[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                   ALTERNATIVE FUELS: CURRENT STATUS, 
                      PROPOSALS FOR NEW STANDARDS, 
                   AND RELATED INFRASTRUCTURE ISSUES 

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

                                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

                               __________

                              MAY 8, 2007

                               __________

                           Serial No. 110-42


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                       JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California          JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts         Ranking Member
RICK BOUCHER, Virginia               RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York             J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey       FRED UPTON, Michigan
BART GORDON, Tennessee               CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois              NATHAN DEAL, Georgia
ANNA G. ESHOO, California            ED WHITFIELD, Kentucky
BART STUPAK, Michigan                BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York             JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland             HEATHER WILSON, New Mexico
GENE GREEN, Texas                    JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado              CHARLES W. ``CHIP'' PICKERING, 
    Vice Chairman                      Mississippi
LOIS CAPPS, California               VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania             STEVE BUYER, Indiana
JANE HARMAN, California              GEORGE RADANOVICH, California
TOM ALLEN, Maine                     JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois             MARY BONO, California
HILDA L. SOLIS, California           GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas           LEE TERRY, Nebraska
JAY INSLEE, Washington               MIKE FERGUSON, New Jersey
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          TIM MURPHY, Pennsylvania
JIM MATHESON, Utah                   MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina     MARSHA BLACKBURN, Tennessee
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, Senior Counsel
                    Bruce C. Harris, Policy Advisor
                          Margaret Horn, Clerk
                       David J. McCarthy, 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. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, prepared statement.............................     3
 Hon. John D. Dingell, a Representative in Congress from the 
  State of Michigan, opening statement...........................     4
Hon. Darleen Hooley, a Representative in Congress from the State 
  of Oregon, opening statement...................................     5
Hon. Tammy Baldwin, a Representative in Congress from the State 
  of Wisconsin, opening statement................................     6
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................     8

                               Witnesses

Robert Meyers, Associate Assistant Administrator, Office of Air 
  and Radiation, Environmental Protection Agency.................    13
    Prepared statement...........................................    16
    Answers to submitted questions...............................   187
Alexander A. Karsner, Assistant Secretary, Energy Efficiency and 
  Renewable Energy, U.S. Department of Energy....................    23
    Prepared statement...........................................    25
    Answers to submitted questions...............................   177
Elizabeth A. Lowery, vice president, Environment, Energy and 
  Safety, General Motors Public Policy Center....................    66
    Prepared statement...........................................    68
Warren I. Mitchell, chairman of the board, Clean Energy..........    70
    Prepared statement...........................................    72
Paul D. Reid, president and chief executive officer, Reid 
  Petroleum Corporation..........................................    76
    Prepared statement...........................................    78
Robert Greco, group director, Downstream and Industry Operations, 
  American Petroleum Institute...................................    89
    Prepared statement...........................................    91
Charles T. Drevna, executive vice president, National 
  Petrochemical and Refiners Association.........................   107
    Prepared statement...........................................   109
    Answers to submitted questions...............................   172
Daniel A. Lashof, Climate Center science director, Natural 
  Resources Defense Council......................................   122
    Prepared statement...........................................   124
    Letter of March 27, 2007 to Members of Congress..............   167
Bob Dinneen, president, Renewable Fuels Association..............   143
    Prepared statement...........................................   145

                           Submitted Material

``Ethanol's Impact Multifold'', AP article of May 7, 2007, 
  submitted by Mr. Shimkus.......................................   164
``List of Alternative Fueling Station Total Counts by State and 
  Fuel Type,'' U.S. Department of Energy, submitted by Mr. 
  Dingell........................................................   170


  ALTERNATIVE FUELS: CURRENT STATUS, PROPOSALS FOR NEW STANDARDS, AND

                      RELATED INFRASTRUCTURE ISSUES

                              ----------                              


                          TUESDAY, MAY 8, 2007

                  House of Representatives,
            Subcommittee on Energy and Air Quality,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Rick 
Boucher (chairman) presiding.
    Members present: Representatives Butterfield, Melancon, 
Barrow, Markey, Gonzalez, Inslee, Baldwin, Hooley, Matheson, 
Dingell, Hastert, Upton, Whitfield, Shimkus, Shadegg, Buyer, 
Bono, Walden, Rogers, Sullivan, Burgess, and Barton.
    Also present: Representative Green.
    Staff present: Bruce Harris, Lorie Schmidt, Laura Vaught, 
Chris Treanor, Jonathan Brater, Margaret Horn, C.H. Bud 
Albright, David McCarthy, Tom Hassenboehler, and Matthew 
Johnson.

  OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN 
          CONGRESS FROM THE COPMMONWEALTH OF VIRGINIA

    Mr. Boucher. The subcommittee will come to order. This 
morning the Energy and Air Quality Subcommittee is turning its 
attention to alternative fuel. Increasingly, our Nation's 
energy independence is a goal which we all share and given that 
we currently import approximately 60 percent of the oil which 
we consume in the United States, it is appropriate and 
necessary that we explore and encourage all possible means of 
increasing the domestic production of fuels which will lessen 
our dependence on foreign sources of oil.
    While corn-based ethanol is currently the primary 
alternative fuel produced in the United States, other biofuels, 
including cellulosic-based manufacturing for ethanol and 
biodiesel holds great promise for increasing the contribution 
of domestically produced fuel. Also promising is the potential 
of coal-to-liquids, regarding which we heard testimony at a 
previous hearing. Today our focus is on a broader range of 
alternatives to petroleum other than coal-to-liquids.
    The Energy Policy Act of 2005 established a mandatory 
amount of renewable fuel that must be contained within the 
United States' gasoline supply. The amount of the mandate 
increases over time with 7.5 billion gallons required in the 
year 2012. For each year after 2012, the Act requires that EPA 
determine, in consultation with the Secretaries of Energy and 
Agriculture, the mandatory renewable fuels volume amount with a 
minimum of 250 million gallons of renewable fuel to be derived 
from cellulosic biomass each year.
    The program started last year with an interim rule. The EPA 
issued a final rule for the Renewable Fuel Standard on April 
10, 2007, just about 1 month ago. The final rule included a 
mandate that 4 billion gallons of renewable fuels be used the 
first year, but actual production in that first year was almost 
5 billion gallons. The Department of Energy projects that more 
than 11 billion gallons of renewable fuels will be used in 
2012, a number well above the 7.5 billion gallons mandated by 
EPAct 2005.
    Today's hearing we will explore recent proposals to change 
the Renewable Fuels Standard by increasing the amount of 
renewable fuels that would be required, expanding specific 
requirements for renewable fuels using cellulosic feedstock, 
broadening the mandate to cover other types of fuels and 
possibly changing the Renewable Fuels Standard to a low carpet 
standard. Increasing the amount and type of fuels mandated are 
the two primary components of the fuels portion of President 
Bush's proposed 2010 Initiative to reduce gasoline consumption 
by 20 percent by the year 2017.
    The President's proposal would convert the Renewable Fuels 
Standard into an Alternative Fuels Standard, expanding both the 
volume of fuel to be produced and the type of fuels that would 
qualify. This proposal would require 35 billion gallons of 
alternative fuels by 2017; by most accounts, an aggressive 
target. One consideration for both current and future fuels 
mandates is the state of the renewable fuels infrastructure. 
Currently, all automakers warranty their vehicle engines to run 
on ethanol blends up to E-10. Automakers also produce flexible 
fuel vehicles that can accept ethanol blends of E-85.
    There are more than 6 million flexible fuel vehicles on the 
road today and Ford, General Motors and the Chrysler Group have 
also pledged to double their annual production by 2010 and to 
make one-half of all vehicles that they manufacture biofuel 
capable by 2012. Although the number of flexible fuel vehicles 
has increased, the availability of E-85 at retail outlets has 
not increased accordingly. There is a wide range of estimates 
for the cost of converting existing infrastructure or 
installing new E-85 infrastructure at all service stations, 
with estimates ranging from $5,000 to $20,000 to convert 
existing equipment and from $2,500 to $75,000 to install new 
equipment, a very wide range of estimates.
    The availability of the appropriate infrastructure is 
necessary for the wide scale deployment of alternative fuels, 
so an examination of the current status, as well as obstacles 
or opportunities surrounding the alternative fuels 
infrastructure is clearly appropriate for this morning. I look 
forward to hearing from our witnesses regarding the expansion 
of use of renewable and/or alternative fuels, as well as the 
related infrastructure issues.
    And we will turn to testimony from our first panel 
momentarily. Before I do that, I am pleased to recognize other 
members for their opening statements and would note that any 
member who elects to waive an opening statement will have the 
time allotted for that opening statement added to that member's 
question period for the first set of witnesses. I am not 
pleased to recognize the ranking member designate for today, my 
good friend, the gentleman from Michigan, Mr. Upton, for 5 
minutes.
    Mr. Upton. Well, thank you, Mr. Chairman, and I am going to 
take the opportunity to defer and as I did not know I was going 
to be in this seat, Mr. Hastert is on his way, so I am going to 
ask unanimous consent that he may defer, as well.
    Mr. Boucher. Without objection, so ordered.
    Mr. Upton. Thank you.
    Mr. Boucher. And I thank the gentleman. The gentleman from 
Illinois, Mr. Shimkus, is recognized for 3 minutes.
    Mr. Shimkus. I will also defer, Mr. Chairman.
    Mr. Boucher. The gentleman defers his opening statement. 
The gentleman from Indiana, Mr. Buyer, is recognized for 3 
minutes.
    Mr. Buyer. I will defer.
    Mr. Boucher. The gentleman defers. The gentleman from 
Oregon, Mr. Walden, is recognized.
    Mr. Walden. Mr. Chairman, I, too, will defer.
    Mr. Boucher. Mr. Walden defers. The gentleman from 
Oklahoma, Mr. Sullivan, is recognized for 3 minutes.
    Mr. Sullivan. I will defer.
    Mr. Boucher. The gentleman from Texas, Mr. Burgess, is 
recognized for 3 minutes.
    Mr. Burgess. Mr. Chairman, I will submit my statement for 
the record and save time for questions.
    [The prepared statement of Mr. Burgess follows:]

  Prepared Statement of Hon. Michael C. Burgess, a Representative in 
                    Congress from the State of Texas

    Thank you, Mr. Chairman.
    Mr. Chairman, this is probably one of the most crucial 
issues facing our country today.
    I firmly believe that America's energy security should be 
this committee's top priority.
    Home-grown fuels, such as biodiesel, cellulostic ethanol 
and coal-to-liquids, can help move the United States towards 
greater energy independence, and can even help to clean the 
environment.
    As we begin work on energy independence legislation, I look 
forward to working with the chairman to include a provision 
that I'm working on which would incentivize clean diesel.
    Diesel engines get an average of 30 percent greater fuel 
efficiency as gasoline engines, so putting more diesel cars on 
the road instead of a gasoline engine is like dramatically 
increasing the CAFE Standard.
    Using biodiesel in those diesel engines can further reduce 
our demand for petroleum.
    And, which this is not in our committee's jurisdiction, I 
hope that the energy independence legislative package will also 
include my bill H.R. 927, which would provide parity for 
biodiesel produced from recycled restaurant grease--something 
that we have in abundance in the Dallas-Fort Worth Metroplex.
    There are numerous challenges to be met as we seek to 
increase our use of alternative transportation fuels--both in 
terms of technology, biology and chemistry, and in terms of 
supporting infrastructure. I appreciate our witnesses appearing 
before us today to discuss these issues.
    Mr. Chairman, I yield back.
                              ----------                              

    Mr. Boucher. The gentleman from Michigan, Mr. Rogers, is 
recognized for 3 minutes.
    Mr. Rogers. Mr. Chairman, I would defer.
    Mr. Boucher. Well, the Republican side of the aisle gets a 
blue ribbon today for perfect consistent performance. The 
gentleman from Michigan, Mr. Dingell, the chairman of the full 
committee, is recognized for 5 minutes.

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

    Mr Dingell. Mr. Chairman, thank you. I commend you for 
holding yet another important hearing regarding energy security 
and climate change. You have been showing extraordinary 
leadership in this matter and I think the committee has reason 
to be very grateful to you.
    Today's examination of alternative fuels is particularly 
important to the committee's ongoing work on these important 
issues. Consumers deserve to have vehicles capable of operating 
on alternative fuels and to have these fuels readily available 
for their use. Ethanol has already helped clean the air as an 
additive to gasoline, 10 percent ethanol blended with 90 
percent gasoline. It is not as an additive, however, that 
ethanol has its greatest potential. Its greatest contribution 
is improving national security and addressing climate change 
will be realized when low carbon ethanol is available at the 
marketplace as a true alternative, 85 percent ethanol blended 
with 15 percent gasoline, commonly known as E-85.
    I look forward to hearing from our witnesses today what 
obstacles remain towards achieving this objective and what we 
can do to overcome it. In addition to E-85, other biofuels such 
as biodiesel, offer unique opportunities to improve efficiency 
and would consume less petroleum. Diesel fuel performs more 
efficiently than gasoline. These properties make diesel fuel 
excellent for heavy duty applications both on and off the road. 
Biodiesel expands upon diesel's natural efficiency by making a 
portion of it renewable. Additionally, biodiesel has fewer 
pollutants than traditional diesel fuel. Without a standardized 
fuel specification for biodiesel, engine and vehicle 
manufacturers have been reluctant to warrant their products 
when used with bigger concentrations of biofuel.
    The potential benefits of biodiesel extend well beyond the 
light duty passengers cars and trucks. If biodiesel is 
standardized and widely available, it has significant potential 
to save petroleum and reduce emissions of carbon dioxide from 
freight, rail, maritime and other transportation sectors, which 
are often overlooked. Establishing a single national 
specification for biodiesel in concentrations of 20 percent and 
greater should be part of any package addressing these issues.
    It is also wise to examine longstanding regulations of both 
fuels and vehicles in the context of alternative fuels. 
Government regulations should encourage alternatives to 
petroleum, not provide disincentives. For example, a corporate 
average fuel economy program regulates how efficiently a 
vehicle burns its fuel. It does not take into consideration, 
however, what fuel it is burning or the level of carbon dioxide 
it is emitting. Assuming our national objectives are to consume 
less petroleum and reduce greenhouse gas emissions, it is the 
efficiency with which a vehicle burns non-petroleum based fuel 
and emits few greenhouse gases. E-85 is less efficient than 
gasoline, yet it displaces petroleum and can significantly 
reduce greenhouse gas emissions.
    We must continue to ask these questions as we proceed with 
new legislation and review existing policies. Biofuels are 
considered in the context of energy security and climate change 
and it is important that we continue to examine how they can be 
made available to consumers true alternatives to petroleum. 
Anything short of that objective will fall short. Thank you, 
Mr. Chairman. I yield back the balance of my time.
    Mr. Boucher. Thank you very much, Mr. Dingell. The 
gentleman from Massachusetts, Mr. Markey, is recognized for 3 
minutes.
    Mr. Markey. I will waive.
    Mr. Boucher. The gentleman from Massachusetts waives. The 
gentleman from Texas, Mr. Gonzalez, is recognized for 3 
minutes.
    Mr. Gonzalez. I will waive.
    Mr. Boucher. The gentleman from Washington State, Mr. 
Inslee, is recognized for 3 minutes.
    [No response]
    Mr. Boucher. The gentlewoman from Oregon, Ms. Hooley, is 
recognized for 3 minutes.

 OPENING STATEMENT OF HON. DARLENE HOOLEY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Ms. Hooley. Thank you, Mr. Chairman I would like to welcome 
all our witnesses and thank you for being here today. I look 
forward to your testimony. I won't take up my full time, but I 
would just like to say a couple things regarding biofuels. 
While I am 100 percent supportive of the pursuit of development 
of biofuels, I would like to encourage my colleagues on this 
committee to not let it divert us from taking other steps to 
limit our dependence on foreign oil.
    One of the most effective ways we can do this is through 
production of more fuel efficient vehicles. Biofuels, while 
worthy of pursuit, and certainly part of the solution, will not 
be a panacea. Biofuels need to be viewed as one piece of a bold 
strategy to begin to move our country toward our goal of energy 
independence. In the President's State of the Union address, he 
proposed his 2010 Initiative to reduce gasoline consumption by 
20 percent by 2017.
    He called for biofuels from ethanol made from wood chips 
and switchgrass to be practical and competitive within 6 years. 
I applaud the President for setting these worthy goals, but I 
question how achievable it is. Corn harvests won't be large 
enough to meet either of the President's 35 billion or 60 
billion gallon targets and alternatives to corn-based ethanol 
aren't yet economically viable, but I hope they will be. As we 
are going to hear today, the U.S. currently doesn't have the 
infrastructure in place.
    While the U.S. continues on its pursuit of alternative 
energy, I would like to remind my colleagues of the good we can 
do and the gains we can make from simply making our vehicles 
more fuel efficient. I hope our witnesses today will be able to 
shed light on the progress that is being made in relation to 
biofuels and what we can do to advance its development in hopes 
of meeting or exceeding the President's goals.
    Thank you, Mr. Chairman, and I yield back the remainder of 
my time.
    Mr. Boucher. Thank you, Ms. Hooley. The gentlewoman from 
Wisconsin, Ms. Baldwin, is recognized for 3 minutes.

 OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Ms. Baldwin. Thank you, Mr. Chairman. I am pleased that we 
are continuing our alternative fuels discussion that we began a 
few weeks ago. Our Nation is producing renewable fuels at 
record rates and we now have the ability to expand our 
projection even more. It is time for us to take significant 
advantage of this opportunity to advance our use of home-grown 
biofuels and in turn, reduce our dependence on foreign oil and 
prepare ourselves for a post-petroleum economy of the future.
    Renewable fuels have been good for our environment, our 
economy and our farmers and our Nation's energy future. The 
standard included in the Energy Policy Act of 2005 has led to 
significant growth in the ethanol and biodiesel industries. In 
my home State of Wisconsin, we are well on our way to producing 
more than 500 million gallons of ethanol annually and we will 
still be producing more than 70 million gallons of biodiesel. 
These production levels have reinvigorated rural Wisconsin and 
similar production levels across the country have revived rural 
America.
    But if we are going to use the opportunity presented to us 
today and expand on renewable fuels production, we must ensure 
that it is done with clean and environmentally friendly 
transportation fuels, those that lessen our greenhouse gas 
emissions and protect our air, water and natural resources. I 
have significant concerns about replacing the Renewable Fuels 
Standard with an alternative fuel standard. By altering the 
standard, we are opening up our Nation's mandate to an entirely 
new source of energy production, coal-to-liquid. And while 
coal-to-liquid may be a domestic fuel source, its greenhouse 
gas emissions could be as much as twice as high as petroleum 
based fuels.
    At a time when our committee is prepared to take bold 
action to reduce the greenhouse gas emissions causing climate 
change, I am at a loss for why we would support increased 
production of a fuel that would increase CO\2\ levels. I am 
hopeful that this hearing will shine a light on the truth about 
coals to liquid so that we can move forward with policies that 
will promote our environmental stewardship and our energy 
independence.
    I also look forward to hearing from the witnesses about 
ways in which we can improve the infrastructure that is 
supporting the renewable fuels industry. For instance, is our 
transportation infrastructure, such as rail, able to handle the 
increased supply of ethanol while providing reasonable shipping 
rates? What incentives can we provide to promote consumer 
awareness about the availability of clean fuels and what role 
do Federal, State and local governments play in encouraging the 
use of flex fuel vehicles and E-85 fuel?
    Thank you and I yield back the balance of my time.
    Mr. Boucher. Thank you very much, Ms. Baldwin. The 
gentleman from Georgia, Mr. Barrow.
    Mr. Barrow. Mr. Chairman, I will waive.
    Mr. Boucher. Mr. Barrow waives.
    Any statements for the record will be accepted at thsi 
time.
    [The prepared statement of Mr. Barton follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Boucher.I am pleased now to recognize our first panel 
of witnesses and we welcome to the subcommittee this morning, 
representing the administration, first, Mr. Bob Meyers, who is 
the Associate Administrator of the Office of Air and Radiation 
of the Environmental Protection Agency, certainly no stranger 
to this committee. And Mr. Meyers, we welcome your return to 
the committee this morning. We also welcome Mr. Andrew Karsner, 
the Assistant Secretary for Energy Efficiency and Renewable 
Energy for the U.S. Department of Energy, who testified before 
our subcommittee last week. We enjoyed your testimony so much, 
we decided to have an encore this morning and we welcome you, 
as well.
    Without objection, your prepared written statements will be 
made a part of the record. We would welcome your oral summaries 
and ask that you keep those to approximately 5 minutes. Mr. 
Meyers, we will be pleased to begin with you.

STATEMENT OF ROBERT MEYERS, ASSOCIATE ASSISTANT ADMINISTRATOR, 
 OFFICE OF AIR AND RADIATION, ENVIRONMENTAL PROTECTION AGENCY, 
                         WASHINGTON, DC

    Mr. Meyers. Thank you, Mr. Chairman and members of the 
subcommittee. I also appreciate the opportunity to come before 
you today and testify on how the expanded use of renewable and 
alternative fuels supports the President's goals of enhanced 
energy security and strengthen environmental protection. Your 
letter of invitation asks three questions and I am going to try 
to attempt to address each one in the order that they were 
asked.
    First, with regard to the status of the Renewable Fuels 
Standard, or RFS, on April 10 Administrator Johnson signed the 
RFS rule and the rule published just a few days ago, on May 1. 
Initial compliance with the RFS rule will be required on 
September 1, 2008. This rule implements section 211(o) of the 
Clean Air Act established by the Energy Policy Act of 2005. 
Although the rule and its accompanying analysis run many 
hundreds of pages, this wide-ranging rule actually accomplishes 
a very direct and straightforward result. It essentially 
provides the rules of the road for our best implementation, 
including a credit trading program that works within existing 
market structures.
    EPA estimates that by 2012, the transition to renewable 
fuels will result in reductions of between 2 and 3.9 billion 
gallons of petroleum consumption per year. In the same year, we 
estimate that the RFS and increased use of renewable fuels will 
achieve reductions in carbon dioxide and equivalent greenhouse 
gas emissions between 8 and 13.1 million metric tons. Further 
effects on the air quality are detailed in my written statement 
and included in the agency's accompanying regulatory impact 
statement.
    I should note that EPA's analysis of the rule acknowledges 
that renewable fuel use in the transportation sector will very 
likely exceed the mandates established in the RFS. Experience 
to date has warranted this out. However, it should be 
emphasized that the promulgation of a final rule allows such 
use to occur with the existence of a flexible credit trading 
and banking system and with proper verification. In addition, 
section 211(o) only specifies RF levels through 2012; years 
following are subject to administrative determination. Thus, 
the RFS rule will remain a vital part of the renewable fuel 
implementation for the foreseeable future at what volumes are 
experienced.
    You also requested views with respect to proposals to 
change the RFS by increasing the amount of renewable fuels 
required or to expand specific requirements on feedstock will 
burden the overall mandate. My written testimony and the 
testimony of Assistant Secretary Karsner details the 
administration's legislation to enact the Alternative Fuel 
Standard or AFS. Along with the legislation the administration 
has on reformed CAFE, the AFS responds to the President's 
challenge in the State of the Union address to reduce gasoline 
consumption by 20 percent in the next 10 years.
    The AFS builds off a structure of the RFS and specifies 
that 35 million gallons of alternative fuel be used in the 
Nation's transportation fuel by the year 2017. The AFS would 
include all fuels that are currently part of the RFS. It would 
include fuels currently classified as alternative fuels under 
the Energy Policy Act, as well as other fuels that can qualify 
as alternative fuels.
    On a fundamental level, then, this structure should provide 
additional competition to the alternative fuel marketplace. The 
AFS defines ethanol, butanol, natural gas, liquefied petroleum 
gas, hydrogen, coal-to-liquids and electricity among its 
included fuels. As proposed by the administration, the AFS 
would replace the RFS in the year 2010, but would retain the 
flexible credit and banking and trading mechanisms pioneered in 
the RFS. The legislation provides for an accelerating schedule 
for AFS requirements in the years 2010 through 2017.
    Although different AFS fuels will serve to offset 
greenhouse gas emissions by different amounts, increasing the 
use of fuels under an AFS program could result in greater 
greenhouse gas emission reductions in our current mix of fuels. 
For example, one advantage of the longer timeframe provided by 
the President's proposal, along with market incentives it 
creates, is allowing for commercial development of cost-
competitive cellulosic ethanol.
    Cellulosic ethanol may achieve very large greenhouse gas 
reductions, up to 90 percent compared with petroleum based 
gasoline. Other fuels like electricity, compressed natural gas 
and liquefied natural gas can achieve substantial greenhouse 
gas reduction. Ultimately, the level of greenhouse gas 
reductions achieved by the AFS will depend on the 
implementation of the program, market forces, the incentives 
available for the development of various renewable and 
alternative fuels and the mix of fuels used to meet the target.
    Finally, you asked about policies that Congress could enact 
that would hasten the development and deployment of necessary 
infrastructure. Obviously, I will point to Twenty in Ten and 
the legislation the President has put forth and the very real 
incentives that this legislation can produce by expanding and 
building upon the structure Congress enacted in the RFS. We 
stand ready to work with this committee and Congress as you 
move to consider Twenty in Ten and related legislation.
    In addition, I would be remiss if I also did not note that 
EPA's initiated a voluntary partnership that can lead to 
greater penetration of the E-85 structure. The initiative is 
designed to expand our existing program to promote the 
introduction of E-85 in transportation quarters and among 
fleets.
    Thank you, Mr. Chairman and members of the subcommittee, 
for this opportunity. This concludes my prepared statement and 
I would be pleased to answer any questions that you might have.
    [The prepared statement of Mr. Meyers follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Boucher. Thank you very much, Mr. Meyers. Mr. Karsner.

STATEMENT OF ALEXANDER A. KARSNER, ASSISTANT SECRETARY, ENERGY 
  EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY, 
                         WASHINGTON, DC

    Mr. Karsner. Chairman Boucher, members of the committee, 
thank you for the opportunity to present the administration's 
views on its Twenty in Ten goal and to discuss programs under 
way at the Office of Energy Efficiency and Renewable Energy, 
EERE, at the Department of Energy to accelerate the development 
and deployment of renewable fuels and alternative fuels that 
will reduce our Nation's dependence on oil and enhance our 
energy security.
    In his 2007 State of the Union address, President Bush 
challenged our country to reduce gasoline consumption by 20 
percent within the decade, the Twenty in Ten plan. The 
President called for a robust Alternative Fuel Standard 
requiring the equivalent of 35 billion gallons of renewable and 
alternative fuels. The goal is a significant expansion of the 
7.5 billion gallon target now in law for 2012 under the 
Renewable Fuels Standard. The Twenty in Ten plan holds the 
promise of diversifying our sources, types and volumes of fuels 
we use, while reducing our vulnerabilities and dependencies on 
oil. Only through transformational technological change can 
these goals be achieved and we believe the administration's 
proposals provide the tools to achieve them.
    The Department's portfolio of research, development and 
commercialization activities support the Twenty in Ten and 
longer-term clean energy goals. The Department is particularly 
focused on solving technical problems to overcome the barriers 
to biofuels growth through a strategic cost-shared partnership 
with private industry and collaboration with other agencies. 
Together, with the financial tools already included in EPAct 
2005, we believe that this multi-pronged effort will expand the 
role of domestically produced biofuels in our Nation's energy 
supply and our economic future.
    Our biomass program is focused on making cellulosic ethanol 
cost competitive by 2012, a target put forth in the President's 
2006 Advanced Energy Initiative. Just last week, Secretary 
Bodman announced the availability of up to $200 million for 
cellulosic bio-refineries at 10 percent of commercial scale, 
subject to appropriations. The 10 percent scale demonstrations 
have the potential to reduce the overall cost and risk to 
industry and contribute to the quicker commercialization of 
larger scale facilities.
    Additionally, DOE will invest up to $385 million for as 
many as six commercial scale bio-refineries over the next 4 
years, subject to appropriations. The development and 
deployment of a biofuels distribution infrastructure in the 
United States is fundamental to providing for displacement of 
gasoline and increased consumer choice.
    To bring these issues into focus, the Department has 
developed a biofuels infrastructure team to support greater 
convergence between our vehicle technologies and biomass 
program. As a result, the Department is pursuing a growing 
number of infrastructure activities, including analyses of 
feedstocks, pipelines, terminal facilities, storage and vehicle 
technologies. The President's Twenty in Ten goal holds the 
promise of accelerating penetration of cellulosic ethanol and 
other alternative fuels into the marketplace and bringing the 
benefits of a clean, renewable and alternative energy source 
more quickly to the Nation.
    To meet these challenges, cutting edge research, 
development, deployment and commercialization must indeed be 
supported by transformational policy changes, the types of 
proposals that the President in the State of the Union. The 
administration looks forward to working with Congress to shape 
these policies and legislation that can make this happen.
    This concludes my prepared statement and I would be happy 
to answer any questions the committee may have.
    [The prepared statement of Mr. Karsner follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Boucher. Well, thank you very much, Mr. Karsner, and 
thank you, also, Mr. Meyers. My questions are propounded to 
both of you or to either who chooses to answer.
    The President's target of 35 million gallons of alternative 
fuels by 2017 is certainly an aggressive target and I note that 
in order to meet that, the President is proposing to encompass, 
within the category of alternatives, both those fuels that are 
currently part of the Renewable Fuels Standard and other fuels, 
as well. I would assume that within the category of the other 
fuels encompassed would be coal-to-liquids. Is that correct, 
Mr. Meyers?
    Mr. Meyers. Yes. The bill uses EPAct definition of 
alternative fuel, which currently includes coal-to-liquids.
    Mr. Boucher. Do you have, within the proposal, any specific 
targets for each type of fuel that would be covered?
    Mr. Meyers. No, the legislation does not establish specific 
targets for any one fuel.
    Mr. Boucher. Cellulosic ethanol will obviously be a large 
part of how this new mandate would be fulfilled. Currently, 
there are no commercial cellulosic ethanol production 
facilities, so at what point do you anticipate that cellulosic 
ethanol will be commercially viable and added to the 
production? And then looking over a 10-year period, to the end 
point of your mandate, how much do you think cellulosic ethanol 
will contribute to achieving that 35 billion gallon per year 
total? Mr. Karsner.
    Mr. Karsner. Mr. Chairman, I agree with the premise of your 
question that cellulosic ethanol can and likely will be amongst 
the largest contributors to such a mandate being fulfilled. As 
Bob indicated, we don't like to choose what the balance would 
be between the technological pathways that would get us there. 
We have very deliberate plans at the Department of Energy to 
stand up competitive commercial-ready cellulosic ethanol 
facilities by 2012. At that point the question is at what rate 
can they be replicated across the Nation? What is the policy 
environment? Is it durable and predictable enough for investors 
to amass sufficient capital to replicate commercial scale 
facilities that will matter?
    Mr. Boucher. And so just picking a number, do you have a 
sense of how much contribution to this 35 billion gallon 
mandate cellulosic ethanol will be?
    Mr. Karsner. I don't have such a number because it is 
impossible to isolate exclusively the viability of the 
technology away from what the policy environment conditions are 
that will ultimately drive the capital market investments. All 
three of those factors have to work in harmony. What I can say 
is that I do believe cellulosic ethanol is sufficiently 
technologically mature and not requiring technological 
breakthroughs, that if the policy environment were correct, it 
could accelerate much faster.
    Mr. Boucher. So in order to derive this 35 billion gallon 
annual number, you did not assign specific projected volumes to 
individuals fuels, including cellulosic ethanol or coal-to-
liquids. You simply assume that the combination of all of them 
could get us to 35 billion gallons. Is that accurate to say?
    Mr. Karsner. I think it is correct to say that rather than 
taking any one fuel type, it was the President's objective to 
take a top line objective, which was 20 percent reduction in 
our gasoline supply within the decade and create as open a 
platform as possible to enable as many alternatives to gasoline 
to compete.
    Mr. Boucher. One of the major problems that we confront is 
the adequacy of the infrastructure for alternative fuels in the 
United States at the retail level. Service stations don't have 
sufficient availability of ethanol and E-85 pumps in order to 
satisfy the flexible fuel vehicle demand that is anticipated. 
There are issues about the availability of flexible fuel 
vehicles. Does your proposal encompass any infrastructure 
upgrades and to what extent have you treated this obvious need 
in the recommendations coming from the administration?
    Mr. Karsner. The alternative fuels proposal does not 
directly address how to bring about the infrastructure 
necessary for retail delivery. There is an underlying 
assumption of market adaptation. We, of course, have the Clean 
Cities program that works, really, on a voluntary basis with 
mainly downstream independent retailers to bring on that 
infrastructure. To give you an idea, last year was a record 
year. We added 450 stations on top of the Nation's 750 
stations, so with about a 70 percent growth rate, we are, as of 
yesterday, at 1,200 stations that can serve E-85. At that 
record rate, were we to maintain it, it would still take more 
than 100 years to get to critical mass, up to about 50,000 
stations that are needed to make a difference for E-85 
infrastructure.
    Mr. Boucher. So how do we address that challenge? I 
understand that your initial proposal does not make specific 
infrastructure improvement recommendations for our 
consideration, but do you have recommendations for us or will 
they be forthcoming from you?
    Mr. Karsner. I think it is a worthy issue for the Congress 
to deliberate on, to try to examine what forces will enable 
either voluntary uptake of E-85 distribution predominantly 
amongst the majors that have been thus far recalcitrant to 
bring it on board, or whether further policy stimulus is 
necessary. But if E-85 is to be a primary pathway, we will need 
a substantially larger growth rate than current mechanisms 
provide.
    Mr. Boucher. OK. Thank you both very much. My time has 
expired. The gentleman from Illinois, Mr. Hastert, is 
recognized for 5 minutes.
    Mr. Hastert. Thank you, gentlemen. Thank you, Mr. Chairman, 
for having this hearing today.
    Mr. Karsner, I just listening to your testimony. You said 
you assume that the market would be able to readapt, in your 
statement. Is there anything that is causing problems, in your 
mind, that is causing the market not to readapt?
    Mr. Karsner. Yes. The market is like anything else in 
society, it has imperfections. And there are certain 
imperfections in the scenario of planning the profitability of 
private corporations that would not lead them to think in 20- 
and 30- and 50-year cycles that the Nation requires for this 
magnitude of adaptation. And so the inherent nature of 
investing and the net present value calculations needed would 
lend ourselves towards shorter-term calculations, so there are 
just limitations inherent in the marketplace.
    Mr. Hastert. What about the ability for the marketplace to 
work has to have kind of free flow supply and really a free 
flow of demand. What if there are actual impediments to the 
demand side? What happens?
    Mr. Karsner. I'm not sure I understand the question. What 
type of impediments?
    Mr. Hastert. Well, let us say, for something like 
Underwriters Laboratory insists on not bringing forward a 
standard for pumps. That would impede a gas station, an oil 
company or a delivery company for gasoline retail can't get the 
liability clearance to put in a pump, so does that impede the 
market?
    Mr. Karsner. Only nominally, only marginally, if at all. 
How do you mean?
    Mr. Hastert. Nominally or marginally. Well, if you can't 
buy the gasoline at the station, how do you deliver the 
product?
    Mr. Karsner. Well, with regard to that specific example, 
sir, the Underwriters Laboratory issue has largely been 
bypassed by the State regulators, the fire marshals in the 
counties and so we haven't seen any significant impediment to 
the growth of E-85 relative to the examination period for UL to 
certify those pumps.
    Mr. Hastert. I think you are really off base, because I can 
tell you, delivery companies won't put in pumps unless they get 
legal liability. If you can't get legal liability unless they 
are certified by Underwriters Laboratory. So you got somebody 
with a fist around the pipeline. Aren't you aware of that?
    Mr. Karsner. Not only are we aware of that, we are working 
very closely with our laboratories, with Underwriters 
Laboratories to resolve the issues and we would expect it to be 
resolved and behind us by the end of this year.
    Mr. Hastert. Well, let me ask you a question. If you are 
going to resolve the issue and they had every piece of the pump 
certified last year, then they completely withdrew all those 
certifications. How are you moving forward? I don't understand 
that.
    Mr. Karsner. Well, I think it is a question of, as you 
indicate, the insurance companies, oil distributors that are 
interested in installing that infrastructure very much value 
the Underwriters Laboratory's seal of approval. Underwriters 
Laboratory has its own processes for determining that that seal 
of approval is. It is not a governmental process, inherently. 
They had previously, as you indicated, certified independent 
parts and components, but the very growth rate and nature of E-
85 compelled them to take another look at it and say that they 
wanted to certify the systems holistically. When they did that, 
we urged them to do that with haste and opened up the national 
laboratories in a collaborative way to try and get on a very 
deliberate schedule to do this in a timely manner and we worked 
with the States and the fire marshals to assure that growth 
would continue unabated. I do agree with you that it is a 
constraint, but it is a constraint that I was indicating could 
be overcome in a very short order.
    Mr. Hastert. Well, Mr. Karsner, if somebody wanted to 
jigger the market and make sure that the supply wasn't 
available and so people who manufacture flex fuel cars have no 
customers because the customers can't find a gas pump, don't 
you think that is an impediment? Have you looked farther 
beyond, just the face of this? Who is holding this up? Why 
would an institution like Underwriters Laboratory take 
everything back off the table? That doesn't make sense.
    Mr. Karsner. Yes, I agree with your sense of urgency, sir, 
but I hesitate to make Underwriters Laboratory a culprit based 
on what their own processes for safety inspections, so forth, 
are. This is really a question of magnitude, so who it is 
affecting is the independent downstream retailers that are, in 
fact, very small participants in the distribution----
    Mr. Hastert. I understand that. What I am saying, have you 
ever thought about maybe having the Justice Department look in 
at who is doing the funding for Underwriters Laboratory?
    Mr. Karsner. I have not thought of that, sir.
    Mr. Hastert. Well, do you think that might be a good idea?
    Mr. Karsner. I am not sure I am qualified to put an opinion 
up for----
    Mr. Hastert. I pass.
    Mr. Boucher. Thank you very much, Mr. Hastert. The 
gentleman from Texas, Mr. Gonzalez, is recognized for 8 
minutes.
    Mr. Gonzalez. Thank you very much. I just wanted to make 
sure that not only am I efficient, but that I have enough fuel 
here. Let me ask you, Mr. Karsner, the concern here, in this 
committee, we are juggling two considerations. One is going to 
be oil independence, the other is climate change. I am not sure 
how you incorporate the climate change elements in your policy. 
The concerns I have, and I am going to play the devil's 
advocate, but it does not mean that I don't believe that we can 
forge some sort of policy that will adequately address both of 
those concerns, but nevertheless, it appears to me that not 
necessarily that you are putting in all of your eggs in one 
basket with ethanol, but that you are looking to ethanol as a 
primary source, as the large or a huge proponent of the 
solution when it comes to oil independence.
    This is my concern, how you factor all this in. Does 
ethanol provide you better gas mileage, which should be part of 
the equation? The answer is probably no because it is 20 to 30 
percent less efficient as far as a power source than gasoline. 
Does the production of ethanol increase the use of energies in 
the production cycle? And my understanding is that it does, but 
we, again, we are producing an alternative, but it is costing 
us more in investment in other energies to produce that.
    Does it provide advantages when it comes to climate change? 
Yes and no. My understanding is that, of course, it is one of 
those things where the benefits might be with carbon dioxide, 
but not necessarily with nitrogen oxide and other pollutants. 
Does it cost the Federal Government less in the way of an 
alternative, that is ethanol? My understanding is that there is 
a 51 cent a gallon tax credit that is extended to those that 
use and produce.
    The question of food versus fuel. And I know it is not all 
about corn, but nevertheless, the implications are great. My 
understanding that, in 2008, half of the United States corn 
harvest will be directed for ethanol use and of course, we have 
seen the price increase from $2 a bushel to $4 a bushel.
    Taking all that into consideration, how do you balance your 
policy making?
    Mr. Karsner. Is that for me?
    Mr. Gonzalez. Mr. Karsner.
    Mr. Karsner. Yes, sir. You brought up a number of very key 
issues and like any fuel source, ethanol will have its 
characteristics, its advantages, its relative disadvantages and 
all of those can be answered one way or--I will start by 
saying, first and foremost, it is not selecting ethanol for its 
endemic characteristics or choosing it as a primary technology 
pathway, because we don't like to choose technology winners. 
The reason why ethanol appears to significant is because 
quantitatively, it has the greatest capacity for volumetric 
growth relative to displacement of gasoline, so quantitatively 
rather than qualitatively, it stands out.
    With regard to the pricing of ethanol, the energy content 
question, it is not necessarily the miles per gallon that is 
really as important, per se, as the price parity for the energy 
content. In other words, if the pricing of the ethanol you 
purchase is relative or cheaper on a miles per gallon basis, 
then price parity is demonstrating that the consumers will take 
it on. There is a lot of mythology, misinformation and 
disinformation with regard to the energy content and loss with 
ethanol, in general, and it is mainly aimed at our conventional 
ethanol rather than future advanced generation ethanol, 
cellulosic ethanol, which has significantly different 
characteristics through biochemical and thermo-chemical 
platforms.
    But let me address it even in the conventional ethanol 
arena, it will depend on the power source that is used in a 
conversion process as to what the gains in the energy balance 
would be, but in all cases, that energy balance, when compared 
against the fossil energy or petroleum incumbents, should be 
better and one could make the same statement about ethanol 
versus gasoline on a greenhouse gas basis and that is, just 
again, taking the conventional ethanol and comparing it with 
gasoline, not even going to where we want to go, which is the 
cellulosic ethanol, which is substantial improvements across 
the board in all of these.
    I won't touch on the food versus fuel debate. It is really 
the domain of the Department of Agriculture and their 
economists, to a large degree, except for to say that we are 
seeing significantly more crop yields and planting, so there is 
some degree of adaptation and year on year adjustment in the 
market that is yielding more equilibrium, but of course, these 
things lag in time, so it is always difficult to take a 
snapshot in time when you have had a record growth of ethanol 
on one year and say what is the disparity to corn plantings. I 
think we will see more and more equilibrium as the fuel source 
grows.
    But the bottom line is for all of these reasons, we focus 
not on ethanol, but on all technology pathways that are 
domestic, that are clean and can be made affordable as 
alternatives to gasoline because that is what our energy 
security and our environmental needs demand.
    Mr. Gonzalez. My concern, the administration is joined with 
some Members of Congress in not looking at the overall picture 
and that is my concern. We are not taking all facets. My fear 
is we are going to be putting out--there is a feel good message 
and there is always an inclination to do that and that is a 
real concern. I wish that we could look at it holistically. I 
don't think that we are really doing that and I understand 
there is a whole lot of politics at play. And I have about 2 
minutes. And Robert Samuelson posted, on the 24th of January of 
this year, had an article--you probably read it and I want you 
to be able to respond to one of his assertions, which I don't 
know if it is totally accurate.

    Let us do some basic math. In 2006, Americans used 7.5 
billion gallons 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, bond fuels would address 
part of the increase in oil demand. It wouldn't reduce our oil 
use or import dependence from current levels.

     How do you respond to that?
    Mr. Karsner. I respond by saying that that is a fairly one 
dimensional mathematical exercise and that I am not sure I 
agree with your overall premise that we are not looking at this 
in a holistic, integrated way. It happens to be the primary 
focus of the subject again, quantitatively, volumetrically, 
near-term that ethanol and biofuels take up a larger piece of 
the conversation, but it does not take up a larger priority 
from the Department of Energy's perspective and the National 
Laboratory's perspective and so Mr. Samuelson didn't account 
for what the advances might in lithium ion batteries and the 
capacity to integrate better fuel injection and compression 
ratios in our engines and higher efficiency lightweight 
composites in our vehicles. And so all of these things combined 
will make up a better fuel future and biofuels will be a piece 
of it. It is certainly the piece that is nearest on the horizon 
that we can clutch and quantify greater, but it is only a piece 
of it and we are working on all of these things, not a single 
silver bullet, but really, silver buckshot.
    Mr. Gonzalez. And my time is up. Thank you very much and I 
yield back the 10 seconds.
    Mr. Melancon [presiding]. Thank you, Mr. Gonzalez. Mr. 
Upton for 8 minutes.
    Mr. Upton. Thank you, Mr. Chairman, and Mr. Meyers, welcome 
back to the committee. It is good to see you. I have a truck 
engine research facility, Eaton, in my district in Michigan, 
and they have done just some marvelous work on redesigning 
diesel engines so that they don't have to idle, so whether it 
is a UPS truck making deliveries or trucks making repairs on 
the telephone poles and truckers idling at night as they pull 
over; they don't have to turn on their engines with the new 
techniques and I would love to get you or the administrator out 
sometime this summer to look at what they are doing. I may 
submit a question, for the record, in terms of some of the 
difficulties that they are having, but it really is advanced 
and they think they can save millions of gallons, as we look 
down the road and you all, I think, have been helpful, but I 
would love to let you kick the tires a little bit. I have 
driven some of the trucks around and it would be great to have 
you come out----
    Mr. Meyers. I would happy to accommodate your request.
    Mr. Upton. I have cosponsored the legislation that is being 
submitted by Mr. Boucher and Mr. Shimkus which includes carbon 
sequestration. And with that carbon sequestration there is some 
pretty good evidence that harmful emissions are actually, maybe 
even lower than current fuels. I think the statistics show it 
is nearly above it. It can show that, in fact, the emissions 
are less than today and I am just curious to know, as we look 
to move this legislation forward, where are we in terms of an 
update in terms of regulations as it relates to carbon 
sequestration under the Safe Drinking Water Act?
    Mr. Meyers. Well, Mr. Upton, I am with the Office of Air 
and Radiation, so I wouldn't speak exactly to where we are with 
regard to safe drinking water regulations, but we have been 
working on that issue and the Office of Water and I would like 
for them to submit more information, but we worked on guidance 
for experimental wells that should allow basic R&D work that is 
necessary for carbon sequestration to move forward. There are 
longer-term issues in the UIC program, the Underground 
Injection Control program--to address those longer term--but we 
are moving forward, as an agency, on this issue.
    Mr. Upton. Great. Maybe you can provide something for the 
record or a comment. I look forward to seeing it. Mr. Karsner, 
we all want to help the auto industry, we all want more fuel 
efficient vehicles and a number of us are concerned about 
unfunded mandates in terms of how we get there. I was a 
supporter of this last year, of getting the chairman of the big 
three, actually even more than that, to come down and meet with 
the President.
    If you will remember, even recently, they had a number of 
the vehicles out on the south lawn and I thought we were well 
on the way to seeing pretty decent funding for the Advanced 
Battery Consortium project and as I saw those numbers last 
November, they were asking for about $100 million for that 
fund. And I was very surprised to see, in the President's 
budget, that they didn't ask for $100 million, which I thought 
that he had signed off on, but it was only $11 million in terms 
of the President's budget as it was submitted.
    I just wonder if you might comment on that in terms of 
where the administration is as we look to fulfilling that goal.
    Mr. Karsner. Yes, sir. I am not sure what component you 
were looking at for 11. It is a little bit tricky the way that 
we have reorganized, in the budgetary lines, the way hybrids, 
electrification and plug-ins have been characterized, but I am 
quite sure it is more than 11. I would be happy to report back 
for the record what those numbers are.
    Mr. Upton. Is it a lot more than 11?
    Mr. Karsner. It was more than doubling from the previous 
year, let me say that, and the substantial delta between what 
the automakers had proposed and what the national program is, 
is really, to a large degree, learning, demonstration and early 
deployment and manufacturing studies. So we are in general 
agreement. In fact, we work very closely with the automakers 
through our FreedomCAR and Fuel Partnership and are integrating 
plug-in and electrification technologies alongside of the 
existing hydrogen program.
    But we are working out the details and approaches to how we 
might work together with regard to manufacturing and 
demonstrations. We think it is very important that we don't 
over-invest in demonstrations that are very far ahead of their 
time and focus more exclusively on concept cars rather than 
cars that can be placed in people's garages. And so there isn't 
a big difference on the scope and direction, but maybe on some 
of the details of the program. But we are very enthusiastic 
about working together on battery technology.
    Mr. Upton. Mr. Doyle and I have introduced legislation that 
would require a 10 percent mandate on ethanol, very much along 
the lines of what some States have done. Minnesota has always 
been a real leader in that effort. Where is our delivery 
system, our pipeline system, in terms of being able to meet 
such an increase in renewable fuels mandate? Are they capable 
of doing that or is the Department looking at what stress or 
corrosion might be there? Where are we in terms of studying the 
current infrastructure and what needs to be done----
    Mr. Karsner. It is a great question and an essential part 
of the puzzle, is the delivery and transportation 
infrastructure from the facilities into wholesale and retail 
delivery systems. It is predominantly the domain of the 
Department of Transportation, but I am please to report that we 
have worked very closely with them. We recently had an off-site 
with the senior leaders, Deputy Secretary Admiral Barrett, and 
are going to work together on a program together on the issue 
of pipeline delivery systems. But as you know, ethanol is not 
particularly conducive to sharing that pipe, because of the 
water issues, with other fuel sources and that makes it a bit 
more difficult and challenging than future alcohols like bio-
butanol, for example. But it is our understanding that the 
pipeline industry is very keen and interested in getting into 
more exclusive investment of ethanol dedicated pipelines.
    Mr. Upton. Thank you. I yield back.
    Mr. Melancon. Thank you, Mr. Upton. Next, Mr. Inslee for 8 
minutes.
    Mr. Inslee. Thank you. We were talking about the need to 
accelerate getting E-85 pumps in for consumers so we have a 
choice and I would offer one step forward. Today I will be 
introducing the Federal Low Carbon Fuels Act, myself and 
several other of my colleagues, that will basically set up a 
requirement that our fuels meet certain standards for reducing 
carbon dioxide emissions from their combustion and we think 
this is absolutely imperative if we are going to meet our 
national goal of reducing the threat of global warming, by 
increasing the efficiency of the reduction of CO\2\ from our 
various fuels and I believe it is necessary to have such a 
standard in addition to an RFS, because we are going to have so 
many different types of fuels, including electricity, and which 
is one of the things that gets credit in my bill.
    This is an approach that I hope you will give some thought 
to because one of the things we want to do is allow coal to be 
burned cleanly, the CO\2\sequestered, then the electricity can 
go through the wires through our garages into our plug-in 
vehicles and the coal fire-fired utilities would be able to 
earn credits under this standard. Here is a way to incorporate 
clean coal into our transportation sector in a way that reduces 
CO\2\, rather than increases it if you don't sequester the 
carbon and coal-to-liquid system or make it no better, 
marginally better, perhaps 2 percent better.
    This is a way to use electricity and get it into our 
standard. So I guess I hope that you will give some thought to 
this and we would like your input, of course, after you have 
had a chance to take a look at the bill. This is an approach 
that is starting to be used in California and Europe and the 
bipartisan National Commission on Energy Policy have suggested 
a low carbon fuel standard in that regard. So what are your 
thoughts about this idea, that we should be integrating 
electricity into our consideration of fuels? Have you thought 
about that? Is that in any of your plans at all?
    Mr. Meyers. Well, within the AFS legislation that was 
submitted, electricity is a qualified fuel, so within the 
President's bill, electricity could participate in the AFS 
system.
    Mr. Inslee. Now, my understanding, my concern of your 
proposal for an alternative fuels, my reading of it, it goes 
backwards on a CO\2\ or a global warming provision. And the 
reason I say that is, in the original RFS, you essentially have 
most all the fuels are going to have some CO\2\ benefits to 
them. But then what you essentially opened the door and you 
said now we are going to give credits to these non-CO\2\ 
reducing fuels. You essentially go backwards from the step 
forward we took to move forward on CO\2\ reduction. How can we 
think other than it is a step backwards when it comes to CO\2\ 
reduction?
    Mr. Meyers. Well, Congressman, I think first you have to 
look at the types of fuels that are in the AFS and if you go 
down the list through cellulosic ethanol, biodiesel, 
electricity, gaseous hybrids and compressed natural gas, 
liquefied natural gas, corn ethanol, liquid bio-petroleum gas, 
methanol, they are all positive--according to our most recent 
estimates. With respect to CTL, I certainly would acknowledge 
the issue of carbon emissions from CTL. I think that is 
something that is well known. We have analyzed that, also, and 
our figures are with carbon sequestration--so you have a small 
increase----
    Mr. Inslee. What size?
    Mr. Meyers. 3.7 percent.
    Mr. Inslee. Do you consider that less than small? We 
certainly do. We have to get an 80 percent reduction of CO\2\ 
by the year 2050. Three percent is nothing. I guess I am going 
to ask you this question. If we are serious, if we are serious 
in this country about getting to an 80 percent reduction of 
CO\2\ by 2050, are you seriously suggesting that a 3 percent 
reduction, starting a whole industry--instead of going to a 
technology that can reduce it, which is ethanol or electricity, 
burning coal cleanly, creating electricity, putting it in our 
cars, using coal in a clean way that reduces our CO\2\ 
somewhere between 45 and 90 percent, depending on how you 
count, wouldn't you think that the preferable way is to use 
coal if we want to reduce CO\2\ emissions?
    Mr. Meyers. I didn't mean to suggest it was a small 
increase. What I meant to suggest was our currently analysis 
and the assumptions projected that percentage increase. Under 
different sets of assumptions, higher carbon capture rates, it 
might be possible for CTL to be actually negative. Regardless 
of that, the other aspect of this is in terms of where the fuel 
will be used. If you assume a CTL production which produces a 
very high quality diesel, when diesel is used in the market, it 
expands the diesel market. Diesel engines inherently are more 
efficient. So it depends on how you approach the issue--how you 
look at the mix of the fuels that are used in transportation--
--
    Mr. Inslee. Well, let me just ask you about coal. To me, we 
have two opportunities in coal. One is to burn it in combined 
cycle plants, sequester the CO\2\, run the energy through our 
lines into our garages, put it into our plug-in cars, run them 
for 40 miles at 1 cent a mile--it costs 9 cents for gas today--
1 cent a mile. After 40 miles you use ethanol or gas after 
that. If you use coal in that way, which my bill would suggest 
we should, you can reduce your net life cycle CO\2\ emissions 
by somewhere between 45 and 90 percent, depending on what else 
you burn with the electricity.
    The alternative way to use coal is to make it into a 
liquid. If you don't sequester it, you increase CO\2\ 118 
percent. If you do sequester it under the scenario you 
suggested, maybe we can reduce it by 3 percent. Which of those 
alternatives would be preferable to reduce our global warming 
gases? In your opinion.
    Mr. Meyers. Well, Congressman, it accommodates both. And 
exactly what you just described----
    Mr. Inslee. I would like to direct you to my question. 
Which of those two approaches do you think would be better if 
we have to solve global warming?
    Mr. Meyers. Congressman, I think the approach to global 
warming is a complicated issue in terms of the variety of 
inputs----
    Mr. Inslee. Let me ask you a different question. If one way 
of using coal will reduce CO\2\ by 45 to 90 percent and one way 
of using coal will reduce it by 3 percent in the best case 
scenario, how could you conclude other than that the better way 
to use coal is by turning it into electricity cleanly in 
running our plug-in hybrids? How could you conclude anything 
but that?
    Mr. Meyers. Under the parameters of just looking at 
emissions, you might make that conclusion. However, I think the 
issue of climate change has an economic component to it. What 
is unstated here is the economics of each avenue. I can't 
present you with analysis right now what the economic tradeoffs 
would be in each avenue of supplying the market. The one thing 
the AFS tries to do is not pick winners and losers on the 
economic marketplace and to that extent, we strove for economic 
efficiency in the proposal. But I am not trying to avoid your 
question. Obviously, if one method produces less GHG per gallon 
per mile, that, on the emissions standpoint, is something that 
has better a profile than one that doesn't. But the issue of 
climate change and how to approach it is much more complicated 
than just the emissions. You have to look at the----
    Mr. Inslee. I appreciate your time, gentlemen. We are going 
to try to get you more R&D dollars. We have had a 65 percent 
reduction in your R&D dollars since 1979. We are going to try 
to do better for you. It is ridiculous when we have this 
existential threat to be cutting your R&D budget. Thank you.
    Mr. Melancon. Thank you, Mr. Inslee. Mr. Barton up to 5 
minutes.
    Mr. Barton. Thank you, Mr. Chairman. It is always good to 
see our two witnesses here, one who used to be counsel to the 
committee and the other, who is doing a good job in the 
Department of Energy.
    Before I get into questions, I want to make a statement 
about something that is not material to this hearing, but I 
think is material to this Congress. Dr. Michael Burgess, who is 
a member of this committee, told me, when I walked in this 
morning that he had an appointment just last evening at 4 
o'clock to look at the Intelligence bill, which is supposed to 
be on the floor later this week and that when he got over to 
the Intelligence Committee for his scheduled appointment, he 
was told by a majority staff person that he couldn't look at 
the bill.
    Now, to me that is an outrage. We ought to be able, 
especially bills that are scheduled to be on the floor, if you 
take the time to make an appointment--now obviously, an 
Intelligence bill is a little bit different breed of cat than 
just a run-of-the-mill bill, but a Member of Congress in good 
standing who has an appointment should be able to look at the 
bill. And I am going to take this up with the chairman of this 
committee, who is a man of honor and integrity, Mr. Dingell, 
and then if need be, I am going to ask for a meeting with the 
Speaker, but I just think it is an outrage that this new 
majority that talked about openness and operated on a different 
plane won't let a member of the minority take the time to go 
and have an appointment and actually read a bill, to me it is 
just an abomination and I wanted to--that is not the purpose of 
this hearing, but I want to put that on the record.
    With regard to this hearing, Mr. Boucher is not here, but 
this is a good hearing and something that obviously we need to 
work together on. I would ask the gentleman from the Department 
of Energy what the prospects are of having technology that is 
actually commercially implementable for cellulosic ethanol and 
how soon we could hope to have that technology?
    Mr. Karsner. Thank you, Congressman. We take the view that 
there is a need for a technological breakthrough right now for 
cellulosic ethanol in the applied science, research and 
development portfolio, where we sit, we are actually working 
more on standing it up to be commercial and have a very 
specific timetable for that by 2012 and so our focus is on 
process integration and coming up with the commercial paradigms 
that will regularly attract positive returns for the investors 
in facilities that can scale at a timeframe that matters. But 
2012 is what we are looking to for that.
    Mr. Barton. What is the chief impediment right now to the 
scale of the commercialization? What is it that they haven't 
figured out?
    Mr. Karsner. I think right now it is the capital cost. 
Fundamentally, the capital cost is about three times what 
conventional ethanol is and that is because each of these is a 
one-of-a-kind process that we are standing up. We know how to 
convert, through biochemical and thermo-chemical platforms into 
cellulosic ethanol, but each time you do it, it is standing up 
an experiment. That is why we have these two separate 
solicitations brought to 16 facilities that will give us a 
diversification of risk to try and lower that capital cost 
which the taxpayer is sharing on these first ones, so that we 
can reliably replicate these.
    Mr. Barton. Well, what is your expected best case learning 
curve to get the cost down? Do you expect to get it comparable 
to current cost for corn-based ethanol?
    Mr. Karsner. Yes, we do. It is about a third higher right 
now, based on both operational and installed cost and our goal 
is to get it to a parity with conventional ethanol, $1.31, by 
2012.
    Mr. Barton. OK. And Mr. Meyers, I listened, with great 
interest, to your answers to my good friend, Congressman 
Inslee. You obviously didn't need any help in answering his 
questions, but I would like to know, in a similar vein, why the 
Bush administration feels like its alternative fuel standard, 
which does not pick winners and losers, as you correctly 
pointed out, why you believe, as the spokesman from EPA, that 
that is a better approach than some of things that Mr. Inslee 
was talking about?
    Mr. Meyers. Congressman Barton, I want to be careful that 
the administration has not reviewed Mr. Inslee's legislation 
nor taken a position on the legislation.
    Mr. Barton. I am not accusing you at this point. Jay may, 
but I am not.
    Mr. Meyers. With respect to the AFS and the AFS question, I 
think what the administration did was adopt what Congress 
provided as a structure in the RFS. In the RFS, Congress 
provided an increased mandate, provided for a cap-and-trade 
system, but did not specifically say exactly what fuels were 
used.
    Mr. Barton. You actually helped put that together, as I 
recall.
    Mr. Meyers. I had some role.
    Mr. Barton. You did.
    Mr. Meyers. But in any event, the fuels effectively in the 
RFS compete in the marketplace. If cellulosic becomes more 
cost-dependent because of some reason, some feedstock or some 
breakthrough, some technology side and you can sell it for less 
than corn ethanol, it is going to win the race and vice versa 
for all of the other types of fuels that qualify--bio-butanol 
and different fuels. If they can compete, you measure them on a 
BTU value and energy content value, which is a good 
approximation of petroleum displacement. If they can sell it 
for less, they win. We adopted that structure in the AFS, where 
the marketplace really drives the selection of fuels and we did 
not adopt a segregated market where we would have individual 
mandates or sub-mandates within the overall mandate.
    Mr. Barton. Thank you. And thank you, Mr. Chairman, for 
extra time.
    Mr. Melancon. You are quite welcome. Ms. Hooley, 5 minutes.
    Ms. Hooley. Thank you, Mr. Chair. I am going to start out 
with Mr. Meyers. If you had to put together an energy 
independence program and taking into account, also, trying to 
do something about global climate change, what would that 
energy independent program look like, what is the mixture that 
you see and what areas would you put additional research 
dollars into?
    Mr. Meyers. Congresswoman, I am not going to be able to 
answer the entirety of your question because my role with EPA 
does not cover all the energy issues. We certainly have a 
greater role in looking at the environmental impacts of energy 
production and use and that is the role we play within the 
Federal Government. But my first suggestion was just those type 
of concerns were what led the administration to try to take a 
very hard target of 20 percent reduction in gasoline 
consumption off of projected use in 2017 and then try and put 
together a structure of policies that would get us to make that 
goal.
    I think the obvious answer to all the problems we have with 
energy dependence over several decades is a complicated problem 
requiring complicated solutions across a variety of these 
economic sectors. In the transportation sector, measuring it as 
a 20 percent gasoline consumption reduction, we consider it to 
be aggressive, but we thought it was a target which could lead 
to some very positive results for the economy and for the 
development of environmental fuels.
    Ms. Hooley. Mr. Karsner, do you want to take a stab at that 
question? What would it look like?
    Mr. Karsner. What would it look like? As I mentioned to the 
chairman, you cannot isolate exclusively the question of 
technology away from policy and away from capital markets. We 
tend to focus almost exclusively on the cultivation of 
technologies when, in fact, most of the technologies that would 
increasingly liberate us from our dependencies or from 
greenhouse gas emissions are readily available, but they have 
insufficient policy that is insufficiently durable with not 
enough longevity predictability or capital formation to occur 
at a rate that matters. And so I would throw all of my focus on 
doing what is necessary to offer those technologies and 
technology providers preferential access to markets and 
preferential access to capital rather than continuously focus 
on the silver bullet nature of one technology over another or 
its intrinsic characteristics.
    Ms. Hooley. I know, that as we look at alternative fuels, 
that you have to have a market for it and you have to have 
capital for it. What is going to cause someone to invest in 
alternative energy? What is it going to take to get the capital 
to get the markets for some of these alternatives?
    Mr. Karsner. Well, the simplest answer, putting on my 
business hat, would be a higher rate of return that is 
predictable over a longer period of time. And right now there 
are great returns in the alternative energy space and that is 
why you are having a substantial aggregation of capital. But 
people wonder does that mean is it in the seventh inning, is it 
in the eighth inning? Is this a boom and bust? What kind of 
policies can we put in place to reliably see these returns over 
a much more protracted period? So there is no question you can 
get the returns that make capital flow in that direction, but 
to make them flow greater, which I think is the essence of your 
question, you need the policies that will sustain those market 
conditions. There is a lot in the Energy Policy Act that can 
help that.
    Ms. Hooley. When you talk about sustaining that policy, 
what kind of timeline are we talking about?
    Mr. Karsner. Well, I think it is until it is done. 
Depending on how you define energy independence or reduced 
greenhouse gas emissions or economic competitiveness, the 
Nation should have certain measures. That is what really the 
President's policy seeks to do is give us a top line objective 
of 20 percent gasoline reduction within a decade, so we have a 
metric in timeframe and a metric in size and scope, and so it 
is not too much of us to focus, as a Nation, for a decade 
period. I would suggest that it is a reasonable timeframe. That 
is how most companies measure their long-term net present 
value.
    Ms. Hooley. Thank you. My time is up.
    Mr. Melancon. Thank you, Ms. Hooley. Mr. Shimkus from 
Illinois.
    Mr. Shimkus. Thank you, Mr. Chairman. I appreciate the 
panel being here and I think one of the big things that I think 
we are moving to is diversity in the transportation mix, 
whether that is an RFS, alternative fuels, plug-in hybrids and 
the like, that is the way our electricity generation today, 
that helps mitigate the big swings that you see and I think 
helps long-range cost projection, so there is a lot of great 
discussions back and forth, but I wanted to key on some of the 
comments.
    First of all, I just want to make a point. In the commodity 
markets there is always boom and bust. And to my friend from 
Texas, Mr. Gonzalez, we both have been here about 10 years. I 
remember when a barrel of crude oil was $10 a barrel and I was 
worried, you were probably worried about our marginal oil wells 
that were being capped because it cost more money to get the 
oil out of the ground then you got on return. And now it is at 
$60, six-fold increase in 10 years. So it is always funny to 
hear folks worry about corn.
    Ten years ago, corn was at $2 a bushel. It is at $4 now. 
Farmers are pretty resilient. They are used to boom and bust. I 
would like to unanimous consent to submit this article into the 
record from the AP. Basically, a couple issues.
     Corn prices had hovered around $2 a bushel for a decade, 
have nearly doubled in the last year due to ethanol demand. But 
others say prices could sink back to $2 a bushel with a record 
crop and could top $5 a bushel if there is a drought. We don't 
know what the price of a bushel of corn will be. They are 
planting record acres, but they also have yield. Bio-technology 
has been made great strides. So I don't underestimate the 
ability of the American farmer to produce to meet our Nation's 
demands both on food and fuel and I think they are going to be 
up to the task. I am very excited about the cellulosic debate, 
also, and of lot of this AFS, Alternative Fuel Standard, is 
predicated on the breakthrough on cellulosics.
    The first question I would like to ask is, because you 
said, Mr. Karsner, a couple times, it is dependent upon the 
policy environment initiated, so for us to do that, what should 
be the policy? That is what Chairman Boucher is really asking, 
as we move forward to move an energy bill. What else can we do? 
What policy initiatives do we need to take in this to obviously 
incentive-ize in this AFS and the cellulosic debate?
    Mr. Karsner. Well, the easy answer would be the President's 
policy, of course. The why is timeframe, size and scope. It is 
very important that we move beyond the aspirational and the 
rhetorical when we talk about energy dependencies and 
greenhouse gas emissions. We have got to, if we want to deal 
with this with urgency, put a timeframe to bear that is 
measurable and even in the Department, we have typically sort 
of looked at 30 percent within 30 years and the rate of 
technology flow over too long of a time frame can also throw us 
askew if you think of what the technologies were 30 years ago. 
A Princess phone was a technological breakthrough. So a 10-year 
timeframe, for the Nation to wrap itself around, with a very 
specific metric; in this case, the most ambitious in size and 
scope that we have yet asked for with force of law, is what the 
President is putting out.
    Mr. Shimkus. Because we need refineries, cellulosic 
refineries built. Now, we were fortunate to have testimony from 
a company from Ottawa, Canada that has a pilot plant. He 
testified driving on E-85, based upon cellulosic to the airport 
to get here, but this is very similar to the coal-to-liquid 
debate. When Chairman Boucher and I dropped a bill today, it is 
intended to incentive-ize the first six refineries because that 
is the breakthrough, once you have it. Let me ask it this way. 
Either one can answer. What locomotive engines can be used in 
plug-in hybrid technology right now? Do you know of any, Mr. 
Karsner?
    Mr. Karsner. We don't really have locomotives in our 
program, so----
    Mr. Shimkus. OK, how about aviation? How about planes? Do 
we have any planes that can fly on electricity, plug-in hybrid 
technology?
    Mr. Karsner. I am now aware of any.
    Mr. Shimkus. What about our major oceangoing vessels? Can 
they use plug-in hybrid technology?
    Mr. Karsner. Again, it is out of my scope.
    Mr. Shimkus. In Illinois, the great Mississippi River is a 
great transportation means to get our crops to the Port of New 
Orleans and of course, we have great barges run by boats that 
push these automobiles for 40 miles. But you are not going to 
do interstate transportation of 16-wheelers with plug-in hybrid 
technology. So I want to encourage him to join with us. This 
doesn't have to be a zero-sum game. I continue debate. This is 
a debate on supply. The more supply we have with different 
alternatives, the more competitive markets, the lower prices 
and our economy survives, especially in this carbon climate 
debate we are having here. Why not give the benefit to coal-to-
liquid, on carbon dioxide, and why not give the benefits of 
electricity generation on coal-to-liquid by using this new 
technology and then sequestering it. Wouldn't that be a win-win 
for all of us?
    Mr. Karsner. Do you want to take that, Bob?
    Mr. Meyers. I think the AFS was structured to, as I think, 
referenced before, not pick the winners and losers in the fuel 
debate, so I think that allows the longer-term competition. The 
other thing about the AFS is that we provide a 10-year schedule 
can help drive market expectations in the longer term. Right 
now the RFS is limited at 0.12 and beyond that there is an 
administrative process to figure each year, or a series of 
years after that, what the landscape is going to look like. 
That is something that is hard to predict now in 2007.
    Mr. Shimkus. Can't we say that the RFS that we passed in 
the EPAct is very successful and really exciting to the 
renewable fuel industry?
    Mr. Meyers. I think experience has borne that out and in 
the testimony on the second panel, from Mr. Dinneen and others, 
references the large amount of investment that has occurred.
    Mr. Shimkus. Yes. And that is something we should take 
pride in and I think that is why there is really a bipartisan 
movement to really ramp it up. I think we have to be cautious 
and as we bring more fuels or venues to the bay, I do think we 
can get to a higher standard if we don't try to. I yield back.
    Mr. Boucher. Thank you, Mr. Shimkus. We appreciate it, Mr. 
Karsner. Thank you for reminding me about the Princess phone. I 
had long forgotten. I think I have got Ms. Baldwin for 5 
minutes.
    Ms. Baldwin. Thank you, Mr. Chairman. Secretary Karsner, 
both the Congress and the President are considering the 
adoption of very ambitious goals for ethanol production and use 
in the coming years. Based on reports from my constituents, and 
articles reported in the media, I have become very concerned 
about whether the infrastructure is or will be in place to move 
significant amounts of ethanol to our refinery and population 
centers in the United States. Since today we cannot use 
pipelines to move ethanol, we are dependent upon rail, truck 
and barge for transportation and given the location of the many 
of Nation's ethanol production facilities, rail is today the 
primary means of transportation of most of our Nation's 
ethanol. I have been very concerned about rail bottlenecks that 
are a problem and that rail system constraints may continue to 
be a problem for some time to come. In fact, I have introduced, 
along with several of my colleagues, legislation to address 
this issue. I wonder what your thoughts are on the adequacy of 
our rail system to move ethanol.
    Mr. Karsner. Congresswoman, it is a valid concern. Again, 
in our shop where we deal primarily with conversion platforms, 
we haven't deal specifically with that, but like you, we are 
aware of that constraint and it is pending nature to 
potentially become a bottleneck. We know that the shippers are 
concerned and so for that reason, as I said, we recently 
convened with the Department of Transportation and for the 
first time the administration has really convened, at the 
presidential appointee level and above, an interagency biofuels 
R&D board to take these holistic views at the supply chain 
management of ethanol as we grow the system, and biofuels in 
general.
    And again, of course, I think coal is somewhere in the area 
of 70 percent of all rail transport and so you have a 
competitive situation there of a burgeoning 300-percent growth 
rate in ethanol that we currently see, what our aspirations and 
what our mandate may be that imminently will bump up against 
that. And so I know the Department of Energy were also looking 
at ways to move that coal instead by wire with--clean coal 
carbon capture and storage and production in the Powder River 
Basin, by way of example. So the more of that you can alleviate 
by transmission modernization, you will allow for some 
additional rail capacity. But it is an issue and we would be 
happy to work with your office to explore that more.
    Ms. Baldwin. Great. Thank you. And you hinted at the answer 
to my second question, in terms of the formation of this task 
force. But do you think the Department has, currently, 
sufficient information on this issue, to avoid rail 
infrastructure constraints due to the movement of ethanol at 
this time?
    Mr. Karsner. Well, I am sort of the school that you can 
never have too much information and so it is predominantly the 
domain of the Department of Transportation. We are intrigued 
enough and interested enough that we are reaching out to them 
and saying we have to collaborate on this issue, and we have 
had a very cooperative effort, so there can always be more.
    Ms. Baldwin. Thank you. One of our witnesses, who will be 
testifying on panel II, indicated in his written testimony, 
this is Mr. Reid, that E-85 faces challenges in gaining 
popularity in the marketplace, primarily because it suffers 
from the chicken and egg factor. Does E-85 face roadblocks 
because of the relatively small number of flex-fuel vehicles, 
or because E-85's availability is still relatively limited? In 
encouraging the use of E-85, government fleets can set a real 
example for communities. They can help educate the public about 
environmentally friendly options that are available and they 
can create access to fueling stations that might not otherwise 
be available. What is the Department of Energy doing to 
encourage government entities, at the Federal State and local 
levels, to make investments in flex-fuel vehicles and E-85 
stations?
    Mr. Karsner. Well, specifically, I have a program in my 
office called the Federal Energy Management Program. That has 
responsibility for compliance and reporting of the executive 
orders. And the President, of course, has just issued an 
executive order on this subject, as well as building 
efficiency, that succeeded the previous Clinton era executive 
order that we had been seeking compliance with and I am proud 
to tell you that the Federal Government exceeds its compliance 
requirements for flexible fuel vehicle procurement across the 
board. And so to the extent that we are doing that, we have 
meant to be a model. That has been in legislation for some 
time. It is not proving to be enough to move the market. We 
will continue to be in compliance and exceed compliance, but it 
will not, in and of itself, resolve that chicken and egg 
dilemma that you spoke of.
    Ms. Baldwin. Well, how can farmers provide assistance to 
your agency to spur additional support for these vehicles and 
E-85 stations within governmental entities and beyond the 
Federal level?
    Mr. Karsner. It really needs to go well beyond the Federal 
level because of the critical mass. It matters how much a 
person has to look for E-85 before they say, well, I want this 
to be part of my life, let alone before you get to price 
parity. We have 170,000-plus gas stations in this country. We 
have 1,200 as of yesterday that are E-85 capable. At the 
current record clip, it would take more than a hundred years to 
get to a third of gas stations. So unless the majors decide 
that they want to bring this on board underneath their canopies 
and part of their fuel mix, it is unlikely that E-85 will make 
a significant dent in the future at the current rate and scale 
of it, even though we are moving at a record clip. The car 
companies will tell you that it is the oil companies and the 
oil companies will tell you it is the car companies; that is 
the chicken and egg. The truth is we need to understand whether 
or not we need further policy stimulus to encourage us to break 
out of that situation.
    Ms. Baldwin. But if local governments, universities and 
State governments were investing in----
    Mr. Karsner. All insufficient relative to the magnitude and 
the scale that is required for E-85 to be a substantial, 
competitive end-use product, which is something that we desire 
for it to be, commercially available across the Nation.
    Ms. Baldwin. Mr. Meyers, you had a comment on that?
    Mr. Meyers. I briefly mentioned in my opening statement 
regarding EPA's SmartWay Program and we have used this program 
very successfully to work on public private partnerships to 
encourage use of energy-saving technology in the transportation 
sector. Recently last year we expanded that partnership to the 
Grow and Go Program, which works with the transportation 
industry. We are focus on corridors and we are focused on users 
and we are trying to--we have goals of the 20 and 50-percent 
commitment to expand use through that marketplace of E-85 and 
try to get the chicken and egg program from that angle. Thank 
you.
    Mr. Boucher. Thank you. Mr. Walden for 8 minutes.
    Mr. Walden. Thank you very much, Mr. Chairman. During the 2 
weeks that we weren't in session here, I spent most if of it 
traveling around my district looking at potential facilities, 
either under construction or already developed or planned for 
various production compatibilities for ethanol and other 
biofuels, and there were some issues that came to light during 
that period that I would like your guidance on and your 
comments on. One, when it comes to ethanol itself, made from 
corn, what do you do with the distillers grain that is left 
over, both either wet or dry? My understanding is, if you leave 
it wet, there is less energy consumed in the production of the 
ethanol, but you have to feed it to somebody, cows, pretty 
quickly or it begins to distill.
    But I was amazed at the volume of distillers grain that was 
left and so if you can address that issue, as well as, then, I 
met in Pendleton, Oregon, grain growers. They have been 
analyzing and putting together a facility that would make agri-
biodiesel out of canola or other plant seeds and yet to do--I 
am told, to do 100 million gallons of agri-biodiesel, you would 
need a million acres to grow the canola. You would end up with 
a million gallons of glycerin as a byproduct and enough 
distillers grain left over that you would have to have 570,000 
head of cattle to feed it to and you would have to supplement 
that with some sort of starch and protein to make up for what 
is taken out. But there are these unintended consequences, not 
to mention the price of corn and wheat that is going up as 
well, which I will get into next. But as you analyze the drive 
toward these alternative fuels, which I support like you do, 
what are we going to do with byproducts that are out there? Who 
is doing that analysis?
    Mr. Karsner. My quick answer would be we are going to 
profit from it, but I think that the question of how you profit 
from it, I will not be in as good a position as Bob Dinneen, on 
the next panel, to comment on, mainly because we focus almost 
exclusively on cellulosic ethanol rather than the conventional 
paradigms today. But I know that there is a substantial market 
for DBG as animal feed and byproducts on cellulosic ethanol is 
something that we are encouraging. We would like to have an 
integrated bio-refinery with multiple byproducts to allow for 
profitable income streams to those facilities.
    Mr. Walden. But I think the market, and I will look forward 
to the testimony from the next panel, but the market for that 
distillers grain is somewhat limited in some regions of the 
country, in terms of we don't necessarily have huge feedlots 
out in the west, in some parts like my district. Mr. Meyers, 
did you have a comment?
    Mr. Meyers. I couldn't comment specifically on your 
district and the distillers grain marketplace. There is 
general, though, my understanding from several sources, in 
terms of utilizing more of the corn plant in the process, and I 
think that is referenced in the testimony of the second panel. 
Instead of using some of the stalks, some of the product--with 
the corn, that may be the next incremental step here to using 
more of that resource, the advantages obviously being we 
already have the transportation structure involved and the 
plants are already located. But I think I would agree with Mr. 
Karsner, that the specific market conditions are best addressed 
through the private panel.
    Mr. Walden. All right. I would just--for you that, in some 
regions of the country, this may not be as good a solution as 
others, even though we are all trying to become more energy 
independent and with less emissions. Let me give you one 
anecdote as well. When I was down in the southern part of my 
district, a cattle rancher, when I raised the issue of ethanol, 
said let me tell you what ethanol has meant to me: a hundred 
thousand dollar higher feed bill to finish my herd. There are 
these unintended consequences that I think this committee needs 
to be aware of.
    Second, I have done a lot of work over the years in the 
Congress on forestry issues and the cellulosic research that is 
going on holds great promise for using woody biomass, which 
would help us reduce the fire threat in our forests, which, as 
you know, may burn a lot of greenhouse gases among other 
pollutants out there. Tell me about what efforts you are 
undertaking that would specifically utilize woody biomass out 
of the Nation's forests?
    Mr. Karsner. Well, I completely agree with you. Woody 
biomass, wood chips, urban wood waste and forestry residue we 
see as a primary pathway and many believe will be the 
predominate pathway for cellulosic ethanol and so we have 
sought as much diversification as we can in those pilot 
facilities that we have stood up and included that as an 
attractive pathway. It is a feedstock that we regularly run 
through our integrated bio-refinery facility at Golden, 
Colorado, to test its characteristics for output, but we are 
very optimistic about its prospects and potential to be a major 
contributor.
    Mr. Walden. One of the issues I have run into in some areas 
that I chaired last Congress, when it comes to the use of woody 
biomass for alternative fuel is the lack of ability in the west 
to get a long-term commitment of supply out of the Federal 
Forest Service, which is where most of the forestlands are, 
sufficient to justify to the investors a certainty level to 
cause them to invest in the facility, and the 10-year 
stewardship contracts are inadequate and that there really 
needs to be some longer-term commitment in order to both do the 
cleanup we need to do in the forest as well as provide 
feedstock to justify the investment in these facilities. I 
realize the Forest Service isn't necessarily in your purview, 
but as we work toward these alternative energy sources, this 
certainly is a problem we need to address. Do you have any 
comment on that, either one of you?
    Mr. Karsner. Yes, I would comment. I was a little bit in 
neglect with my comment to Chairman Barton, indicating that 
capital cost was almost the exclusive factor. Feedstock 
management utilization predictability is going to be another 
very specific gating factor to the commercialization of 
cellulosic ethanol. And again, if I put on a developer's hat, I 
would say, obviously the longer-term contract that would be 
available for predictability of supply and allowing me to 
invest in management systems of that feedstock, the better off 
we will be in terms of standing up a commercial cellulosic 
industry in general.
    Mr. Walden. Mr. Meyers, do you have any comments?
    Mr. Meyers. I wouldn't have any further comment on it.
    Mr. Walden. Then, finally, let me ask you this. If we 
implemented fully the President's recommendations regarding 
these alternative fuel sources, what percent of our fuel 
consumption would that amount to? What we consume today in 
fossil fuels, if we were to add this to the mix, what percent 
would we get to in ethanol cellulosic? I have heard it is very 
small percentage. Even if we did everything we are proposing 
today, it still amounts to a fairly small percentage of what we 
consume in terms of fuel, is that correct?
    Mr. Karsner. I will let Bob take a hit at it. I think, if I 
understand your question correctly, what percentage of gasoline 
are we displacing with the alternatives, and that is 
specifically calculated to be 20 percent. So we are aiming for 
a reduction of 20 percent of our gasoline consumption by 2017 
through the President's plan.
    Mr. Walden. Does that include the E-85, because you have 
talked about the distribution issues there. Does that take into 
account the difficulty in achieving that?
    Mr. Meyers. That is the overall policy goal measure. It is 
a number--the 2017 projected E-88 gauge for gasoline 
consumption. In terms of allocation--5 percent was with regard 
to reform CAFE proposal, 15 percent with regard to fuels. So 
what we are talking about is reducing the projected level of 
gasoline consumption, through our AFS proposal, by 15 percent 
from what would have otherwise occurred in 2017. In terms of 
what fuel mix will be there, that is based on many 
considerations. We certainly believe E-85 will be part of the 
equation and as a higher blend, E-85 fuels have some distinct 
advantages in terms of levels of volatility and emissions. And 
also, further penetration of E-85 allows for better 
optimization with regard to the vehicles. But we haven't, 
again, sort of predicted or set out a real statement to the 
market saying this what E-85 will be in 2017.
    Mr. Boucher. Thank you, Mr. Walden. The gentleman from 
Massachusetts, Mr. Markey, is recognized for 8 minutes.
    Mr. Markey. Thank you, Mr. Chairman, very much.
     Mr. Meyers, the administration has proposed adoption of an 
alternative fuel standard, mandating that 35 billion gallons of 
alternative fuels be used by 2017. According to the testimony 
submitted by the NRDC witnesses, who appear on our second 
panel, if half of this alternative fuels mandate were satisfied 
with coal-to-liquid fuels, our Nation's carbon dioxide 
emissions would be 175 million tons higher in 2017 than 
targeted by the administration. Why is the administration 
issuing an alternative fuels proposal that could make 
greenhouse pollution even worse?
    Mr. Meyers. Mr. Markey, I have not viewed the analysis 
behind the NRDC's testimony, although I did read it. There must 
be a chain of assumptions there. One, I would think, perhaps, 
behind the number would be that the CTLs produced without 
carbon sequestration. I think our figures show that, without 
carbon sequestration, there is a very substantial increase of 
greenhouse gas emissions, but with carbon sequestration, that 
that is down into the range of comparability to ordinary 
diesel. Secondarily, one misunderstanding of the analysis in 
the NRDC's testimony, with respect to how we measure diesel and 
I think they look at us, in terms of our GHG analysis, as 
having measured relative gasoline, when actually we measured it 
relative to diesel itself. So again, I guess to return to my 
point, that increased diesel use and increased use of diesel 
equipment----
    Mr. Markey. How substantial would greenhouse gas emissions 
be without carbon sequestration?
    Mr. Meyers. We predict that, comparing diesel to diesel, a 
118 percent increase on the CTL without sequestration.
    Mr. Markey. A 118 percent increase without carbon 
sequestration?
    Mr. Meyers. Right.
    Mr. Markey. OK, thank you. So without sequestration, you 
could not do this and meet the greenhouse gas emission targets?
    Mr. Meyers. I am not sure what we meant by we can do 
exactly what.
    Mr. Markey. I am saying wouldn't be wise to pose this as a 
greenhouse gas solution if there was no carbon sequestration 
which was in place?
    Mr. Meyers. I think that we are working on carbon 
sequestration with the Department of Energy. My understanding, 
in terms of the Air Force, look at CTLs, that they are looking 
at purchasing fuel that is derived from facilities with carbon 
sequestration.
    Mr. Markey. What if it is not ready, what if carbon 
sequestration technology was not ready, would it be wise to 
proceed?
    Mr. Meyers. I think there are many factors with regard to 
CTL. One of the factors that I know has drawn a lot of support 
with respect to the energy balance and national security 
elements of CTL, those were part of the President's policy, as 
well as greenhouse gas emissions.
    Mr. Markey. So you are saying that the administration 
reserves the option of moving forward with coal-to-liquids even 
if it increases by a hundred and eighteen percent greenhouse 
gas?
    Mr. Meyers. Congressman, we adopted the law that Congress 
passed in terms of defining alternative fuels. Congress right 
now defines alternative fuels as including carbon coal-to-
liquids. That creates certain advantages for coal-to-liquids in 
the current marketplace established under law.
    Mr. Markey. We are in a global warming debate as well. The 
NRDC testimony further argues that ``even if coal-to-liquid 
synth-fuels fully deploy carbon capture and storage, fuel cycle 
greenhouse gas emissions from using these fuels will be 
somewhat worse than conventional gasoline, because the vehicle 
tailpipe emissions from liquid coal have the same carbon 
content as gasoline or diesel.'' And the ``residual emissions 
from a liquid coal plant employing CCS still is somewhat higher 
than emissions from a petroleum refinery.'' Do you agree or 
disagree with that?
    Mr. Meyers. In employing carbon sequestration?
    Mr. Markey. That is right.
    Mr. Meyers. I think that depends on the chain of 
assumptions that is involved. When we did our analysis, we 
assumed essentially a capture rate of about 85 percent from the 
CTL facility. I think you would have to compare that to what 
would be feasible in the petroleum refinery and also the 
indication is that, with regard to petroleum refineries, you 
would have to have a suitable geological repository and I am 
not sure if that exists for all petroleum refineries.
    Mr. Markey. OK. So 15 percent is not captured, is that what 
you are saying?
    Mr. Meyers. I am saying I cannot give you a relative for a 
carbon in/carbon out number for petroleum refineries versus 
coal-to-liquids. I think it depends on the assumptions for each 
facility.
    Mr. Markey. OK, I think it is important, though, that you 
submit for the record your assumptions based upon----
    Mr. Meyers. Sure. We would be happy to do that.
    Mr. Markey. And then we can analyze it to understand what 
the administration's view on that is. See, the problem that I 
have is that I think, rather than focusing on that, I think 
that the administration should be focusing on the deployment of 
plug-in hybrids, which would actually allow coal and other 
forms of electrical generation to contribute to powering our 
Nation's cars and SUVs, but not with a double whammy of carbon 
emissions in the coal-to-liquids conversion process and then in 
the vehicle itself. You wind up actually complicating this 
problem, because clearly want to increase--the goal is to 
increase our ability to back out oil from overseas without 
increasing global warming, while at the same time decreasing 
the threat of global warming without increasing our dependence 
upon imported oil. So it has to fit within that formula and 
what you have here is something that goes outside the formula, 
but it seems to me to be unnecessary, since just the burning in 
traditional coal plants would help with the plug-in vehicle 
issue and help us to solve that problem.
    Mr. Karsner, in Massachusetts there are 69,000 E-85 
vehicles driving around, but we have one E-85 pump in Chelsea, 
so you can imagine how long that ride is for many people in 
Massachusetts, 69,000 people with vehicles to get over to that 
pump. How long does the DOE think it will take before there 
will be, say, 500 E-85 pumps in Massachusetts? Because within 5 
or so years, we will have a half a million of these vehicles in 
our State. So how long before you think there will be 500 pumps 
in Massachusetts?
    Mr. Karsner. That is a very good question, Congressman 
Markey, and at risk of being redundant with some of my earlier 
answers, not focusing exclusively on Massachusetts, but the 
problem in general for the Nation.
    Mr. Markey. No, just take Massachusetts. Give me some idea 
of the timeframe to have it be an effective system of delivery 
of E-85 to the pumps, with the hundreds of thousands of 
vehicles by that point in time to have access to it.
    Mr. Karsner. We have 170,000 gasoline stations nationwide. 
The Department estimates that we need not less than 50,000 for 
E-85 to reach critical mass.
    Mr. Markey. What year is that?
    Mr. Karsner. At the current rate of growth, that is more 
than 100 years away.
    Mr. Markey. So that is very helpful to me. Since most of 
the stations our now centered in the Midwest, we will probably 
be at the end of it out here in Massachusetts and as my 
constituents are purchasing these vehicles, they still won't 
have anyplace to go to purchase this wonderful fuel, and it is 
something we would encourage, but we need a system here, if we 
are going to do it, to make sure that these pumps are in place, 
and I think any plan has to be realistic in talking about that. 
And the final question is, do you agree with the number, that 
even if we planted 70 million acres, every one of the 70 
million acres in which corn is grown in 2006 and it was used 
for ethanol, that it would only displace 12 percent of all the 
gasoline that we consume in the United States?
    Mr. Karsner. We don't focus at all on corn-based ethanol, 
almost exclusively on cellulosic, so I would have to report 
back to the record after consulting with colleagues at USDA on 
that.
    Mr. Boucher. I thank you, Mr. Markey. The gentleman from 
Oklahoma, Mr. Sullivan, is recognized for 8 minutes.
    Mr. Sullivan. Thank you, Mr. Chairman. And Mr. Meyers, 
currently, and you touched on this a little bit earlier, but 
currently the ethanol component of gasoline cannot exceed 10 
percent. Why is this the limit for ethanol/gasoline blends? Why 
can't we have blends greater than 10 percent? And what problems 
do we encounter with regard to air quality and engine 
performance, et cetera?
    Mr. Meyers. Congressman, we are looking at those issues in 
the context of Minnesota's E-20 initiative. First of all, with 
regard to E-10, that is our level that we have historically 
have approved, as part of our fuel certification program, as 
the legal fuel in this country. Beyond E-10, and I think our 
experience has been overwhelmingly good, we have to experienced 
problems in terms of vehicle performance, et cetera. With 
regard to E-20, we have to look carefully at those issues with 
regard to what is in the incumbent fleet. Not only do we have 
look at cars, we also have to look at smaller engines, small 
mowers, other types of vehicles that fuel and would buy it from 
the gas station down the road. So we have to look at those 
types of issues. We are involved a cooperative process now with 
the industry, that is both the ethanol industry and the 
equipment manufacturers, we are looking at those issues and 
right now it is too preliminary to tell you exactly what our 
conclusion would be as to whether E20 would meet the test that 
is laid out in the Clean Air Act.
    Mr. Sullivan. And Mr. Karsner--oh, go ahead.
    Mr. Karsner. I was just going to agree with our colleague. 
Of course, it is a multifaceted question and EPA would be the 
predominant agency to ultimately determine whether the 
emissions characteristics, et cetera, that would allow those 
limits. I just returned from Brazil where there is no blend at 
all in the Brazilian market that is less than E-22. So we, of 
course, are running through our vehicle technologies program to 
understand what higher intermediate blends may need to 
availability in the growth rate of ethanol and allowing for a 
more gradual rise in penetration of the overall Nation's fuel 
mix without having to wait that hundred years.
    Mr. Sullivan. And also, Mr. Karsner, can you take me 
through the supply chain, from feedstock to final consumer, for 
the average gallon of ethanol that is consumed today, please?
    Mr. Karsner. I probably couldn't do that question any 
justice because, as I said, the Department of Energy almost 
exclusively focuses on future energy, cellulosic ethanol, 
rather than the conventional ethanol industry, so we have very 
little nexus to it, so I am not in a good position. I could 
report back to the record and give you----
    Mr. Sullivan. But basically the corn is harvested, it is 
trucked, it is taken to a plant or a terminal and all of that. 
What I am getting at is if ethanol could be shipped by 
pipeline, would the total cost to consumers be reduced, and how 
long would it take and how much would cost to establish an 
ethanol distribution system that utilizes pipelines? And maybe, 
if there are any drawbacks on pipelines, if you could touch on 
that?
    Mr. Karsner. Well, there are characteristics of the ethanol 
and its water absorption issues that affect its capacity to 
share that pipe with anything else but ethanol, and so that has 
been the primary dilemma.
    Mr. Sullivan. Nothing can be shipped other than ethanol in 
the pipe?
    Mr. Karsner. I couldn't do this justice. It is the 
Department of Transportation domain. We have recently begun 
collaborating with them, exactly, to go through the supply 
chain issues and try to figure out, from our side, those skills 
that we have, what are the possibilities of blending bio-
butanol, for example, that would allow for ethanol shipment 
more effectively. But it is my understanding today that you 
need dedicated pure ethanol pipeline facilities, because it 
can't easily share with other fuel sources.
    Mr. Sullivan. But don't you think that will reduce the cost 
if we had some pipelines in place that we could ship it on?
    Mr. Karsner. It is my understanding that the pipeline 
industry is divided on that question. Many of them are 
ambitious to get into ethanol delivery by pipeline and many of 
them are staying away. I just don't have sufficient expertise 
on whether it would lower cost.
    Mr. Sullivan. Well, thank you. I yield back the balance of 
my time.
    Mr. Boucher. Thank you, Mr. Sullivan. The gentleman from 
Georgia, Mr. Barrow, is recognized for 8 minutes.
    Mr. Barrow. Thank you, Mr. Chairman. At least in the area 
of transport energy, just the stuff we use to drive our trucks, 
our cars and our tractors around, it seems to me that we are 
dealing with a three-legged stool here. You have to got to have 
a supply of fuel, you have got to have an infrastructure to 
deliver it and you have got to have a supply of vehicles that 
can run on it. And so far, we have talked about, at least 
mostly today we are talking about what little we have gotten 
involved in this at the Federal level is to be fooling around 
with the level of supply of the fuel, and all kinds of 
questions arise in all of that. You all haven't got, for 
example, a formula as to how we can reach 35 billion gallons 
and told how much of it is going to be corn, how much of it is 
going to be cellulosic, how much of it is going to be coal-to-
liquids. We haven't got a plan for that. We haven't got a plan 
for the infrastructure, when we talk about the infrastructure.
    One of you all testified earlier that we are assuming the 
infrastructure is going to be in place because the demand is 
going to be there down the road. It is a demand fixed by law 
and a demand fixed by the conditions that have gotten us where 
we want to be so far. You assume we are going to have the right 
mix of renewable fuels in the grid, if you will. We are 
assuming that is all going to be in response to Ms. Baldwin's 
question, it doesn't seem to me that the analogy of the chicken 
and egg does any justice to the situation. We don't have a 
chicken and egg problem, we have a chicken, we have a chicken 
feed, we have a henhouse, we have a rooster and an egg problem, 
at least, and that is not even dealing with the chicken hawks 
that are out there, that we will deal with with the next panel 
of witnesses. We are not even close to describing the problem.
    So the question I have got is, who is running the store? 
Who is actually coordinating in the executive branch of 
government a plan to not only get us a supply of clean fuel, 
but an infrastructure that is capable of delivering it from the 
producers to the consumers and making sure that there is a 
supply of vehicles out there that will generate the demand for 
the fuel when it is there? Who is coordinating this? I heard 
one of you all saying that, earlier on--just the other day and 
I don't want to be sarcastic or anything, but do we need to 
talk to who conducted that, in order to find out what the plan 
is? I hear you when someone says, ``what should we be doing?'' 
You say, well, we are implementing the law as you pass it, 
Congressman. You make the laws and we are just carrying it out. 
We need a little guidance and a little leadership here and I 
want to know who is actually heading up the shop in the 
executive branch of government in trying to come up with a plan 
to make sure that we are not only going to have a supply of 
fuel, but an infrastructure that is capable of delivering it 
and a fleet of vehicles that is actually going to be needing 
it. Who is heading that up? Who wants to go first?
    Mr. Meyers. I will take it. I will take a crack. First of 
all, with regard to vehicles, most of the fuels we are talking 
about--E-85 has the E-85-capable vehicle, but the E-10 vehicle 
does not. Other fuels that are contemplated here, obviously are 
going to have some of the chicken and egg problem. Electric 
vehicles will have an introduction situation where they have to 
have consumer acceptance.
    Mr. Barrow. Mr. Meyers, I want to make sure I have 
explained the problem, though, because here is the problem in a 
nutshell. We have got folks back in my district selling trucks 
and there is an ad that I hear when I ride around in my 
district. Are you tired of high fuel prices? Come on down the 
road and we have flex-fuel trucks you can buy. And they are 
selling flex-fuel vehicles in my district. There isn't any E-85 
fuel for them to run on, so they are running on gas and the 
problem is summed up in that episode. How can we actually get 
the E-85 fuel that these trucks are selling--there is a demand, 
but that is an itch they can't scratch down there. That is the 
problem. Could you help me understand what we are doing to get 
that problem solved?
    Mr. Meyers. There have been efforts. The Energy Policy Act 
provides tax incentives for infrastructure development for E-85 
pumps.
    Mr. Barrow. Well, is that enough?
    Mr. Meyers. I think, according to my colleagues testimony, 
there is a substantial way to go in terms of E-85 penetration 
under the current incentives that exist.
    Mr. Barrow. So it is not enough?
    Mr. Meyers. Well, I don't feel qualified to give you an 
opinion on how much of a tax incentive----
    Mr. Barrow. Well, if my friend down in Vidalia, Georgia is 
buying a flex-fuel truck and it is going to take a hundred 
years for us to get the 50,000 stations that can carry it so 
that E-85 can carry it on its own in that marketplace, I guess 
he is going to be a little long in the tooth before he can get 
the benefit of the extra money he is paying for a vehicle that 
can't run on nothing that is there.
    Mr. Meyers. That is correct, although the incremental price 
on E-85 vehicles now is not absorbent.
    Mr. Barrow. Well, I am glad that he is not paying that much 
more for something he can't use. My point is he is still not 
getting what he needs and his problem, I can multiply that 300 
million folks and describe the problem of this country in a 
nutshell. Now all I want to know is what effort is being made 
in the executive branch to develop a game plan? They cannot 
deal with this problem in just one part, one part of a three-
legged stool, but is going to actually try and bring all the 
pieces together so that it is going to come in for--because 
right now, when I hear Mr. Karsner talking about the market 
conditions, they need to create access to markets and access to 
capital, with respect to the policy we have got right now, it 
sounds like what we are doing is we are lying on a train wreck 
to create the market conditions to deliver all of this other 
stuff. The train wreck is we have got one vital link in the 
chain, it is fuel supply, we haven't got any idea as to how we 
are going to get there and what mix is going to be in it, but 
that is the thing we are going to mandate and so far, that is 
the only thing we are mandating and everything else is going to 
have to get in line and respond to that market incentive and 
what I see coming is something that is not going to be 
deliverable at the time that is going to be needed and we are 
either going to extend or we are going to basically not get 
anywhere. I want to know how I answer the folks back home, 
about how we are coordinating our response to this problem.
    Mr. Karsner. Well, we have to do it together. We have 
greater coordination than ever before at the administration's 
level.
    Mr. Barrow. Who is in charge of it?
    Mr. Karsner. Well, I co-chair with Under Secretary Dorr, at 
the U.S. Department of Agriculture, something called the 
Interagency Biofuels R&D Panel and so that involves the 
Department of Transportation, EPA----
    Mr. Barrow. That is the fuel leg of the three-legged stool. 
How about the infrastructure and the vehicle?
    Mr. Karsner. And we are taking on all of those issues of 
supply chain on board, so feedstock, the transport to 
facilities. But I think your pointing to a very real problem, 
which is we are operating on legacy systems of organization of 
government that have emanated out of World War II and we have 
21st century problems with urgency that we need to address by 
taking down stovepipes----
    Mr. Barrow. And I am looking to you guys for leadership. 
What is the solution? How do we plan our way out of this?
    Mr. Karsner. Any plan has to got to take into account how 
you are going to cultivate the market, because we are a market-
based economy. We are not a politburo, ultimately, so we don't 
have 5- and 10-year plans in that way. So the question is how 
do you change the way investments are done for returns into 
those products and services that we desire that are tantamount 
to the Nation's interests? And ultimately, if I am an executive 
and I have a fiduciary responsibility to my shareholders to 
profit, it is unlikely that I am going to rapidly take aboard 
products that compete with my base in order to----
    Mr. Barrow. So if you won't create the market conditions 
that we want, how can we incentive-ize the players to invest in 
what we want to get at? If we wait for the money, the market 
will solve this problem. But I will tell you, my part of the 
country will dry up and blow away if we wait for the market to 
solve the problem in our part of the country the way it solved 
it down in Brazil. Well, we all drive long distances to do our 
work and to get to and from our jobs and just to get around and 
we are energy-dependent. If we wait for the market, the market 
will solve our problem, but I don't want it to be at the 
expense of my part of the country.
    Mr. Karsner. Or any part of the country. The bottom line is 
that what the President has sought to table and the 
conversation that we are now having with Congress on the 
legislation we hope that it will be returned to the President 
to sign, is significantly disruptive policy with enforcement by 
law. So it is more than disruptive technology, which has been 
our focus for a quarter of the century----
    Mr. Barrow. It sounds to me, though, Mr. Karsner, and I 
apologize for interrupting, but my time is running out. Sorry 
you had to stop. It sounds to me like you are restating the 
problem. I want to know what the solution is and I am still 
listening. Thank you, Mr. Chairman. I have to yield now.
    Mr. Boucher. Thank you very much, Mr. Barrow. The gentleman 
from Michigan, Mr. Rogers, is recognized for 8 minutes.
    Mr. Rogers. Thank you, Mr. Chairman. I appreciate you 
having this hearing. It is so very important. Unlike many, I am 
a complete optimist and fairly excited about where we are going 
on alternative fuels and when you look at where we have come in 
the last few years, it is really nothing short of remarkable, 
with hybrid buses in the cities which is reducing the emission 
and doubling the gas mileage in many cases. We started that in 
2001, to increase the number of hybrid buses. And I think we if 
we figured it out, you replaced 13,000 of them with a hybrid 
bus in the cities, that is an equivalent of 600,000 hybrid cars 
on the road, so that is a big impact and they are making an 
impact.
    And if you look at where the car companies are and I hear a 
lot of big government solutions to go and tell the car 
companies what to do, but I will use General Motors as an 
example. They just developed something called the Volt. Are you 
familiar with the GM Volt? That is pretty exciting technology 
in that car. Lithium ion batteries. We still have a little ways 
to go, but 540 miles on a tank of gas and the only thing that 
the fuel, either ethanol or gasoline, does is charge the 
batteries, so it has very low emissions, very high efficiency 
and we are close. I think they are looking somewhere between a 
2010 and 2012 for commercialization of that technology. When 
you look at ethanol, the car companies stepped up in a big way. 
There are some two million cars out there ready to run on E-85. 
I own one and it is great. We happen to have a station in my 
hometown, so it is readily available, it is cheaper, cleaner. I 
have no problems with the car and I really enjoy driving the 
car. Great stuff.
    So there has been a lot of progress. It seems to me, if we 
are going to have you all, which is the U.S. Government, get 
involved, I am not sure I want you all involved in such a huge 
way. Nobody told Ford, Chrysler and General Motors to make E-85 
cars. You didn't mandate that, did you? Was there a mandate to 
do that?
    Mr. Karsner. There is an incentive to do that.
    Mr. Rogers. But there is no mandate? You didn't say you are 
going to build 2 million E-85 cars?
    Mr. Karsner. Well, indirectly, the CAFE mandate serves as 
an incentive for those flexible fuel vehicles to be produced.
    Mr. Rogers. So it is the 0.08 incentive in there that you 
get credit for, but you didn't say E-85. You just gave them the 
alternative fuel credit, did you not? It is a pretty good way 
to do it, an incentive. But we are talking about Cap and Trade, 
which is a very big complicated system. It means brokers make a 
lot of money, it costs more to build stuff, and I am not sure 
the environment is cleaner. My argument is we ought to 
encourage them to do what they are doing now and we can do it 
for a little bit of money, not a whole bunch of new programs. 
If we look at the one problem between the farmer part is 
working. The research part is almost there in places like 
Michigan State University, as I am sure you are aware, right on 
the cutting edge of cellulosic research. As a matter of fact, 
they have extracted sugar on the bench. All as they need to do 
is figure out how to produce it in mass quantities. They are 
right there. They think, for something like $3 million, they 
can get to that next level. Three million bucks. We are talking 
about hundreds and hundreds of millions of dollars that are out 
here frequently. Refineries are being built because we built 
incentives into the energy bills. Build it and it will get this 
thing kick-started.
    The one that worries me the most is the distribution 
because, as you said, I think, halfway, we inherited a pretty 
old system. We are hearing some disturbing things, that large 
oil companies are saying you can't put ethanol under the tarp 
of which we pay for. Are you hearing any these stories out 
there? In other words, and I won't give any company name, but 
the company will go out and we hope would assist you and build 
the gas station. So anything under that footprint, you can't 
put an ethanol plant because we don't sell ethanol. That is a 
hurdle that wouldn't be a legal impediment but causes a problem 
in getting us more ethanol pumps. Are you familiar with the 
problem?
    Mr. Karsner. We have heard of that. We are familiar with 
that.
    Mr. Rogers. And what are we doing about that? Or what can 
we do about that?
    Mr. Karsner. I am not sure of what the full extent of what 
we can do about it. Secretary Bodman did pledge to investigate 
it and I am not sure what the extent of that investigation is.
    Mr. Rogers. That is an impediment that we have to get rid 
of, don't you agree?
    Mr. Karsner. It is a very complicated subject area, in the 
sense that it involves franchising contractual agreements, of 
which I am not an expert. But you know, fundamentally, if the 
question is what is necessary for a scale and rate of E-85 
access, then it will involve greater access to the major 
franchises.
    Mr. Rogers. So this is an important issue and you think 
that maybe policymakers might want to a look at. I am not for 
big government intervention, but we just ought to understand 
the problem. Fair enough? Just so we know it is a problem. So 
part of this problem of distribution isn't necessarily the 
system of which we talked about. As far as the ability to do 
it, it is a whole set of other unknown, under-the-radar type of 
problems that are head-scratchers, hard to get through it.
    Mr. Karsner. I was going to say I think you characterized 
it very well, that there is a great reason to be very 
optimistic about the technologies that the Nation is invested 
on and their capacity to manifest, but there are a lot of very 
practical impediments.
    Mr. Rogers. We passed a bill in Congress last year and I 
think we are taking another run at it for providing CAFE fines, 
turn that money around and allow grants to gas stations, 
independent gas stations to put in ethanol pumps. The 
government needs to be very careful where we intrude in the 
market, but that probably serves as a value to kick-start kind 
of an ethanol economy. Don't you think it is important that we 
get enough pumps out there so that this takes on an economy of 
scale? Is it not and don't you do that through Clean Cities now 
to some small degree?
    Mr. Karsner. We do it but as you indicated, it is to a very 
small degree and with programs like SmartWay, we chip away at 
this giant boulder. The question is can we do it fast enough 
and in effect, scale enough to make a difference?
    Mr. Rogers. Would the $20 million or so in CAFE fines every 
year from companies who don't meet our CAFE standards and pay 
those fines, would that be a better start than what you are 
doing now, if we dedicated all of that to increasing the number 
of pumps?
    Mr. Karsner. It would be a marginally additional chisel. We 
have $8.6 million in Clean Cities now and we did 450 gas 
stations last year, and so we could continue to invest in it 
through this way, through substantial grants, but the key 
really would be to make it a profitable proposition for the 
incumbents to take on board.
    Mr. Rogers. Well, isn't this back to that horrible chicken 
and the egg? But if you can't buy it at a gas station, it 
doesn't become part of your routine to even to seek that 
opportunity. It is very difficult for someone to take the 
business risk, not knowing where the scale of ethanol is going 
to go. It is not like petroleum, where everybody knew the car 
had to run on it. We are just not sure where this is going and 
it is probably in our national interest to encourage more pumps 
so that we can at least get some economy to scale, is it not?
    Mr. Karsner. Every bit helps, but that is pumps and flex-
fuel vehicles and we would want substantial critical mass 
penetration of both and we would want it also so that we can 
look at all of the intermediate blends and what their 
possibilities may be upon EPA's review.
    Mr. Rogers. And I am going to run out of time here, so I 
want to switch gears very quickly. I think diversification is 
the key. Probably the Midwest is going to be able to head 
ethanol because it is close, but maybe the rest of the country 
is run on something else. I think that is OK. I don't think 
that is necessarily a problem. But lithium ion batteries, I 
think, are going to be a very important part of technology 
going into the future of alternative fuel vehicles. There is a 
patent problem with them now, as I understand it. Japan tends 
to hold and their companies to hold most of the patents, so our 
folks are trying to play catch up. Would it not be a great 
investment for us, rather than to do these big mandates, Cap 
and Trade, and we are going to tell Americans what kind of cars 
they can buy, to actually provide some assistance to companies 
like General Motors, who are trying to and desperately working 
furiously with their intellectual capital, end capital, to get 
these lithium ion. Isn't there some value in us doing this, 
from all of the problems----
    Mr. Karsner. We do that now and we do it in the very best 
way with our FreedomCAR and Fuel Partnership. It has largely 
been focused, particularly with General Motors and the other 
carmakers, on hydrogen over the last 5 years. We are 
increasingly more focused on how to move electrons, other than 
just the protons, through hydrogen fuel cells. So we see it 
integrating and growing in that collaboration, as you 
described.
    Mr. Rogers. But you didn't even come close. I guess what 
worries me and Mr. Upton mentioned it, the $100 million that we 
thought was agreed on to get us to that point where we could 
have robust research on something that we could commercialize 
as soon as 2010, with the right resources, that helps America 
out of a problem. We got, to your words, $11 million. Was that 
yours? So maybe it is even double that. So $20 million, which 
is 80 percent short of where we need to be, but I would hope 
that the administration would hold true to what we all believe 
was a commitment to meet that demand and I think they are going 
to help us solve a problem versus EPA and the Department of 
Energy sitting around a table trying to figure out it. I would 
rather have research and development at General Motors and Ford 
actually getting their hands on some science to work it out. 
Thank you very much, Mr. Boucher.
    Mr. Boucher. Thank you. The gentleman from Louisiana, Mr. 
Melancon, is recognized for 5 minutes.
    Mr. Melancon. Thank you, Mr. Chairman, I appreciate it. I 
guess, since I am from Louisiana, I am associated with the 
sugar industry and I want to talk about cellulosic ethanol or 
ethanol from sugar, but I have heard about hybrids, I have 
heard about coal, cellulosic, corn ethanol. I haven't heard 
anything about natural gas for vehicles and I know that the 
buses in the city run on natural gas. I don't know whether it 
is LNG or whether it is just regular, the gas, natural gas 
itself. Do we have numbers on efficiencies, costs and other 
items, that it is not become a topic of conversation, at least 
not in here today and I haven't heard it before anywhere.
    Mr. Meyers. We did do calculations with regard to 
greenhouse gas on CNG. I think, between the Department of 
Energy and the EPA, we could probably find some numbers on 
vehicles and distribution. I am not sure exactly what data sets 
we have to draw from, but we could work and provide that to the 
committee.
    Mr. Melancon. Has there not been a lot of discussion about 
either compressed natural gas or LNG?
    Mr. Meyers. Well, no. CNG has been very helpful in a lot of 
the situations. We have had situations where, for example, it 
was California where, in order to offset power plant 
construction emissions, investment was made in CNG vehicles for 
garbage trucks and that type of shortfall, urban environment. 
So the emission reductions occurred in the urban center and 
certainly the experience with regard to emission profiles with 
the CNG vehicles has been very good, so we don't have a qualms 
with the technology or the emissions from CNG vehicles.
    Mr. Melancon. And the only thing I understand is your 
population difference and actually, I believe you could run one 
or the other, and I don't know which one, whether it is 
gasoline or the compressed natural gas carburetion and vice 
versa. So if that is the case, you could have a tank of regular 
gas and a tank of compressed natural gas back there, and 
wouldn't it be more efficient?
    Mr. Meyers. I think there are some factory vehicles. I 
don't know the extent of that technology, but we would be happy 
to----
    Mr. Melancon. Yes, I am just curious because I keep hearing 
everything about ethanol and coal. and I don't hear anything 
about it. I had an uncle and he has been dead for 12 years and 
probably for 35 years before that was running his tractors on 
compressed natural gas, which as a kid I thought that is great. 
Why aren't we doing it?
    Mr. Meyers. Well, I think we are doing it in certain 
contexts. I think it is a market-driven situation. We referred 
earlier to E-85 chicken and egg problem. With some respect, 
some of that problem has occurred with regard to the fueling 
infrastructure for CNG and historically, I think that has been 
an issue. So it has been used in fleet applications where you 
have central refueling. And again, I think, within the context 
of our programs, we have funded some through the Clean School 
Bus Program. So again, the market sort of decides those issues 
in our current structure.
    Mr. Melancon. We are talking about natural gas and we are 
talking ethanol and the problem of delivery systems, pipelines, 
tank trucks, whatever, and Mr. Markey made the comment about 
not getting his market. Mr. Barrow, the same thing. I think 
maybe I heard it on the Republican side. There is CNG in every 
part of this country I have ever been to. There are 
distributors of CNG in every part of this country I have been 
to. Is there not some incentive that we ought to be giving 
maybe instead of to Ford Motor and the oil companies and all, 
to the local distributors to start putting up at their 
convenience stores, because they are the jobbers, they are the 
ones that own those facilities, the CNG and encourage the auto 
manufacturers to starting moving to it? Is there a downside 
that I am not understanding?
    Mr. Meyers. I don't see a downside, Congressman, and in 
fact, I think that is one of the goals of the AFS. The AFS 
gives CNG an incentive by making it qualified as an alternative 
fuel, which is subject to 35 billion mandated in the bill. So I 
think if you are looking for incentives, I think that is a very 
big incentive for CNG. The testimony you have from the second 
panel references certain costs of engines for the fuel, with 
respect to gasoline and gasoline prices and the combination of 
price, and the mandate, I think, could provide some significant 
incentives for the industry. Going back for a second to your 
question with regard to your vehicles using both, our role here 
would be with regard to the CNG conversions, that we have to 
ensure that those meet Clean Air Act requirements, so we see a 
number of conversion kits going to market and we are right now 
in the context of working with those issues with industry. So I 
think, as a whole, the EPA has tried to work these issues out 
and as a whole, I think we have seen emission benefits from CNG 
technology in the marketplace.
    Mr. Melancon. And I am running out of time. I didn't mean 
to pick on you, Mr. Meyers. I kind of threw it out for both of 
you all, but since you chose to take the ball and run with it.
     I thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Melancon. The 
gentleman from Arizona, Mr. Shadegg, is recognized for 5 
minutes.
    Mr. Shadegg. Thank you, Mr. Chairman. And I want to follow 
up on that series of questions. As I understand the current 
definition of renewable fuel, it would include natural gas 
produced from landfills or sewage treatment facilities but not 
any other type of natural gas. And I share the gentleman's 
interest in the issue and I guess I want to make sure that, am 
I correct about that understanding, that it would not include 
other natural gas? And if so, is there a reason for that?
    Mr. Meyers. Well, I think the reason was that in the Energy 
Policy Act of 2005, the mandate that was constructed dealt with 
renewable fuels, so the renewable fuel definition comes to a 
number of different types of fuels, but sort of a bottom-line 
analysis, if it is derived from plant or animal waste and other 
renewable feedstocks, it can pretty much qualify as renewable 
fuel. If not, if it is still a fossil fuel, Congress did not 
incorporate that.
    Mr. Shadegg. The point we made earlier, that we were faced 
with policy choices, now one option would be to define 
alternative fuel as any fuel that reduces the use of petroleum-
based fuels, rather than using the definition of something that 
comes from something renewable, at least in the short term. As 
the gentleman pointed out, there is a lot of potential for 
natural gas, in moving vehicles, that has already been proven 
and natural gas is already widely available in homes and there 
are small compressors that you can get. That market seems to be 
some degree down the road. Is there a cogent argument why that 
shouldn't be considered as an----
    Mr. Meyers. No, the administration agrees with that 
argument and we specifically adopted natural gas as a fuel 
qualifying for AFS. Additionally, within the definition of 
alternative fuel in the bill, there is a provision that would 
allow non-crude oil-based fuels to qualify also as alternative 
fuels in the future, subject to determination by the Department 
of Energy.
    Mr. Shadegg. Mr. Karsner, do you have any objection to 
that?
    Mr. Karsner. No, I agree completely.
    Mr. Shadegg. Mr. Karsner, I briefly met with Daniel Yergin 
and he had just been to Japan and he made the comment that the 
Japanese are as obsessed with battery technology as we are with 
ethanol. I have concerns about corn-based ethanol, some of the 
concerns about the corn market and the things it will do to our 
cost of food. I have fewer concerns about cellulosic ethanol. 
But I guess my question of you is are we doing enough, in this 
country, on battery technology, and are there things that this 
Congress should do to push us further down that road?
    Mr. Karsner. It is a great question, Congressman. I believe 
that electricity should become a primary pathway, a 
technological pathway and it is available under the Alternative 
Fuel Standard, just as natural gas would be. And so we would 
like to see as much upside as we can. Of course, this country 
took a different bend on our history with electrifying vehicles 
and electrifying trains and we are at somewhat of a competitive 
disadvantage. There are people on the second panel that can 
address this better than I. But as we restart our efforts 
towards electrification and first, we need to think in terms of 
what does it take to cultivate that industry here in the United 
States? We need much broader hybridization of the fleet in 
general, as a step-stone to plugging in a hybrid fleet in 
general and we need it for far more than just the luxury of 
feeling green with niche cars. We really need to hybridize 
efficiency across all of the vehicles that people want to buy 
and so we have doubled our investment in that. I think there 
are ideas out there about how we could go further and we are in 
emerging dialog with the car companies right now.
    Mr. Shadegg. I appreciate your suggestions perhaps as--I am 
running out of time and I want to ask another series of 
questions. I am aware of damage that has been done by fuel 
containing as little as 5 percent ethanol to the existing 
infrastructure and a lot of money being spent on that damage 
that has been done, ethanol levels of 5 to 10 percent doing 
damage to fuel tanks and fuel lines and lots of things. I am 
concerned that we are not studying the infrastructure issue 
enough. I believe it is Minnesota that is trying to go to a 20 
percent standard and I asked a witness before this committee 
sometime back about that and the witness essentially mislead 
the committee and said no, they are not going to go to a 20 
percent standard, when in fact they are. I believe there are 
serious issues with generators, chainsaws, lawn tools, 
motorcycles, the marine industry, ATVC.
    At a 20 percent mandate, my question of you is two things: 
one, is there any warning that is being given, because the 
stories I have heard indicate there has been no warning given 
of the potential for damage. And second, has anybody ever given 
any thought to the creation of an unanticipated consequences 
fund? We all are aware that MTBE, when it was brought on line 
to clean our air, we thought was a good idea. Then we 
discovered it has an unanticipated consequence of damaging our 
water supply and so we had to fix that and we had to come up 
with the money to fix it. I would suggest there are a lot of 
unanticipated consequences of higher proportions of content of 
ethanol and nobody's kind of looking down the road and saying, 
well, how are we going to fund dealing with those problems? And 
I would appreciate comments from both of you, if I could.
    Mr. Meyers. Sure, I can start. First, with regard to E-5 or 
E-10 problems, I am not personally aware--would be happy to 
receive--in terms of information. We would obviously be 
concerned if there are some issues there. Our experience, as I 
said earlier, generally has been that E-10 has been very 
successful in the marketplace and we have car standards now 
that were improved through the Mobile Source Air Toxics Rule, 
which even with the permeation standards, are applicable there. 
It will even reduce further some of the volatility emissions. 
But on a going-forward basis, I think we and EPA, in terms of 
looking at these fuel issues, take them very seriously and take 
the investigation and the analysis that is required very 
seriously and needs to occur.
    And with reference to what I said earlier with regard to 
Minnesota, we are trying to work now with the parties involved 
and try to look at that issue closely to make sure we have the 
type of information that is necessary. We certainly recognize 
that the moment that an E-20 blend would be legal, then it 
would be legal to use in a lawn mower, legal to use in a 
snowmobile, legal to use in all types of equipment. So those 
are factors that we have to take into account, as well as 
obviously the performance of the emission control system and 
our fundamental authority is with regard to emissions and 
interference with the emission control systems. So those would 
be all factors in our review.
    Mr. Boucher. Thank you very much, Mr. Meyer. And Mr. 
Shadegg, thank you. The gentleman from Utah, Mr. Matheson, is 
recognized.
    Mr. Matheson. Thank you, Mr. Chairman. In the development 
of the Alternative Fuel Standard list, can you share with me 
what the thinking was behind including natural gas as one of 
the alternative fuels?
    Mr. Meyers. Well, I think our initial cut, as I explained, 
was to try to adopt those fuels that Congress has defined as 
alternative fuels. With regard to natural gas, and I think we 
referenced earlier that, when the President announced this in 
the State of the Union address, we were talking about the 
energy security benefits as well as the environmental and 
greenhouse gas benefits that could be associated with use of 
the fuels. Most natural gas is much more domestic, I guess I 
would say, than our oil supply system, domestic and within 
North America.
    Mr. Matheson. Yes, you just hit the point I wanted to ask 
you about and that is I understand the environmental, but it is 
on the energy security benefits, based on the supply and demand 
dynamic we face today and looking forward. Did you consider the 
Department of Energy's projections about future increasing 
imports of LNG to meet our natural gas needs in this country, 
in terms of including it as one of the Alternative Fuel 
Standards for energy security purposes?
    Mr. Meyers. Not in my memory did we consider imported LNG 
specifically, but I don't think, in terms of the definitions 
that are applicable to the AFS right now and the fuels that are 
mentioned, that would be excluded.
    Mr. Matheson. I just want to get to the point that energy 
security was one of the rationales for adding it.
    Mr. Meyers. Sure.
    Mr. Matheson. And we are facing an future with increasing 
imports to meet our natural gas needs. I think that is 
something we ought to be talking about and figure out if that 
would make sense or not to have that included, the other fuels. 
One other question I wanted to ask about is fuel specification 
standards. Do you think these should be negotiated in the 
marketplace or should the government set standards?
    Mr. Meyers. We exert authority under the Clean Air Act to 
certify fuels, so we have current existing authority within 
211(c) of the Clean Air Act. And so in terms of anything being 
sold for use in a motor vehicle, we need to make that 
determination consistently to law, so it is decided by 
government.
    Mr. Matheson. OK. Thanks, Mr. Chairman.
    Mr. Gonzalez [presiding]. The chair recognizes Mr. Green 
from Texas.
    Mr. Green. Thank you, Mr. Chairman, for allowing me to 
participate in the hearing on fuels and as you know and the 
committee knows, I represent a lot of employees who 
manufacturer gasoline at our refineries and so it is very 
important that we do not do anything to put those jobs in 
jeopardy, particularly since we need that refined product. 
Gasoline has its drawbacks, but it is also the cheapest and 
most efficient fuel that we produce today, so if you disrupt 
that supply and production of gasoline to a significant degree, 
the consequences will be felt by every American.
    Mr. Karsner, what effect on food prices and other economic 
consequences if we continue or further increase our Renewable 
Fuel Standards to require greater and greater levels of 
ethanol, such as 20 to 60 billion gallons per year figures in 
some pieces of legislation?
    Mr. Karsner. Well, I am not an agricultural economist, sir, 
but what I could say is that we don't expect grain-based 
ethanol that competes in the food and feed market to take us 
substantially beyond 10 percent. There are people on the next 
panel more qualified to talk to that. So we expect the bulk of 
things to come from non-food edible feedstocks, like 
agricultural residues and woody biomass and urban green waste, 
for example.
    Mr. Green. Thank you. It is my understanding that the 
President's policy is assuming that cellulosic ethanol is going 
to supply that increase, as you mentioned just now, and it 
seems the President's proposal is pretty aggressive. It appears 
as a very complicated market rather than assurance of success. 
Instead of taking a leap and requiring more ethanol, when 
cellulosic ethanol is not yet ready, why would it be a more 
prudent course to wait until the current ethanol mandate is 
done in 2012, then decide whether to increase it further, if 
cellulosic ethanol is ready to market? Are we to that point now 
where we can pick up that 90 percent from cellulosic ethanol?
    Mr. Karsner. I would say we are certainly past the point 
where policy is required for future projections and 
installation of infrastructure that takes many years to erect 
and prove out. So you need a lead time, a substantial lead time 
for the market to react to invest the money that maybe 36 to 48 
months later would produce the product.
    Mr. Green. OK. So any bills we consider, we need to make 
sure we build in that lead time so investors and the market can 
adjust?
    Mr. Karsner. Well, in fact, I think that the President has 
tabled it now in 2007. We expect a working towards commercially 
competitive cellulosic ethanol by 2012. That is only one 
component, as are lithium ion batteries and the other 
technologies. So we think there is sufficient lead time right 
now built in if Congress were to act and give the President 
legislation he could sign.
    Mr. Green. Mr. Meyers, a later witness from the National 
Resource Defense Council will testify that biodiesel produces 
much less greenhouse gas emissions than corn-based ethanol. Do 
you agree with that assessment? And so is there a valid reason 
promoting biodiesel standards within the Renewable Fuel 
Standard?
    Mr. Meyers. Yes. In terms of GHG emissions, we certainly 
agree that our current analysis shows biodiesel creates more 
benefits than corn-based ethanol, given the assumptions we did 
in our analysis, which, with respect to corn-based ethanol, was 
based on an average plan.
    Mr. Green. Would that be a reason for promoting biodiesel 
as a Renewable Fuel Standard?
    Mr. Meyers. Yes, and Congress recognized that in the RFS 
and we recognize that in the AFS.
    Mr. Green. OK. What is the EPA's latest view on the 
relative emissions from biodiesel, ethanol and gasoline for 
smog and air toxics? Will any of these new fuels be an 
improvement over gasoline? Is ethanol, as we know it today, 
clean fuel and will cellulosic ethanol be different to a 
greater degree?
    Mr. Meyers. Our impact analysis that accompany the RFS rule 
indicate what we thought would be our current assessment of the 
air emissions effects of ethanol blended fuels. What they 
showed essentially was that some emissions go up and some 
emissions go down. Emissions that go down include carbon 
monoxide and benzene as well as, obviously, our analysis of the 
GHG benefits. With regard to emissions that go up in areas that 
are not using ethanol blended fuels right now, there will be 
increases in--but when we did further analysis based on 
computer modeling of air quality impact, we showed that to be 
essentially less than one-half of part per billion on a 
standard of 84 PPB. So in other words, there are some issues we 
have to look at in the future. There could be some ozone 
effects with use of ethanol and I think our opinion is that 
there are ways to address those.
    Mr. Green. It seems like our problem may be, and I know I 
am almost out of time, that if we want renewable fuels, it 
again limits our need to import hydrocarbons and at the same 
time, the committee's goal and the Congress' goal and I think 
we are getting there, is to deal with global warming. So it 
sounds like those are two goals that we can't match, using 
ethanol or even cellulosic technology.
    Mr. Karsner. I would say the overwhelming majority of all 
the alternative fuels available to meet our requirements would 
in fact be beneficial to greenhouse gas emissions, particularly 
if you consider the cellulosic ethanol will make up a 
substantial portion of that. We calculate, and Bob is in a 
better position to comment than I, but in excessive of 80 
percent decline in greenhouse gas emissions from the tailpipe, 
based on the use of cellulosic ethanol. I will oil the wheels.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Gonzalez. Thank you, Mr. Green. Mr. Meyers, Mr. 
Karsner, I want to go ahead and extend the thanks of the 
subcommittee for your testimony this morning. Please understand 
that Members may be submitting questions in writing and we 
would really appreciate a prompt response to those written 
inquiries. Again, thank you for your service.
    Mr. Karsner. Thank you.
    Mr. Meyers. Thank you.
    Mr. Gonzalez. We will proceed now with the seating of the 
second panel We extend a welcome to the second panel.
     The witnesses on our second panel, let me make sure I have 
them in the proper order, Elizabeth A. Lowery, vice president 
for Environment, Energy and Safety, General Motors Public 
Policy Center; Mr. Warren I. Mitchell, chairman of the board, 
Clean Energy; Mr. Paul D. Reid, president and chief executive 
officer, Reid Petroleum Corporation; Mr. Robert Greco, group 
director, Downstream and Industry Operations; Mr. Charles T. 
Drevna, executive vice president, National Petrochemical and 
Refiners Association; Daniel A. Lashof, Climate Center science 
director, National Resources Defense Council; and Mr. Bob 
Dinneen, president, Renewable Fuels Association.
    I think I have got everyone. I will caution everyone to 
please keep your testimony to the 5 minutes. Your written 
statements have been submitted and will become part of the 
record. But if you would keep to those 5 minutes so that--I 
know we will have Members coming in and out that will have 
questions. We will start off with the first witness and that is 
Ms. Lowery.

STATEMENT OF ELIZABETH A. LOWERY, VICE PRESIDENT, ENVIRONMENT, 
    ENERGY AND SAFETY, GENERAL MOTORS PUBLIC POLICY CENTER, 
                          DETROIT, MI

    Ms. Lowery. Good afternoon. Thank you, Mr. Chairman and 
members of the subcommittee. My name is Elizabeth Lowery, vice 
president for Environment, Energy and Safety at General Motors 
and I am pleased to be able to speak to you today regarding 
GM's plans for expansion of vehicle offerings capable of using 
E-85 ethanol fuel and the need for ramping up the availability 
of this fuel and the infrastructure needed to make it available 
to American consumers.
    Today's automotive industry provides more in the way of 
opportunities and challenges than we have seen in its entire 
history. On the challenge side, there is serious concerns about 
energy supply, energy availability, sustainable growth, the 
environment, and even national security issues that 
collectively have been called energy security. For the global 
auto industry, that means that we must, as a business 
necessity, develop alternative sources of propulsion, based on 
alternative sources of energy in order to meet the world's 
growing demand for our products. The key is energy diversity, 
which can help us displace substantial quantities of oil that 
are consumed by U.S. vehicles today.
    This is a huge assignment, but it is also an extraordinary 
opportunity. But developing alternative sources of energy and 
propulsion, we have the chance to mitigate many of the issues 
surrounding energy availability. We will be able to better cope 
with future increases in global energy demand. We will minimize 
the environmental impact of the automobile.
    This means we must continue to improve the efficiency of 
the internal combustion engine, as we have for decades. But it 
also means we need to dramatically intensify our efforts to 
displaced petroleum-based fuels by building more vehicles that 
run on alternatives and accelerating our commitment to the 
development of electrically-driven vehicles.
    Today, I want to focus on our activities to accelerate the 
availability and use of alternative fuels. We believe that the 
biofuel with the greatest potential to displace petroleum-based 
fuels and provide carbon dioxide emission reductions in the 
U.S. is ethanol. As a result, we have made a major commitment 
to produce vehicles that run on E-85 ethanol. We believe there 
are many benefits of using E-85: it is renewable, it helps 
reduce greenhouse gas emissions, it helps reduce smog-forming 
emissions, and can help support the domestic agriculture 
industry in the United States.
    GM has produced more than 2 million E-85-capable vehicles 
that are on the road today. For the 2007 model year, we have 16 
flex-fuel models, from pickups and SUVs to full-size vans and 
minivans to our best selling Impala and Monte Carlo midsize 
family cars. But that is just the start. Along with 
DaimlerChrysler and Ford, we announced in June 2007 that 
America's three domestic auto companies will double our 
production of vehicles capable of running on renewable fuels by 
2010. And later last year we were prepared to make fully half 
of our annual production biofuel-capable by 2012, provided 
there is ample availability and distribution as part of an 
overall national energy strategy. If all of the E-85-capable 
vehicles on the road today, along with those that GM, Ford and 
DaimlerChrysler are committing to produce over the next 10 
years, were to run on E-85, we could displace 22 billion 
gallons of gasoline annually by 2017. Furthermore, if all the 
manufacturers made the same commitment, we could increase this 
displacement of gasoline to 37 billion gallons annually.
    So the potential biofuels, like E-85, to significantly 
displace petroleum is within our grasp today. The vehicles are 
on the road or in the works, but they are not being fully 
utilized because of the constraints on E-85 supply and 
distribution. To help address these constraints, we are 
partnering with government, fuel providers and fuel retailers 
across the United States. to help grow the E-85 ethanol fueling 
station infrastructure. In 2006, there were 600 E-85 refueling 
stations. Today, the number of stations has more than doubled 
to over 1200. Since May 2005, GM has helped to add 240 E-85 
fueling stations in 13 States, with more to come.
    In addition to our partnerships, GM is heavily engaged in 
the promotion and education side of developing the ethanol 
marketplace. We launched a national advertising campaign in 
February 2006, beginning with the ads during the 2006 Super 
Bowl. The visibility and viewership presented by the Super Bowl 
offered a great opportunity for us to launch a major marketing 
and advertising campaign that focuses on key energy 
diversification issues. Web traffic to our 
livegreengoyellow.com  Web site was in the millions as 
consumers investigated E-85, flex-fuel vehicles and station 
locations.
    In addition, GM has partnered with the Governors' Ethanol 
Coalition to loan E-85 flex-fuel vehicles to 28 States and 
organizations so that they may use them to educate the public 
and promote the benefits of using ethanol. This partnership has 
been extended through 2007. We have also provided $1,000 E-85 
fuel coupon available with a new vehicle purchase in Chicago 
and Minneapolis areas. And across the country, flex-fuel 
vehicle owners that are equipped with OnStar can simply press 
the blue OnStar button and get directions to the nearest E-85 
pump.
    We are also equipping our E-85-capable cars and trucks with 
yellow fuel caps and exterior flex-fuel badging. This will help 
consumers know that their vehicle is flex-fuel capable. This 
yellow cap will also be a regular reminder that these consumers 
have a fuel choice each time they go to fill up their tank.
    Importantly, as we pursue expansion of biofuel to the 
market, there are steps the government can take to help. First, 
we need a strong and sustained push from Congress and the 
administration to support biofuel production, including next-
generation cellulosic ethanol. Second, the biofuels 
infrastructure should be significantly expanded. The market 
response to renewable fuels is encouraging, but it needs to 
reach a self-sustaining level that is not lessened when 
gasoline prices fall.
    Mr. Butterfield [presiding]. We are going to have to ask 
you to conclude, please.
    Ms. Lowery. Sure. Steps to increase the availability of 
biofuels should help increase its use. And third, government 
purchasing should set the example. Government fleets should be 
using E-85 ethanol.
    In summary, we believe tomorrow's automobiles must be 
flexible enough to accommodate many different energy sources, 
and part of that flexibility will be enabled by the continued 
focus on E-85. Thank you and I look forward to your questions.
    [The prepared statement of Ms. Lowery follows:]

                     Testimony of Elizabeth Lowery

     Good morning. My name is Elizabeth Lowery and I am Vice 
President for Environment, Energy, and Safety Policy at General 
Motors. I am pleased to be able to speak to you today regarding 
GM's plans for expansion of vehicle offerings capable of using 
E-85 ethanol fuel and the need for ramping up the availability 
of this fuel and the infrastructure needed to make it available 
to American consumers.
     Today's automotive industry provides more in the way of 
opportunities--and challenges--than we have seen in its entire 
history. On the challenge side, there are serious concerns 
about energy supply, energy availability, sustainable growth, 
the environment, and even national security issues that, 
collectively, have come to be called ``energy security.'' And 
the fact of the matter is that it is highly unlikely that oil 
alone is going to supply all of the world's rapidly growing 
automotive energy requirements. For the global auto industry, 
this means that we must--as a business necessity--develop 
alternative sources of propulsion, based on alternative sources 
of energy in order to meet the world's growing demand for our 
products. The key is energy diversity, which can help us 
displace substantial quantities of oil that are consumed by 
U.S. vehicles today.
     This is a huge assignment. But it's also an extraordinary 
opportunity.
    By developing alternative sources of energy and propulsion, 
we have the chance to mitigate many of the issues surrounding 
energy availability. We will be able to better cope with future 
increases in global energy demand. We will minimize the 
automobile's impact on the environment.
     This means that we must continue to improve the efficiency 
of the internal combustion engine, as we have for decades. But, 
it also means we need to dramatically intensify our efforts to 
displace petroleum-based fuels by building more vehicles that 
run on alternatives, such as E-85 ethanol, and, very 
importantly, by significantly expanding and accelerating our 
commitment to the development of electrically driven vehicles.
     Today I want to focus on our activities to accelerate the 
availability and use of alternative fuels. We believe that the 
biofuel with the greatest potential to displace petroleum-based 
fuels and provide carbon dioxide emissions reductions in the 
U.S. is ethanol. As a result, we have made a major commitment 
to produce vehicles that can run on E-85 ethanol.
     We believe there are many benefits of using E-85:

      Ethanol is a renewable fuel
      Using E-85 helps reduce greenhouse gas emissions
      Using E-85 helps to reduce smog forming emissions
      Using E-85 can help to support the domestic 
agriculture industry in the U.S. and support new job growth

     GM has produced more than 2 million E-85 capable vehicles 
that are on the road today. For the 2007 model year, we have 16 
flex fuel models, from pickups and SUVs to full-size vans and 
minvans, to our best selling Impala and Monte Carlo midsize 
family cars. But that is just a start. Along with 
DaimlerChrysler and Ford, we announced in June of last year 
that America's three domestic auto companies will double our 
production of vehicles capable of running on renewable fuels by 
2010. That's more than two million E-85 and biodiesel-capable 
vehicles a year by the end of the decade--the single largest 
commitment to renewable fuels in our nation's history. And 
then, later last year--in a meeting with President Bush--GM, 
Ford and Daimler Chrysler announced that America's domestic 
auto companies were prepared to make fully half of our annual 
vehicle production biofuel capable by 2012, provided there is 
ample availability and distribution, as part of an overall 
national energy strategy.
     Let me put the significance of these announcements in 
perspective. If all of the E-85 capable vehicles on the road 
today--along with those that GM, Ford, and DaimlerChrysler have 
already committed to produce over the next 10 years--were to 
run on E-85, we could displace 22 billion gallons of gasoline 
annually by 2017. Furthermore, if all manufacturers made the 
same commitment, we could increase this displacement of 
gasoline to 37 billion gallons annually.
     So, the potential of biofuels like E-85 to significantly 
displace petroleum is within our grasp today. The vehicles are 
on the road or in the works, but they are not being fully 
utilized because of constraints on E-85 supply and 
distribution.
     To help address these constraints, we're partnering with 
government, fuel providers, and fuel retailers across the U.S. 
to help grow the E-85 ethanol fueling station infrastructure. 
In 2006, there were 600 E-85 refueling stations, today the 
number of stations has more than doubled to over 1200. Since 
May of 2005, GM has helped add 240 E-85 fueling stations in 13 
states--with more to come. Some highlights include:

      In 2005, GM co-marketed fuel coupons and owner 
awareness in Sioux Falls, South Dakota.
      The Department of Energy awarded a grant to a 
team from GM, CALSTART, Pacific Ethanol, CleanFUEL USA, 
Community Environmental Council, and others to add 15 E-85 
pumps in California.
      GM has partnered with Kroger--in Texas and we've 
helped E-85 outlets grow from 1 to 27 in the past year.
      Through our partnership with Kroger pumps are in 
operation in Ohio with co-marketing events including a dealer 
breakfast.
      GM is supporting the state of Colorado with the 
recently announced opening of 40 additional stations including 
``85 cent fuel days'' promotions.
      We have partnered with Meijer, CleanFuelUSA, the 
State of Michigan and the State of Indiana to introduce 
approximately 40 new retail outlets.
      We have similar partnerships in Illinois that 
launched 20 stations with VeraSun, Gas City and Shell; and in 
Minnesota with VeraSun and Erickson Oil accounting for 10 
additional stations.

    We need to do more of this--and we will.
     In addition to our partnerships to enhance availability 
and distribution, GM is heavily engaged in the promotion and 
education sides of developing the ethanol marketplace. We 
launched a national advertising campaign in February of 2006--
beginning with an ad during the 2006 Super Bowl hosted in 
Detroit. The visibility and viewership presented by the Super 
Bowl offered a great opportunity for us to launch a major 
marketing and advertising campaign that focuses on key energy 
diversification issues. After the Super Bowl, the campaign 
continued through the 2006 Winter Olympics. Web traffic to our 
Livegreengoyellow.com website was in the millions as consumers 
investigated E-85, GM flex fuel vehicles, and station 
locations.
     In addition, GM has also partnered with the Governors' 
Ethanol Coalition to loan E-85 flex fuel vehicles to 28 states 
and organizations so that they may use them to educate the 
public and promote the benefits of using ethanol. This 
partnership has been extended through 2007. We have also 
provided a $1000 E-85 fuel coupon available with a new vehicle 
purchase in the Chicago and Minneapolis areas. And across the 
country, flex fuel vehicle owners of vehicles equipped with 
OnStar need to simply press the blue OnStar button and get 
directions to the nearest E-85 pump.
     We are also equipping our E-85 capable cars and trucks 
with yellow fuel caps and exterior flex fuel badging. This will 
help consumers know that their vehicle is flex fuel capable. 
The yellow cap will also be a regular reminder that these 
consumers have a fuel choice each time they fill up their tank.
     So, overall, technology, biofuels and energy diversity are 
the best answers to oil security concerns. And, as we pursue 
these technologies--and more energy diversity--there are steps 
the government can take to help.

      First, we need a strong and sustained push from 
Congress and the Administration to support biofuel production, 
including next-generation cellulosic ethanol.
      Second, the biofuels infrastructure should be 
significantly expanded. The market response to renewable fuels 
is encouraging, but it needs to reach a self sustaining level 
that is not lessened when gasoline prices fall. Steps to 
increase the availability of biofuels should help increase its 
use. Government should continue incentives for: the manufacture 
of biofuel-capable flex fuel vehicles and increased support for 
broad-based infrastructure conversion.
      Third, government purchasing should set the 
example. Government fleets can help lead the way to bringing 
new automotive technology to market and bringing down the cost 
of new technologies. The government should continue to purchase 
flex fuel vehicles, require maximum utilization of E-85 in the 
government flex fuel fleets and use Federal fueling to 
stimulate publicly accessible pumps.

     Before concluding, let me note the importance of the 
Underwriter's Laboratory process of certifying the safety of 
the dispensing equipment for E-85. Certification of the 
dispensing systems is critical for widespread development of E-
85 infrastructure. Since the use of E-85 here and in other 
parts of the world is well established at this point, we are 
optimistic that this process can be completed quickly. Our 
technical experts are assisting UL and we know that UL is 
working hard on this project. We urge the Committee to stay 
abreast of this process as well--to make sure that no 
artificial hurdles arise to needlessly slow the UL approval 
process.
     In summary, we believe tomorrow's automobiles must be 
flexible enough to accommodate many different energy sources. A 
key part of that flexibility will be enabled by the continued 
focus on getting E-85 fuel and vehicles capable of using that 
fuel into the market quickly. We look forward to working with 
the Congress and the Administration to make this even more of a 
reality.
                              ----------                              

    Mr. Butterfield. Thank you very much. Mr. Mitchell, you are 
recognized for 5 minutes.

 STATEMENT OF WARREN I. MITCHELL, CHAIRMAN OF THE BOARD, CLEAN 
                     ENERGY, SEAL BEACH, CA

    Mr. Mitchell. Thank you, Mr. Chairman and honorable members 
of the Energy and Air Quality Subcommittee. I am Warren 
Mitchell, chairman of Clean Energy, which provides natural gas 
infrastructure and fuel to fleets and consumers. I am also 
retired chairman and president of Southern California Gas 
Company. I look forward to amplifying on some of the questions 
that were raised during the first panel.
    I believe that the 35 billion gallon goal for petroleum 
reduction for 2017 is certainly a stretching goal but it is one 
that I believe is achievable if we use renewables as well as 
alternative fuels. Because of declining oil production and our 
view that production and demand have hit peaks, at least 
production at 85 million barrels a day, and we are consuming 
worldwide about 85 million barrels a day. There is a real need 
to meet this 35 billion goal by 2017. Primarily because of the 
growth in China and India for oil demand, we believe oil prices 
will continue to increase, which will place greater pressure on 
gasoline and diesel prices.
    Ethanol and biodiesel, we agree, are good solutions to 
contributing to the 35 billion goal, but we think that they are 
capable of meeting about 18 billion gallons a year reduction by 
2017. Therefore we believe alternative fuels need to be 
included as part of the solution and we believe that natural 
gas is especially an important fuel for that consideration. It 
is clean, it is domestic, it is economic, there is a major 
infrastructure in place and it can make a strong contribution 
and I think, with some of the things that I cover in a few 
minutes, you will understand that we are not confronted with 
the chicken and the egg issue. When I said clean, light-duty 
vehicles meet near-zero emission standards and heavy-duty 
vehicles will meet the 2010 standards this year. They produce 
27 percent fewer of greenhouse gases when compared to gasoline, 
and 21 percent fewer greenhouse gases when compared to diesel. 
So they make a strong contribution to our global warming 
concerns.
    When I mentioned domestic, 98 percent of the natural gas 
demand in the United States is met by gas produced in North 
America. Seventy-seven years of resources remain in the United 
States, based on current usage and I want to put the 
utilization of natural gas for transportation in perspective. 
If 11 million vehicles were powered by natural gas, there would 
only be a 4 percent increase in our national throughput, but we 
would displace 8 billion gallons of imported petroleum.
    When I talk about infrastructure, you have a national 
pipeline system that reaches nearly every community in the 
United States. Now Clean Energy, my company, builds refueling 
infrastructure for fleets on a no-capital cost basis to the 
fleet operator. Because we have such a competitive fuel 
advantage, we can absorb the capital cost in the cost that we 
charge to the fleet owner. We are confident about the price of 
natural gas as we move forward and we offer fleet operators 3- 
to 5-year fixed price contracts for their fuel. And this is a 
major concern when you have the types of spikes we have when 
you look at gasoline and diesel. These infrastructures that we 
build for centralized refueling for fleets are also made 
available for public access so we can have smaller consumers 
utilize those as a place to refuel. Now the real breakthrough 
that hasn't been mentioned in the past very much is that there 
is a home refueling appliance that can be installed in any 
garage that has a gas piping system and 110-volt electrical 
plug to fill it in and it can slow fill a vehicle overnight 
with about 8 or 10 gallons. So the consumer that wants a 
natural gas vehicle doesn't even have to go to a refueling 
station.
    When I talk about economics, we are talking about $1.95 
cents a gallon, currently, for fleet operators, which covers 
all costs, including fuel. And we are talking about $2.17 
equivalent costs for diesel. If you look at the home refueling 
unit, it provides natural gas to the consumer for $1.36 a 
gasoline gallon equivalent.
     Current gas prices are $3.00 for gasoline and $2.95 for 
diesel. So what I want to say is we have a proven technology 
here with ample supply that can meet the air quality standards. 
What we need, we need the Renewable Resource Initiative to be 
including an alternative fuel component, we need to extend the 
current energy and highway bill benefits through 2017, and then 
natural gas can be a real player. We also would support 
incentives for automakers in the United States to build more 
natural gas vehicles, although there are about 180 vehicles in 
light, medium and heavy-duty applications available today.
     Thank you and I look forward to your questions.
    [The prepared statement of Mr. Mitchell follows:]

                    Testimony of Warren I. Mitchell

    Good morning Chairman Boucher and Honorable Members of the 
Subcommittee on Energy and Air Quality. My name is Warren 
Mitchell and I currently serve as the Chairman of Clean Energy 
- North America's leading clean transportation fuel provider. 
Before I joined Clean Energy's board, I served as Chairman and 
President of the Southern California Gas Company. I want to 
thank you for having me before you today to share my thoughts 
on this very timely national issue.
    Clearly, the country is facing an impending transportation 
fuel crisis, and it is appropriately challenging itself to fill 
a 35 billion gallon per year renewable fuel goal by 2017. The 
country is also coming to the realization that there is no one 
``silver bullet'' that can solve our country's over dependence 
upon oil. More to the point, many alternatives that the nation 
has focused on to date can carry a premium, face significant 
air quality challenges with uncertain climate change benefits, 
require significant subsidies or have yet to even be produced 
at any substantive scale. This is why it is imperative that 
Congress widen its focus on renewable fuels to include other 
alternatives that can help promote greater energy independence, 
advance clean air and climate change goals, and bridge this 
country toward both a renewable and zero emission future.
    Although it is often overlooked, downplayed or 
misunderstood, there is a fuel that is largely domestic, low in 
carbon, historically exceeds vehicle emissions standards, and 
can be produced from a renewable feedstock. The fuel that I 
speak of also is price-competitive with petroleum, enjoys an 
existing national infrastructure that can fuel vehicles at 
stations or in the convenience of your own home, provides a 
bridge to a hydrogen future, and currently fuels cars, school 
and transit buses, refuse and port trucks by the thousands; 
displacing hundreds of millions of gallons of petroleum today. 
What is this miracle fuel you ask? It's natural gas, and yes, 
it's the same fuel that powers the range that you cook with, 
your water heater, and possibly generates electricity for your 
local utility.
    Today, Clean Energy fuels over fourteen thousand vehicles 
daily with clean, affordable, and domestically produced natural 
gas. Our company, with an annual growth rate of 28 percent over 
the past three years, operates over 170 fueling stations 
nationwide, and is on track to sell approximately 82 million 
gallons of natural gas in 2007. Unlike some fuels, natural gas 
can provide our nation with an immediate solution to foreign 
oil dependency, mounting urban air pollution challenges, and 
global climate change, while providing a direct bridge to a 
hydrogen future. Natural gas is in many ways an ideal 
transportation fuel solution and will remain so well into the 
future.

                           Global Oil Supply

    Clean Energy is no longer alone in the camp that believes 
that high oil prices are here to stay. The world recognizes 
that it is looking straight into a looming supply-demand 
problem. Oil is a finite and dwindling resource and the world's 
demand for it keeps on growing. There is no question that the 
world will continue to face stubbornly climbing oil prices for 
the long term.
    Let's take a look at the facts. In the Arab embargo back in 
the 1970s, we were importing approximately 25 percent of our 
oil. In the first Gulf War, we were importing 42 percent of our 
oil. Today we are importing 64 percent and we can only expect 
to be worse off if we fail to diversify our transportation 
fuels in the near term. We've been pumping oil out of the 
ground since 1859. The last time a world class oil field was 
found was in the Caspian Sea in the late 1990s. The easy oil 
has been found. There are no surprises out there. We've either 
peaked as far as oil production goes, or it's right around the 
corner.
    Demand is growing globally. China used 3.4 million barrels 
of oil per day a decade ago. Today they are currently over 6.7 
million barrels per day. There are forecasts showing them using 
11 million barrels per day a decade from now. Wait until they 
really start buying automobiles. We are using more than 30 
billion barrels of oil a year worldwide. The last time we found 
as much oil in a year as we consumed was 1985. Production 
worldwide remains steady at 84-85 million barrels a day. 
Current demand is about 85 million barrels a day and demand 
projections for 2008 are easily north of that given China and 
India's increasing demand.
    The treadmill is getting faster and faster. The decline 
curve for oil production is steady. Saudis say they can produce 
10.8 million barrels per day, but they're only producing 8.6 
million barrels per day. We all heard talk three years ago of 
Iraq production reaching 3 million barrels per day. They are 
producing roughly 2 million barrels. To make matters worse, 
we've also got some serious geopolitical problems: Iran, 
Venezuela, Nigeria, and Russia. They are all wild cards.

                          Alternatives to Oil

    We, as a nation, must look at all solutions and we need to 
get serious about fuel diversity now. We all have known that an 
oil shortage was coming. Even assuming optimistic new 
production sources coming on line, balanced with estimated 
production decline curves, the demand-production gap could be 
as high as 30 million barrels per day in 2020. Clean Energy 
agrees with many energy experts that there is no one ``silver 
bullet'' alternative that can solve our petroleum dependence. 
All renewable and alternative fuels must be encouraged because 
farm fuels, i.e., ethanol and biodiesel, cannot by themselves 
achieve the petroleum displacement goals that Congress and the 
President are considering today. Assuming that ethanol and 
biodiesel achieve their greatest forecasted production targets, 
they would fall 18 billion gallons short of a 35 billion gallon 
a year displacement goal for 2017. Even with a five year 
extension to 2022, it is unlikely that these fuels alone will 
reach Congressional targets. Therefore, we urge the Committee 
to expand the ``Renewable'' Fuel Standard to an ``Alternative'' 
Fuel Standard, and allow natural gas to play a significant role 
in displacing petroleum in the transportation market.

            Natural Gas is Domestic, Abundant and Renewable

    Natural gas is a domestic source of transportation fuel 
with an estimated 77 years of additional supply or 30 years 
extra supply over oil. Over 98 percent of our current use of 
natural gas is produced in North America, which helps protect 
us from unstable geopolitical situations and helps our energy 
independence by not importing as much foreign oil. Over time, 
we believe natural gas will be moved out of the power 
generation business by coal, nuclear, and other renewables, 
further increasing the availability of domestic natural gas 
supplies for our country's transportation needs. Regardless, 
natural gas use in the transportation sector would have a 
negligible impact on supply. To put this into perspective, if 
we powered 11,000,000 light-duty vehicles or 5 percent of the 
U.S. light-duty fleet with natural gas today, it would only 
account for 4 percent of the country's current natural gas fuel 
usage. Further, with the advancements in pyrolysis to convert 
coal and biomass to methane, an already abundant national 
supply of natural gas could be augmented by a source capable of 
providing extraordinary climate change benefits.

                          Natural Gas is Clean

    Natural gas burns clean and efficiently. Natural gas 
vehicles meet near-zero emission levels for passenger car 
applications and already meet or exceed 2007 heavy-duty 
emission standards with some truck engines targeted to certify 
to the 2010 standard as early as this year. Not only is natural 
gas inherently cleaner than gasoline or diesel, it also 
provides a readily available low carbon alternative that can be 
implemented today. In fact, a recent California Energy 
Commission ``well to wheels'' analysis found that natural gas 
provides roughly a 27 percent reduction in greenhouse gases for 
light-duty vehicles and up to a 21 percent reduction for 
medium- to heavy-duty vehicles when compared to their petroleum 
counterparts.

                        Natural Gas is Economic

    Natural gas is economic. The price for natural gas as a 
transportation fuel is very competitive with today's gasoline 
or diesel fuels. In fact, natural gas was very competitive with 
oil at $30 a barrel, let alone at the market's current price of 
$64 a barrel. Clean Energy views natural gas as a commodity 
tracking at a discount to oil, especially when compared to 
diesel. For example, if you assume a natural gas price at $7.61 
per thousand cubic feet and $1.01 to cover transport, 
compression, taxes, and capital recovery costs, you can achieve 
a very competitive $1.96 gasoline gallon equivalent or a $2.17 
diesel gallon equivalent. As of Thursday, national gasoline 
averages ranged from $2.99 to $3.29 per gallon and diesel 
averaged at $2.92 per gallon.
    Historically, the overall market has suffered over a dozen 
global oil supply disruptions over the past half century 
lasting 1 to 44 months in duration with supply shortfalls of 
one to 14 percent of world demand, adding to the volatility of 
oil prices. Despite the reality of volatile oil prices and 
unlike any energy provider we know, our company is able to 
guarantee a fixed price per gallon of natural gas to our fleet 
customers below today's gasoline and diesel prices for up to 
five years on a energy equivalent gallon basis.
    In addition to the comparatively low cost of natural gas as 
a transportation fuel, Congress took an important step in 
passing the energy and highway bills two years ago. As the cost 
of uncertain diesel technology increases in an effort to meet 
new federal clean air emission standards, the 2005 energy bill 
provides up to a $32,000 tax credit for medium and heavy-duty 
trucks that can serve our refuse, transit, and goods movement 
industry sectors. This tax credit is helping to narrow the 
incremental cost differential between diesel and natural gas 
vehicles. When fuel price and operational maintenance savings 
are factored in, natural gas vehicles become even more cost-
effective than their diesel counterparts. Because some of the 
incentives put in place are going to take awhile to have a real 
impact, we need Congress to continue to provide long-range 
policies that promote alternative fuels in the marketplace 
through 2017.

                       Natural Gas Infrastructure

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

                    Natural Gas Vehicle Availability

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

                          Natural Gas Markets

    Like all alternative fuels, natural gas as a transportation 
fuel satisfies several key niche markets that can provide 
significant petroleum displacement. As of December 31, 2006, 
Clean Energy had over 200 fleet customers operating over 14,000 
vehicles, including 3,000 transit buses, 1,200 taxis, 800 
shuttles and 790 refuse trucks. With the expansion of America's 
goods movement system, the San Pedro Bay Ports have already 
signaled an interest in purchasing over 5,300 liquefied natural 
gas class 8 trucks within the next five years, displacing 
approximately 80 million gallons annually of petroleum alone. 
If Congress were to require transit, refuse and taxi fleets to 
adopt alternative fuels into their portfolios, the benefits 
could be as great as 4.3 billion gallons displaced annually.

                     Natural Gas Bridge to Hydrogen

    Natural gas is also viewed as a bridge fuel to hydrogen as 
it continues to be the most cost-effective way to produce 
hydrogen and provides invaluable experience and knowledge to 
users on how to handle gaseous fuels. In addition, natural gas 
infrastructure can be leveraged to provide hydrogen as well as 
blended hydrogen/natural gas dispersing. In fact, the blending 
of hydrogen and natural gas, similar to our station in 
Vancouver, Canada, provides even lower near zero emission 
performance at the tailpipe. If the US possessed fully 
integrated OEM produced natural gas vehicles, these vehicles 
can operate on natural gas, hydrogen, and blended hydrogen/
natural gas fuels.

                         Policy Recommendations

    Achieving the production goals of 35 billion gallons 
annually by 2017 and 50 billion gallons per year by 2030 
requires the addition of fuels beyond the renewable portfolio 
and the inclusion of alternative fuels to this portfolio is 
critical for the country's security and economic and 
environmental health. Clean Energy urges Congress to transform 
the Renewable Fuel Standard enacted under the Energy Policy Act 
of 2005 into an Alternative Fuel Standard to help avoid a 
potential 18 billion gallon production shortfall in 2017. 
Furthermore, and whenever possible, Congress should assure the 
public that all fuels within this portfolio do no harm to air 
quality or cause air quality backsliding prior to their 
implementation. Congress should also recognize and provide more 
research, development and deployment dollars toward biogas 
projects as pyrolysis and other advancements can certainly 
further our country's renewable and climate change goals. 
Congress should extend the tax credits for alternative fuels 
and vehicles established under the Energy Policy Act through 
2017 in an effort to provide added certainty to fleet owners 
who lead in early alternative fuel adoption. Further, we 
believe federal action requiring key public and private fleets 
to adopt and implement alternative fuel strategies will help 
foster the alternative fuel penetration required to achieve the 
nation's alternative fuel goals for 2017 and beyond.
    Natural gas vehicles offer a proven solution in light-, 
medium-, and heavy-duty vehicles that are ready for wide-scale 
implementation today. Our resources of natural gas can play a 
critical role in diversifying our nation's transportation fuel 
needs. Natural gas is a clean, inexpensive, and a potential 
renewable fuel that is domestically abundant and helps reduce 
greenhouse gases. In leveraging natural gas as a transportation 
fuel we not only take advantage of existing pipeline 
infrastructure but also foster the production of cleaner 
vehicles for our children's future. The societal experience of 
operating a natural gas vehicle is likely the only realistic 
approach to achieving a hydrogen economy. Clearly, Congress 
must enact more national policies like the 2005 Energy and 
Highway bills to help natural gas and other alternative fuels 
penetrate the marketplace and be made available to the public. 
One thing to do right now would be to extend the tax credits 
and other benefits to 2017 and require certain niche markets 
(i.e., transit, refuse, port, and taxi cabs) to use alternative 
fuels. Without the firm support of the Congress behind all 
petroleum alternatives, our nation's ability to free itself 
from its current oil dependence will most certainly put our 
nation's economy, security, and overall public health at risk. 
Clean Energy urges the expansion of the current Renewable Fuels 
Standard toward a broader Alternative Fuels Standard that 
includes clean, domestic and affordable natural gas as a 
transportation fuel.
                              ----------                              

    Mr. Butterfield. Thank you very much. Mr. Reid, 5 minutes.

   STATEMENT OF PAUL D. REID, PRESIDENT AND CHIEF EXECUTIVE 
       OFFICER, REID PETROLEUM CORPORATION, LOCKPORT, NY

    Mr. Reid. Thank you, Mr. Butterfield and members of the 
subcommittee, for holding this hearing today and inviting me to 
testify. I serve as the chief executive officer of the Reid 
Group based in Lockport, New York. The Reid Group distributes 
Mobil, Sunoco, Citgo, Coastal and unbranded motor fuels 
throughout upstate New York and northwest Pennsylvania.
    I appear today on behalf of the Society of Independent 
Gasoline Marketers of America, SIGMA, where I serve as 
president, and the National Association of Convenience Stores, 
NACS, of which I am a member. Together, SIGMA and NACS members 
sell approximately 80 percent of all motor fuels in the United 
States.
    At the outset, I would like to correct the record 
concerning some statements made regarding the composition of 
the retail motor fuel market during the subcommittee's hearing 
on April 18, 2007. A witness at that hearing mentioned that 
only 18 to 20 percent of the retail motor fuel locations are 
independently owned and operated. In fact, the composition of 
the retail marketplace is much more diverse than this. Of the 
more than 165,000 motor fuel retail locations in the Nation, 95 
percent are operated by independent businesses. Therefore, as 
the Nation transitions toward the sale of more renewable fuels, 
independently-owned businesses will be leading the charge.
    Congress should be pleased that the market is proceeding to 
offer renewable fuels ahead of the federally-mandated schedule. 
There is no reason to believe that this will not continue in 
the absence of increased mandate. SIGMA and NACS do not oppose 
the transition to a renewable fuel economy, however, we urge 
Congress, in its decisions, to be fully cognizant of the 
economic and consumer consequences associated with continuing 
mandates on the motor fuel business.
    To this end we recommend Congress: (1) make any increased 
mandate contingent upon a finding that there is enough supply 
and sufficient infrastructure to deliver this product; (2) that 
any Federal promotion of an alternative fuel focused on 
compatibility with existing infrastructure; and (3) that 
Federal policies represent the best interests of your 
constituents' economic welfare.
    To illustrate the complexities associated with non-
compatible alternative fuels, let me talk for a moment about 
the challenges our industry is having with E-85. Although 
alternative fuel proposals under consideration may present even 
more complex compatibility issues, but we think the E-85 
experience serves as a good benchmark. Because E-85 is more 
corrosive than regular gasoline or fuel for the lower 
concentrations of ethanol such as E-10, it requires vehicles 
and equipment that are compatible with the fuel. The least 
expensive approach to sell E-85 is the retrofit of a pump 
system that are already has the compatible tank. Many older 
tanks are not compatible. This requires replacement of several 
components. For all of these conversions, including tank 
cleaning, I estimate the cost to be between $8,000 and $9,000. 
And again, this is still using the same pump or dispenser.
    To convert with a new dispenser specially manufactured to 
sell E-85, I would be facing an expense of something in the 
range of $20,000 to $25,000. Of course, that is a bargain 
compared to the installation of an entirely new system for E-
85, with a new tank, for which I was recently quoted a price of 
$75,000. Other members have quoted much higher prices. As Mr. 
Hastert pointed out earlier, currently there are no systems 
that have UL approval, although we expect that in fairly near 
future.
    Also please keep in mind that the annual pretax operating 
profit for a convenience store in 2006 was a mere $33,000. The 
infrastructure cost to install alternative fuel systems, 
therefore, are so substantial that, ultimately, consumers will 
pay the price. And price is another very important factor for 
this committee to consider, as few other issues attract as much 
attention from consumers, the media and Congress as does the 
price of gasoline.
    NACS recently fielded a survey to assess consumer 
sensitivity to gasoline prices. This survey found that more 
than one-quarter of consumers will turn left across a busy 
intersection to save one penny per gallon, and half of 
consumers will do so for three pennies per gallon. What the 
NACS survey further revealed, however, is that while consumers 
want to promote a green economy, when they go to fuel their 
vehicles, the only green that truly matters is either the green 
in their wallets on their charge cards. Because more and more 
consumers are using their credit cards to buy gas, our 
marketing costs are rising dramatically; but we can leave 
credit card discussions for another day.
    In closing, as Congress considers policies to accelerate 
the market's transition, SIGMA and NACS urge you to keep in 
mind the nature of the retail marketplace and to remember the 
economic interests of your constituents. Government mandates 
are often antithetical to a free motor fuels marketplace and 
will typically wind up harming consumers in the short run and 
beyond. Thank you for the invitation to testify. I will be 
happy to answer any questions my testimony may have raised.
    [The prepared statement of Mr. Reid follows:]

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    Mr. Butterfield. Thank you, Mr. Reid. Mr. Greco, I believe 
it is your turn for 5 minutes.
    Mr. Greco. Thank you, Mr. Butterfield.
    Mr. Butterfield. Mr. Greco.

   STATEMENT OF ROBERT GRECO, GROUP DIRECTOR, DOWNSTREAM AND 
INDUSTRY OPERATIONS, AMERICAN PETROLEUM INSTITUTEWASHINGTON, DC

    Mr. Greco. Mr. Butterfield and members of the subcommittee, 
API welcomes this opportunity to present the views of the U.S. 
oil and natural industry on renewable fuels. We have also 
welcomed working with both the subcommittee and the full 
committee on global climate change. As research on the policy 
debate continue, our member companies have taken action now to 
reduce greenhouse gas emissions and are investing and 
developing technologies that will reduce them further in the 
future. API supports voluntary technology-based approaches that 
have produced substantial progress toward reducing emissions.
    Concerning renewable fuels, API supports a realistic and 
workable RFS. Our industry is the Nation's largest user of 
ethanol and is increasing the volume of renewable fuel in 
America's transportation fuel mix. The industry significantly 
exceeded the 2006 RFS requirement of four billion gallons of 
renewables and according to EIA estimates, should exceed the 
2007 requirement as well. The existing RFS requirement have 
attracted substantial and significant investment capital to 
increase ethanol production. At the same time, innovative new 
approaches to producing and utilizing biofuels for 
transportation are underway.
    The most economical and practical use of ethanol is as E-
10, a 10 percent blend in gasoline. E-10 is already used in 
many parts of the country. It requires no modification to 
vehicles, no major changes to service station pumps and storage 
tanks, and has a long history of successful use by consumers. 
E-85, which contains 85 percent ethanol and 15 percent 
gasoline, is an alternative fuel that faces significant 
technological and economic hurdles. E-85 requires specially 
built flexible fuel vehicles, or FFVs, which currently comprise 
only 3 percent of the existing fleet of 220 million vehicles. 
EIA estimates that FFV penetration will not rise about 10 
percent of the entire vehicle fleet until sometime after 2030. 
E-85 also requires special service station pumps and storage 
tanks, as Paul mentioned, which represent a significant 
expenditure for our Nation's independent service station 
dealers that can range from $20,000 to as high $200,000.
    These small businessmen and women are in the best position 
to evaluate consumer demand for E-85 at their service stations. 
Currently there are over 1,200 retail outlets nationwide, 
located principally in the Midwest, that are equipped to 
distribute E-85. The number appears to be growing rapidly on 
its own, as we heard this morning, absent any government 
mandate. Contrary to the false claim by some industry critics, 
oil companies are not preventing the installation and use of E-
85 pumps and storage tanks.
    Although no one knows the precise amount, at some point in 
the not too distant future, limits on domestic corn ethanol 
production will be reached. Too little attention is being paid 
to the transition from that point forward, especially on 
impacts associated with a delay in mass-scale production of 
cellulosic ethanol. Given the limited likelihood that 
cellulosic technologies can begin producing sizeable volumes of 
ethanol in 5 years, contingency provisions will likely be 
needed to avoid the potential for wasted resources and 
increased costs.
    API offers these specific comments concerning possible 
renewable fuels by--first, restrictions on Federal requirements 
in the Energy Policy Act of 2005, or EPAct, should continue. A 
Federal alternative or renewable fuels mandate should not have 
a per gallon requirement, it should not require any particular 
alternative fuel to be used to meet that mandate, it should not 
require an alternative fuel to be used in any particular 
geographic area, and should not require an alternative fuel be 
made from a particular feedstock or restrict the us of any 
feedstock or processing speed.
    Second, States and localities should be preempted from 
setting alternative or renewable fuels mandates. There should 
be an explicit and complete Federal preemption of States from 
setting alternative fuel standards or controls of any type. Or 
in lieu of an explicit preemption, restrictions on State 
latitudes could be enacted.
    Third, EPA should be provided the additional authority to 
grant temporary waivers during supply emergencies. There should 
be Federal preemption of existing State fuel and ASTM 
performance regulations when a waiver is issued during a supply 
emergency, such has happened during the Hurricanes Katrina and 
Rita. There should be emergency waiver of authority for up to 
90 days. The 20-day limit for waives provided in EPAct is 
adequate for most situations, but proved inadequate during 
Hurricanes Katrina and Rita. Waiver authority should also 
remain with the EPA Administrator. To change authority to the 
President would prevent speedy implementation of waivers, as 
was intended under EPAct.
    Lastly, any mandates for increased alternative ore 
renewable fuel usage should get accompanied by periodic 
technology and feasibility reviews that would allow for 
appropriate adjustments to ensure that energy companies and 
consumers are not penalized if economic and technical hurdles 
prevent us from reaching alternative or biofuels usage targets.
    In conclusion, API and its member companies stand ready to 
work with the subcommittee to provide additional information or 
assistance on the issues I have addressed. Thank you and I look 
forward to your questions.
    [The prepared statement of Mr. Greco follows:]

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    Mr. Butterfield. Thank you very much. I am going to 
expedite this. We have three votes coming up in a few minutes. 
Mr. Drevna.

   STATEMENT OF CHARLES T. DREVNA, EXECUTIVE VICE PRESIDENT, 
NATIONAL PETROCHEMICAL AND REFINERS ASSOCIATION, WASHINGTON, DC

    Mr. Drevna. Congressman Butterfield and members of the 
committee, thank you for the opportunity to testify. I am 
Charlie Drevna, executive vice president of NPRA.
     NPRA believes it imperative that Congress and the 
administration and all stakeholders work in a determined but 
nevertheless cooperative effort to develop policy that achieves 
the desired results of a balanced fuel supply and demand ratio 
that enforces necessary environmental protections. At the same 
time, these policies must ensure the continued economic growth 
and security of the country. These goals are not and cannot be 
deemed mutually exclusive. NPRA therefore pledges to do our 
part in developing a full understanding of all factors 
surrounding these issues.
    If members of this committee are experiencing some sense of 
deja vu, it would be understandable. Only two summers ago the 
Energy Policy Act of 2005 was signed into law. The Renewable 
Fuel Standard in that law won't even begin implementation until 
September 2007--weeks ago. But it is still too early to 
evaluate the 2005 law. That policy was years in the making and 
was consensus-based. While we have surpassed initial 
legislative targets for renewable fuels use, that is not bad 
news. It simply means that the market has worked. It shouldn't 
be used as a basis for readjust fuel policy even before final 
implementation.
    Now we are confronted with new initiatives to expand 
renewable fuel substantially. While a diverse fuel mix may 
enhance security, the energy content of ethanol, one-third less 
that than conventional fuels it replaces, greatly reduces 
ethanol's impact on foreign dependency. Our experience with the 
fuel market tells us that 6 billion gallons of ethanol is both 
necessary and complimentary to fuel supply. Mandates, and I 
stress the word mandates, beyond that level become problematic.
    While it is no secret that my industry, and especially my 
association, has a history of proposing fuel mandates. We would 
ask that further changes to policy be limited by a form of the 
Hippocratic oath: first do no harm. Mandates for alternative 
fuels do not exist in a vacuum. The time and expense dedicated 
to implementing new mandates directly competes with the ability 
of our industry to make investments in refinery expansions. The 
industry has responded by adding capacity to existing 
refineries. In fact, we have added the equivalent of one new 
world-class refinery each of the past years, each of the years 
for past decade. However, additional mandates may suppress such 
expansion significantly.
    While NPRA supports research into a broad array of 
renewable inputs, the foreseeable future for alternative fuel 
seems to be dominated by traditional starch-based ethanol, 
especially by corn and corn has a significant head start over 
its competitors. Even if corn only meets half of the 
President's 35 billion target, that would require dedication of 
about 40 percent of the crop to fuel. We wonder whether trading 
some increased fuel diversity for a fuel supply dependent upon 
good weather and reasonable fuel prices really makes sense.
    And of course, even as the U.S. gets the production 
economics just right, there is still a question of distributing 
fuel to market. Ethanol distribution is bedeviled by problems 
in using our existing infrastructure pipelines that provide a 
cost-effective mechanism to get fuel to market. Talk of a 
virtual pipeline system really means no pipeline system at all. 
Further, even assuming perfect distribution to the market, the 
current vehicle base is not equipped to handle the type of 
volume that is being discussed. In order to consume the 35 
billion gallons, we would need rapid replacement of some 237 
million vehicles currently on our roads that are not flex-fuel 
vehicles.
    There are additional infrastructure constraints and time--I 
want to move on here so we will probably have some questions on 
those. But NPRA would leave the committee with one request. If 
Congress does proceed with mandates beyond those contemplated 
in the 2005 Act, let us make sure we have one fair Federal 
policy and not a patchwork quilt of State and Federal mandates. 
As it did in the Clean Air Act Fuels Program, Congress should 
preempt State efforts that interfere with the cost-effective 
distribution of clean fuels.
    In short, the refining industry is the conduit through 
which alternative fuels may get to market. The industry is 
working hard to meet the 2005 program and so far, it has so far 
met with success. But we would ask that you not use that 
success as the basis for massive expansions and mandates. We 
ask instead that policymakers tread carefully, realizing that 
good fuels policy must balance supply, price, infrastructure 
and yes, even food concerns. While we realize that is a tall 
order, the American consumer deserves no less. Thank you and I 
will be happy to answer any questions that you may have.
    [The prepared statement of Mr. Drevna follows:]

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    Mr. Butterfield. Dr. Lashof.

STATEMENT OF DANIEL A. LASHOF, CLIMATE CENTER SCIENCE DIRECTOR, 
       NATURAL RESOURCES DEFENSE COUNCIL, WASHINGTON, DC

    Mr. Lashof. Thank you very much, I am Daniel Lashof. I am 
the science director of the Climate Center at the Natural 
Resources Defense Council. I appreciate the opportunity to 
share my views with the committee.
    As you know, U.S. energy policy must address three major 
challenges. We have to reduce our dependence on foreign oil, we 
have to reduce global warming and we have to support a robust 
economy through our policies. I believe that biofuels has the 
potential to contribute substantially to all three of those 
goals, but we have to do it right in order to achieve those 
goals. Sustainably produced biofuels used in efficient vehicles 
will reduce global warming pollution and it will reduce our oil 
dependence and will enhance our rural economies. But there is 
danger, a severe danger, in our view, to our forests, our 
public lands, our ecosystems, if we pursue biofuels on a large 
scale without appropriate guidelines and I want to share some 
views about the guidelines that I think are needed. And in 
summarizing my testimony, I would like to make four points and 
I think have about a minute for each.
    First, any expansion of the Renewable Fuel Standard should 
incorporate explicit environmental performance standards. There 
is a lot of justifiable excitement about cellulosic ethanol, 
but it is very important to recognize that the choice of 
feedstock is just one factor that goes into the overall 
environmental impact of a particular biofuel production 
process. If you look at my exhibit in my testimony, or the A 
chart that is also in my testimony, you can see a variety of 
greenhouse gas impacts for different fuels. It is possible to 
use corn as a feedstock and with efficient processing and 
biomasses to energy source, achieve substantial greenhouse gas 
benefits from a corn-based system. Conversely, although 
normally we think of cellulosic ethanol as preferable, if you 
clear a mature forest in order to get the cellulose that you 
put into ethanol, you put so much CO\2\ in the atmosphere, it 
would take many, many decades to get that back for the benefits 
of the fuel. So it is possible to do corn right and it is 
possible to do cellulosic ethanol wrong. So if you want to have 
greenhouse benefits for biofuels, you need to explicitly 
incorporate into the program a requirement to achieve those 
benefits. That is a way to get that. And a low carbon fuel 
standard that Mr. Inslee talked about earlier, in our view is 
the best way to do that.
    Second, turning to the administration's proposal, as Mr. 
Markey brought up earlier, there is a real risk that that 
proposal could increase rather than decrease global warming 
emissions. The administration cites it as contributing to 
reductions in global warming emissions, but nothing in their 
policy actually guarantees that result and that is because they 
open the door to alternative fuels that could have much higher 
greenhouse gas emissions than conventional fuel. They also 
claim some benefits from improving vehicle fuel economy 
standards, but again, their proposal there doesn't actually 
require an increase. It provides for--which they have already, 
but doesn't require an increase. In fact, I calculated that if 
half the alternative fuel mandate proposed by the 
administration was satisfied with coal-derived liquid fuel, 
which were produced without CCFs, without carbon capture, the 
CO\2\ emissions would be 175 million tons higher than the 
emissions targeted by the administration. And to offset that, 
if you were to offset that by higher fuel economy standards, 
you would have to raise fuel economy standards by more than 8 
percent per year rather than the 4 percent per year suggested 
by the administration.
    Third, my third point is that electricity for plug-in 
hybrid vehicles is the best way to use coal as a substitute for 
gasoline. I believe there is even better alternatives than 
coal, but if coal is to be used, plug-in hybrid vehicles can 
displace twice as much gasoline per ton of coal used and 
produce one-tenth the greenhouse gas emissions per mile as 
using that same coal to produce liquid fuels. So I believe that 
we ought to start with where we could use coal, if we are going 
to use it, to have the natural benefits and that is in the 
production of electricity at plants that capture carbon dioxide 
and put it under ground.
    Fourth and my final point is that EPA should be directed to 
protect air quality as it implements any expansion of the 
Renewable Fuel Standard. As we heard in previous testimony from 
Mr. Meyers, when you put ethanol in a vehicle, some emissions 
go up and some go down. There is no reason to allow a trade-off 
here. EPA should be directed with a very clear, very simple no 
backsliding rule that when alternative fuels are used in a 
vehicle, emissions that contribute to air quality degradation 
should not increase compared with conventional fuel.
    So in summary, Mr. Chairman, I do believe that biofuels 
hold great promise as a tool for reducing global warming 
pollution, breaking our dangerous addiction to oil and 
revitalizing rural economies, as long as appropriate standards 
and incentives are used to shape the Nation's bioenergy 
industry. Thank you very much.
    [The prepared statement of Mr. Lashof follows:]

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    Mr. Butterfield. All right, Mr. Dinneen.

     STATEMENT OF BOB DINNEEN, PRESIDENT, RENEWABLE FUELS 
                  ASSOCIATION, WASHINGTON, DC

    Mr. Dinneen. Thank you, Mr. Chairman. Please, you will have 
to excuse me. I am having a serious deja vu experience here 
today, because I can remember not too long ago when I was 
testifying before this very committee with some of the same 
organizations testifying along side me that were very concerned 
about the 3 billion gallon Renewable Fuel Standard that this 
committee was at that time considering, and they were 
testifying with great passion about how much that was going to 
disrupt the marketplace and how the ethanol industry certainly 
couldn't produce that much ethanol and even if they could they 
wouldn't be able to distribute it across the country and what a 
disaster it was going to be for our Nation's gasoline 
infrastructure.
    Well, Mr. Chairman and members of the committee, we are now 
a few years later. This committee wisely put in place the 
Renewable Fuel Standard that imposed a 7\1/2\ billion gallon 
RFS by 2012, and as the testimony you have already heard today 
suggests, we have not only met it, we have exceeded it. Given 
the market signal that the Renewable Fuel Standard is 
providing, our industry began a rapid expansion. Wall Street 
recognized that this was a place to put their investment 
dollars. The refining community recognized that ethanol was a 
part of their future and I frankly give them great credit for 
working with our industry to build the infrastructure, to make 
the transition to an RFS such a success as it has been. But 
look at what you have today. We now have 116 ethanol plants in 
operation all across the country. Ethanol is blended in 46 
percent of our Nation's fuel. But we are not done yet. There 
are no less than 81 ethanol plants that are under construction 
all across the country, in areas far outside of the typical 
Midwest grain belt. We have got plants under construction today 
in California, in Arizona, Mr. Shadegg, in Florida, in Georgia. 
There are actually more plants under construction today in 
Texas than in Illinois. The industry is growing and growing 
rapidly and it is providing tremendous benefits and it is 
revitalizing rural communities all across this country. That is 
what this Congress foresaw; that is the reality that the RFS 
has been.
    The industry is evolving, it is changing as it grows. As 
new capital comes into the industry, new intellectual capital 
is coming into the industry as well, looking at new ideas and 
new feedstocks and new technologies. There is not an ethanol 
company that I represent that does not have a cellulose-to-
ethanol research program underway today. Why? Because they 
already have cellulose coming into the facility and they 
recognize that that is going to be a significant part of the 
future, not as a replacement to grain, but certainly as an 
additional component of what we are able to get from our 
abundant agricultural and waste products across this country.
    Recently the Department of Energy, under grant program that 
the Energy Policy Act of 2005 provided, gave six different 
grants to six different companies in six different parts of the 
country, using six different technologies on cellulose. It 
ranges from processing ethanol from municipal solid waste with 
acid hydrolysis to processing ethanol from woody biomass using 
gasification to processing ethanol from corn stover and other 
waste off the corn field using intermatic conversion. 
Cellulosic ethanol production is far closer to a reality than 
conventional wisdom believes and it is going to happen soon. 
And that is a good thing, because our industry is going to 
continue to grow and we need to be able to look to other 
resources beyond just grain.
    As the industry grows, as our production base expands, the 
marketplace is also evolving. You now see ethanol largely being 
sold as a blend component in gasoline, but thanks to the 
leadership of U.S. automakers like General Motors and Ford, 
that have made a very real commitment to flexible fuel 
technology that will allow ethanol to be used as E-85 all 
across the country, we see an opportunity to grow beyond a 
blend market and to grow into those E-85 markets. The oil 
industry has certainly wrapped themselves around ethanol as a 
blend component in gasoline and I give them great credit for 
that. They continue to resist ethanol as a replacement fuel in 
E-85 and I guess if they did anything else, I would be somewhat 
confused. But that is the reality. That is where we need to be 
moving if we are indeed going to address our energy and 
environmental issues with the intensity and the focus that I 
believe this country and this Congress wants us to do. The oil 
industry will continue to oppose that, but that is a dog fight 
farmer story. I am intent on working with this committee to 
make sure that we move beyond that and we get to a future that 
is far more sustainable. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Dinneen follows:]

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    Mr. Butterfield. Thank you very much. Well, all the time 
has expired for the testimonies. We are going to start the 
questioning. The problem is we have three votes on the House 
floor at this moment. It looks about 10 minutes and 15 seconds 
remaining for us to get to the House floor. That means that we 
will reconvene in about 30 to 45 minutes. That would be 10 
minutes after the last vote. At this time, the committee is in 
recess.
    [Recess]
    Mr. Butterfield. I thank all of you for your patience. We 
are now ready to resume the committee hearing. At this time it 
is my pleasure to recognize the distinguished chairman of the 
committee, the gentleman from Michigan, for questions.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy.
     Gentlemen of the panel, these questions will be asked so 
that you can answer yes or no because of the great limitation 
on time. First question, Ms. Lowery, if you please, 
approximately how many vehicles are already on the road today 
capable of operating on alternative fuels such as E-85?
    Ms. Lowery. It is more than 6 million on the road today, 2 
million from General Motors.
    Mr. Dingell. Now in June, Ms. Lowery, General Motors 
announced and Ford announced and the Chrysler group announced 
that they would double their production of vehicles capable of 
operating on renewable fuels by 2010 and have committed to 
making half of all vehicles production biofuel-capable by 2012, 
is that correct?
    Ms. Lowery. Yes, it is.
    Mr. Dingell. Now, Mr. Greco, if you please, is it not true 
that E-85 accounted for only 1 percent of the alternative fuel 
consumption in the United States in 2004?
    Mr. Greco. I don't know the number.
    Mr. Dingell. You don't know the number?
    Mr. Greco. No.
    Mr. Dingell. Would I be incorrect if I said 1 percent?
    Mr. Greco. Or less, maybe. I don't know.
    Mr. Dingell. OK. Now, the Congressional Research Service so 
advised us and the committee. Mr. Greco, another question. Is 
it not true that out of 165,000 retail outlets selling motor 
fuels to consumers, there are only approximately 1,000 which 
offer E-85 to consumers?
    Mr. Greco. DOE mentioned 1,200 this morning, I guess about 
a 70 percent increase.
    Mr. Dingell. All right.
    Mr. Greco. About 1,200 this morning that DOE mentioned, 
yes.
    Mr. Dingell. OK.
    Mr. Greco. About 1,200.
    Mr. Dingell. Twelve hundred. I will deal with the 
correction. And out of these 1,000 or 1,200 stations, 
approximately 100 of these stations are branded by a company 
generally recognized as one of your members, so I would suspect 
that out of this number, only 10 percent of those affiliated 
with your member companies are included in the numbers, is that 
a correct statement?
    Mr. Greco. I don't know. I am not sure which brands are 
involved or what the market arrangements are for those 
companies.
    Mr. Dingell. Now, I will insert in the record a list of 
stations available in the United States and I ask unanimous 
consent, Mr. Chairman, that that be done.
     Mr. Greco, have your association or your member companies 
made a commitment comparable to that of Ford, GM or Chrysler, 
to facilitate the installation of E-85 pumps?
    Mr. Greco. We have made a commitment to use ethanol in 
gasoline to a maximum extent, as by law and that is what we are 
focused on.
    Mr. Dingell. So you are telling me you have not made a 
commitment of that kind?
    Mr. Greco. Our focus is on using E-10 in every gallon of 
gasoline that can be used by every vehicle on the road today. 
That is the focus of the membership.
    Mr. Dingell. I guess you are telling me your answer then, 
sir, is no. Now, Mr. Drevna, if you please, has your 
association or your member companies made a comparable 
commitment to facilitate the installation of E-85 pumps?
    Mr. Drevna. No, sir, we haven't made any commitment like 
that, but I will stand by the same response of Mr. Greco. We 
look at the market and what the market demands these days and--
--
    Mr. Dingell. So the answer is?
    Mr. Drevna. The answer would be no, sir.
    Mr. Dingell. The answer is no. Now, Mr. Greco and Mr. 
Drevna, in the interest of solving the problem here which we 
have of the chicken and the egg, for once and all, if the 
Congress mandated that automakers produce flex-fuel vehicles, 
would you or your organizations support a corresponding 
mandate, accompanied by corporate financial support for small, 
independent retail outlets, to install E-85 pumps so that 
consumers can buy and use this alternative to petroleum? Would 
you please, first, Mr. Greco.
    Mr. Greco. No, our members are focused on E-10 and when the 
consumer wants E-85, the demand will drive the availability of 
that.
    Mr. Dingell. So the answer is you would not make that 
commitment.
    Mr. Greco. No.
    Mr. Dingell. Mr. Drevna, what do you have to say about this 
matter?
    Mr. Drevna. Basically the same, Mr. Chairman.
    Mr. Dingell. Thank you. So you are telling us that your 
organization would not make that commitment, either. Gentlemen, 
thank you, and Mr. Chairman, for your courtesy, thank you.
    Mr. Butterfield. All right, thank you, Mr. Chairman. At 
this time, the gentleman from Oklahoma is recognized for 5 
minutes.
    Mr. Sullivan. Thank you, Mr. Chairman. Mr. Dinneen, my 
understanding is that the current Federal tax incentives for 
ethanol fuels is provided to the producer of the gasoline, 
which includes some big oil companies. Can you explain how, if 
the tax incentive is provided to the producer of the gasoline, 
this incentive program has helped corn farmers and ethanol 
producers?
    Mr. Dinneen. We find that the gasoline marketers of blended 
ethanol are indeed given a tax incentive to allow them to pay 
more for the ethanol that they are buying. Now, how much of the 
tax incentives filters down to the producer is a discussion 
that the ethanol producer would have with their refiner or 
gasoline marketer or customer.
    Mr. Sullivan. OK. And Mr. Drevna, you suggest in your 
statement that substantially expanded the renewable fuels 
mandate could suppress refining expansion. Could you elaborate 
on that statement? Could the U.S. end up becoming a net 
exporter of gasoline if all of these proposals were to take 
effect?
    Mr. Drevna. I am glad you asked that question, Mr. 
Sullivan, because, first of all, any mandate, an increase of a 
mandate over today's EPAct 2005 volumes, it wouldn't actually 
give pause to refinery executives as to whether they should 
continue with capacity expansions. If we could talk for a 
moment, sir, about what the world would look like in 2017. And 
again, there has been a lot of ifs here. If cellulosic comes 
into play, if all of these other technologies come into play 
and we are required, as an industry, to reduce gasoline 
consumption 20 percent below projected 2017 levels, that 
equates to a figure that is below gasoline production today. So 
it would make little or no economic sense for refineries to 
expand.
    Now, in the same thing and a good thing I would suggest is 
that diesel demand continues to rise, which means the economy 
is chugging along fairly well. To illustrate, we can do a lot 
of things in the refinery business, but it is very difficult 
for us to make diesel without making gasoline. So what will 
happen in 2017, again, assuming all of these things, all of 
these ifs come into play, and those are big ifs, sir, the first 
thing we would do is we back out all imports of gasoline, 
because the United States would end up being a net exporter of 
gasoline. Now, I asked if that is the public policy we are 
attempting to achieve here, if we are producing domestic 
gasoline that we can't use here because we would be saddled 
with a 20 percent reduction figure. And then in the case of 
weather disasters such as we witnessed 2 years ago with Katrina 
and Rita, what saved the supply in this country was the 
imports. Baking out imports and having the U.S. be a net 
exporter of gasoline, again, I think those are questions that 
have to be looked at, the long-term impacts, the unintended 
consequences of these massive mandates.
    Mr. Sullivan. Thank you, sir. And Mr. Reid, is it true that 
oil companies are blocking wider use of E-85 by forbidding gas 
station owners to put in pumps? Are there any current legal 
impediments that prevent them from doing so?
    Mr. Reid. To the best of my knowledge, there is no blocking 
or preventing. There are legal impediments, in the sense that 
the retailers who are selling a branded motor fuel are required 
to identify their pumps with the trade name, trade address of 
their brand supplier. So if they are offering a product for 
sale at the outlet that is not supplied by their franchise 
contract supplier, they are obligated to protect the 
intellectual property rights of their supplier and ensure that 
the--let us just use as an example an E-85 pump--to make sure 
the consumer understands that the product they are selling is 
not a branded product of their supplier refiner company.
    Mr. Sullivan. Thank you, sir. And Mr. Mitchell, how does 
the fuel costs of natural gas compare to the price of gasoline 
or diesel fuel?
    Mr. Mitchell. Well, currently, using $7.61 for the price of 
natural gas and adding the amount to compress the fuel, 
transport it, collect margin and capital recovery, it is about 
$1.95. The average gasoline price as of last week ran between 
about $3.00 and $3.20 cents, depending on whether it was 
standard or super leaded fuel, or unleaded. And with diesel, 
diesel is about $2.95 and because of the BTU conversion, a 
natural gas equivalent gallon would be about $2.17. I also 
mentioned that, through the home refueling device, since there 
is no capital recovery component for the homeowner, or 
essentially none, there is no margin. Then they would receive 
the natural gas at a gasoline gallon equivalent of about $1.35, 
because that would be a home refueling unit installed in their 
garage.
    Mr. Sullivan. Thank you, Mr. Mitchell, and thank you 
panelists. I yield back.
    Mr. Butterfield. Thank you. The gentleman yields back. At 
this time, the chair recognizes the gentleman from Georgia, Mr. 
Barrow.
    Mr. Barrow. Thank you, Mr. Chairman. I want to follow up on 
Representative Sullivan's questions just for a second. These 
questions might be most directed to you, Mr. Greco, and Mr. 
Drevna, if you want to chime in, that would be fine.
    I heard Mr. Reid say earlier in his testimony that 
independent businesses are going to be leading the charge and I 
guess one of the questions is just how independent are 
businesses that are tied up in franchise agreements that end up 
constraining their choices and their options. For example, I 
heard you, Mr. Greco, talk about the importance of brand name 
protection, product ID and the importance of, I believe it was 
your, Mr. Reid, avoiding the problem of mis-fueling.
    You want to make to sure that all of these things are tied 
up and yet the article that I just mentioned talks about things 
like ExxonMobil Corp's standard contract with its Exxon 
stations, it bars them from buying fuel from anyone but itself 
and they don't make E-85, so it essentially bars them from 
getting any E-85 fuel. ConocoPhillips, a number of the 
franchisees says the company doesn't allow E-85 sales on the 
primary island. BP guidelines for stations that carry the 
company name bar any mention of E-85 on the gasoline 
dispensers, on the perimeter signs of the light poles.
    These are the sorts of things that franchisees encounter, 
so in addition to the problems we talked earlier about, just 
creating a sufficient supply of this stuff, we have franchise 
agreements which could effectively be getting in the way of 
people who might want to try and avail themselves of that 
option, so how independent can folks be if they are constrained 
in this way and basically what I am getting at is should 
Congress play a role in this? I am making the suggestion 
before--sometimes it is the best thing if the government is the 
heavy in the picture.
    You represent all of your members you have got to address 
the interests of your members, as a whole. But sometimes, like 
Harry Truman said, we spend 95 percent of our time up here 
trying to persuade folks to do what is in the best interest to 
do, anyway. And sometimes government can play that role. If you 
were to come in and sort of make it plain that agreements 
cannot constrain or restrict folks in certain ways. Might that 
help solve the problem? One of your members want to go first, 
but be constrained by being put at a competitive disadvantage 
vis-a-vis others pull back. Is there a constructive role for us 
to play getting everybody onto the same playing field in 
clearing away these impediments which pop up in one form or 
another, these agreements?
    Mr. Reid. Can I respond to that?
    Mr. Barrow. Yes, sure.
    Mr. Reid. As I mentioned, I don't believe that it is an 
issue, meaning there are contractual provisions. The Gasohol 
Competition Act of 1980 precludes the enforcement of those 
contractual provisions. As a business owner, I have the freedom 
to move forward with those opportunities if I so choose.
    Mr. Barrow. But if you are contracting with a big guy and 
you are using their name, you are a franchisee, you have got to 
play by the rules of the franchisor.
    Mr. Reid. I am obligated to eligible property rights.
    Mr. Barrow. Sure, but I am saying it goes beyond eligible 
property rights. If you say you can't buy anything from anybody 
else and they don't make it, it is not beyond the eligible 
property rights to make sure it can't be sold on a primary 
island. It has to be put somewhere. It is not allowing folks to 
get what they need if you tie it up in a contract. There may be 
no legal impediments in the sense that there is a statute 
prohibiting you from doing something, but if it is a contract 
that we enforce in a court of law, that ends up being a legal 
impediment.
    Mr. Reid. My point being that those contractual provisions 
are not enforceable in a court of law.
    Mr. Barrow. Why not? Who says?
    Mr. Reid. It is under the Gasohol Competition Act of 1980.
    Mr. Barrow. Well, if I am the owner of this independent 
business, I am not going to be able to fight that out in a 
court of law with Exxon. Mr. Dinneen, can you respond to this? 
Can you shed some light on this?
    Mr. Dinneen. I think there are some impediments to the 
marketplace moving toward E-85. There are some issues--pointed 
out to many of them. The suggestion that the Gasohol 
Competition Act of 1980 provides--wanting to go down this route 
some protection, I think is just not accurate. The Gasohol 
Competition Act of 1980 was very narrow. It only addressed 
credit cards exclusively and it didn't talk about prohibitions 
against putting an E-85 pump under the canopy.
    Mr. Barrow. I don't think there is any statute about that, 
is there?
    Mr. Dinneen. No.
    Mr. Barrow. OK.
    Mr. Dinneen. It might be something to look at, is how you 
could amend the Gasohol Competition Act to address some of 
these marketplace realities.
    Mr. Barrow. Well, it is a sensitive subject, but it really 
is a friendly suggestion and talked about how maybe Congress 
can play a role in being the heavy in the picture, where 
everybody wants to go their own way, but it is in their best 
interest for everybody to go the same way, but they are at a 
competitive disadvantage in going first. I have to yield, Mr. 
Chairman. Thank you.
    Mr. Butterfield. Thank you, Mr. Barrow. The gentleman 
yields back. Looks like we have no more members on the Minority 
side or the Majority side. I will conclude, ladies and 
gentlemen, with just a few questions.
     Let me start with Ms. Lowery. Ms. Lowery, Dr. Lashof has 
testified that the administration's Alternative Fuel Standard 
could increase greenhouse gas emissions, rather than decrease 
them. Do you agree that that is possible?
    Ms. Lowery. Actually, I think what is important is to look 
at the whole diversity of energy sources and look at the 
various streams and what the greenhouse gas emissions would be 
from those fuel sources. But from the Renewable Fuels Standards 
and the Alternative Fuel Standards, there could be great 
improvement in greenhouse gas emissions, so we need to look at 
all the different pathways.
    Mr. Butterfield. Thank you. Dr. Lashof, my understanding is 
that the maximum feasible amount of corn-based ethanol is 14 to 
17 billion gallons of ethanol per year by 2017. Do you agree 
with that number?
    Mr. Lashof. I have heard that number cited. I don't think I 
am in a good position to say whether that is true.
    Mr. Butterfield. What do you think is the maximum feasible 
amount?
    Mr. Lashof. I think it is a somewhat elastic issue. I think 
that there is a potential to grow additional corn. I do think 
if you hit those lines, you are clearly going to be starting to 
diversify away from corn into other feedstocks, if you can 
expand much beyond that. It doesn't mean that I don't know that 
there is an absolute maximum that the market can produce.
    Mr. Butterfield. Mr. Dinneen, do you want to take a stab at 
that?
    Mr. Dinneen. Yes, I think those analyses have been done and 
USDA has agreed with some of that, is looking at today's 
technology. But the fact of the matter is technology is 
evolving and there are companies working on biotechnology today 
that could potentially provide significantly increased yields 
on existing acreage that would allow that number to increase. 
But looking at today's technology where we are, yes, about 14 
to 17 billion gallons of ethanol from grain is about the upper 
balance of what you could responsibly achieve.
    Mr. Butterfield. Thank you. Mr. Greco, do you believe that 
it is reasonable to expect that the United States could meet a 
35 billion gallon per year alternative fuel standard by 2017?
    Mr. Greco. As I think I pointed out in my testimony, we are 
very concerned about this transition phase where we are talking 
10, 15 billion gallons that is realistic from corn. But beyond 
that, we are talking about billions of gallons from 
technologies that have not produced, commercially or 
economically, viable amounts yet. So if you are talking about 
doubling or tripling the known production capability of corn, 
which is a longstanding proven technology, it is hard to see us 
getting there in the next 5 years based on these assumptions 
and then ramping up as quickly as some of these proposals would 
suggest, which is why we are supportive of technology reviews. 
So if Congress decides to go down that route, they can take a 
step back and check periodically to see is the technology where 
we think it is and if not, we need to adjust accordingly.
    Mr. Butterfield. All right. Mr. Dinneen, let me go back to 
you for a moment. At our last hearing on alternative fuels, 
which was, I suppose, 2 or 3 weeks ago, a man by the name of 
Brian Foody, the president and CEO of Iogen, testified that the 
goals of 3 billion gallons of advanced fuels by 2016 and 21 
billion gallons by 2022, which are both included in the Senate 
version, are both ambitious and achievable. Do you agree or 
disagree with him?
    Mr. Dinneen. Mr. Foody is a member of Renewable Fuels 
Association, so I wouldn't be so foolish as to disagree with 
him. But seriously, yes, you can certainly get those numbers. 
As I indicated in my testimony, I think the movement towards 
cellulosic ethanol is coming fast and furious. It will be 
commercialized far sooner than conventional wisdom suggests and 
those are numbers that would be achievable. You have seen 
dramatic in the grain-based ethanol industry just since the 
Energy Policy Act of 2005 was enacted. We doubled in size since 
then. We are going to double in size in another 18 months. Once 
the marketplace understands there is technology out there that 
has a marketplace for the product, the marketplace can respond 
very quickly.
    Mr. Butterfield. Mr. Drevna, let me ask you a yes or no 
question. The Senate Energy Committee just voted on a provision 
that would require new--facilities to reduce the life cycle for 
greenhouse gas emissions from their fuel by 20 percent compared 
to conventional gasoline. Should all transportation fuels have 
to meet this standard?
    Mr. Drevna. Congressman, again, NPRA, we are oppose 
mandates. We think that on a going forward basis, as the 
technology is developed, as the right incentives, not 
giveaways, but the right incentives for individual companies, 
individual processes, technologies, feedstocks, it should be a 
level playing field for all. And if that happens, we believe we 
are going to get to where we should collectively want to go, as 
a nation, but to force feed things early on, and in all candor, 
without having the technologies available today, doesn't make 
any sense.
    Mr. Butterfield. Thank you. I believe my time has expired. 
At this time, I am going to recognize the gentleman, my friend 
from the State of Washington, who announced to this committee a 
few weeks ago that he, himself, has an alternative flex fuel 
vehicle. Am I remembering that correctly, Jay?
    Mr. Inslee. Thankfully, you are right. No, I do. I have a 
car, it is a Toyota Prius and it has been a very great car and 
this fall, A123 battery company is offering a conversion kit 
with a lithium ion battery. You plug it into a plug-in vehicle, 
it will get 150 miles a gallon, run it for 1 cent a mile for 
somewhere between 20 and 40 miles and it is available this 
fall. You have got to put some cash down to get the conversion, 
but we are hoping our manufacturers really follow through with 
their efforts to really come up with production models.
    I wanted to ask Dr. Lashof, my concern about going for a 
Renewable Fuels Standard to an alternative standard, it 
essentially allows you to swallow, if possible, if I understand 
the administration proposal, to swallow the fuels that would be 
CO\2\ reducers and go to fuels that were possibly even CO\2\ 
increased. As I understand their proposal, they could have 90 
percent of the entire requirement filled by coal versus liquid 
that is non-sequestered and end up with an 118 percent increase 
for every gallon they sell. Is that your understanding?
    Mr. Lashof. Yes, it is, Mr. Inslee. If you actually look at 
the legislation--it is 35 billion gallons wide open, there is 
no environmental performance standard associated with it, there 
is no requirement that that fuel by renewable. We heard the 
testimony from the first panel that that was their intent and 
that they would sort of let the marketplace sort it out and 
although they have expressed the expectation that cellulosic 
ethanol would play a role, there is no environmental 
performance or other incentives built into the proposal that 
would ensure that result.
    And this juncture here is that they released an analysis 
when the President made his announcement of his policy, 
suggesting that their policy would reduce greenhouse gas 
emissions by about 170 million tons relative to the business-
as-usual forecast, return gasoline based emissions to their 
current levels by 2017, so that is their projection. And the 
problem is that their policy doesn't really contain the 
performance standards that would in any way assure that you 
would actually achieve those numbers.
    Mr. Inslee. And I think you said something gracious about 
my bill that would plug that standard, so if you did, great. If 
you didn't, I hope you will put it in the record.
    Mr. Lashof. I did and thank you very much for your 
leadership in introducing that. I do think that if the goal is 
to get greenhouse gas reductions, the most effective and 
efficient way to do that is to actually have performance 
standard that requires that outcome and that is what your bill 
would do, so I think that is a very important way to----
    Mr. Inslee. Thank you. I appreciate that. I wanted to ask 
Mr. Drevna and Mr. Greco, what percentage of pumps today are 
controlled by companies, either by ownership or franchise 
agreements? What percentage of our pumps today are controlled 
by entities that do not distribute E-85? The number service 
stations today, what number of them, just percentage, ballpark 
figure, controlled by companies, refiners or distributors or 
whoever they are, who do not sell E-85?
    Mr. Drevna. I am going to defer to----
    Mr. Reid. I noted that approximately 95 percent of the 
motor fuel outlets in this country, of which there are 
approximately 165,000, are operated by independent businesses, 
not by vertically integrated major oil companies.
    Mr. Inslee. So you would say, you were saying 95 percent of 
these service stations are legally free to sell anything they 
want?
    Mr. Reid. That is correct.
    Mr. Inslee. So there are no franchise restrictions 
prohibiting them from selling E-85 or a competitor's product?
    Mr. Reid. Actually, 100 percent of these stations are free 
to sell what they want as long as it meets the EPA 
specifications.
    Mr. Inslee. I am really sorry I don't know the answer to 
this, because I should because I tried a case involving this at 
one time, but if I have a service station and I have a 
franchise from one of the big companies, let us just call it 
Acme Oil, there is nothing to prevent me from selling E-85 
distributed to me by Acme Oil's competitor in those franchise 
agreements?
    Mr. Reid. With respect, we covered this territory a few 
minutes ago.
    Mr. Inslee. I am sorry.
    Mr. Reid. And there is some confusion, apparently, about 
the affability of the Gasohol Competition Act of 1980 and my 
counsel has generously offered to provide the committee with a 
memo that fleshes out the provisions of that act and how it 
applies to the more modern environment.
    Mr. Inslee. OK, is there anything you can tell me, just 
generally, whether there is any----
    Mr. Reid. There are no legal impediments.
    Mr. Inslee. I see. OK. Thank you.
    Mr. Butterfield. I thank the gentleman. Looks like our 
final witness is the gentleman from Texas, Mr. Gene Green.
    Mr. Green. Mr. Drevna, following up on the questions 
earlier from my colleague from Oklahoma, he talked about 
expansion projects, refinery expansion projects being 
cancelled. Will we see, if we mandate other uses, whether it is 
E-85 or something else, do you see any concerns that these 
refineries will be cancelled?
    Mr. Drevna. Congressman Green, clearly--and I would be 
naive to sit here and say that the refining industry of 2007 is 
going to be the same refining industry that we are going to see 
in 2017. We are constantly evolving, we are constantly 
changing. However, given the fact that we have yet to, for lack 
of a better term, swallowed the 7.5 million gallons, which we 
will. We will surpass that, simply because it is needed. 
Ethanol is fine blend stock and it is wet, so we need all the 
blend stock we can get, given the supply situation we are in.
    But if you are a refinery executive or sitting in the board 
room of a major refiner, you have to take pause and think what 
am I going to look like in 5, 10, 15, 20 years from now? Those 
decisions have to be made today. And given the debate going on 
in Congress and other places these days, you would have to 
consider that these folks are going to take great pause before 
they commit huge capital to refinery expansion projects when we 
are being told on the other hand in 10 years from now, we want 
you to reduce gasoline consumption by 20 percent. So it is just 
a dichotomy of messages being sent to my industry.
    Mr. Green. One of the concerns I have is the impact on 
pricing. We are already hearing complaints from all over the 
country about the high price of gasoline right now. What impact 
would either cancellation of those expansion plans or 
additional closing of refineries have, even though we may have 
an alternative product coming on, whether it be ethanol, 
whether it be E-85, whether it be coal-to-liquids, do you see 
even more volatility in the price structure for what people pay 
at the pump?
    Mr. Drevna. Congressman, it with some trepidation that I 
even talk about what we think prices are going to be, because 
historically, not in my industry, but I think the rest of the 
country, has been very good at predicting anything like that. 
But given the fact that--and I only know what I know today and 
today and--if you look at where prices of gasoline, where the 
price of ethanol is and as more ethanol plans come on line, I 
think those margins are going to--that cost price should come 
somewhere soft. But who knows where? It is one of those things 
we are hearing--it is just around the corner, it is just around 
the corner. All this technology is just around the corner but 
again, that gives no great solace to refinery managers who have 
to make significant investments.
    The other thing we are talking about is E-85. On a unit-
per-unit basis, right now ethanol is selling a heck of a lot 
higher than gasoline. That is just on a volumetric basis. When 
you compound the fact that it is a 25 to 30 percent fuel 
penalty, we are going to have to see ethanol come way down 
before it becomes a competitor in price to gasoline. Then you 
are going to have all these ethanol plants out there who are 
going to be coming back to Congress saying we are in financial 
straits here because we are not meeting our investment 
strategies. So these are the concerns that we have, as 
refiners. And again, I think it goes back to what Congressman 
Barrow said, it is just not a chicken and a egg thing, it is 
the whole barnyard.
    Mr. Green. Mr. Chairman, I have a number of other 
questions. I know I am almost out of time, but I would just if 
we could submit questions in writing. Let me follow up with 
that. Mr. Dinneen----
    Mr. Butterfield. Let me offer a suggestion to you. We are 
going to have a second round of 1-minute questions, so why 
don't you go ahead and take your 1 minute now?
    Mr. Green. OK, great.
    Mr. Butterfield. If that meets the approval of the 
committee. So you have an additional minute.
    Mr. Green. Mr. Dinneen, let me be brief. I have a very 
urban district and I don't hear from agriculture groups very 
often, but now that the farm bill has come around I am hearing 
more and more about agricultural interest in energy policy that 
are not ethanol producers. Livestock producers are having 
increasing feed prices and increasing--should we avoid further 
increases in renewable fuels mandate until we fully develop 
cellulosic ethanol so that we are not Peter's pantry to pay for 
Paul's gas tank?
    Mr. Dinneen. Congressman, thank you. Actually, I think the 
marketplace is already responding. You saw corn prices being 
reduced as soon as the Crop Intention Report came out last 
month, showing that farmers have responded to the market signal 
that was given and increased the corn planted or acres intended 
to be planted by more than 15 percent. The marketplace will 
respond, but I think you can't just look at this in a vacuum. 
My good friend, Mr. Drevna, just indicated that somehow that 
ethanol pricing today was significantly higher than gasoline on 
a volume basis and that is just flat out not true. Indeed, 
ethanol is significantly cheaper than is gasoline today, even 
before the taxes, but----
    Mr. Green. Dr. Lashof, you testified that without adequate 
guidelines, large scale biofuels production carries great risk 
to our lands, forests, et cetera, and I want to focus on that 
on the climate. Your testimony includes a chart that shows 
ethanol production actually produces more greenhouse gases than 
gasoline and that the amount of greenhouse gas emissions for 
ethanol in part depend on the source of the power used, coal, 
natural gas, et cetera. Do you think that the fact that using 
all natural gas in corn ethanol production raises natural gas 
prices--it is driving utilities to pursue new coal plants, such 
as the former TXU proposal and have major environmental 
organizations factored in their thinking on ethanol on this?
    Mr. Lashof. Well, thank you for the question. I do show one 
case where an ethanol plant is producing more greenhouse gases 
than gasoline. It is a coal fired plant that uses corn that was 
grown in a very energy intensive way. The other cases we see 
benefits relative to gasoline that varies depending on what 
energy source is used for the feedstock, so we would like to 
see the ethanol industry move away from natural gas as its 
process energy source. If it moves to biomass, which could be 
collected along with the corn, then there is an opportunity for 
much greater greenhouse gas benefits and we could avoid that 
negative impact on natural gas prices, so I think, again, the 
type of greenhouse gas performance standard that Mr. Inslee has 
proposed would create an incentive to move toward more 
efficient processes----
    Mr. Butterfield. The gentleman's time has expired. The 
gentleman from Oklahoma is recognized for 2 minutes.
    Mr. Sullivan. Thank you, Mr. Chairman. This question is 
directed to Mr. Greco, Mr. Drevna. If you would both answer 
this, please. Many States and even localities have implemented 
or are considering proposals to create their own biofuels 
mandates. What is wrong with letting States and localities 
implement their own renewable fuels mandates? If you could both 
comment.
    Mr. Greco. Well, thank you for the question. Individual 
State mandates fracture and reduce the flexibility of our fuel 
supply system. One of its strengths is the flexibility to move 
fuel around to meet needs, both anticipated and unanticipated 
and when you start having individual local biofuels or ethanol 
mandates, you are now creating localized markets that have 
their own requirements that are restricting the flow of 
commerce and are, in effect, a problem, particularly when you 
talk about a larger mandate. If you are focusing on a national 
fuels mandate, you really don't need the individual State ones, 
because they are just restricting the flow of fuel and an 
increase in price volatility.
    Mr. Drevna. I agree with everything that Bob has said 
there, Congressman, and in addition, what would we have to do, 
as refiners, depending upon individual States, we have a pretty 
sophisticated fuel distribution, supply and distribution 
network throughout the country and even as we saw and have 
seen, with the implementation of the ultra low sulfur diesel, 
it was a concern how we were going to add another product into 
an already, pretty constrained pipeline system.
    If we, as refiners, have to make different blend stocks for 
different States or different localities, that is going to put 
a major strain on the refinery system and be a real strain on 
the delivery system to these things. And it is going to be an X 
product going here, a Y product going there and it is just 
going to cost more to make. It is going to cost more to ship 
and it is an affront to a national policy, if indeed, a 
national policy is renewable fuels, again, NPRA says let the 
marketplace dictate where those fuels should be used in the 
best way possible.
    Mr. Butterfield. The gentleman's time has expired. The 
gentleman from Washington has 2 minutes.
    Mr. Inslee. Thank you, Mr. Chairman. Mr. Reid, I want to 
make sure I understood your answer about this issue. I 
understood you to say there was no legal impediment for the 
stations selling E-85 and I was just looking at a Wall Street 
Journal article of April 2, 2007 and it says, ``For instance, 
franchises sometimes are required to purchase all the fuel they 
sell from the oil companies. Since oil companies generally 
don't sell E-85, the stations can't either, unless the company 
grants an exception and lets them buy from another supplier.''
    It moves on to say, ``ExxonMobil Corporation's standard 
contract with Exxon stations bars them from buying fuel from 
anybody but itself and it doesn't' sell E-85. A spokesman for 
ExxonMobil says it makes exceptions case by case.'' Now, I 
don't mean any disrespect to Exxon, they just happen to be the 
one they quote in the article. Is that the situation that, in 
fact, the contracts bar these franchisees from selling unless 
they get specific approval? Is that generally the situation in 
the industry?
    Mr. Reid. I would submit that the Wall Street Journal 
reporter is incorrect in his story.
    Mr. Inslee. In what regard?
    Mr. Reid. OK, the Gasohol Competition Act of 1980 prohibits 
the enforcement of those types of contractual provisions. It is 
that simple.
    Mr. Inslee. How this story gets out that an Exxon 
spokesman, according to the Wall Street Journal, says they make 
exceptions to their contracts case by case?
    Mr. Reid. We have offered to prepare a memo which we will 
submit to the committee and hopefully, that will provide ample 
explanation.
    Mr. Inslee. Thank you very much.
    Mr. Butterfield. I thank the gentleman. The gentleman from 
Georgia, 2 minutes.
    Mr. Barrow. Thank you, Mr. Chairman. Ms. Lowery, I want to 
turn to the commitment that your firm has made to make sure 
that--I think that your testimony, you are prepared to make 
fully half of your annual vehicle production biofuel capable by 
2012 provided there is ample availability and distribution as 
part of an overall national energy strategy. What is the 
tripping point, what do you need in order to be able to meet 
your commitment?
    Ms. Lowery. Well, what we need, we are doubling our 
production through 2010, so that is making sure there----
    Mr. Barrow. Yes, but that is not half your vehicles.
    Ms. Lowery. Right.
    Mr. Barrow. It is doubling the small amount to twice the 
small amount.
    Ms. Lowery. Right.
    Mr. Barrow. What are you going to need out there in the 
economy, in the infrastructure world in order to be able to 
follow through and make half your production biofuel ready?
    Ms. Lowery. What we need is the E-85 infrastructure 
developed, so we need more E-85 readily accessible to our flex 
fuel----
    Mr. Barrow. How much is enough in the absence of a 
mandate--I am not proposing that, but in the absence of a 
mandate, how much is enough for you all to go ahead and do it 
on your own?
    Ms. Lowery. We don't have a specific number. What we think 
is important is that our customers that are driving that are 
driving those flex fuel vehicles today should have----
    Mr. Barrow. Do you have a general number? A percentage of a 
penetration in the market? We have heard 50,000 out of 170, 
165,000. Is that what you are going to have to have?
    Ms. Lowery. Well, right now what we have is we definitely 
made progress with the 1,200 stations. We certainly have to 
have certainly more than that. I don't have a specific number.
    Mr. Barrow. Mr. Reid, you represent an awful lot of people 
who are very important to the folks I represent, so I want to 
ask you, in following up on what Ms. Lowery said, what can we 
do in Congress to help you and your members make E-85 
infrastructure more available? What is the most important thing 
we can do to help you all deliver on that so General Motors can 
turn and can deliver on their commitment?
    Mr. Reid. In my opinion, before E-85 is widely available, 
there needs to be more supply. Even if we had E-10 available in 
every gallon of gasoline that sold in this country, we would 
need triple the current amount of ethanol that is being 
produced. That is 10 percent ethanol, 90 percent gasoline. E-
85, 85 percent ethanol, 15 percent gasoline. I think we are 
just a little bit ahead of the power curve today.
    Mr. Barrow. You are waiting for the supply before you will 
build the infrastructure to deliver it, it sounds to me like.
    Mr. Reid. We need supply. We need vehicles that can utilize 
the supply, if you are focused on E-85. The flex fuel vehicles, 
even producing at the increased pace that they are projecting, 
will still only be, in 10 years, maybe 20 percent of the total 
vehicle pool. It takes time to turn over 140, 50 million 
vehicles.
    Mr. Barrow. I just wanted to know what we can do to help 
and you can amplify later on. Thank you, Mr. Reid. Mr. 
Chairman, I yield.
    Mr. Butterfield. Thank you, Mr. Barrow. I believe that 
completes the testimony today. I want to thank each one of you 
for coming forward and I apologize for the inconvenience this 
afternoon, but that is just the way the House works. Let me say 
to you that any follow-up questions that any of the members of 
the committee might have may be presented to you in writing and 
I would ask your courtesy in responding to each one of those 
questions. All right. I am a former judge, I will say court is 
in recess.
    [Whereupon, at 3:00 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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