[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
SUBCOMMITTEE HEARING ON
SECOND GENERATION BIOFUELS:
THE NEW FRONTIER FOR SMALL
BUSINESSES
=======================================================================
SUBCOMMITTEE ON RURAL AND URBAN ENTREPRENEURSHIP
COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JUNE 11, 2008
__________
Serial Number 110-98
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
HEATH SHULER, North Carolina STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona TODD AKIN, Missouri
MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas STEVE KING, Iowa
DAN LIPINSKI, Illinois JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa DAVID DAVIS, Tennessee
YVETTE CLARKE, New York MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Kevin Fitzpatrick, Minority Staff Director
______
Subcommittee on Rural and Urban Entrepreneurship
HEATH SHULER, North Carolina, Chairman
RICK LARSEN, Washington JEFF FORTENBERRY, Nebraska,
MICHAEL MICHAUD, Maine Ranking
GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana DAVID DAVIS, Tennessee
HANK JOHNSON, Georgia
(ii)
C O N T E N T S
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OPENING STATEMENTS
Page
Shuler, Hon. Heath............................................... 1
Fortenberry, Hon. Jeff........................................... 2
Chabot, Hon. Steve............................................... 3
Bsrtlett, Hon. Roscoe............................................ 5
WITNESSES
Wooley, Dr. Robert J., Director, Process Engineering, Abengoa
Bioenergy New Technology, Lakewood, CO......................... 7
Barnwell, Mr. Scott, General Manager, Blue Ridge Biofuels,
Asheville, NC, On behalf of the National Biodiesel Board....... 9
Todaro, Mr. Tom, CEO, Targeted Growth and Sustainable Oils,
Seattle, WA.................................................... 10
Trucksess, Mr. Jeffrey M., Executive Vice President, Green Earth
Fuels, LLC, Houston, TX........................................ 12
Byrnes, Mr. Robert, Nebraska Renewable Energy Systems, Oakland,
NE............................................................. 10
APPENDIX
Prepared Statements:
Shuler, Hon. Heath............................................... 34
Fortenberry, Hon. Jeff........................................... 36
Chabot, Hon. Steve............................................... 37
Wooley, Dr. Robert J., Director, Process Engineering, Abengoa
Bioenergy New Technology, Lakewood, CO......................... 38
Barnwell, Mr. Scott, General Manager, Blue Ridge Biofuels,
Asheville, NC, On behalf of the National Biodiesel Board....... 43
Todaro, Mr. Tom, CEO, Targeted Growth and Sustainable Oils,
Seattle, WA.................................................... 47
Trucksess, Mr. Jeffrey M., Executive Vice President, Green Earth
Fuels, LLC, Houston, TX........................................ 51
Byrnes, Mr. Robert, Nebraska Renewable Energy Systems, Oakland,
NE............................................................. 60
Statements for the Record:
The American Agriculture Movement, Inc........................... 60
(iii)
SUBCOMMITTEE HEARING ON
SECOND GENERATION BIOFUELS:
THE NEW FRONTIER FOR SMALL
BUSINESSES
----------
Wednesday, June 11, 2008
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 1539 Longworth House Office Building, Hon. Heath Shuler
[chairman of the Subcommittee] presiding.
Present: Representatives Shuler, Ellsworth, and Bartlett.
Also Present: Representatives Fortenberry and Chabot (ex
officio).
OPENING STATEMENT OF CHAIRMAN SHULER
Chairman Shuler. I will call the Subcommittee hearing to
order. I would like to first welcome all of our folks here
today to this very important hearing.
We have a lot to discuss. We will try to keep it from the
member standpoint as brief as we possibly can because of our
expert witnesses that we have today. And we look forward to
your testimony. I again thank you for your travels here today
and your safe travel home tomorrow.
We are here to examine the issues of second generation
renewable fuels and the opportunities for small businesses. At
a time when our country is paying $4 a gallon for gasoline, it
is critical that we continue the development of alternative
energy supplies to help reduce prices and our independence on
foreign oil.
While this may not be the only answer to our challenges,
entrepreneurs have been instrumental in developing these new
and affordable energies. Renewable energies hold the potential
to have an enormous impact on domestic fuel supplies, rural
economics, and small businesses.
In an industry driven by small businesses, growth in
renewable fuels has been a win-win for the U.S. economy.
Today's hearing will focus on the next generation of biofuels.
The advancement of corn-based ethanol is a step in the
right direction. But it carries a great consequence, mostly due
to its low efficiency. Because of this, we must continue to
produce more advanced and sustainable models for biofuels
production.
Currently, renewable energy producers are investing in
research in new technologies that will enable production of
both cellulosic ethanol as well as biodiesel from alternative
sources. This means that ethanol will be produced not only from
corn but from wood chips, corn cobs and biomass inputs, like
grasses.
Diversifying the sources of production will mean that
farmers and small businesses, in areas like Asheville, North
Carolina, will play a role in developing these clean energies.
While the growth in these industries has been advanced,
challenges remain. Cellulosic ethanol producers face high
capital investments with no guarantees of return. By addressing
these barriers, small firms will be able to make large-scale
productions a reality in the near future.
It is critical that policies encourage the development of
these new innovations to expand the sources of energy. This
ranges from tax incentives and trade policies to usage
requirements and financial assistance. Our energy policy must
not only work in the short-term but also the long-term energy
security of our nation.
Recognizing obstacles to growth, the House recently passed
the Energy and Tax Extending Act of 2008. This step was
important because it includes a variety of renewable energy tax
provisions and specifically extends the biodiesel tax
incentives for one year, through December 31st, 2009. But,
perhaps more importantly, it provides a dollar per gallon
incentive for all biodiesel.
Though renewable fuels have grown exponentially over the
past decade, it still makes up less than one percent of the
current U.S. production. This hearing will provide us with a
better understanding of the current state of the next
generation of the renewable fuels industry and what it needs to
grow. In the end, we need to do what it takes to ensure that
small businesses will continue to have the resources to enable
them to develop new fuels.
I appreciate the witnesses here today to talk about this
important issue. And I look forward to today's discussion. At
this time, I will yield to my good friend Mr. Fortenberry, the
Ranking Member, for his opening statement.
OPENING STATEMENT OF MR. FORTENBERRY
Mr. Fortenberry. Thank you, Mr. Chairman, for calling this
very timely hearing. And I want to thank our panel as well for
joining us today.
This hearing is about the second generation of biofuels and
the role of small businesses in renewable energy production.
And we are also privileged to have our Ranking Member Chabot
join us here today.
We are here to examine possible new technologies that can
bridge the transition to a sustainable energy future and how
small businesses can participate in these ventures.
Geopolitical instability and high energy costs make clear that
our nation needs to chart a new path that can lead to lower,
more predictable energy costs for communities, small
businesses, and families.
The causes of recent high energy prices are numerous,
including geopolitical instability, commodity speculation,
supply restrictions, boutique fuels, the strategic petroleum
reserve, lack of sustainable alternatives, and the
oligopolistic leverage of OPEC.
While Congress toils with policy responses, grain ethanol
and soy biodiesel are components of a portfolio of renewable
energy sources that will help us build a more sustainable
future.
There is a long history of grain-based fuels in our
country. While ethanol was considered viable by many pioneers
of industry, including Henry Ford, it was the rising energy
cost of the 1970s that hastened the advent of the current
biofuels age. Additional concerns about the safety of the
additive MTBE, methyl tertiary butyl ether, in gasoline in
recent years led toward a consensus in favor of further
development of grain-based ethanol as a safer alternative.
In 2005, Congress passed a new energy bill in order to
foster greater energy independence as a result of rising
concerns over global tensions and the security of our energy
sources. A centerpiece of this legislation was a renewable
fuels standard mandating that a minimum level of renewable
fuels be produced annually.
Given its relative infancy, questions have arisen about the
efficiency of grain-based ethanol and biodiesel. New
synergistic developments and rapid improvements in efficiency,
however, are continuing to prove the usefulness of these
technologies.
One example of this can be found in Jackson, Nebraska, in
my district, where an ethanol plant is powered in part by
methane gas that is produced by a local landfill greatly
increasing energy output efficiencies.
Researchers in small firms must now consider the next step
in this evolution, such as the second generation of biofuels,
from sources such as switchgrass, corn stover, and biomass.
Small-scale production utilizing partnerships between
government, small business, and communities can be realized as
a result of public policy and business opportunity. Whether it
is from improvements in cellulosic ethanol technology or
utilizing combinations of different renewable resources, new
biofuels can alleviate some of the pressures placed on existing
energy supplies.
During this hearing, we will hear from a diverse group of
witnesses, including an innovative Nebraskan, who is a leader
in small-scale progressive renewable energy production.
Mr. Chairman, thank you again for holding this hearing. And
I yield back to you.
Chairman Shuler. Thank you, Mr. Fortenberry.
I now yield to the Ranking Member of the Committee, Mr.
Chabot, for his opening remarks.
OPENING STATEMENT OF MR. CHABOT
Mr. Chabot. I thank the Chairman for yielding. And I want
to thank you for holding this important hearing and for
allowing me just a couple of minutes to speak. I will be brief.
Disturbingly, each time I talk about the energy and gas
prices, when we are doing the statement, we have to revise it
to reflect another increase. Now, hopefully it is not cause and
effect.
I hope the prices aren't going up because I keep giving
these speeches, but last weekend we surpassed the unfortunate
$4 a gallon milestone. And it seems that every day brings a new
record high. And my constituents and I am sure the constituents
of all the members who are here today are rightfully outraged
and are demanding answers. They want to know why, for example,
we aren't drilling in the United States, in ANWR, and in the
outer continental shelf especially and why we aren't building
more refineries--we haven't built one in over 30 years, the
last one being 1976, in this country, virtually made it
impossible to build another one--and why we aren't doing more
to promote alternative energy sources.
In response, this Congress and, unfortunately, gives them
legislation that purports to fix our energy problem simply by
raising taxes, by billions of dollars on domestic energy
companies, and hoping for the best. That is not an energy
policy. That is a tax increase.
And it is on every American family because let's face it.
When you raise taxes on the energy companies, whether you call
it a windfall profits tax, whatever the heck you call it, they
pass it on. And people just pay more at the pump. That is what
happens.
Critics of domestic drilling point out that even if we
drilled in ANWR and in the outer continental shelf, we wouldn't
have oil available for that for another five years or another
ten years. Well, that is one reason we should have done this
five years or ten years ago, but it was blocked by Congress. I
know many of us are waiting to hear what Congress is going to
do about this.
Over time we have improved the technology mitigating the
environmental impact of oil and gas development. For instance,
rather than having several stations drilling straight down,
horizontal, and directional drilling can reach oil and gas
deposits as far as ten miles away. But instead of taking
immediate steps to reduce our dependence on oil-rich but
unstable foreign governments, members of this Congress have
focused on placing our nation's sources of oil off limits,
hamstring the construction of new refineries, and requiring the
production of boutique fuels that drive up prices on consumers,
as the gentleman from Nebraska just mentioned.
Just as the nation has never taxed itself into prosperity,
it is simply not plausible to believe that we can tax and
regulate our way to energy independence and lower gas prices.
I have and will continue to support efforts to encourage
investment in biofuels and other renewable energy technologies.
I think that is appropriate. I think we ought to be doing it
and doing more of it. I have every hope that we will discover
energy alternatives that will change the world.
But I want to thank our witnesses for being here today. And
this is part of the overall solution, but it is not the entire
solution. There are a number of other things that we could be
doing, we should be doing, that we should have done a long time
ago. And ANWR and the outer continental shelf are at the top of
my list, as are nuclear power plants.
The fact that we haven't built one here in the United
States in over 20 years is ridiculous when you consider that
France, for example, has 80 percent of their power now produced
by nuclear power plants. They are being built in China, being
built in Russia, being built in India, all around the world
except here. We have over 100 of them, but we haven't built one
in 20 years.
And all of these things together, it has to be a
comprehensive strategy to deal with our energy problems. And
one of them is clearly biofuels, but part of it is also going
after oil that we have control over that is within the United
States or in our borders.
And to think that Cuba and China are going to be drilling
off the coast of the Florida Keys and going after that energy,
both oil and natural gas, trillions of cubic feet of natural
gas--they are going to get it, and we have put it off limits to
American consumers--just baffles the mind.
And I thank the gentleman for yielding and thank him for
holding this hearing and yield back the balance of my time.
Chairman Shuler. Thank you, Ranking Member.
At this time I would like to yield to Dr. Bartlett for his
opening statement.
OPENING STATEMENT OF MR. BARTLETT
Mr. Bartlett. Thank you, very much for yield. And thank you
for holding this hearing.
Fifty-one years ago the 14th of this last May, Hyman
Rickover, the father of our nuclear submarine, gave what I
think was the most insightful speech of the last century to a
group of physicians in St. Paul, Minnesota. In that speech, he
noted that at that time we were about 100 years into the age of
oil, which he noted as the golden age. He said that the age of
oil would be but a blip in the 8,000-year history of man.
And he had no idea how long the age of oil would last.
Today we know fairly precisely how long the age of oil will
last, but 50 years ago, 51 years ago, he didn't know. But he
said how long it lasted was important in only one regard, that
the longer it lasted, the more time we would have to plan an
orderly transition to renewable sources of energy.
Mr. Chairman, Hyman Rickover would tell you that this
hearing is 51 years too late. It is at least two decades too
late. We have known of an absolute certainty for 28 years to
now that this day would come because 28 years ago was 10 years
after the United States reached its maximum oil production,
which was predicted by M. King Hubbert 14 years earlier, in
1956.
When you look back in 1980, it was really obvious that he
was right because we had peaked in 1970. And you pull up the
Google for ``Hubbert's peak'' and pull up that peak and look.
We were obviously well down the other side in 1980.
So what have we done for the last 28 years? With no more
responsibilities than the kids who found the cookie jar or the
hog who found the feed room door open, we just have been
pigging out. We have behaved as if oil is absolutely forever,
in total denial of the reality that it is a finite resource.
And today we now have oil at $130-some a barrel and gasoline at
$4 a gallon.
And the President's proposal to do something about this
will do nothing, Mr. Chairman, but make the price of oil go up.
If you drill, it takes energy to drill. For the moment, that
will drive the price of oil up. If you invest in alternatives,
that takes energy to invest in alternatives. For the moment,
that will drive the price of oil up.
As I said, this hearing would have been very productive 20
years ago. My wife has a great observation on where we are. She
used that old country Western it is too late now to do the
right thing.
So here we are today. And I am really pleased to be here.
We will transition. Geology will mandate that we transition to
renewables. It is just incredible the innocence, the ignorance,
and the denial of people in both of our parties about this
energy situation.
I think that the American people would gladly follow
someone who was honest with them. Drilling is not going to
bring down the price of oil. Not a drop will flow for five
years. So for five years, you will be investing in drilling and
driving up the price of oil.
Investing in alternatives will not bring down the price of
oil today. There is only one thing, Mr. Chairman, that will
bring down the price of oil today. And that is to use less of
it.
Two things will accomplish that. One, the price will go so
high we are going to have a global economic depression. And
that will bring down the price of oil. Tragic if that is what
we let happen.
The only other thing that will bring down the price of oil
is a conscious, purposeful program of conservation. If we use
less, I will guarantee to you that the price of oil will drop.
I think, Matt Simmons thinks that we can buy two decades of
time with an aggressive conservation. I am just going to make
one little anecdote. I was driving to work the other day. In
the two lanes in front of me, in one lane was an SUV with one
person in it. In the car beside that was a Prius with two
people in it. The people in that Prius were getting six times
the miles per gallon per person as compared to the person in
the SUV. We have enormous opportunities for conservation. It is
the only thing that will momentarily bring down the price of
oil so that we can now invest in alternatives.
Hyman Rickover, by the way, would be pleased we have had
some of our oil reserves held because now we at least have some
energy that we can use to invest in alternatives for the
future. Had we been able to drill everywhere, there would be no
surplus energy to invest. And so our investment made at least
two decades too late will do nothing more for the moment to
drive up the price of oil.
I have a lot of people in my district. I have a big, long
district. And my people can't afford to live near where they
work because it is too darn expensive to live there. They live
50, 60, 70, 80 miles away. They can't even afford to buy a new
car. They are driving that old clunker, which is inefficient.
This is really, really tough. And the American people have
every right to be furious with their leadership because their
leadership in both of our parties have systematically failed us
for at least the last three different presidencies in our
country.
So thank you very much for holding this very important
hearing. I look forward to the testimony and the discussion.
Thank you.
Chairman Shuler. Dr. Bartlett, thank you so much. And I
couldn't agree with you more. We do have so much work to do.
At this time I would like to introduce our first witness.
Dr. Wooley is Director of Engineering with Abengoa Bioenergy
New Technology in Lakewood, Colorado. Dr. Wooley, you are
recognized for five minutes.
STATEMENT OF MR. ROBERT J. WOOLEY, DIRECTOR, PROCESS
ENGINEERING, ABENGOA BIOENERGY NEW TECHNOLOGY
Mr. Wooley. Thank you, Mr. Chairman, members of the
Subcommittee.
As mentioned, my name is Robert Wooley. I am the Director
of Process Engineering at Abengoa Bioenergy. I appreciate the
opportunity to participate in today's hearing to discuss
second-generation biofuels. After briefly introducing my
company, I will focus my remarks on some of the challenges
facing second generation or cellulosic ethanol.
First, I would like to say that Abengoa Bioenergy is
committed to the renewable fuels industry. Our corporate
leadership believes the existing energy model, based on fossil
sources, is showing clear signs of exhaustion, as we have heard
from the distinguished people already.
Because of that, our company will have invested almost $500
million in research to advance cellulosic ethanol and signed an
agreement with the City of Phoenix to provide them with
greenhouse gas-free solar power. Extending the 30 percent
investment tax credit for solar, as the House has done, is very
important to our parent company.
Personally I have spent the last 12 years developing and
engineering the cellulose to ethanol process, first as the
Biofuels Technology Manager at the National Renewable Energy
Lab, then as the biomass technology development leader at
Cargill's NatureWorks, and now at Abengoa Bioenergy.
I would like to provide the Subcommittee with some
background on Abengoa Bioenergy. We entered the U.S. market
when we purchased High Plains Corporation in 2002. Abengoa
produces starch-based ethanol in York, Nebraska, where we also
have a pilot plant for the development of the cellulosic
ethanol technology. We have starch-based ethanol also in
Ravenna, Nebraska; Colwich, Kansas; and Portales, New Mexico.
And we are in the process of building two new plants: one in
Illinois and the second one in Evansville, Indiana, in Mr.
Ellsworth's district.
We are designing a hybrid facility to be built in Hugoton,
Kansas. This hybrid facility will produce 88 million gallons
per year of starch-based ethanol and 12 million gallons a year
of cellulosic-based ethanol. The launching of the second
generation cellulosic industry is only possible through the use
of this first generation technology basis, cash flows from that
first generation, the know-how, and the infrastructure.
Our pilot cellulosic plant in York, Nebraska is the proving
grounds for the technology that we are incorporating in the
Hugoton plant. In fact, cellulosic ethanol can be produced
today. However, the main concern is how much it costs to
produce that gallon. We are working as quickly as we can to
figure out how to produce that lower cost of production.
Fuel production from biomass is currently offering
considerable savings in greenhouse gas emissions from
transportation fuel and has the potential for more. The current
technology has a life cycle reduction in greenhouse gas as
compared to fossil fuels, such as gasoline, of about 28
percent.
In some of our plants, we are starting to introduce biomass
as the energy source for converting that corn ethanol. That
increases the reduction in greenhouse gas to 52 percent. By
using cellulose as the feedstock, rather than corn, to make the
ethanol, we can reduce the greenhouse gas by 90 percent
compared to gasoline.
What are the barriers to the cost of production? First, the
rapid increase in the price of feedstocks, has caused banks and
Wall Street to be concerned over the profitability of the
industry. Financing for new ethanol-based plants is difficult
to obtain and nearly impossible for new, unproven technology,
such as the cellulose ethanol.
To obtain a financing package, financial institutions will
require the cellulosic industry to line up long-term contracts
with feedstock suppliers. Feedstock collection, harvesting,
storage, and transportation will be significant challenges to
the industry we will have to address.
As an example, in this plant in Hugoton, Kansas, we will be
requiring 700 to 1,100 tons of biomass daily to operate the
cellulosic ethanol and the steam facility to supply steam to
both plants. We will also need 90,000 bushels a day of corn to
operate the starch facility. To do this, we need 100 trucks per
day delivering biomass to the plant, this biomass in the corn
of corn stover, sorghum stover, or wheat straw. In addition,
another 100 trucks per day will be delivering corn or milo
starch to the processing.
Significant resources are needed to be dedicated to this
issue over the next year to make the system work. There are
still areas of technology development that can help reduce the
cost of converting cellulosic material to ethanol, freeing up
more of the cost of production to enable the farmer to produce
the feed material. These include the cost of enzymes to convert
cellulose to sugar.
Currently starch conversion to ethanol spends a few cents
per gallon of ethanol, while the initial cellulosic processes
will probably spend 50 cents to a dollar per gallon. With
further research, we feel that this can be reduced to 10 cents
per gallon. It will always be a little bit more expensive than
starch because of the complexity of the conversion).
In conclusion, Abengoa is committed to the renewable fuels
industry. Unfortunately, a well-coordinated attack from those
who defend the status quo is raising doubts on our capability
to increase our energy independence. We will have to show that
we understand the advantages of renewable energy sources,
confident in knowledge of renewable fuels, and continue to
devote significant financial resources to research and
deploying these new technologies.
Thank you.
[The prepared statement of Mr. Wooley may be found in the
Appendix on page 38.]
Chairman Shuler. Thank you, sir.
At this time our next witness is Scott Barnwell. Mr.
Barnwell is the General Manager of Blue Ridge Biofuels in
Asheville, North Carolina. I don't think there is a company in
our region that has had a greater impact on the awareness of
this issue and truly making a difference in not only the
discussions but actually in proving a point than this company
has - Blue Ridge Biofuels.
So, Mr. Barnwell, thank you. And you will be recognized for
five minutes.
STATEMENT OF MR. SCOTT BARNWELL, GENERAL MANAGER, BLUE RIDGE
BIOFUELS
Mr. Barnwell. Mr. Chairman, Ranking Member Fortenberry,and
members of the Subcommittee, I really appreciate the
opportunity to come and talk to you today and testify on this
very important topic.
I am General Manager of Blue Ridge Biofuels, located in
Asheville, North Carolina. And I am also here speaking on
behalf of the National Biodiesel Board, the trade association
for the U.S. biodiesel industry.
Just to give you a little bit of background, Blue Ridge
Biofuels started in 2004 building our plant in Asheville. Two
years later we actually began supplying biodiesel to the first
publicly available biodiesel station in that part of the state,
actually one of the first in the Southeast, and started
continuing construction of the plant beyond that.
A big component of our operation has been education. We
have tried to educate the public about the importance of
alternative fuels and biodiesel, in particular. And in many
ways, Blue Ridge Biofuels I think was ahead of our time because
while we are now here today in 2008 talking about second
generation biofuels, that really for us was our beginning.
We were somewhat nontraditional in our approach. We really
focused on recycled waste vegetable oils as our base feedstock
from the very beginning and have been growing that ever since.
And every drop of fuel that we have produced has come from
recycled waste vegetable oils, and we are currently involved in
research and development to actually expand that feedstock
base.
This fuel has been used by countless residents of western
North Carolina for personal vehicles, for construction fleets.
The Asheville Regional Airport uses our fuel. A number of
municipalities, including the City of Asheville, City of
Hendersonville, City of Black Mountain, throughout western
North Carolina use of fuel.
And we have been expanding, in addition to universities.
And also we are one of the pioneers in developing what is
called bioheat or home heating oil, that has a biodiesel
component, again all with fuel that is made from recycled waste
vegetable oils that are one of the most sustainable fuel
sources and feedstock sources available.
So in many ways, our business model has been we were
founded and based our ideas with a strong environmental ethic,
but, quite frankly, the economics is coming full circle now.
And that is why we are starting to see many others in the
industry looking at these recycled oils as a potential
feedstock, taking what was once considered a waste product and
actually turning that into a very effective fuel, a very clean-
burning, high-quality fuel that meets all ASTM specifications.
I would like to applaud the leadership, both the Chairman
and others in the House, for your leadership in expanding the
use of domestic renewable fuels. And, in particular, with H.R.
6049, the Renewable Energy and Job Creation Act, that was
passed by the House prior to Memorial Day, has a few critical
provisions for our business, in particular, and for the
national biodiesel industry.
Most importantly is the extension of the biodiesel tax
incentive for another year. That is a critical element as we
have to spend a great deal of resources in research and
development. That is an element that has actually allowed us to
remain viable. And without that, I probably wouldn't be here
talking to you today had that tax incentive not been enacted in
the first place.
Also, a very important part of that legislation is
increasing the tax incentive to make it equal among all
feedstocks because, as you know, until now and including now,
the fuel that we make, we receive 50 percent of the tax
incentive that producers that use virgin feedstocks receive.
And when we talk about sustainability and promoting sustainable
feedstocks and sustainable fuel and promoting energy security,
that is absolutely critical for the long-term growth of the
industry.
I would also like to express our pleasure with the expanded
renewable fuel standards that was included in the Renewable
Energy and Job Creation Act enacted last December. That is
going to create a much broader base of production for biodiesel
and help make this a more important component of our expanded
renewable energy development here in the U.S.
Increased biodiesel production is very important for the
environment. It is good for consumers, and it is good for our
country as a whole.
We are working in partnership right now with the University
of North Carolina to develop actually new innovative approaches
to be able to expand these recycled feedstocks to use very low-
quality oils that have historically not been used in biodiesel
production. And that type of research and development is going
to be actually promoted and enhanced by the renewable fuel
standard that was enacted.
So, again, I would like to thank you for this opportunity
to come here and speak to you. Research into these new
feedstocks into these second generation biofuels over the next
four to five years will be critical for the long-term success
of the biodiesel industry in this country. And we look forward
to working with you. And thank you, Mr. Chairman, for the
opportunity to come speak to you.
[The prepared statement of Mr. Barnwell may be found in the
Appendix on page 43.]
Chairman Shuler. Thank you, Mr. Barnwell.
Our next witness is Tom Todaro, the CEO of Targeted Growth
and Sustainable Oils in Seattle, Washington. You will be
recognized for five minutes.
STATEMENT OF MR. TOM TODARO, CEO, TARGETED GROWTH AND
SUSTAINABLE OILS
Mr. Todaro. Thank you.
Good morning. As the Congressman said, my name is Tom
Todaro. I run an agricultural biotechnology company based in
Seattle, Washington but with field stations in many of our
districts, actually, all of the Midwest.
The company is almost ten years old, making us sort of the
old man of the industry we are talking about today. These
problems take a long time in terms of the biology necessary to
create plant life that can provide a remarkably different
energy source than the ones you are seeing today. So while the
other members around the table use machines to produce it, we
use plants to produce what they need to put into their
machines.
So I will talk briefly about us and then we basically serve
as a footprint for what the industry will likely look like over
the next couple of years.
So the company works both on biodiesel and on ethanol, both
in next generation or generation and a half. So the biodiesel
crop we use is a crop similar to canola. It is called camelina.
It is a mustard seed.
We chose it because it has very, very good energy
qualities. It is not a great food oil, but it grows in marginal
lands, so in eastern Washington, Oregon, Montana, the Dakotas.
The work we have done on it non-transgenically has allowed
really substantial yield increases through some very clever
technologies that we have developed using marker-assisted
breeding and some science words I won't bore you with today.
But the net result is we think we are achieving a cost per
gallon savings of about 50 percent over soybeans. It rides up
and down. Soybean oil today is trading at about six cents a
pound.
And that pricing, both on soybean oil and on corn, is what
is creating all of these problems with financing being
available for the physical plants that are in the Midwest.
So generally the goal is to do 100 million gallons. By the
end of 2010, 2011 probably, we will be the largest dedicated
second generation feedstock in the country.
On the ethanol side, we looked back in time, rather than
forward in time. A thousand years ago, 3,000 years ago, the
Mayans were using sugar to create alcohols. Alcohol is all
ethanol is.
We started looking at ways to convert traditional corn into
a sugar-based product. Rather than going through the starch
process, we basically are able to turn corn into sugar cane. So
this corn has no cob. It has no ear. It has no kernels. What it
has is an awful lot of sugar in its stalk.
And if our last year's tests prove out this year, we will
be getting 1,000 gallons an acre on corn that we can grow in
the Midwest, in the Farm Belt. And if this proves out to be
true, it helps relieve the food versus fuel debate in a
counterintuitive way, which is let's take a small area around
the ethanol facility, grow very high energy corn stovers there,
and allow that to be the product that feeds the ethanol
industry for a certain period of the year. Well, you can't do
it all year for some reasons, but it will work three, four,
five, six months of the year depending on growing seasons.
The third and I think the most esoteric but the one that
requires the long-term investment that Dr. Bartlett was talking
about, is prokaryotic algae. All the oil you are getting today
out of the ground, almost all of it, comes from algae. Some of
it is from old trees, but it is all biomass that has had a long
time to digest.
We believe that Targeted Growth is able to take that second
generation, this algae, use a whole bunch of photosynthesis,
the energy from the sun, and create something that grows at
five to ten thousand gallons an acre, so many fold over what we
think we can do in corn.
That will take us several more years to develop. And I am
unable to say what Congress can do to help because I don't
understand the legislative process, but I can tell you what we
can do and what others like us should be able to do.
And to the extent you can help companies like Targeted
Growth and the others of this panel, I am pretty confident that
sort of help is on the way and well within the time before oil
depletes and we are back to alternative sources that would be
more problematic to use. Biofuels really can make a significant
impact in the amount of fossil fuels that are consumed today.
Thank you.
[The prepared statement of Mr. Todaro may be found in the
Appendix on page 47.]
Chairman Shuler. Thank you, sir.
Our next witness is Jeffrey Trucksess, the Executive Vice
President of Green Earth Fuels LLC, which is based in Houston,
Texas. Mr. Trucksess, you will have five minutes for your
testimony.
STATEMENT OF MR. JEFFREY TRUCKSESS, EXECUTIVE VICE PRESIDENT,
GREEN EARTH FUELS, LLC
Mr. Trucksess. Mr. Chairman, Committee members, thank you
for this opportunity to speak with you today. I am the
Executive Vice President of Green Earth Fuels and one of the
founders.
We are one of the largest biodiesel producers in the
country. I guess that is an honor to be here as one of the
largest. Three years ago we called ourselves five guys and a
fax machine. So small businesses can transcend. And I think
this country is going to need that sort of innovation because
we have got some challenges ahead, as you all have pointed out.
One of the differences about our biodiesel company is we
are making significant investments in second generation or
generation and a half feedstocks. We actually have a joint
venture with Targeted Growth to commercialize this crop,
camelina. We are investing enough capital to do about a million
acres, hopefully by 2011.
We are also building a model palm plantation in Guatemala.
I call it a model palm plantation because we are preserving all
the primary rainforests, providing about 4,000 jobs to the
region, developing an independent growers' program. So it
brings jobs to the region, and it is a highly productive crop.
And it can be done environmentally sensitively.
The most interesting thing, thanks to Congress, we have
gone as an industry from about 25 million gallons a year in
2004. You guys have passed a renewable fuel standard tax
package. We are up to about 500 million gallons a year now. And
the renewable fuel standard will take us to a billion.
I think that is just a start, but it creates the
marketplace that drives the investment. To get to some of these
next generation crops, I appreciate your support. And I think
we have a lot to do.
And one of the most important pieces here is stability of
policy. And that is something that is in grave question right
now, tax credits expiring, fuel standard being questioned. And
I can tell you from sort of the financial community and the
business community it is devastating.
And so we certainly look to you to provide the sort of
leadership that is going to be long-term and appreciate what
the House has done on the proposed extension, but we will get
to that in a bit.
A little bit about camelina. Tom has given you a brief
overview. One of the interesting things is it is a non-food
crop, in part because it doesn't taste very good, but it grows
best in marginal areas or as a rotation crop for wheat. So
typically every third year you would leave your acre of wheat
fallow to let the soil regenerate.
This fits in well nicely, kind of like the corn-soybean
rotation that has worked over time. So it fits in well. You are
not competing for the wheat acres because it is not that
profitable, but instead of leaving it fallow, you are using it
or it is very low-input, low water, low fertilizer needs. So
you can put marginal acres into use.
There is another crop: jatropha. We are planning about 50
trial acres of that. We did a study in Texas to see how would
this work in Texas, how could you do it, you know, again,
utilizing marginal acres that we are not taking advantage of.
Ironically, we found about a million acres of triangles on
center pivots of land currently in production, where the center
pivot doesn't actually reach the corners. There are a million
acres of that, camelina or jatrophic, that grow great in an
area like that. Again, you are not competing with food crops.
It is a low-input crop, doesn't need the water, huge potential
there.
Texas looked at, you know, if we could do 500 million
gallons in Texas, it would be about a $22 billion industry and
create 100,000 jobs in the state. So it is huge jobs. It is
going to farmers. It is going to small businesses, small
crushers because biodiesel and a lot of these other
technologies are great regional businesses. You have Blue Ridge
here. You see them pop up everywhere.
We just recently spoke at a conference in Albuquerque, New
and had the national labs there, a lot of leading experts in
agriculture. Kind of the consensus of the day was there is a
significant opportunity to do sustainable biofuels. Is it the
complete answer? No, it is not he complete answer, but it
certainly offers potential five percent, ten percent. Algae
comes along, maybe greater than that. So the leading experts
think we can do it. And we just need sort of the commitment
from our nation so we can continue to make these sorts of
investments.
And I guess I have referred to it a lot, but it is
critical: stability of policy. It really is what drives
investments. The renewable fuel standard I know has been
questioned recently. I urge you. The linkage you question that.
You question the marketplace. You scare investors. They pull
out. They pull back their money. And it stops investments for
ten years.
So when I started this business, we went to the investment
community. And they are like, oh, we have been burned on
ethanol before. We don't even want to look at it. It was a huge
hurdle to get over because policies had changed over time.
So, even though there are questions, I think Congress has
done a great job in setting the policies. Stick with them
because it is what really drives the next generator.
Tax incentive package. Again I applaud the House action on
this. We are working with the Senate as hard as we can to try
and get them to pass it, but already banks started pulling
money out of my business because they are concerned it won't
get extended.
A retroactive fix doesn't work for the fuels industry. It
has worked for wind. It won't work for us. So banks get scared.
They pull their money back, which means I can't invest in
camelina. I can't invest in Tom's science.
So it is critical that we get these things done and move
early--you know, even if it doesn't expire until December, we
have problems now--and invest in the research and development.
I appreciate the time and look forward to your questions.
[The prepared statement of Mr. Trucksess may be found in
the Appendix on page 51.]
Chairman Shuler. Thank you, Mr. Trucksess.
At this time I yield to the Ranking Member, Mr.
Fortenberry, for introduction of our next witness.
Mr. Fortenberry. Thank you, Mr. Chairman.
I would like to introduce Mr. Robert Byrnes from Oakland,
Nebraska. Mr. Byrnes is a producer of beef and pork and worked
for many years as a chemical engineer. He runs Nebraska
Renewable Energy Systems and is President of the Nebraska
Renewable Energy Association. At his business, he works with a
wide variety of renewable energy sources and runs an off-the-
grid farm as a demonstration of what renewable fuels can
achieve.
Mr. Byrnes came all the way from Nebraska to Washington in
a vehicle powered entirely by biodiesel. And we appreciate your
willingness to come out and look forward to your testimony.
STATEMENT OF MR. ROBERT BYRNES, NEBRASKA RENEWABLE ENERGY
SYSTEMS
Mr. Byrnes. Thank you, Congressman Fortenberry and Chairman
Shuler for the opportunity to visit with you. I hope my
testimony will be of some value to the Committee in their
considerations.
As the first registered producer of biodiesel in Nebraska,
I have been involved with developments in my state from the
ground floor and just recently commissioned the largest
operating biodiesel facility in the state. The Energy Farm in
northeast Nebraska that I own is energy self-sufficient and is
currently in use as an energy training facility.
I co-founded the Nebraska Renewable Energy Association in
2006 and am currently focused on the needed processing of the
materials that will supply these second generation oils to the
market.
Travel to and from this hearing will be petroleum-free,
using 100 percent Nebraska-made biodiesel.
When we started building the biodiesel facility two years
ago, soybean oil was 23 cents a pound, which reflected the 10-
year average. Soybean oil now is trading at 67 cents a pound,
reflecting its historically strong correlation with petroleum
crude oil.
Biodiesel production cost is heavily dependent on feedstock
price. An additional dollar a gallon is required to convert
this oil to meet ASTM requirements for biodiesel.
As a result of this surge in costs, almost half of the
biodiesel production capacity built in the last three years is
currently offline. Similar price surges have also been seen in
animal fats and used vegetable oil markets. It is clear that
the first generation of feedstocks available for biodiesel have
run their course.
To meet these short-term needs, industry has turned to
waste and low-value streams to substitute for first use oils.
Removal of the oil-rich fraction of corn prior to ethanol
production is an excellent opportunity since the oil actually
inhibits ethanol fermentation.
This oil is also a limiting factor of the DDG, the dried
distiller's grain, that comes out of the process as animal
feed. The average 40 million-gallon ethanol plant can
realistically supply 2 to 3 million gallons of high value corn
oil.
In terms of regulatory requirements, biodiesel facilities
are characterized as chemical processing facilities. While
environmental and personal safety must always be ensured,
current regulatory requirements are a tremendous cost for the
renewable small business owner.
Nationally an exponential expansion of the feedstock pool
is required to make a significant impact on petroleum diesel
consumption levels. If all of the fats and oils currently grown
in the U.S., over 950 million acres of agriculture, were used,
all of them, we would supplant 10 to 12 percent of our
petroleum diesel consumption across our country. And that is
not possible to do.
I will only mention two of the most promising examples of
future feedstocks that offer this exponential increase of the
available pool; first, biomass and waste-fed gasification. This
can be used to create the building block of organic chemistry
known as syngas.
This syngas can then be reformed to a liquid using 100-
year-old German chemistry techniques back to a liquid, which is
how they were able to make liquid fuel from coal for two world
wars. With this technology, waste and low-grade materials can
be recovered into renewable diesel or renewable ethanol. The
efficiencies of small business research efforts are needed
here.
Second, algae production is a tremendous growth area with
small businesses leading the way in innovative applications.
Algae has been shown to provide over 50 times the productivity
per acre as soybean and will actually expand the available food
stream by adding a completely new and protein-rich food and
feed supplement.
Nebraska has had its first algae project announced this
week in a rural area owned by small business. This project is
being developed by a renewable energy firm that grew out of my
original work within the broad spectrum of available
technologies.
This algae project will recycle process waste heat from an
oil seed-crushing facility and biomass combustion emissions to
boost photosynthetic production of these oils and process them
in-house to close the loop.
Decentralized growth of algae and production of oil could
be done most quickly through municipal waste facilities where
treatment, capacity and food are currently available. Large
facilities and processing infrastructure will take time to
construct. Small business innovation is once again in the best
position to develop this technology in the short term.
A tremendous boost for decentralized utilization and small
business production of alternative biofuels would be to exempt
all biofuel producers from state and federal road taxes up to
5,000 gallons per year. These producers would need to show
verification of biofuel gallons used and not necessarily ASTM
certification of fuel quality.
Significant expansion of the successful grant programs
currently in place are essential in supporting small business
in meeting the challenges of supplying these second generation
feedstocks.
Biodiesel itself is a trademark term and is defined by the
industry ASTM standards. Non-ASTM renewable diesel or stray
vegetable oils can also run diesel motors. But to gain access
to the dollar gallon tax credit, ASTM standards must be met.
And these oftentimes represent a significant burden to the
small producer.
While any fuel in general distribution must meet strict
criteria, small businesses that produce and use these materials
for themselves or convert the motors to allow their use cannot
gain access to this tax credit, even though the use directly
replaces petroleum diesel consumption.
The original diesel engine designed by Rudolf Diesel 100
years ago was designed to run on these straight oils. I
provided power to my Energy Farm for years using a renewable
diesel from animal fats, waste, and alternative seed oils that
could not technically be called biodiesel although, it replaces
petroleum diesel.
Future feedstocks will also challenge the strict soy-driven
ASTM standard requirements. The tax credit of a dollar a gallon
should be extended to any renewable biodiesel or biofuel that
is used to directly displace the consumption of petroleum-based
diesel or gasoline.
In closing, small business will remain a leading and cost-
effective innovator in this critical area. The decentralized
energy production systems being developed in many cases could
be of significant value to U.S. military, Homeland Security, or
FEMA. These agencies could greatly benefit from the creation of
a streamlined process to partner with small businesses that can
support the goals of these agencies for continued operations
without requiring vulnerable energy logistical support.
I thank you for your invitation to address this body and
your interest in this area. And I would be glad to provide any
answers to questions.
[The prepared statement of Mr. Byrnes may be found in the
Appendix on page 54.]
Chairman Shuler. Thank you.
Mr. Todaro, I guess explain to us more. I mean, I was very
interested when you said that it was from almost 5 to 20
thousand gallons per acre on this algae production. Explain a
little bit more to me, if you can, the process, how that works.
And probably the most important thing, how do we get there
quickly?
Mr. Todaro. The easiest way to think about algae or any
single cell organism is it can only do one thing at a time. So
algae just divides. Its sole focus is to keep dividing to
maintain life. It is not wasting any energy making roots or
leaves or growing vertical, creating high-density cellulose,
which the cellulosic people need to remove. So all it does is
grow.
It can take a much, much higher percentage of the photons,
the energy from the sun, than any traditional land-based crop.
And so all earlier calculations, done by NREL and by others,
show that there is a solid theoretical basis that says if you
just take sunlight, you shoot it onto things and all they do is
divide, you will get so much biomass with so much lipids.
The problem has been traditionally that because they can
only do one thing, they either divide and you get lots of green
stuff or they make oil and they don't divide very well.
And so companies like Targeted Growth, us, and others have
said, well, how do we crack this fundamental problem? And the
way you do that is you put in what are called inducible
promoters. You tell the thing, ``Okay. In the beginning of your
life, just divide. And then when you have a high enough
density, in an outdoor probably facility, please change. And
then spend the rest of your life just making oil. And then we
can process you.''
The problem is this is pretty complicated. This is a multi-
gene system. You know, I have got a dozen molecular biologists
who do nothing but try to figure this out. And my big fear is
that because there is one thing I can guarantee, which is that
15 years from now, it will be an algae that is the biofuel that
everybody is using, its inherent advantages are just too great,
the problem is there is no guarantee that is going to be a
U.S.-based solution.
There is a lot of good work going on in Asia, some pretty
good work going on in Europe. And this can be a game change.
Whether it is us or somebody else or a combination of
companies, one of my big fears is the investments made abroad
are so much greater than the investments made here that if
somebody really cracks the nut, they are going to have
extraordinary, extraordinarily valuable technology for
generation. It becomes an operating system. It becomes the next
Microsoft. Because once you have figured out how to do it, it
is deployable everywhere.
Chairman Shuler. How far away are we? Do you think it will
take 15 years?
Mr. Todaro. Yes. Well, it depends on what you mean by ``how
far away.'' We can do it in a really cool-looking flask right
now. Come out. You are welcome to visit our labs.
Nobody else has been able to do it in a cool-looking flask.
So that is exciting. There are certainly companies that are
trying to produce algae right now. And with some limited
success, I think the first generation algae fuels are almost
ready, but the game changer is being able to do what I am
suggesting.
We have a letter of intent from a major utility. We will
like try to do a 20 or 25-acre trial with them over the next
year to 18 months. There are others that are trying things of
about that scale. But this involves biotechnology. So this is
genetically engineered. And there is no point in avoiding the
question because these pathways are so complicated we need to
put them in.
And so depending on legislative issues, Food and Drug
Administration, government oversight, we will have a marketable
useful product in five, six years realistically. And then if it
works, the expansion rates are exponential, just like algae
itself.
Chairman Shuler. So the long term is that it is almost like
I guess growing up in the mountains of North Carolina when the
first cars were produced and the first person to have a car,
fuel was pretty easy because they had moonshine. I mean, they
actually produced ethanol.
Mr. Todaro. Absolutely.
Chairman Shuler. And that was part of the old process, that
you could actually produce it at home. So could a mini farm
produce enough with this algae production to be able to almost
have a stand-alone fuel station, if you will, if this becomes
process?
Mr. Todaro. You certainly could. I mean, I think there will
be huge rural implications. Like all things, there is
efficiency with scale.
So I think realistically the first generation of these is
likely to be collocated with utilities or CO2 sources so that
you can do them on tens of thousands of acres.
But even second generation algae, which is actually much
easier to do because we can produce a new strain of algae in
four and a half hours, it is quite realistic to see a solution
where the alkanes, the actual molecule, almost to ASTM spec,
you can simply create right there in a pond.
So is it unrealistic to assume that ten years from now a
farmer could take an acre of their land, grow material like
ours, have it excrete number two diesel, and use that farmer to
power vehicles? I think that is quite likely. I think that it
is probabilistically where this thing ends up, yes.
Chairman Shuler. Mr. Byrnes, you are off the grid or do you
sell back to the utility company?
Mr. Byrnes. The Energy Farm is an off-grid facility focused
on bringing out the technology and practicality of the energy
loop that exists on the farm, as you had alluded to. I think
there is a lot of synergy in bringing the technologies
together. And smaller, diversified farms, as farms have
classically been, have a lot more potential to utilize that
energy loop than specialized larger facilities.
But the farm I have is off grid over four years. The power
lines run by--we have wind and solar, biodiesel, crushing, and
renewable energy in terms of working on our digester this
summer.
Chairman Shuler. What do you feel like your savings have
been over that four years?
Mr. Byrnes. Self-reliance is my savings. I have never
quantified it. But the fact that we can do it and show other
people how it may or may not fit for them or one aspect of it,
the satisfaction that it brings I think in showing people that
it can be done as a demonstration project is the value.
Chairman Shuler. Mr. Barnwell, tell me and other members of
the Committee about the education process that you have gone
through, whether it be in the schools or just educating the
public or even from the bumper stickers.
Mr. Barnwell. Right. Well, a big challenge for us is
getting people to understand that these fuels that we are
talking about don't require any special equipment. People
assume that when you start talking biofuels or biodiesel that
they need to go out and buy some new equipment, some kind of
new engine, they have to have their car modified or truck
modified or so on.
So a big part of it is just getting the word out there
through--we do a lot of talks at conferences and festivals and
so on in the western North Carolina region, in particular, and
in the schools, the universities, going in and just talking
about both the value of biodiesel in terms of the net energy
output that comes from it. And it is very high. It is about 3.5
units of energy for every energy unit input but also the fact
that you can simply put this straight into your existing diesel
vehicles.
So whether they are truck drivers or folks with a Mercedes
or Volkswagen diesel car--like I said, we have fire trucks and
landscaping equipment at the actual airport running our fuel--
but just educating these folks and these fleet managers so that
they understand not only can they just run this fuel in their
existing equipment, but it is actually better for their
equipment. It is a higher-quality fuel in terms of its
lubricity and other properties.
So the bottom line comes down to price almost always. And
if we can provide a product comparable to petroleum diesel,
which we have been able to do over the long haul, in some cases
we are actually slightly under petroleum prices in western
North Carolina, some of the lowest-priced biodiesel in the
country. People are very willing to accept that and adopt that.
We find that people do it for a number of reasons. Some it
is purely environmental. They want to have cleaner emissions
and cleaner air in the mountains. Other people it is more a
question of national security and patriotism. They would rather
put fuel in their tank that is produced right there near their
home from people that they know and keeping that money right
there in their local economy, as opposed to shipping those
dollars off to the Middle East. So it is a number of reasons.
Chairman Shuler. What is the cost right now per gallon at
the pumps?
Mr. Barnwell. Well, we sell everything from B-2, 2 percent
biodiesel, up to B-99, essentially pure biodiesel. And it
ranges. In the lower blends, it is very comparable with
petroleum, obviously, because it is mostly petroleum.
Our B-99 right now is selling in the Asheville area
anywhere from 4.80 to $5 a gallon, which is right on par with
petroleum diesel.
Chairman Shuler. Dr. Wooley, you talk about the
transformation of cellulosic ethanol production and some of the
problems and issues. I note that wood chips have always been
mentioned in many different ways. We have seen how the
production of corn has increased, and we had a hearing.
Bakeries, for example, are experiencing higher wheat prices as
a result of higher corn production.
Will using wood chips increase lumber prices and cost of
homes if that goes into production or is it a lower quality of
wood that is being used?
Mr. Wooley. Well, first, to help everyone understand the
feedstock, so wood is, believe it or not, very similar in
composition and structure to things like the corn stover and
the grasses that we talk about. So as far as the conversion
technology, it is very similar. And you just have to grind it a
little bit differently.
Part of the challenge around wood and grass is that it is
sort of the chicken and egg. How do I get somebody to commit to
a large tract of land for wood to supply to me? How do I get
somebody to commit to a large tract of grass to commit to me?
So I am getting around to your answer. One way to look at
it is using the agricultural residues, which are already
there--they are not used for very much else--gets us so that we
can develop the technology. Then we can move to wood
feedstocks. Wood feedstocks are actually in some ways better.
They are much more dense. You can haul them much more
efficiently down the roads in trucks.
And to answer your question about how will that affect the
lumber industry, it depends on what sort of the economic
position is of who is producing it. And this is sort of
secondhand information from myself. There are some areas of the
country that have been traditionally producing wood pulp. There
is less demand for wood pulp. So those stands of lumber or
trees are under-utilized right now. And so converting those and
using those for feedstocks for cellulosic ethanol would have
little, if any, impact on anything else.
And so there is also the ability to use more of the
second--and I am not a lumber guy. So I don't fully understand
it, but there is certainly prime wood, the wood that you would
like to have for two by fours, and then there is secondary wood
that is not as useful for that industry, which can be used in
the cellulosic ethanol industry. So, again, sort of that
secondary wood that is not as useful for the prime industry.
Chairman Shuler. Mr. Trucksess, if you looked at one area,
whether it be funding, policy, R&D, if you could have your wish
list, what would it be for Congress to help incentivize
companies such as yours to be able to grow and give us the
independence that we need, the efficiencies that we need, and
the technologies that can be and are available?
Mr. Trucksess. Good question. I think it is two parts to
that answer. One step you already took. The renewable fuel
standard has sort of a carve-out for advanced biofuels. I think
everyone here at the table qualifies under the advanced
biofuels. It is a small sector of the policy right now, but I
commend you for doing that because it has stimulated a lot of
investment sitting here at the table. Make sure that stays in
place because if it goes away, I think we all probably go away.
And, two, it is the, at least for my industry, extension of
the biodiesel excise tax credit, broadly speaking, for these
guys, whether it is the cellulosic credit or ethanol credit. It
is absolutely critical because everyone really relies on
private equity, banks to fund this technology. And you start
giving unstable policies. And they just pull back their money.
And they don't start up again next year when you change the
policy.
I was just at an event for Representative Ciro Rodriguez.
And one of the guys that attended started the Biodiesel
Coalition of Texas. He was one of the major recipients of the
CCC Bioenergy program, which has been re-funded, started the
whole industry, really, in Texas.
And he is now out of business because some Texas policies
changed, some government policies changed, disappeared, came
back. He expanded, policies went away. He had overextended
himself because of the disappearing policies. And now he is out
of business.
So, again, the sooner you can act to extend the excise tax
credit for us and when you go towards perhaps the next
Congress, look at long-term extensions. Give investors the
certainty to create new technologies.
And let us make partnerships with his company. He needs me
behind him so he can go to a farmer and say, ``Well, I am going
to buy the product from you.'' If it is camelina, a farmer
needs to know who is going to buy it if I grow it. We have got
to create these partnerships. I can only partner. I can write
the contract if you tell me, ``Yes. Here is what'' I am going
to have in a year or two years.
So I appreciate it.
Chairman Shuler. One last question. Mr. Byrnes, the Ranking
Member and I were wondering, how did you get that through
security?
[Laughter.]
Chairman Shuler. I don't want to know the answer. At this
time I will--
Mr. Fortenberry. We will erase that gap.
Chairman Shuler. Yes, we will erase that.
Recognize Mr. Fortenberry for his questions for the
witnesses.
Mr. Fortenberry. Thank you, Mr. Chairman.
All of you have provided very engaging testimony in
particular areas of expertise that you have. And, of course,
that is very helpful. But for us as policy-makers, it is always
helpful to take a step back and look at things from the high
altitude.
And Congressman Bartlett said it quite well. I think we
need an orderly transition to a more sustainable energy future.
And you all have a role to play in that.
Now, the question is, how big is that role going to be?
What chapter of a very large energy portfolio can you provide?
If you will using your expertise about the variety of
technologies that you all are using to make money and if you
had a best case scenario as to the potential expansion of all
of these opportunities that are obviously going to have to be
done, integrated in an environmentally sensitive fashion--but
talk about how big the potential here for this chapter of our
overall energy portfolio. Will you potentially meet 10 percent,
20 percent of our overall energy needs in the country?
Mr. Todaro. You know, I can tell you from our point of view
that for a company like Targeted Growth, it is actually quite
quantifiable. So if you look at camelina, which is this canola
derivative, we should be doing 100 million gallons in 2011-ish.
That will grow to maybe 200 million gallons, basically a drop
in the proverbial energy bucket.
The sugar-based corn ethanol I was speaking about, which
really is a next generation technology, where you are doubling
or tripling the amount of energy per acre that a corn farmer
can get, that is a billion, so a billion to a billion and a
half. So you are starting to make a dent, still reasonably
small but a billion here, a billion there. It starts to add up.
The third generation technologies, the algal systems, we
are talking about are limitless. You know, there are all of
these great studies. If you took X number of square miles in
just New Mexico, you could fuel the whole country.
You know, those sorts of scale-ups aren't really the right
way to think about it, but the right way to think about it is
it is massive. I am very comfortable say that. All terrestrial
based oils that go away, if they are replaced by a biofuel, it
will be a single cell organism.
So I would think of that as 100 million, billion. Infinite
is the way to think about it.
Mr. Fortenberry. Okay. If everybody would respond to that,
please? And when you say, ``infinite,'' again, trying to
quantify this for us in terms of a ten-year, five/ten-year
horizon, it would be better if it were a six-month horizon
because--
Mr. Todaro. Right.
Mr. Fortenberry. Yes. People are--
Mr. Todaro. Unfortunately, you know--
Mr. Fortenberry. But, again, in terms of the overall energy
portfolio, how this potential--and if all of you could add to
this, the percentage that it would make up of our overall
energy portfolio, I think it would be helpful to know, just
your best estimates, best case scenarios on continued
development, sustainable policies that promote it, exceptions
perhaps for regulations that adversely impact small businesses,
ongoing development of small-scale distributed generation, new
technologies that are coming online that will integrate even
more types of biomass.
Mr. Wooley. If I could respond, in the ethanol industry, we
certainly believe in what others have predicted as well, about
15 billion gallons easily from corn and other starch sources in
the United States. And that is certainly technology that is
there and can be expanded quickly. And we are doing our share
to do that.
As far as the cellulosic industry, just from the corn
stover and the wheat straw that is out there, we have got
probably another 15-plus billion gallons. Now, that is going to
take a little bit longer. And we really have to have a
progression.
We are going to build a pioneer plant, really, in Hugoton,
Kansas, as I mentioned earlier. And that is 12 million gallons.
That is not very big, but that is a spot where we can prove the
technology. We probably have to build one more that is more
full-scale, maybe the 50 to 100 million gallons.
And then at that point--so now we are talking we are up
into the 2015 time frame. At that point, if the financial
markets are there and the proper marketing incentives are there
to ensure that we can get that financing, then you can start to
really expand that industry. So now you can start to see that
15-plus billion gallons coming from things like agricultural
residues.
After that, we start to get into and we believe at the same
time we need to continue to develop things like the energy
crops, so whether it is wood energy crops in the case of
hardwoods or whether it is grass crops, that can then go again
to marginal lands.
And even with switchgrass, the current strains--and we are
working with small business partners, too, to develop some of
those strains. We are talking on the order of 1,000 gallons of
ethanol from an acre of switchgrass.
So those start to open up new lands that are not
necessarily useable for other purposes. And now my best guess
personally would be another 15 billion gallons or so from those
sorts of resources. So at the end of what I have just added up,
it is 45 billion gallons. That is on the order of a third of
our current gasoline usage and maybe in the 2025 time frame or
so.
Mr. Fortenberry. Okay.
Mr. Barnwell. With the current renewable fuel standard, we
are looking at increasing to one billion gallons of biodiesel
production. That represents almost two percent of all biodiesel
that is used in a 60 billion-gallon market.
So that is the starting point just in the next couple of
years. Going beyond that, we know that there is enough
feedstock out there if it is tapped. And there is a lot of
untapped feedstocks, like even in these second generation
feedstocks, such as recycled waste oils and waste greases.
If we can have the right technology in place that we could
tap into all of those and we can have an efficient collection
system to bring all of this into the biodiesel market, we could
see that number easily increase to five, six billion gallons a
year. So right there you are getting close to ten percent. And
I think that is feasible in the five to ten-year time frame.
And then going beyond that, the kind of work that some of
the other folks here on the panel are describing in terms of
increased feedstock, that is really the bottom line when it
comes to biodiesel, availability of feedstock.
We can produce fuel as long as there is a feedstock to
produce it from. And the new technologies with algae, in
particular, are very exciting. I think infinite is a big
number, but when you think about it, as long as we can produce
enough on these marginal lands to meet demand and at the same
time address the points that Dr. Bartlett raised with
conservation and actually trying to keep that demand in check
through other technologies, things like hybrid vehicles, even
hybrid diesel vehicles, which are now coming on the market. And
even buses driving around this city are using those
technologies now.
By reducing those demands, it is sort of a--you know, we
can get this balance. Let's get this scale into a better
balance.
Mr. Fortenberry. Anybody else care to respond? Yes, sir?
Mr. Trucksess. Several people have done a good job. DOE did
a study a few years ago that said, you know, based on sort of
current technology, you could do about 5 percent or 5 billion
gallons of biodiesel from sort of current crops, you know, look
at sort of the emerging technologies if we really get to sort
of that is the bridge for the five or ten years that you need
to get to the second generation technologies. Does that make a
huge difference?
I have talked to API. And they said petroleum demand growth
was growing six percent, supply was growing three percent. So
at a three percent differential, you are now at $140 a barrel
oil.
So does a percent or two make a difference? In the global
scheme of things, it makes a huge difference in the short term
because, you know, Goldman is predicting $200 a barrel oil or I
have seen several different estimates. It is T. Boone Pickens.
It is going up. And so small percentages make a difference
until you can get to some sort of--
Mr. Fortenberry. Well, I am asking a very hard question
because it has to be a convergence of a lot of things, but we
see a convergence of a lot of things. We see the high price of
oil, the demand for new technologies, the policies that are
lining up to promote that increased emphasis, appropriately so,
on conservation that turn to looking at environmental
stewardship as an integral part of managing our energy
production.
But, again, all of this is helpful. And don't get me wrong,
but if one of you could venture out and predict how big of a
sector that the biofuels, these types of renewable energy
processes can play in terms of replacement of overall energy or
meeting overall energy needs in the country in a fairly short
horizon, it would just be helpful.
Now, that is difficult, I know. But you are out there. You
are on the front line. You are making money at it. You see the
potential of this.
Mr. Todaro. I mean, you need to define your horizon. I
would probably bet that no--
Mr. Fortenberry. You go ahead and--
Mr. Todaro. Yes. I would bet that probably nobody here is
making money on it. I mean, seriously most of us are doing this
because we believe. There are probably all alternatives we
could do to get a bigger paycheck. But the issue is so
enormous.
What there is a radical under-investment in is basic
research and development. It is companies like my own. I am not
tooting our horn. There are lots of other good companies and
universities that should be promoted.
But if you think about the Manhattan Projects or times when
the government really said, ``This is a fundamental issue of
national security. And we are going to devote resources
necessary to win,'' we can absolutely do it. In five years, we
will be able to show you that we are going to be done.
With engineering and process engineering done within ten
years, can we be replacing just through a photosynthetic
solution and a cellulosic based solution 20, 25 percent of
currently useable fuels? Absolutely.
I don't know if you have children. By the time my children,
who are four and six, go to college, I would venture to bet
that half of what they do will be based on biofuels. And from
there, it is a tipping point because at some point, what
happens, of course, is you drive down the price of oil enough
that it winds up being a commodity-based threat.
And once you get to $50 oil--but you know what? We get to
there, and we are directly competing with oil after massive R&D
done here in the U.S. I think all of us are going to be very,
very pleased with that.
Mr. Fortenberry. Well, you make some excellent points about
the need for a focused energy movement that builds rapidly
toward a sustainable energy vision that meets important
environmental goals, that untangles the question of
particularly foreign oil from foreign policy considerations and
creates a dependence on homegrown fuels that give us a real
sustainable future.
You probably wouldn't find a Congress member around here
who doesn't want to do that. Yet, the dynamics of our system,
for whatever reason, have not created a breakthrough moment in
which we can coalesce around a vision that is grand and
meaningful and doable.
And I think that is one of the important reasons that we
are doing this today, and I really appreciate the leadership of
the Chairman in holding this hearing. And to the degree that we
can make a contribution in that regard, here we sit.
One more question, Mr. Byrnes. You talked about some
exemptions for the development of small-scale distributed
generation of energy systems. That might be helpful to small
business because, again, whether it is the old technology that
used to take place in the mountains or innovative ideas that
are taking place in the garage shops that tweak engines and put
new things in them, to allow the innovation, to not inhibit the
innovation of those opportunities may be the way in which we
create an important component of this large energy breakthrough
that we are looking for. So why don't you review some of those
key points that you made earlier in that regard?
Mr. Byrnes. As a registered small producer, the first
producer in Nebraska with a license, I did work with Motor
Fuels. And they were very helpful in creating classifications
for different production categories based on capacity, based on
numbers of gallons per year. And I think Nebraska has a pretty
good model there, but they don't have an exemption.
And at the small scale, if you are producing 5,000 gallons
a year or less and that is a number that is a very significant
number because that is average fuel consumption for a farm over
an annual basis. That is a common number I hear from folks.
If they can avoid some of the red tape and just do it and
get it done in a safe and environmentally responsible manner,
that is a huge benefit. The reporting, the potential fines, the
time and investiture and the paperwork and the bonding and the
insurance and licensures and all of that stuff, that oftentimes
costs more than the potential savings of doing it to begin
with.
I think the amount of innovation that I see, I talk to
people all day long, I mean, just citizens doing stuff and
floating ideas by me and stuff. The amount of innovation is
just staggering, what people are doing out there. And it is
increasing.
Necessity is the mother of invention. And we are
approaching that cusp where it is going to have to be.
Hopefully we can get ahead of it with a little foresight before
it smacks us with a two by four.
We don't have time to respond, but I think we will most
efficiently and certainly most quickly respond with the little
guy who has this equipment in the wood line or already doing
it. Half is already in place. And the amount of dollars that is
spent in that kind of research and the take-away from that kind
of research far outweighs any other way of doing it.
You learn a lot more by doing it. I mean, on wind systems,
I read about wind systems for two years, burned-out printer
cartridges printing and reading. And I learned more in two days
of installing my system than I did in two years of reading
about it. We need you to just do it.
And I echo the gentleman's comments here about the
Manhattan Project type of necessity and focus. There is nothing
this nation cannot overcome if we put our mind to it. I don't
know that we have put our mind to it yet.
Mr. Fortenberry. Thank you, Mr. Chair.
Chairman Shuler. Couldn't agree more. Couldn't agree more.
At this time the gentleman from Indiana, Mr. Ellsworth,
will be recognized.
Mr. Ellsworth. Thank you, Mr. Chairman. Thank you,
gentlemen. I can't imagine a more important hearing that you
could have held and five better guests and witnesses.
Mr. Byrnes, I get hit with a two by four every time I go
home from people that want to do something about $4 gasoline.
When I don't go home, then they hit me on the e-mail with that.
So I think we are all getting hit with that two by four.
Mr. Todaro, you said earlier you don't understand the
legislative process. I have got to tell you that sometimes
people on this side of the table don't fully understand it
either.
I would like to associate my comments with Mr. Bartlett
first. And I have got to tell you when I start reading about
this stuff I go to his Web site and look at his energy
speeches. And thank you for all you do in your research. It
helps us young-ins down here. And I appreciate everything that
you do and your comments on this. Just a couple of questions.
And, besides that, Mr. Wooley, thank you for what you are
doing in my area. And if you want to locate those other two
plants in Evansville, we will try to roll out the red carpet
for you. We sure wouldn't be opposed to that.
Tell me the difficulty of retrofitting as we move into the
second phase or the second generation fuels. Are we going to be
able to retrofit or is it all new technology? Are we going to
be able to retrofit some of the phase one plants into the phase
two, where we are going to save some costs there or is it a
whole new process? We may have touched on it with the wood
earlier, but is that going to be a difficult switch?
Mr. Wooley. We plan to follow the concept that we are doing
in Kansas right now, and we will go back to what at that point
will be an existing plant in Indiana and retrofit a hybrid
facility. So we will have both to start out with.
And so the first challenge in an area is the feedstock
availability. So it is very local. It is not like corn. I mean,
we could pretty much site a corn plant anywhere in the country
with delivering corn by rail and that sort of thing or barges.
But sourcing the biomass feedstock in the area of the plant. So
that is challenge number one.
As far as there is a synergy. There is a good synergy
between the two facilities. There is a lot of infrastructure, a
lot of power, steam, and waste water and all of those sorts of
facilities that can be shared between the two.
And then longer term as the cellulosic technology really
proves itself out, then there is a very good likelihood that we
could start to retrofit and move away from the corn in that
plant. And when we do that, we still maintain much of the
fermentation.
Those very large tanks that you see, those are all very
much the same. In some of the front end, how we process that,
the corn stalks, into sugar, turning the corn into sugar would
have to change.
But that is kind of our progression. We go back and we
retrofit our current starch with the cellulose technology, take
advantage of everything that we have already got there, the
know-how, the people, the technology, and the expertise, and
really start to really understand the cellulose.
And I agree with the gentleman earlier about doing it. I
mean, that is a key thing. I mean, I personally have been
involved in cellulosic ethanol research for the last 12 or 15
years. And I have sat around and read about it and studied it
in labs and things like that.
And actually going out and building this plant, building
this pilot plant first and building this plant in Kansas, we
are going to learn a lot. And that is going to really enable us
to make those steps.
And the key thing is along with us knowing how to do it,
getting the risks down to the financial community. They have to
see that we know what we are doing, too. And by actually doing
those, we will demonstrate that. And then it becomes any
incentives that you all can provide for us of loan guarantees
or making sure that we have got a place to sell the ethanol.
That just continues to force that financial community to
see, ``Yes, we have got a viable business here. And we
understand technology.'' And that will come back to the
gentleman's issue about how fast we can do this. A lot of it
has to do with how fast the money can come after we have proven
the technology.
Mr. Ellsworth. I think that leads into my second. It is not
a question, it is a comment, but if you have a comment on it, I
would appreciate it. When we approved the incentives on--we
always talk about unintended consequence. And I think that is
one of the big fears of Congress, one of the unintended
consequences.
I think we need your help because Congress--I think Mr.
Fortenberry was talking about this--that we try to look at the
big picture. And we don't have a crystal ball on what that is
going to be.
So as you go through your process with the plants, that we
look ahead and we try to fight those unintended consequences so
we don't end up with egg on our face. And we want to supply
those incentives and do exactly what you are doing. Thank you,
but help us find those. And if you see them, let us know.
If anybody wants to comment, that is fine. But if not, Mr.
Chairman, thank you all very much. It has been a great hearing.
Chairman Shuler. Thank you.
I now recognize a person who knows as much about this
energy policy as anyone in Congress. Dr. Bartlett, thank you.
Have as much time as you would like.
Mr. Bartlett. Thank you very much. Thank you all very much
for your testimony.
I would like to start out by kind of putting in context
where we are. We use 21-22 million barrel of oil a day in our
country. We use 70 percent of that in transportation for liquid
fuels. What we have been doing for 150 years now is harvesting
what nature has stored away in the ancient past over a very
long time period. We are now mining that resource very, very
quickly.
The National Academy of Sciences has said that if we turned
all of our corn into ethanol, every bit of it, and discounted
it for fossil fuel input, which is very high, at least 80
percent, that it would displace 2.4 percent of our gasoline.
They noted that we could save as much gasoline by tuning up our
cars and putting air in the tires. And that is all of our corn
crop.
The relatively trifling contribution that corn ethanol has
made has doubled the price of corn. Farmers have diverted land
from soybeans and wheat to corn. So soybeans and wheat prices
have gone up.
Drought in rice-producing areas around the world has driven
the price of rice up. So we now have a food shortage worldwide
and food riots in several countries. And our corn ethanol at
least is partly responsible for that.
Mr. Wooley, you mentioned the difficulty in getting
financing, which is the reason I am a very strong proponent of
ARPA-E. Much of the really cutting-edge technology in our
military today is there because of DARPA. And what DARPA does
is to fund technologies that are so out there that you can't
ask your stockholders in your company to finance that. And that
is a legitimate role of government.
And so I am a strong supporter of ARPA-E. It is now the
law. But this administration is not supporting that. I hope we
pass another law that punishes them if they don't support it.
There are two bubbles that have broken, Mr. Chairman. The
first was the hydrogen bubble, the hydrogen economy. It was
supposed to solve all of our problems. I think people finally
figured out that hydrogen is not an energy source. Hydrogen is
simply a carrier of energy.
Think of it as a battery, and you have got it right. And it
will be very useful by and by when we have an economically
supportable fuel cell, probably two decades off because a fuel
cell is at least twice as efficient as the reciprocating
engine. And when you burn hydrogen, you get water.
By the way, for those who tell you that they have got some
new technique for getting energy out of water. They probably
also believed that they were going to get energy out of the
ashes and no furnace because water is the oxide of hydrogen.
Water is what you get when you burn hydrogen. There ain't no
energy in water, but a lot of people believe that there is.
The second bubble that broke was a corn ethanol bubble. And
the third bubble that will break is the cellulosic ethanol
bubble. We will get something from cellulosic ethanol.
I, among other things in a life of 82 years, have been a
farmer. And it is hard for me to imagine if we are going to get
a whole lot more from our wasteland, not good enough to grow
anything on, than we could get from all of our corn and all of
our soybeans.
Mr. Barnwell, the General Accounting Office has said if we
turned all of our soybeans into soy diesel, all of it, every
bit of it, that that would displace 2.9 percent of our diesel,
again trifling. If we just took our trucks off the road except
for the last mile and put that cargo on trains, trains are at
least five times as efficient as trucks than hauling cargo.
Aren't we straining at a nut and swallowing a camel? And
shouldn't we really be looking at the big picture? We can
drastically reduce our use of gasoline if we had HOV-3 and HOV-
2. We could drastically reduce our use of diesel if we simply
put that cargo in the train except for the last mile.
By the way, if you could move it by water, that is at least
five times as efficient as moving it by train. So you need to
move it by water as far as you can and then by train and trucks
only the last mile.
Mr. Todaro, you mentioned algae. We are now exploiting
algae, which is probably algae that grew--you are right--in
these ancient subtropical seasons. By the way, our Earth was at
one time very much warmer because we had subtropical seeds in
the north slope and in the seed beds. They weren't seed beds
then. The land was higher north on England.
So what we are now trying to do is to explore the
technology which nature used over a very long time period. And
they squirreled the product away in these gas and oil reserves.
When you are looking at how much gasoline we will displace,
I suspect that we are not really using energy-profit ratio,
that we are not discounting it in the fossil fuel input.
And isn't it a little silly to pretend that you displaced
gasoline, oil when 80 percent of the energy that you get out of
ethanol came from the fossil fuels that helped grow the corn
and produce the ethanol.
Mr. Byrnes, you mentioned syngas. Would you tell us a
little bit about the efficiencies of syngas as compared to
cellulosic ethanol with steam reforming? Can't you take about
any biomass and get syngas from it? And can't the chemists,
starting with that hydrocarbon, make about anything he wishes
from it, just as we do from oil today?
And why isn't syngas a better place to start, which is,
what, a century-old technology? Why isn't that a better place
to start than cellulosic ethanol, about which we know very
little and it is hugely challenging?
Mr. Byrnes. I would be glad to respond, sir. I have often
felt that one of the challenges to cellulose ethanol is that
getting the cellulose, you have kind of a gold rush of
cellulose at the end of the growing season and you've got to
get it to the plant and preserve it and keep it in a certain
condition to undergo a fermentation process. I think with
gasification, burn it. It will burn.
Any time of the year whenever it is available--and I think
that there is a wider variety of feedstocks available from
trash, all kinds of things. Whether old or new carbon, they are
going somewhere. I think it is something to consider.
And I think gasification in the reforming process through
an adjustment of catalysts and pressure and temperature, you
could make any carbon link chain that you want from 2 carbon
ethanol to 4 carbon butanol to 16 carbon diesel or whatever you
need almost with a dial, you know, with these kind of inputs
going in. That is a solid technology.
I am uncertain what the efficiency is, the energy
efficiency is. I know in a gasification process, the energy
input is a match and oxygen and then waste heat is evolved in
the process, which can be recovered for something else. But
other than that, the energy comes from the material itself.
The ethanol facilities in Brazil, they don't have a DDG
feed. They burn that. And that biomass goes back to feed their
ethanol process. Those BTUs go back to their ethanol
production. So they have a different system there.
But I don't see why we don't use that. I think in 1932, you
know, it was at its height. And it was replaced with
electricity that took its place once Tesla figured out how to
transport that. I think that should be considered.
I know there is a pilot plant going up in Germany. Korn
Industries is doing that. I don't know that that is happening
here except on a very small scale.
Mr. Bartlett. Syngas is what, hydrogen and carbon monoxide?
Mr. Byrnes. Yes, sir. Syngas is any carbonaceous material
in an oxygen-starved environment. So it is C plus one-half O2
is H2 and CO.
Mr. Bartlett. Yes. Isn't this fundamentally the process
that is used in getting gas and liquids from coal?
Mr. Byrnes. That is correct. The technology grew up on old
carbon. That same technology can be utilized with new carbon
inputs with the same chemistry. The gasification process does
not care where the C comes from, whether it is old or new
carbon.
And the Fischer-Tropsch reaction reforms it under different
temperature and catalysts and pressure into the liquid, but it
is a fairly--the reforming process does have some energy input
because of the compression that is required to get from a
gaseous dispersed state into a concentrated liquid state. So
that is where your energy input is, not on the actual
gasification itself.
Mr. Bartlett. How would you suggest that we make these
decisions? Clearly you start with a biomass. I would like to
caution, by the way, that we don't really know what is
sustainable in biomass.
I grew up during the Depression. And I remember farmers
then who would brag that they had worn out their third farm.
There weren't many others, then, and a lot of land. And they
just moved from one farm to another. And they wore it out. That
is because they didn't return the fertility they took off the
land.
We now just pour fertilizer onto the land. Almost half the
energy that goes into producing corn comes from natural gas,
with which we make the nitrogen fertilizer. Before that, the
only nitrogen fertilizer available was barnyard manures and
guano. And the guano that took tens of thousands of years to
farm is now gone. If we wait another 10-20 thousand years,
there will be some more guano. And we can mine that.
Guano, by the way, is the droppings of birds and bats that
accumulated in bat caves and in tropical islands over tens of
thousands of years.
I don't know what is sustainable in biomass. I look out
there, and there is a lot of biomass, all of those weeds. To at
least some extent, this year's weeds grow because last year's
weeds died and are fertilizing them. And I don't know what that
extent is. I just don't know what the sustainability is.
I know that switchgrass is quite unique in that it pushes
most of the nutrients back in the roots. It is very deep-
rooted. So it is pulling nutrients up from the subsoils. And so
switchgrass is really kind of unique.
Don't you think we need some experiments in sustainability
before we leave? Go back to the words of Alan Greenspan when
the market was just going way out of control and he talked
about what was irrational exuberance. Was that the term he
used? I think that we have a lot of irrational exuberance
relative to these alternatives.
The amount of oil that we use is just incredible. Every
barrel of oil has the energy equivalent of 12 people working
all year. And 25,000 man-hours of effort, when I first read
that, I said, ``Gee, it can't be true.''
And then I thought I drive a Prius. And I thought, ``Gee,
one gallon of gas at $4, still about the price of water in the
grocery store, by the way, not all that expensive.''
It takes my car 48 miles. Now, I could pull my Prius 48
miles with a come-along and chains and stuff, with a guard
rail. But it took me a long time to pull my Prius 48 miles.
When oil was $12 a barrel, what that meant was that you
could buy the equivalent of one person working all year for you
for one dollar. Wow. That is what has established the
incredibly high standard of living that we have.
And please go and read Hyman Rickover's article, great,
great article, literally a speech that he gave. It was found a
few years ago and put on the Web. There is a link on our Web
site, too. Just Google for ``Rickover'' and ``energy speech,''
and it will pop up. And it will pop up there.
I am a farmer, the biggest industry in my district. And I
am very high on biofuels. But, you know, I am really concerned
about unrealistic expectations. And the down side of
realization, when these unrealistic expectations are not met,
there were enormous unrealistic expectations relative to corn
ethanol.
The chairman of our Agriculture Committee has spent a lot
of time thinking about this. Collin Peterson believes that at
the end of the day, when we finally have transitioned to
renewables, that we will be able to produce about a third of
the liquid fuels that we use today. That is fine. I think we
can live very well on a third of the liquid fuels that we are
using today.
We need to transition there. The opportunities for
conservation are absolutely enormous. And, Mr. Chairman, one of
the things that really disturbs me is that neither of our
parties is emphasizing the only thing that will bring down the
price of oil now. And that is conservation.
You know, the things that we are proposing for the moment,
more drilling, it takes energy to drill. That will simply
compete for oil and drive up the price of oil. Am I right? And
it takes energy. Every one of you use energy in developing
these biofuels. And that simply will now drive up the price of
oil.
We tragically have run out of time and run out of energy.
We never run out of dollars. We simply borrow that from our
kids and our grandkids without their permission. But we have
run out of time, and we have run out of energy.
With an aggressive conservation program, one of the great
giants in this area, Matt Simmons, believes that we can buy two
decades of time.
One of you mentioned the Manhattan Project. We need more
than that, Mr. Chairman. We need a program in our country that
has the total commitment of World War II. I lived through that
war. Everybody had a big--we had Daylight Savings Time so you
could work in your victory garden. There was no legislation
that said you had to have this. It is just what you did if you
were a patriotic American. We saved our household grease. Not a
single automobile was made in '43, '44, and '45. We need a
total commitment of World War II.
The American people are the most creative and innovative
society in the world. But we are deceiving our constituents.
They believe that the oil prices are high because the oil
companies are gouging us or the Arabs are holding back on it.
Neither one of those is true.
The oil companies are the beneficiaries of a supply/demand
side, where they are getting enormously rich. I hope they use
their profits in a better way than they have used them so far.
We also need a technology focus of putting a man on the
moon. And I can remember that. I remember that cartoon that
really said it. It was a buck-toothed redhead kid that said,
``Gee, six months ago I couldn't even spell engineer and now I
are one.'' Everybody, everybody wanted to be an engineer.
Today the best and brightest of our kids are going into
potentially destructive pursuits. They are becoming lawyers and
political scientists.
[Laughter.]
Mr. Bartlett. And this year China will graduate six times
as many engineers as we graduate. And half of our engineers are
Chinese and Indian students. And we really do need a program
that has the urgency of the Manhattan Project.
Now, I lived through the Manhattan Project. And the
professor in the college I was going to came home with the
Manhattan Project and wanted me to major in physics. He was a
physicist. But that was a secret squirreled away. But what it
did was to cut all of the roadblocks so you could proceed very
quickly.
So we need a program that has the total commitment of World
War II, the technology focus of putting a man on the moon, and
the urgency of the Manhattan Project.
I am excited about this. You know, our young kids spend far
too much time watching dirty movies and smoking pot. They need
something that really captures their imagination and challenges
them. Mr. Chairman, this could do it, but we need leadership.
And, you know, our presidential candidate is running away
from the White House. I think he needs to run away from the
Republican party, too, if he is going to win. We really need
leadership in this area.
And although I am a very optimistic person, I tend some
days to be a little down because I just don't see knowledgeable
leadership in either of our parties. I am sorry.
I thank you very much for yielding more time than my share.
Chairman Shuler. No. Thank you, sir.
I want to thank all of the witnesses for their time, their
commitment to come here and give their testimony today. I ask
unanimous consent that members have five legislative days to
enter statements into the record. Without objection, so
ordered.
This hearing is now adjourned.
[Whereupon, at 11:51 a.m., the subcommittee was adjourned.]
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