[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/
                                 house


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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

                              ----------                              

                           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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