[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

                              ----------                              
                                                                   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

                              ----------                              


                       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.]

                                 
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