revisions in the
regulations for fuels, we would support those.
Mr. Farrell. Mr. Barton, I had a chance--thank you for the
question. I had a chance to read that paper carefully. The very
end of the paper, in my opinion, is the most important part
where he observed that--the author notes that he has done one
study and that over time regulations change, technologies
change, and he says as you quoted, that ethanol will be
probably no better than gasoline and I think that the processes
that we have, whether they are sips or standards for new
catalysts for flex fuel vehicles can ensure that we develop,
whether they are biomass-based or fossil-based or whatever that
we can assure that the health of the American public is
maintained.
Mr. Barton. My last question goes to the gentleman that is
the cellulosic ethanol expert. Let us assume that we get your
technology in full production and we work out all the kinks and
we get it down the learning curve, however long that takes.
Once we get to that great day, what is the price per gallon of
cellulosic ethanol most likely to be?
Mr. Foody. Well, first I would say we don't talk about our
own technology cost but I would call your attention to the U.S.
Department of Energy's studies through National Renewable
Energy Laboratories. They projected that the technology target
by 2012 about $1.10 a gallon. Reflecting as a person developing
the technology----
Mr. Barton. That is a wholesale cost or retail cost?
Mr. Foody. That would be a plant gate cost.
Mr. Barton. OK.
Mr. Foody. Reflecting on this as a developer of technology
though, I would say that ultimately the price that you will see
for these products will be linked to what the price of oil and
how energy markets develop and that to the extent that the
price is higher than the absolute cost, you will see greater
investment in the technology and greater reduction in the
consumption of petroleum and better energy security.
Mr. Barton. So a good round number 5 years from now is $1 a
gallon wholesale?
Mr. Foody. I think that is the price that the DoE
estimated. I think though you really have to keep in mind, if
the wholesale price of gasoline is $2 a gallon, that will
probably determine the ultimate selling price.
Mr. Barton. I understand how a market works. You are not
going to give your product away. OK. But it is not going to be
$4?
Mr. Foody. No, it is not going to be $4.
Mr. Barton. Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Barton.
The gentleman from Washington State, Mr. Inslee, is
recognized for 5 minutes.
Mr. Inslee. Thank you. I appreciate your testimony. Thanks
for being here all of you, and I missed some of it. We have
another global warming hearing over there in another building I
have been sitting in so there are a lot of places to deal with
global warming.
I wanted to ask you particularly, Mr. Ward, about some of
the things I talked about earlier about coal-to-liquids and I
am looking at a chart and I will try to get a copy to you, but
basically it is an EPA evaluation of percent change in global
warming gas emissions from a variety of fuels, and it shows for
cellulosic ethanol there would be a 90 percent reduction in
global warming gas reductions per unit. For biodiesel, there
would be a 67.7 percent reduction. For corn ethanol, and this
is an average, there would be a 20 percent reduction. For coal-
to-liquids without carbon sequestration, there would be 118
percent increase, and with sequestration there would be a 3.7
percent increase compared to today's operating situation which
is basically gasoline. So the first question I have, are those
number real? Are those the best assessment that we have at the
moment? And second, if they are and if we do have a limited
resource base to invest in new technologies, why would we--
assuming you accept the premise that there is a problem with
global warming, why would we go with a technology that without
sequestration almost doubles or more than doubles CO\2\ and
goes up a little bit with sequestration when as an alternative,
and I think a probably successful alternative, to burn coal
cleanly, sequester the CO\2\, produce electricity and feed our
plug-in hybrids that I drove a few weeks ago--you get 150 miles
a gallon of gasoline and a penny a mile for electricity in non-
peak hours--why would that not be a better use of our coal, a
cleaner use of our coal and more sensible use for our coal as
opposed to coal-to-liquids?
Mr. Ward. I will answer the second question first and then
go back to the first one. Plug-in hybrid vehicles are a cleaner
solution. They are absolutely a good technology and it is a
technology that this country needs to pursue. The challenge
with plug-in hybrid vehicles is that you need to build a new
infrastructure and a new fleet of vehicles in order to get that
done. What coal-to-liquids does for you is produces a fuel that
works in the existing fleet of vehicles and can serve as a
bridge for us to whatever future vehicle economy it is whether
it is plug-in hybrids or hydrogen economy or whatever that
future is.
Mr. Inslee. Can I stop for you for a second because I want
to understand your answer. You said plug-ins would require a
new infrastructure. What are you referring to?
Mr. Ward. You are going to have to make the plug-in
vehicles themselves. You are going to have to get them into the
market and distributed. I don't think we can do plug-in
airplanes. I don't think we can do plug-in locomotives. I don't
know that we can do plug-in over-the-road trucks. There is
going to be an existing fleet of petroleum-fueled vehicles on
the roads for a very long time. As the inventory wears out,
coal-to-liquids fuels will work in all of those vehicles as
well. So coal-to-liquids is not the end solution but it is a
very important strategic bridge to be able to fuel the fleet we
have using the resources that we have in the United States.
Mr. Inslee. So you are saying there would be some segment
that we couldn't get to with electrification basically. So I
think I understand what you are saying. Assuming that that is
true and assuming that we have a limited amount that the
Federal Government has, and there are limits even here on what
we can spend, thankfully, if we had $100 to spend and if we
could spend $100 developing cellulosic ethanol that reduces
CO\2\ emissions by 90 percent or on biodiesel which reduces
emissions 67 percent, why would we spend that limited Federal
investment on a technology that best-case scenario increases
CO\2\ emissions by 3 percent, worse-case scenario doubles it?
Why should we use our limited resources for a technology that
goes backwards when we have these other alternative fuels that
can almost cut CO\2\ emissions by 90 percent? Why would we do
that? Other than there is--well, anyway, go ahead.
Mr. Ward. Well, I would make a couple of comments with
regard to that. Number 1, I think the dollars that we are
looking to spend on coal-to-liquids are not to develop the
technology, the technology is ready to go, and in my testimony
I point out in some more depth in the written testimony that we
will likely have a coal-to-liquids infrastructure in this
country whether we provide incentives for it or not. It will
just happen--it will respond to market forces. It will happen
slowly. The plants will come on slowly. The reason for spending
Federal dollars on coal-to-liquids technologies now is to build
that bridge that we need to get us through the energy security
issues of bringing that capability of using coal-to-liquids
fuels up faster. So, we don't need incentives to improve the
technology and I would also point out in my testimony that we
got Department of Energy studies that would indicate that if
you do capture carbon from your process making coal-to-liquids
fuels, you can actually improve----
Mr. Inslee. Just in closing, my time is up. I want to make
closing comments. As far as speed, we are building the largest
biodiesel plant in the western hemisphere. It is under
construction right now in Grays Harbor, Washington. We are
ready to go. We don't have to wait. As far as speed, we got six
cellulosic ethanol plants that are going to start construction
now that the loan guarantees are going. I do question your
argument that somehow this would be faster when we have two
industries up and running now, at least the first steps of it.
Thank you very much.
Mr. Boucher. Thank you very much, Mr. Inslee. Just for your
information, in a second round I am going to come back to this
question that you have raised, and in fairness to you I thought
I would let you know that in case you want to stay and take
part in that conversation.
The gentleman from Michigan, Mr. Upton, is recognized for 8
minutes.
Mr. Upton. Thank you. That second round will start about
what, 3 p.m.?
Mr. Boucher. A little sooner, I think.
Mr. Upton. Thank you, Mr. Chairman, and I want to say to
Mr. Maley too, I liked your answers as well to Chairman Boucher
and I think that I will likely add my name as a cosponsor to
that legislation when you introduce it, which I know is in the
next couple of days, so please keep me in mind.
Mr. Ward, you indicated that China is spending $30 billion
on a coal-to-liquid plant and I am just wondering if you can
elaborate on that a little bit, how many facilities and where
are they in terms of development, and what level of assistance
do we have other than perhaps Mr. Boucher's bill in terms of
the Department of Energy looking for that same type of
assistance?
Mr. Ward. In China there are over a dozen projects that are
in the active stage that I would classify as doing front-end
engineering, design or putting them into construction. Probably
the farthest along plant is the world's first commercial-size
direct coal liquefaction plant. We have licensed our direct
coal liquefaction technology to Shenwa Corporation, which is
the largest coal producer in China, the first 20,000-barrel-
per-day direct coal liquefaction train, and that plant will be
coming online in 2008. China has made a strategic decision to
invest in coal-to-liquids technologies. They can either spend
billions of dollars to build pipelines from the coasts to their
interior to make them more dependent on foreign oil, as we are,
or they can build facilities to rely on their domestic
resources, which is what they have chosen to do.
Mr. Upton. And as they proceed on that path, are they
intending to use carbon sequestration?
Mr. Ward. Not to my knowledge.
Mr. Upton. Myself and Mr. Doyle have introduced legislation
in the last Congress as well as in this one that would require
a 10 percent renewable mandate by the year 2012. We have a
number of Republican and Democratic cosponsors on that
legislation and I just wonder, Mr. Ward, Mr. Foody, Hughes and
Lampert, do you think that we can actually--if we are able to
pass that legislation, do you think that it is actually
achievable by 2012 to reach 10 percent renewable mandate?
Mr. Lampert. Well, Congressman, I certainly think that is
capable. We have last year burned about 140 billion gallons of
unleaded gasoline. As you know, every motor vehicle in the
United States today can run on 10 percent ethanol so we could
hit that threshold pretty quickly with the 6 million flexible
fuel vehicles we have on the road today. We could use another 5
to 6 billion gallons should the infrastructure be available to
fuel those vehicles. So I would respond in a very positive
manner, yes, that would be possible.
Mr. Upton. Mr. Hughes, I am glad to say that we have got a
biodiesel plant in my district now that is operating and it is
online now.
Mr. Hughes. Great. That is fantastic. I echo Mr. Lampert's
comments. I think that would be optimistic to be able to do
that and the biodiesel industry has set a vision for ourselves
to be 5 percent of the diesel fuel by 2015. We look to be a
very substantial player and actually are working with the
trucking industry. We are looking at the idea of maybe coming
forward to you all in the Congress with some kind of a standard
for biodiesel in the diesel pool and that would be something on
the order of around 1 billion gallons by 2012.
Mr. Upton. Mr. Foody?
Mr. Foody. I would say we believe that a 10 percent
renewable fuels by 2012 is very doable. However, cellulosic
ethanol by that time probably will not be a major contribution
to that number. Cellulosic ethanol--by 2012, that is about 15
billion gallons. That will be about the time that we are ready
to build very large projects and within the next 10 years
cellulosic ethanol could deliver another 10 percent or another
15 percent on top of that number again.
Mr. Upton. I talked to Mr. Barton before he left after his
questions. I too was a little bit surprised to see that report
availed in the Washington Post yesterday or today, and one of
my thoughts, perhaps, and I wonder if you might comment on
this, Mr. Lampert, was it is because of the transportation of
ethanol, not being able to go into a pipeline so you have
actually got to put it on rail or send it by truck, that
perhaps that factor might have been one of the reasons why in
fact the pollution would be the same or perhaps higher because
you are not able to take advantage of what I think would be
otherwise lower emissions.
Mr. Lampert. Well, lower emissions and certainly lower
cost. Shipping transportation fuel by pipeline is certainly the
cheapest. We do send ethanol by barge as well, but I think in
this particular study, what we are looking at is toxicity.
Clearly, when you consume ethanol in a motor vehicle, you
increase the aldehyde emissions that come from tailpipe, acid
aldehyde, acetyl aldehyde, other forms of aldehyde. Those are
toxic chemicals. What you are doing, however, is reducing the
benzene, the xylene, the toluene, the other very harmful
chemicals. It is an issue of toxicity and with our respect to
the author, we believe as does EPA and the California Resources
Board that some of these toxicity levels that the author has
characterized may be misplaced.
Mr. Upton. Now, doesn't Brazil send most of their ethanol
to their distribution facilities by pipeline?
Mr. Lampert. A large amount of it is, and that is not to
say, sir, that we cannot send ethanol by pipeline but typically
a pipeline is owned and operated by a major petroleum company
so they don't have a great deal of incentive to assist with
that, first. Second, a pipeline is used to ship crude oil,
propane, kerosene, et cetera, and you have got a lot of
distillates that are going to be left in there. If you wanted
to clean the inside of that petroleum, you would use ethanol to
do so. And thirdly, there are some metallurgical
characteristics that may not allow some of the older pipelines,
but that is not to say that we cannot do so.
Mr. Upton. Mr. Hughes, with the transportation of
biodiesel, is there the same trouble as there is with ethanol
in terms of water and therefore pipeline distribution problems?
Mr. Hughes. In Europe right now, you have biodiesel moving
through pipelines and it is moving primarily at a low blend,
about like a 5 percent biodiesel blend. Our industry has
committed some significant resources to working with the
pipeline companies to explore the issue, any kind of technical
issues that might be associated with moving biodiesel through
the pipe here in the U.S. So some of the preliminary reports
that we have gotten show that it is likely to happen, favorable
and, just stepping through some of those hurdles, but our
intent is to eventually have biodiesel moving through the pipes
here in the United States.
Mr. Upton. The last question I have as my time is expiring
is, I am just interested from Mr. Foody, Hughes and Lampert in
terms of your association with the auto industry. Has there
been good coordination? I know that every vehicle can take the
10 percent ethanol. I know that E-85 obviously needs a
different engine, which is not all that much more expensive and
actually I think it is the same price at least for General
Motors, but has the coordination been good between the auto
industry and your fuel?
Mr. Lampert. Well, Congressman, our organization, National
Ethanol Vehicle Coalition, our board of directors is composed
of General Motors, Daimler Chrysler, Nissan and Ford Motor
Company along with the National Corn Growers, ethanol
producers, et cetera, so yes, our coordination is outstanding.
Mr. Upton. Mr. Hughes?
Mr. Hughes. We have a wonderful working relationship with
the automakers, and in fact some of them, Daimler Chrysler is
using biodiesel to factory fill some of their vehicles coming
off the lines here in the United States so we have a very
positive relationship with them.
Mr. Upton. Mr. Foody?
Mr. Foody. If I might say, we have worked with a number of
automakers as well and have a good relationship with them. I
would give you a quick caveat though. We also have Shell as a
major investor in our firm and certainly as we look towards
increasing the total amount of alternative fuels in the pool,
one sees a different vision of the future sometimes coming from
the oil companies than you do from the car companies. I
recently heard a fellow from API testify that the oil industry
could see increasing the amount of renewable fuels from a 10 to
a 15 percent as at least for them a lower-cost way of wrapping
up alternative fuels content and I am not really sure where the
automakers stand on that.
Mr. Upton. I yield back.
Mr. Boucher. Thank you very much, Mr. Upton.
The gentleman from Texas, Mr. Gonzalez, is recognized for 5
minutes.
Mr. Gonzalez. Thank you very much, Mr. Chairman. I am
trying to limit the discussion on oil independence because I
think there are other considerations of the climate change and
how we get those basically to benefit one another when we are
looking at different alternative fuels.
I cut this article out and it says Texas is top State for
alternative fuels. Now, what do you think of that? And
California is second. I hate to tell you, the alternative fuel
is diesel, and you know what we drive in Texas. This question
is--let me see. I think the best--Mr. Lampert, it will be
directed to you. And not setting aside but recognizing some
considerations, because I am going to read from an article that
was written by Mr. Robert Samuelson in the Washington Post on
the 24th of January, because ethanol seems to be getting all
the attention. There are considerations. One of course is
transportation of the materials to produce ethanol, and by
rail--I mean, it really is a significant consideration. The
transportation of the fuel itself, ethanol, and I think Mr.
Upton has touched on that, and then the fueling stations, we
have talked about that.
The cost of producing the alternative fuel, ethanol, and
there has been some discussion about the added cost per unit,
and then the energy or the fuel economy, the energy value of
ethanol which my understanding is less than gasoline. You get
less miles, less power and so on. All that into consideration.
This is Mr. Samuelson's article, Blindness on Biofuels, and
then I want your opinion on his deductions or his comments.
Let's do some basic math. In 2006, Americans used 7.5
billion barrels of oil. By 2030, that could increase about 30
percent to 9.8 billion barrels, projects the Energy Information
Administration. Much of that rise would reflect higher gasoline
demand. In 2030, there will be more people, an estimated 365
million versus 300 million in 2006, and more vehicles, 316
million versus 225 million. At most, biofuels would address
part of the increase in oil demand. It wouldn't reduce our oil
use or import dependence from current levels. Suppose we reach
the administration's ultimate target of 60 billion gallons in
2030? That would offset less than half of the projected
increase in annual oil use. Here is why. First, it is necessary
to convert the 60 billion gallons into barrels because there
are 42 gallons in a barrel. That means dividing by 42. Further,
ethanol has only about two-thirds of the energy value of an
equal volume of gasoline. When you do all the arithmetic, 60
billion gallons of ethanol displaced just under 1 billion
barrels of gasoline. If that merely offsets increases in oil
use, it won't cut existing important dependence or greenhouse
gases.
And I guess what I am asking, Mr. Lampert, do you dispute
the deductions reached by Mr. Samuelson?
Mr. Lampert. I don't have those available, sir, for close
review. I would only respond by saying that our organization
supports all forms of alternative fuels--compressed natural
gas, propane, biodiesel, electricity, plug-in hybrids. We don't
believe that we want to be any more dependent on just E-85 or
just biodiesel but that my grandchildren I hope drive into the
fuel station in the future, not the gas station but the fuel
station and they may get a quick charge on their little
electric vehicle or they may buy E-85 or they might buy
biodiesel. So I think we are going to have a vast mixture of
different forms of fuels, and I would be happy to review the
article and provide a response to you in regard to Mr.
Samuelson's statements but I am not available to do that this
point, sir.
Mr. Gonzalez. I think what it is with Mr. Samuelson is that
if we have legislative mandates and the President is talking
about targets regarding the use of alternative fuels,
especially ethanol, in his State of the Union that those
numbers may be totally off and not realistic, and this
committee of course needs to work with real numbers and real
facts, and I think that is the point made by this particular
columnist. That is the reason that I would ask that question. I
understand, and I think I have about 9 seconds but I believe
that--is it Mr. Foody?
Mr. Foody. Yes. If I may, I would like to just respond to
those points very briefly. I think that it is certainly true
that there is a potential for substantial growth in petroleum
use in America. If we had 60 billion gallons of alternative
fuels being used in America by 2030, that would mean we would
have less imports than if we didn't. It is simply by nature
going to be beneficial. I think another point that was
mentioned in the article was that that wouldn't reduce
greenhouse gas emissions. It is very important to ask the
question about what the type of alternative fuel there is. We
just heard testimony earlier that said if it is corn-based
ethanol, it is something like a 20 percent reduction in
greenhouse gas emissions. With cellulosic ethanol, there is
something like a 90 percent reduction in greenhouse gas
emissions. But there is a potential for that large volume of
alternative fuels to help on the greenhouse gas emissions front
as well.
Mr. Gonzalez. My time is up. Thank you very much.
Mr. Boucher. Thank you very much, Mr. Gonzalez.
The gentleman from Illinois, Mr. Shimkus, is recognized for
5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman, and I appreciate the
testimony here, and just to follow up on Mr. Lampert's
comments. Those of us who have been pushing renewable fuels and
alternatives, we want everybody at the table.
We want the more, the merrier, and I think as we move in
this debate, that would help us all and we want--hopefully the
market will push all the players to be more efficient and
competition and I like that. I also want to mention, as I
mentioned Karen McCarthy and biodiesel, I want to clarify, when
we talk about biodiesel, of course, my initial interest was
soy, soybeans and crushing, and that is what brought me to that
debate, but how we were able to move to pass legislation was,
we said reformulate a cooking oil--beef tallow, and another
colleague who was helpful is recently deceased, Patsy Mink from
Hawaii, was very involved in this, and it is that bipartisan
nature, and as we do on the cellulosic debate, the benefit--and
you talk about ethanol transportation issues.
That is the benefit of the cellulosic debate. Let us get
these refineries in the local areas where you can have local
refineries with local products and then just transport it for
that regional market. We are in a great age of really
addressing this reliance on imported crude oil and the public
is itching for it for the reasons I said in my opening
statement.
Let me ask--what is fun here is because I have also been
working with the chairman on the coal-to-liquids legislation,
Mr. Ward, Mr. Maley, you both have mentioned it and I
appreciate your strong comments. I want to give you a minute to
address--and I had to step outside for some meetings--again let
us take a few minutes and talk about our big opposition will be
the environmental community and I think they should not be for
the reasons you have already highlighted. Can you briefly tell
two or three things each why the environmental community should
look at this more positively than we seem to be hearing? Mr.
Ward?
Mr. Ward. The fuel that comes from a coal-to-liquids
refinery is exceptionally clean compared to the fuel that comes
from a petroleum refinery today in terms of those criteria
pollutants.
In terms of carbon, if we capture and store the carbon that
comes out of the production process, these fuels are about as
good or possibly a little better than the fuels that come from
petroleum-based refineries.
Mr. Shimkus. And the ability to capture the carbon is
easier or harder under our coal-to-liquids refinery?
Mr. Ward. In coal-to-liquids refineries, the carbon comes
off in a concentrated stream and it is relatively easy to
capture. I would point out that carbon capture and storage is
going on today in large scale. Just down the road from the
North Dakota coal-to-liquids project we are working on is
Dakota Gasification. They capture their carbon dioxide, they
put it in a pipeline, they send it to western Canada where it
is used for enhanced oil recovery and stored in that method. We
have studies coming from western Canada where they have been
looking at this process over the years and it is being done
safely. The carbon is staying in the aquifers and not escaping.
So while there is a lot of issues still to work out about
carbon capture and storage and the different modalities for
that, clearly it is already going on on a large scale and it is
something we can do.
Mr. Shimkus. Mr. Maley?
Mr. Maley. I guess my reaction is that when we look at the
estimates on global carbon emissions over the next 20 or 30
years, it is almost regardless of what we do. If we do a great
job here, global carbon emissions are going to grow
dramatically and so our view is that the United States should
be taking the lead in developing the capture technology, the
storage technologies, the other maybe potential benefit use
technologies to deal with this problem because it is a global
problem, we can't just solve it here.
Mr. Shimkus. So if we are going to move on two bills, one
an energy security bill, the other one on global warming,
climate change, and those of us who really are supportive of
this, if we had to as part of the negotiated compromise move to
carbon capture and carbon sequestration in advancing coal-to-
liquid capabilities, you think that would be a risk that the
financial people and the association would, I would say
grudgingly accept?
Mr. Maley. Yes. I think on the four projects we are
developing, we are anticipating that we will up front capture a
pure stream of CO\2\ in our projects. We expect in some markets
where in Texas or Louisiana, there may be a beneficial use,
enhanced oil recovery. In other markets, say in the Midwest, we
would be looking to use our pure stream of CO\2\, which there
are not many of today, to work on projects, demonstration
projects or other alternatives, to help to advance the
technology that will ultimately provide some solutions.
Mr. Shimkus. And being from a part of the country that also
has a lot of marginal wells, central and southern Illinois, the
west Texas experience is that using carbon capture in enhanced
oil recovery, they are recovering more oil than they did in the
initial find. I think we are going to be able to do that in the
oil fields of Illinois and we look forward to using that
technology, but they have to be located and be able to be
piped, so this is a great time and I appreciate the hearing,
and thank you, Mr. Chairman. My time has expired.
Mr. Boucher. Thank you very much, Mr. Shimkus.
The gentlelady from Wisconsin, Ms. Baldwin, is recognized
for 5 minutes.
Ms. Baldwin. Thank you, Mr. Chairman.
Just a quick question for Mr. Lampert. I know you have been
asked a lot about--and I am very struck by the image here, and
being from Wisconsin, of course, I have significant constituent
access to E-85 but we would of course like to see a lot more.
But there has been a lot of questions directed to you about how
do we ramp up the fewer than 1 percent stations nationwide to
greater percentages. I am interested in hearing a little bit
more about the geographical distribution and obviously the
population centers of the country, many of which are not
served, and what sort of discussions and leadership are you
hearing from the States in that regard?
Mr. Lampert. Excellent question, and a number of States,
Wisconsin for one, have really done a lot in the last several
months to advance E-85 and different forms of alternative
fuels, biofuels, and this has not necessarily just been a
Midwest phenomenon. The State of New York is very active. The
State of California obviously very active. The State of
Washington has been active in alternative fuels. If you look at
that map where E-85 stations are, we very intentionally
identified Chicago, Minnesota and the front range of Colorado
to learn to determine what the success would be, what the
failure rate would be of the E-85 fueling stations, and now we
are ready to take that out across the country and I believe we
do have stations in 41 States across the country. So we think
that the next step with that is not the largeness of the
Federal grants but rather the Federal income tax credits and
the support that again an entrepreneur will choose to utilize
rather than is made to utilize because we feel like a mandate
is going to result in poor pricing, poor marketing, poor
performance and ultimately poor customer satisfaction.
Ms. Baldwin. Thank you.
Dr. Farrell, a couple of questions for you. I know your
testimony got cut off a little bit and there is one aspect I
would like you to address at least briefly and then I have a
larger question on sort of research and development and sort of
how we should attack that, but on the quick one, you mentioned
in your written testimony sort of a combination of coal-to-
liquids with carbon capture and sequestration and advanced
biofuels is a new concept. I would like to hear just a little
bit more about what you are hinting at there, and then the
larger question that I would like to hear, as we try to
incentivize innovation both near term and long term, how do we
set that up? Do we do an NIH-like creation in the energy
sector? How do we make sure there is peer review going on in
both public and private sector research and innovation? I think
we have to do it right, and I would love to hear your thoughts
on that bigger question.
Mr. Farrell. Thank you very much. The first question you
asked was about the possibility of using both coal and biomass
as the feedstocks for the gasification process. This has been
done. It has been done for some years in the Netherlands in the
Burgenhem project, and the interesting thing is that it is now
hypothesized and there is some data which are in the beginning
parts of the scientific process. It is just you can actually
grow biomass, grasses most likely, that not only produce
biomass but actually improve the soil quality by putting carbon
into the soil, and by doing so you would actually be able to
produce fuels with this biomass that have either zero or
slightly negative carbon content.
If you were to combine that biomass with coal and then
capture and sequester the CO\2\ stream from the process, you
could get significantly large quantities of domestically
produced fuels very much like the fuels we have today at
potentially a very low carbon footprint, potentially negative
but rather slightly, and this is an area I think in which to go
to your second question, R&D is very necessary. One of the
things that is most important about research in this area is
that there are a myriad of different technologies and a myriad
of different possibilities. I mentioned in the written
testimony that we really need across the board, across the
entire economy approach to incentivizing innovation, and in my
view, strict or tough environmental goals as well as
performance goals like we have begun to introduce in California
with our low-carbon fuel standard would incentivize the private
sector where the bulk of the research is often done as well as
programs that would be appropriate whether is through the
Department of Energy or the EPA for the university sector as
well. But I do think that a sectoral approach is the best way
to go after the innovation question.
Mr. Boucher. Thank you very much, Ms. Baldwin and Dr.
Farrell.
The gentleman from Arizona, Mr. Shadegg, is recognized for
5 minutes.
Mr. Shadegg. Thank you, Mr. Chairman, and thank you again
for holding this hearing. I think these series of hearings have
been very helpful and I applaud you for conducting them.
Mr. Foody, let me begin with you. I would like you to give
me a straightforward and simple explanation if you can on the,
I will use the word efficiency differences between cellulosic
ethanol and let us say corn ethanol or ethanol produced from a
fermentation process. Is there a substantial differential in
the cost involved and in the energy produced?
Mr. Foody. First of all, let me address the basic
technology for cellulosic ethanol. Corn ethanol has been around
for many, many years. Cellulosic ethanol is new technology.
There are relatively small commercial operations but it is new
technology moving forward. It is in some ways intrinsically
more complex and at least more capital intense at the factory
although you are working with much lower cost feedstock. You
are working with agricultural residues or waste. That is why
there is potential for very cost-effective production. When
people talk about the greenhouse gas balance difference between
the two, one of the fundamental reasons for that is that when
you power a facility, a cellulosic ethanol facility, most
designs actually use some of the residue from the biomass
itself. So no fossil fuels actually come into the process. It
is entirely renewable. Not only is the molecules in the fuel
themselves so to speak renewable but also the manufacturing
process is entirely renewably fuel. The actual ethanol that you
get out at the end is the same fuel, used in the same cars. It
couldn't be told apart.
Mr. Shadegg. Mr. Lampert, would you agree with that
statement?
Mr. Lampert. Absolutely. You bet.
Mr. Shadegg. In most corn ethanol plants, a natural gas is
used to process the plant?
Mr. Lampert. That is the majority. We have a plant in
Nebraska now that is actually using livestock manure going into
a digestion system to produce almost 95 percent of the total
energy needed for the facility.
Mr. Shadegg. Mr. Foody, you would say that there is no net
energy gain through cellulosic ethanol opposed to corn ethanol.
It is just that the fuel stock is a biofuel stock, or is there
a net energy differential?
Mr. Foody. The finished product is the same.
Mr. Shadegg. So then you are looking at the amount of
energy?
Mr. Foody. You might look at the amount of fossil-fuel
energy that goes into the production, either into the
production of the feed stock itself, the fertilizers for making
corn or whatever, or that go into the manufacturing operations.
So when people talk about well-to-wheels studies and particular
carbon that is emitted during the production process, they try
to effectively capture or identify all the sources by which
fossil carbon goes into the process, and because cellulosic
ethanol creates residue that itself has energy and that can be
used, most of the balances that have been done around this
process work as well. I might also say just a brief addition to
this. Both cellulosic ethanol and conventional ethanol
processes also produce concentrated CO\2\ process streams
coming off their fermentation and the numbers that you have
heard about haven't incorporated the potential for capture of
that CO\2\.
Mr. Shadegg. Mr. Ward, coal gasification has been around
for a very long time, hasn't it? Wasn't it in fact used by
Germany in World War II?
Mr. Ward. Yes. Actually the coal gasification portion goes
back even farther than that. That is how they made the lamps in
Dickens' London. But the use of gasified coal to make liquid
fuels goes back to--the original work was done in the late
1920's in Germany and then it was implemented during World War
II.
Mr. Shadegg. Because I serve on both this committee and on
the Select Committee on Global Climate Change and Energy
Independence, I spent a lot of the break trying to look at some
of these issues, and it is my understanding that there is not--
I think people think of coal gasification as a single process
but a point of fact is, there are lots of different processes
that are being used, that the process used by, say, Germany in
World War II to create fuel for its war machine has been
improved upon dramatically since then and we are still doing
improvements since that point in time. Is that correct?
Mr. Ward. That is correct. There are two basic ways of
doing coal liquefaction. There is either indirect coal
liquefaction where I take the solid gas, I turn it into a gas
version and then recombine the gas into a liquid so it is
indirect, or direct coal liquefaction where I take the solid
coal and convert it directly into a liquid that I can then
refine. Germany used both of those technologies back in the
1940's and actually one of our predecessor companies was
founded by a scientist from the Manhattan Project, who was
dispatched by the United States Government to Germany to learn
how they did these things, and those technologies both direct
and indirect coal liquefaction have been improved greatly over
the last several decades. Where we are now is not needing more
research and development. What we need now is to overcome the
phenomenon of everyone wants to be the first person to build
the fifth plant. So if we can get the first few plants in and
get it commercially accepted, then the market can take over and
finance the construction of these things like any other kind of
refinery.
Mr. Shadegg. My time has expired, but briefly, with coal
gasification being done by different mechanisms, do you have
any argument with statistics that are cited here for its
greenhouse gas emissions as opposed to other technologies not
necessarily being precise or correct or would you say they are
pretty accurate regardless of which technology is used?
Mr. Ward. Well, I think the key thing for coal-to-liquids
is that the---if you deal with the carbon in the process
whether you are doing gasification or you are doing direct goal
liquefaction, if you deal with it by taking the concentrated
stream that comes out of the process and you store that carbon
or you use it for a specific purpose, it pretty clearly shows
you that you can make liquid fuels with the same kind of carbon
signature or less than what we are doing right now with
petroleum, which is what we are trying to replace.
Mr. Shadegg. Thank you.
Mr. Boucher. Thank you, Mr. Shadegg.
The gentleman from California, Mr. Waxman, is recognized
for 5 minutes.
Mr. Waxman. Thank you very much, Mr. Chairman.
It seems to me that we have two overriding energy concerns.
First our dependence on oil poses a tremendous national
security, economic and environmental challenge, but second,
perhaps even more importantly, uncontrolled emissions of
greenhouse gases threaten the very stability of the planet's
climate and ecosystems. So it seems to me we should do is,
Congress should establish policies that address our oil
dependence but would not reduce our greenhouse gas emissions.
This could result in wasted public expenditures and failed
government policies. I think it is critical to address both of
these issues with any energy legislation considered during this
Congress. Otherwise we could adopt policies that could make our
job of addressing global climate change more difficult. The
effect would be to increase pressure, perhaps unfairly, on
other sources of emissions such as electric utilities and the
automakers. One way to reduce greenhouse gas emissions while
reducing oil use is to ensure that the emissions from
transportation fuels decline over time. With this type of
constraint in place, all fuels could compete on a level playing
field. I would like to get the views of each of the witnesses
to whether they would support a declining cap on carbon
emissions from transportation fuels. We will start with Mr.
Ward and go down the table.
Mr. Ward. As we deal with coal-to-liquids commercialization
issues, our company as a developer and all the other companies
that I know of are only evaluating projects where carbon
capture and storage is capable. What the regulatory framework
looks like in terms of how Congress decides to deal with the
regulation is something that we are going to respond to but we
are not taking a position on it at this time.
Mr. Waxman. So you are not advocating or opposing a cap on
carbon emissions in transportation fuels?
Mr. Ward. My company is not. We are focused on trying to
process the commercialization gap and deal with the energy
security associated with where our fuels come from.
Mr. Waxman. Next gentleman.
Mr. Maley. I guess as a company, we are committed to doing
what is technically feasible in the marketplace, and as the
technologies advance we are committed to implementing those new
regimes so we are always at the state of the art of what is
technically and economically possible and we would certainly
encourage public policy that would support a sensible
development of those regimes.
Mr. Foody. Let me just say, I start from the perspective of
representing a company who is producing a fuel that people
describe as leading to a 90 percent reduction in greenhouse gas
emissions and we are very happy about being able to contribute
to that. I think the question of whether one sets targets on
the overall fuel declining amount of greenhouse gases or
alternatively sets targets, for instance, for the nature of
what advanced fuels might be I think depends upon the specific,
most efficient way of implementing legislation and we wouldn't
have a view, and I am sure you have heard much more learned
testimony about all the different options than we have.
Mr. Waxman. Thank you.
Mr. Hughes. Congressman, I represent the National Biodiesel
Board. In our trade association, we have fuel producers that
make a fuel that DoE has demonstrated as 78.5 percent
reduction, life cycle reduction in greenhouse gases and so that
is what we are focused on is just getting that out there and
reducing those emissions. As an association, we have not as a
matter of policy, discussed how the various carbon options,
carbon reduction policy options, so we don't have a position
for it.
Mr. Waxman. Do either of the last two of you have a
position one way or the other?
Mr. Farrell. Yes, sir, I do. Thank you for the question,
Congressman Waxman. I think that you are quite right, that not
only are these linked but in fact failing to adequately address
climate change increases the security risk and increases the
economic risk. I think that a declining cap does the crucial
task, which is it focuses our attention on identifying what we
are care about in this particular domain, which is
concentration of greenhouse gases in the atmosphere, and it
sends a signal that those values will go down in the right
direction, and that is the crucial task.
Mr. Waxman. Thank you. While carbon capture and
sequestration appears very promising for coal-based electricity
generation, the technology for coal-to-liquids doesn't seem
ready for a carbon-constrained world. Maybe there is a coal-to-
liquids technology that can really deliver low-carbon fuels but
so far, I don't know that anyone appears to be discussing that
technology. Do we have any response whether we are dealing with
both of those issues from the coal technology side?
Mr. Ward. Yes, sir. I would point out that the gasification
technology at the core of an IGCC plant that we talk about for
capturing and sequestering carbon for power generation is the
exact same technology that is employed in a coal-to-liquids
plant so to the degree that we are able to make coal-fueled
power stations through gasification cleaner from a greenhouse
gas perspective, the coal-to-liquids refinery is exactly the
same.
Mr. Waxman. And you think we accomplish the lower carbon
fuels as well as displacement of oil for fuel?
Mr. Ward. There are a number of strategies that we can do.
As my testimony points out, if we capture the carbon and store
it from the production process, we can produce a fuel that on a
life cycle basis is equal to or a little better than the
petroleum fuels that we are replacing. As Dr. Farrell pointed
out, there are additional technological improvements that will
come into play over time such as the co-gasification of biomass
to give us the opportunity to lower those carbon emissions even
farther.
Mr. Waxman. Thank you.
Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Waxman.
We will embark now on a second round of questions, and
given the fact that there is relatively limited attendance of
Members at this stage, it should go rather quickly.
I want to come back to the question that Mr. Inslee raised
about whether or not a gallon of coal-to-liquids fuel has a
carbon content that is any greater than a gallon of traditional
diesel. The EPA has released a study that contains a chart
which Mr. Inslee refers to that shows that even with carbon
capture and sequestration, the coal-to-liquids technology
results in a 3.7 percent greater carbon content in the fuel
than would be true for a petroleum-based fuel. I don't know
where that number comes from. That information is at odds with
what Mr. Ward has said based on his extensive examination. It
is at odds with what Dr. Farrell has testified to here today,
both of whom have said that the fuel coming from coal-to-
liquids has no greater carbon content than the petroleum and
potentially, according to Mr. Ward, could have a lower carbon
content, and so my first question is this: Does anyone know why
the discrepancy between this EPA study showing a 3.7 percent
differential with the greater carbon content for the coal-to-
liquid product and what you, Mr. Ward and Dr. Farrell, are
saying? Dr. Farrell, you are nodding your head. Would you like
to take an attempt at that?
Mr. Farrell. Thank you, Mr. Chairman. I would suggest, I
would offer that the value of 3.7 percent, given the wide range
of various technologies that Mr. Ward referred to and the fact
that technologies are advancing so when we build the second,
third, fourth of these plants, they will be different than what
we are thinking about today, and our comments that the
emissions if the carbon is captured from these processes are
approximately the same that those are all within the range of
these potential studies so I think there is no conflict among
these three.
Mr. Boucher. So you are saying there is really no conflict,
this is kind of an average of the technologies that we know
about?
Mr. Farrell. I would say this is one study, this EPA study.
They have made some assumptions in doing their analyses. You
could make slightly different assumptions and come up with a
number that would be slightly different, maybe plus two or
minus three, and all those are within the range of what we can
do with this type of analysis.
Mr. Boucher. That is a good answer.
Mr. Ward, would you like to supplement that?
Mr. Ward. Yes. I think the thing to keep in mind when you
are looking at any of these kind of analyses, particularly the
life cycle analyses, is the assumptions that go into what
externalities you include in your studies have a lot to do with
where the studies come out. I am not familiar with this
particular study. I don't know if they are taking into account
the relative energy densities of the different fuels that are
being included here. I don't know if this is a study that looks
at the well-to-wheels perspective of how far do I have to
transport my raw materials to do this stuff, what type of oil
feedstock going into the refining and then comparing to all of
those variables shift around. That is why in my testimony we
try to say that if you capture and store the carbon, you are
going to be about the same or a little better than the
petroleum fuels you are trying to replace.
Mr. Boucher. Thank you very much. Let me simply say that
the legislation that Mr. Shimkus and I will soon put forward
that will provide a Federal price guarantee for coal-to-liquids
facilities will contain a requirement that in order to
participate in the price guarantee program, any applicant for a
price guarantee must agree to capture the carbon that comes
from the process and permanently sequester it, and so there
will certainly be no greater carbon contribution from the
manufacturing process, and if what you are saying is accurate
and there is no greater carbon contribution from the fuel
itself, then we should have the confidence that the coal-to-
liquids technology as facilitated by the new price guarantee
program once our bill passes will not increase the greenhouse
gas burden. So let me thank you for these very helpful answers,
and I would recognize the gentleman from Illinois, Mr. Hastert,
for 5 minutes.
Mr. Hastert. I thank the chairman. I was a little bit
perplexed by some of the testimony and some of the answers. I
am glad we have this last round.
One of the questions was, I think either to you, Mr. Ward
or Mr. Maley, that when you are talking about the efficiency of
liquidized coal or gasified coal, that fuel, and whether it had
more carbon than gasoline or some of these other fuels we
talked about, I think when you look at it and even take this
list even though the EPA study--the different fuels that we
have, the question and the answer is there is no one fuel that
is going to supply or replace petroleum in this country but
there are two things that we want to do. We want to have
cleaner air, a better environment and at the same time relieve
ourselves on the dependability of petroleum that comes from
overseas, not only coming off from offshore but also the
manipulation of prices and cartels and those types of things,
that if we have this production domestically, we have a better
supply of quote, unquote, fuel, and not only better but we have
a better cost focus and not we hope manipulated and I want to
say to you, Mr. Foody, that I think one of the things that we
need to really look at is to working together in a North
American energy strategy and certainly you folks would be a
very important part of that.
That being said, one of the questions was I think to you,
Mr. Ward, and discussion that hybrid vehicles are better
because basically you plug in and it is much more efficient
than the fuel that you are talking about. I question, I think
most hybrid fuel vehicles when you plug them it, that is
electricity, right? That is the basic fuel of that. And my
question is, where does electricity come from. Well, it can
come from nuclear energy. We are about our limit of nuclear
capacity right now and we haven't built a nuclear plant in this
country for 25 years. That is fairly clean. It could come from
natural gas, which is fairly clean too but we have a shortage
of natural gas and that is why we need to look at other fuels.
And then we go back to where 50 percent of our electricity is
generated from and it is coal, isn't it, and that is just coal-
fired plants, so it seems to me that what you are talking about
is a clean plug-in hybrid basically when that energy comes from
coal-fired plants. Maybe it isn't as clean as some people
purport it to be. Do you want to comment on that?
Mr. Ward. Well, clearly my boss doesn't pay me to promote
plug-in hybrid vehicles but the advantage to doing them is that
you are using--yes, you are probably using coal-fired power to
do that but you are using coal-fired power generally being
recharged in the off-peak hours when it is most efficiently
produced and at the least cost, and the vehicle itself while
you are operating on the batteries has essentially zero
emissions so----
Mr. Hastert. So the vehicle side is clean?
Mr. Ward. Correct, but there are emissions associated with
it.
Mr. Hastert. The coal-fired emissions, whether you are for
it or against it, aren't any less on off-peak than they are on
peak, are they?
Mr. Ward. Well, you have moved some of the emissions
profile back to the generating plant. Overall it is probably a
cleaner approach. But the limitation with those vehicles though
is that works for passenger cars and those of us who drive a
few miles a day but it doesn't work for trucks and plants.
Mr. Hastert. I understand that. Thank you.
Mr. Lampert, again we got into the discussion of
transportation of ethanol and the pollution that you use to
transport. If you blend ethanol at the refinery, wherever that
refinery would be, move it through the pipes, you still have to
transport the ethanol to the refinery, right? So you have this
whole issue. Isn't the issue of ethanol, the efficiency of it,
part of the cleanness of it, is that you produce ethanol in a
lot of different places and so when you have to splash-blend
ethanol, there is going to be an ethanol plant very, very close
to where you are splash-blending? Isn't that a fact?
Mr. Lampert. I believe of the 106 or 107 operating ethanol
facilities that are located in over 33 or 34 States with
facilities coming online in Washington, Oregon, Louisiana,
planned in Florida, Vermont, Connecticut, New Jersey, et
cetera, I think it is not only that, but a national security
issue as well to have these refineries spread out across the
Nation.
Mr. Hastert. But the essence of the ethanol refineries when
you spread them are close to the splash-blending places as
well?
Mr. Lampert. Yes, sir.
Mr. Hastert. The second part of that question, if I could,
where is the blend mix if you know it? Right now we are at 10
percent ethanol, and I know when I put the E-85 into my truck
and drive it, I probably get maybe 50 miles less or 30 miles
less mileage than I get when I put pure gasoline in it--I think
it is pure gasoline at least, or 10 percent blend is what it
is. So what is the difference? Could you go to 25 percent blend
or 15 percent blend or a 30 percent blend or a 40 percent blend
and not lose efficiency?
Mr. Lampert. Yes, sir, absolutely. If we put a gallon of
diesel fuel and a gallon of gasoline and a gallon of alcohol
here on the table, the BTU, the energy latent heat content is
135,000 for the diesel. That is why all our farmers now operate
diesel tractors. It is 114,000 for gasoline, 87,000 BTUs for
ethanol. It is just the chemistry of it. So as we use 85
percent of this, obviously if you go down to 50 percent ethanol
you are going to have a reduction in the reduction of BTU
content. Clearly we could use E-50, E-40. We are very
supportive of blending pumps in the future. But to answer your
earlier question, ethanol is denatured or poisoned, if you
will, at the production facility and then it is shipped in a 98
percent pure form to the terminal, to the big tank farms where
it is mixed at that point.
Mr. Hastert. I understand. Thank you for your answer. I
yield my time back.
Mr. Boucher. Thank you very much, Mr. Hastert.
The gentleman from Washington State, Mr. Inslee, for 5
minutes.
Mr. Inslee. Thank you. I just wanted to tell the committee,
I checked on this EPA report of April 2007. It does consider
the life cycle costs as far as this analysis. It also does take
into consideration various energy equivalents of BT units, so
those were important questions and I think it does handle both
of those issues for us. I just want to tell you, looking at
this report, listening to Dr. Farrell, listening to Mr. Ward,
the sort of conclusion I come out to is that we have some
biofuels that have potential for very significant savings from
a CO\2\ perspective and I am going to define under the Janesely
rule significant as being 30 percent, let us just figure, and
there are several biofuels that have that capacity. I don't
think coal-to-liquid has that capacity to have a significant
CO\2\ improvement whereas other biofuels do. Do people agree
with that? Does anybody disagree with that at the table?
Mr. Farrell. If I might, Mr. Inslee, thank you for the
question. I think technologies that include coal-to-liquids but
also use biomass as the input to the gasification process and
so they would be combined biomass and coal-to-liquids could
reach this 30 percent reduction but I would have to bend your
rule a little bit in order to do that.
Mr. Inslee. And how would you bend the rule?
Mr. Farrell. By defining the coal-to-liquid process as a
process that was a gasification process that used both coal and
biomass as the feedstock, not coal by itself.
Mr. Inslee. Mr. Ward, is that anywhere in anybody's
thinking at the moment?
Mr. Ward. Yes, sir. In fact, there is a great deal of work
going on in that area in Europe and that is a capability. If
you get to that point, what that would have the effect of doing
would be to greatly increase the volumes of fuels you would be
able to produce because you are able to use the coal----
Mr. Inslee. I would be interested in reading any of that
material you could provide me. I would be very interested in
that.
Mr. Lampert, I wanted to ask you about mandates on pumping
stations. I talked to a gentleman who is sort of the majordomo
of the Brazilian ethanol program over 30 years and what he told
me was, you will have to do something very strong to get the
oil and gas industry to put in ethanol E-85 pumps, and the
reason is, they are competing with the E-85 industry, if you
will. They have no interest in sort of helping their competitor
to get going by making those services available, and he says
the one piece of advice I will give you is, you will have to do
something very strong to change that dynamic, and so I want
to--you suggested not to have a mandate but to increase the tax
advantage but I am concerned that even that will not inspire
those oil and gas distributors, who are not in the ethanol
business, to go help their competitors sell a product to break
their domination in the industry right now and I think it is a
pretty small percentage of service stations that are truly
independent from the oil and gas refining industry so why
should we think that increased tax incentive will be enough to
really inspire a timely industrialization of this, put these
pumps in?
Mr. Lampert. Congressman, we hear a lot about the Brazilian
example, if you will, and just anecdotally speaking, the
Brazilian ethanol program was implemented under the auspices of
a military dictatorship and in that sense it was much easier to
establish public policy. Well, obviously we don't have an
interest in that here but we think that profit is a very strong
motivator for the petroleum industry and I would use another
example of the bottled-water industry of 20 years ago, and I
try to characterize myself as a bottled-water salesman, come
into a gas station and say let us have 5 feet of your
refrigerator space to put in bottled water. Well, the major oil
companies laughed the bottled-water salesman out of the door 20
years ago and the independents saw that as a new profit center
and today indeed it is a very a valuable profit center and we
feel like as this profit center is established that again the
petroleum industry, the majors are not the innovators, it is
that little guy, that they will see the loss of profit. Their
shareholders may force them into doing that at some point.
Mr. Inslee. And just real quickly because I want to ask
another question. What percentage of distributors are
independent from the refining industry roughly?
Mr. Lampert. Eighteen to 20 percent.
Mr. Inslee. I will just tell you, I am still troubled by
that. If we only have 18 to 20 percent of the independents, is
that really going to be enough. I wanted to ask Mr. Foody,
there was a question asked about production of cellulosic
ethanol and I am not sure the answer and the question matched.
My understanding, I have been told there is hope for cellulosic
on an energy-per-acre basis can increase productivity of BTUs
per acre, if you will, once we go to cellulosic as opposed to
corn. Could you comment on that?
Mr. Foody. Sure, although if you don't mind, I would like
to spend 30 seconds addressing that earlier question. I had a
very interesting discussion with the CEO of one of Brazil's
largest ethanol companies and he offered me effectively this
free advice for America. He said look, the first thing you need
to do is have a lot of ethanol in the system, permit people to
increase their blend levels to 20 percent or something like
that and then he said if there is ethanol in the marketplace
and there are flexible fuel vehicles around, all of the people
distributing fuel will see that money in flexible fuels. With
respect to the question of, can we see rises in the energy
density per acre, I think the answer is yes. Numbers of people
are developing crops that will grow faster, essentially capture
the energy from sunlight better and I think there are great
prospects in pushing up the land efficiency so to speak by
which cellulosic ethanol would operate.
Mr. Inslee. Thank you.
Mr. Boucher. Thank you very much, Mr. Inslee.
The gentleman from Illinois, Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. I wanted to stay just
to follow my friend Jay Inslee and be prepared to rebut, but he
was kind in his series of questions.
You mentioned the profit word and that is kind of a tough
thing to do in Washington, DC, these days because profit is
kind of defined as being bad. I think profit is good. I think
it encourages us to invest and take risks and get a return on
the investment. The other thing is, opponents like to have this
divide-and-conquer strategy. I want to put on the table, the
corn guys are not in opposition with the cellulosic guys. In
fact, we want them, we want to encourage them in. In all
honestly we get a two-for. We can sell the corn and we can sell
the stover. So we are looking forward to this advancement.
Let me go to Mr. Foody first. When we started working on
this bill on energy security, I think a lot of us have been
hearing stuff about well, we are 10 years away from cellulosic
development. If we put in a lot of money in research in
development, maybe we can speed that up to 5 years, and I think
that has been part of our thought process. I think part of your
testimony says we should be able to go faster than that. Is
that correct?
Mr. Foody. Yes, that is absolutely true. I drive on
cellulosic ethanol. It is manufactured at a significant scale.
Mr. Shimkus. So what we will want to do is get
encouragement and information from the associations of what we
need to do. I will tell you, 18 to 20 percent of the retailers
being independents--I have, as many of you have heard through
these hearings year in and year out, I have over 22 stations
that sell E-85. I can guarantee that 20 of them are
independents. They are the ones that take the risks. They are
the ones concerned about the local community and they are the
ones that are putting them in and for a very nominal cost. So I
love the independents and I see the large retailers starting to
because there is a demand there. The market is pushing that. I
think the water example is a perfect example, especially in
southern Illinois. People are looking for it. We are trying to
know where the stations are and we drive off the intersection
just to get there. So again, I want to applaud my independent
retailers.
The other issue is, we do not have the ability, or maybe
correct me if I am wrong, either in corn or in cellulosic to
produce aviation fuel. Is that correct?
Mr. Foody. I think that is generally true. I would like to
respond to something you said at the start of your discussion
though and just say I believe the corn guys support the
cellulosic ethanol and the cellulosic ethanol guys support
corn. I think that the advance of ethanol in the marketplace
generally is a positive thing.
Mr. Shimkus. Again, that reminds me on the RFS standard.
When we did the EPAct, which I am glad in the committee print
it gave credit to the energy bill we passed, and if you
remember the debate, we were struggling on this committee for a
5 billion RFS standard and we had to get our Senators to help
and they proposed an 8 billion and we settled in conference to
7.5 billion. That has been really the key legislative movement
to now us having this debate and to have the President come
with an RFS standard and have everybody--it is a great time.
People are tripping all over themselves to be renewable-fuel
folks and we like that, and that is why I am not going to let
anybody divide anybody up at this panel, especially from the
supply end, because if we want to decrease import of crude oil
and meet our environmental challenges for the future and the
future demand, we need all of you at the table and we are going
to try very diligently not to disincentivize, which you all are
doing based on policies that we establish here.
So the last question I have, I wanted to just highlight,
because there is an issue, because I also, like my colleague
and friend, Mr. Hastert, have been driving around in flexible
fuel vehicles for a long time and there is a decreased miles
per gallon issue and I believe technology, science and research
will address that. Mr. Lampert, can you give us an example of
Brazil and a GM product that might be addressing the miles per
gallon issue?
Mr. Lampert. Not necessarily in Brazil. We do have some
evidence of a turbo charged Saab, which is a General Motors
product in Sweden that actually increases the turbo charge or
the compression ratio to take advantage of the high octane. E-
85 has been around 100 octane and very high-compression-ratio
engines could take advantage of that much better so we do have
that product available. I believe the Department of Energy
actually flew a Saab into the U.S. to get some testing done at
Oak Ridge recently but there is technology available. We can
get the same mileage out of that gallon of ethanol if we want
to spend the money for it.
Mr. Shimkus. And Mr. Chairman, that might be another issue
that we want to address and how to work with DoE and the
research. I can defend my use of the E-85 because it is pretty
much like 30 cents cheaper a gallon so just the offset ratio of
cost makes it doable but if we really address the miles per
gallon issue and see what we can do at the Federal level to
help incentivize that research and develop and that technology,
I think that is another good addition to the energy security
bill.
I yield back.
Mr. Boucher. Thank you very much, Mr. Shimkus. It was a
very interesting set of questions.
The gentleman from Arizona, Mr. Shadegg, is recognized for
5 minutes.
Mr. Shadegg. Thank you, Mr. Chairman.
I want to begin, Dr. Farrell, with you. You said something
very interesting earlier and I think you got a brief amount of
time to explain it but not enough. I would like to hear it a
little bit more clearly. And that is, it was pointed out that
you do not believe that a single across the entire economy
mechanism for dealing with carbon emissions is the correct way
to go. I hear a lot of discussion in this committee and all the
hearings we have heard about cap and trade. I see a lot of
abuses of cap and trade. I see a lot of government involvement
in setting the initial caps and trying to set these trade
values and I think a part of the problem that I see with cap
and trade has to do with the diversity of the economy. In
Europe, for example, I don't believe their cap and trade
addressed mobile sources which are a major contributor. And so
I was interested in, as an alternative to that, I have looked
at well, maybe the simpler mechanism would be a carbon tax.
Now, of course politicians are never supposed to the word
``tax'' but if that makes the distribution of whatever societal
price we have to pay in this area to address climate change
fairer and more transparent, then perhaps that is the right way
to go. But you threw a whole new dynamic in saying that you
kind of think we should--and your testimony about it was
contradictory to what we have heard here so far, that we should
be looking at, well, for electricity generation it is one set
of calculations, for transportation it is perhaps another, for
industrial use it is perhaps another. I would like to give you
a chance to extend on that.
Mr. Farrell. Thank you very much, Congressman. I am happy
to do so. For those of you who are interested, I am going to
use some figures that are on page 8 of my testimony. What this
table does is, what if we put a policy in place across the
economy that we could model as a $25 tax? What would happen to
the price of generating electricity in various ways, what would
happen to the price of gasoline. A $25 tax on the per ton of
CO\2\, because there is fuel-on-fuel competition in the
electricity sector and because carbon capture and storage
begins at $25 or $30 to become economical just from a straight
cost basis, we would begin to see in that sector very big
changes. That same tax or a cap that resulted in the same would
result in increasing gasoline prices of about 24 cents, and if
all you wanted was to reduce greenhouse gases to some lower
value and some nominal value without requiring much change in
the rest of the economy, without also requiring at the same
time technological innovation and change across the entire
economy, that would be fine, but we do want technological
innovation and a change across the entire economy. So a single
tax or a single cap across the entire economy is unlikely to
induce change and significant innovation across the entire
economy. I will remain agnostic for the moment about whether a
cap or a tax would be right but I think there may be some role
for dividing up the economy into sectors and I suggest that at
least the transportation sector may be a place where you would
do that. The low carbon fuel standard that has been discussed a
little bit already has this property. It can be designed in a
way that will induce innovation in the transportation sector
without raising costs necessarily a great deal and also be
compatible with a cap for electricity and stationary sources.
Mr. Shadegg. Thank you. I appreciate that.
Now, for the both conventional and cellulosic ethanol
representatives, there have been some problems with ethanol.
Ethanol has destroyed fiberglass fuel tanks. There are some
reports of dissolution of resin in the fiberglass. There is
some question about its effect on all types of other engine
parts. I believe some industries, the motorcycle industry and
others, are concerned about mandated higher quantities of
ethanol. I believe Minnesota or one of the other States in the
Midwest is trying to go right now to an E-20 standard. That is
being opposed. I think it being opposed by the marine industry,
the motorcycle industry. How do you propose to address that and
would you in the world you envision since we have to embrace
all of these alternatives, and I certainly support that
including ethanol, how do you envision dealing with some
subsets, aircraft being one that has been mentioned so far, but
others that don't believe they can adapt to higher
concentrations of ethanol. Would you envision that other fuels
also remain in the market and that the extra cost for that be
there, Mr. Lampert and Mr. Foody?
Mr. Lampert. Congressman, I have been very involved with
the Minnesota program, and specifically what it calls for is
that 20 percent of their fuel use will be a renewable fuel, not
for 20 percent ethanol in their fuel. Today they have a 10
percent mandate. All the fuel in Minnesota other than those
used for marine and aviation and antique vehicles has 10
percent ethanol in it. They want to take that to the next step
but it is not use of 20 percent ethanol, they want to bring in
more E-85 vehicles and use more alcohol in total rather than in
each vehicle, if you will.
Mr. Shadegg. Before you comment, Mr. Foody, I have heard
directly from the motorcycle and marine industries that they
are concerned that they are not going to be able to get fuels
that don't have higher concentrations of ethanol. You believe
that is not accurate?
Mr. Lampert. No. The president of General Motors last week
at the New York auto show--I don't want to misquote him. I
believe his statement was that the use of E-20 in a vehicle
designed and engineered to operate on E-10 only will cause
catastrophic damage to the engine. So we do not support the use
of any level blend of alcohol in any form of machinery other
than that which has been designed for.
Mr. Shadegg. Mr. Foody?
Mr. Foody. I think if one sets a target as people have to
see renewable fuels or ethanol go beyond the 10 percent level,
you need to take the question of infrastructure very seriously,
and we have essentially before us a number of examples of
routes that people have taken. Brazilians, for instance,
basically stepped up the concentration in their main grade of
fuel up to 20 percent and the vehicle makers made the
modifications in the cars that allowed that to be workable.
Alternatively, one could go for E-85, keep E-10 and have E-85
in the distribution channel. I think it is an open question
about which would be more effective. Clearly, there are people
on each side of the fence saying it will be more costly for me
to do one thing or the other. I know from the oil industry,
they believe it will be more costly for them and more difficult
to set up E-85 pumps and less likely to succeed than moving
ethanol up in the main grade of gasoline. On the other hand,
one has to work with assuring that consumers have vehicles and
vehicles are on the road that actually can handle that because
we don't want to have a problem of a fuel that causes
catastrophic destruction of people's vehicles. I think that it
is an important question you should consider as you look at the
issues of moving renewable fuel use up. It is a question that
has been addressed though in at least Brazil and there is
probably substantial experience to be gathered there.
Mr. Shadegg. Thank you.
Mr. Boucher. Thank you very much, Mr. Shadegg, and again
the committee's thanks to our witnesses today. This has been an
extremely interesting conversation and we appreciate your
contributions to it. We may have some follow-up questions for
you as we continue our examination in which case we will
communicate with you and pose those questions. For today
though, let me just express our thanks for your very valuable
information. This hearing stands adjourned.
[Whereupon, at 1:00 p.m., the subcommittee was adjourned.]